Assessing economic efficiency and impacts of global warming, acidification, eutrophication of rice production in Lung Ngoc Hoang nature reserve, Hau Giang province

This study uses the data collected from a household survey on 100 farmers in Lung Ngoc Hoang Nature reserve. Economic efficiency in the present study was estimated from stochastic profit frontier function. Farm household makes an average profit of about 18,33 and 8,02 million dongs in Winter-Spring and Summer-Autumn crop, respectively.

ASSESSING ECONOMIC EFFICIENCY AND IMPACTS OF GLOBAL WARMING,

ACIDIFICATION, EUTROPHICATION OF RICE PRODUCTION IN LUNG NGOC

HOANG NATURE RESERVE, HAU GIANG PROVINCE

Lam Kim Nhung1, Truong Hoang Dan2

1 Nam Can Tho University

2 Can Tho University

Information:

Received: 03/12/2017

Accepted: 06/12/2018

Published: 11/2019

Keywords:

Economic efficiency,

Environmental impacts, Life

Cycle Assessment, Lung Ngoc

Hoang, Stochastic profit

frontier function

ABSTRACT

This study uses the data collected from a household survey on 100 farmers

in Lung Ngoc Hoang Nature reserve Economic efficiency in the present study was estimated from stochastic profit frontier function Farm household makes an average profit of about 18,33 and 8,02 million dongs in Winter-Spring and Summer-Autumn crop, respectively The average economic efficiency level was 58,51% and 47,38% in Winter-Spring and Summer-Autumn crop, respectively The efficiency level largely varied across farms due to the big gap in farming techniques and the ability of choosing optimal inputs across farms The life cycle assessment method (LCA) was used to assess the environmental impact The results showed that the impact of global warming in the production of one kilogram of rice was largely due to CH4 emissions from rice soil (94,19%) The use of fertilizer caused the most acidified (94,94%) and eutrophicated (98,03%)

1 INTRODUCTION

Wetlands play a vital role as trapping

pollutants, toxic substances or general wastes

from human activities, providing favorable

breeding grounds for a variety of aquatic

species, as well as contributing many other

benefits to the lives of the local people About

one-fifth of Vietnam population live in wetland

areas and directly depend on the wetlands for

their livelihood, mainly for rice cultivation As

a result, wetland conservation and management

cannot be separated from community

development (Gill & Lý Minh Đăng, 2008)

However, The wetland management system in

Vietnam is characterized by a top-down

approach rather than the decentralized approach with greater involvement of the local community in the management process Lack of cooperation from the local people in the management process harms the local communities living in nature reserves, and also arises conflicts for the use of wetland resources, which leads to restrict the efficiency of conservation activities Based on those backgrounds, the study was conducted to determine the effects of input factors on profit, economic efficiency and estimate the impact of global warming, acidification, eutrophication of rice production in Lung Ngoc Hoang Nature reserve The research results partly form the basis for managers to develop

community-based biodiversity conservation policies and

develop sustainable rice farming livelihoods in

Lung Ngoc Hoang Nature Reserve

2 METHODOLOGY

2.1 Method of data collection

The study was carried out in Lung Ngoc Hoang

Nature reserve, the economic efficiency and the

environmental impact of paddy production in

Summer-Autumn (02/2015-06/2015 lunar

calendar) and Winter-Spring crop (11/2015 –

02/2016 lunar calendar) were examined The

data were collected from 100 rice farmers by

the simple random sampling method

Information from these farm households was

gathered through a structured questionnaire

containing the following information: rice

farming household characteristics, items of rice

production costs, input uses, output prices,

returns, fertilizer and pesticide applications

2.2 Methods of analyzing data

2.2.1 The stochastic frontier model

Ali and Flinn (1989) claimed that farmer has

different factor endowments and faces different

input and output prices As a result, farms may

exhibit different “best practice” production

functions and operate at different optimal

points Economic efficiency and the highest

possible profit can be estimated by the

stochastic frontier function model:

Yi= f (xi) exp (vi – ui) hay lnYi = ln [f(xi)] +

The essential idea behind the stochastic frontier

model is that the error term is composed of two

parts A two-sided error term captures the

effects of measurement random error which

measures statistical noise and random shocks

outside the firm’s control A one-sided error

term captures the effects of inefficiency relative

to the stochastic frontier They are both

assumed to be independently Where, vi, distributed N(0, σv), is a two-sided error term, and ui > 0 is a one-sided error term and a half-normal distribution (u~ |N(0, σu)|) The parameter gamma (𝛾) 𝛾 = σu /σ2 takes the value between 0 and 1 A value of 1 (σu 🡪 σ) suggests the variability in profits among farms is mainly due to the existing differences in the level of technical and allocative inefficiencies, whereas

a value of 0 can be seen as evidence about the existence of statistical noise Phạm Lê Thông

và cs (2011) found that the unknown parameters in the model (1) can be determined

by using maximum likelihood estimation method (MLE) which is widely used to measure the effectiveness of individual producers

The explicit form of the stochastic profit frontier model used in the study is specified as:

lnπi = β0 + β1lnPPi + β2lnPTi + β3lnPGi + β4lnPCi

Where:

● πi is normalized profit of the ith farm

defined as gross revenue less variable cost, divided by farm specific price of 1 kg output rice

● PPi is normalized price of fertilizer defined

as the weighted mean of the price of 1 kg input fertilizers divided by price of 1 kg output rice

● PTi is normalized price of pesticide defined

as the weighted mean of the price of 1 kg input pesticides divided by price of 1 kg output rice

● PGi is normalized price of seed defined as the price of 1 kg of input seed divided by price of 1 kg of output rice

● PCi is land preparation cost (thousand VND/1.000m2)

● Fi is family labor for farming activities

(man-days/1.000m2)

● ei is an error term

2.2.2 Life cycle assessment (LCA)

LCA has been widely used to quantify and

evaluate the environmental impacts of products

through all stages in their life cycle (ISO 14040,

2006) In the study, method of LCA was used

to assess the environmental impacts in rice

production from rice seeding to harvesting

Survey data on the use of fertilizers, pesticides,

and gasoline from 100 farmers were collected

However, some data such as fertilizer,

pesticide, and fuel manufacturing were

impossible to be collected Thus they were cited

from GaBi6 as software program which is an

international database In order to evaluate impacts related to the on-field activities, the referenced methane emission was 212,41 kg/ha (Huỳnh Quang Tín & et al., 2012) Based on N fertilizer application rates, the referenced N2O emission was about 0,42% of the applied N (Jianwen & et al., 2009), the estimated N losses

by NH3 volatilization was 14,6% and 1,7% of the applied N in the dry and the wet season, respectively (Wantanabe & et al., 2010), the amount of NO3- leached was 1,19% of the total chemical N applied (Iqbal, 2011) The amount

of emitted SO2 from fuel combustion was 0,00589 kg/kg fuel (Michaelis, 1998 cited from

Lê Thanh Phong & Hà Minh Tâm, 2015; Lê Thanh Phong & Phạm Thành Lợi, 2012) All impact values are given relative to a common unit, which is gain of 1 kg rice

Table 1 Environmental impact category

Global warming (g CO2-eq)

Acidification (g SO2-eq)

Eutrophication (g PO4- -eq)

(Source: Bentrup & et al., 2004; IPCC, 2007)

3 RESULTS AND DISCUSSION

3.1 General socio-economic characteristics of the study sites

In general, the average age of sample farmers was 50,07 years old The number of household’s

labors were low, on average, 2 people In terms of small farm size, the number of household’s labors

play an important role in bringing down hired labor cost

Table 2 Characteristics of surveyed farmers in the study sites

Farm size (%)

The education level of surveyed farmers in the

study sites was low, 50% of them left school

after primary school This limited their learning

capacity in receiving scientific and

technological knowledge The average farming

experience were 25,68 years Farmers, who had

a lot of experience in rice growing, could reach

a high production efficiency However, they

were self-righteous and not willing to adopt

technological advances in rice production

(Phạm Lê Thông & et al., 2011) The average

rice area per household was 1,37 ha, 50% of

farmers owned rice fields with production area

smaller than 1ha Small farm size was also a

limiting factor for the application of advanced

technology in rice production (Nguyễn Tiến

Dũng & Lê Khương Ninh, 2014)

3.2 Costs and returns analysis

The total costs in both seasons are approximately the same (14,02 and 14,25 million dongs/ha in Winter-Spring and Summer-Autumn crop, respectively) In which, fertilizer and pesticide cost accounted for the highest proportion, accounting for about 46,82% and 45,79% of the total cost in Winter-Spring and Summer-Autumn crop, respectively

The T-test results indicated that there was no statistically significant difference in total as well as the composition of cost between the two crops due to the similarities in traditional farming technique applied by farmers between Winter-Spring and Summer-Autumn crop

Table 3 The production cost per ha

Cost Category

t-ratio Amount

(Million VND/ha)

Index (%)

Amount (Million VND/ha)

Index (%)

The average yields, returns, output price of

farm household were shown in Table 4 Farm

household made an average profit of about

18,33 and 8,02 million dongs/ha in

Winter-Spring and Summer-Autumn crop, respectively

Net returns/cost ratio in Winter-Spring crop

was 1,37 which is about twice as much as the one in Summer-Autumn crop Yields and output price declined while farming costs were still equivalent to the Winter-Spring crop which was the main reason for the sharp decline in profit in the Summer-Autumn crop

Table 4 The financial efficiency of rice production in Lung Ngoc Hoang Nature reserve

3.3 Stochastic profit frontier model and

Economic efficiency

Linear regression models were statistically

significant at 1% Because the LR statistic and

variance-ratio parameter in both Winter-Spring

and Summer-Autumn crop are statistically

significant, there was sufficient evidence to

conclude that the profit level largely varies

across farms mainly due to the big gap in farming technique The variance-ratio parameter implies that 84% of the variability in profits among farms in Winter-Spring and 91%

the variability in profits among farms in Summer-Autumn due to the existing differences

in the level of technical and allocative inefficiencies

Table 5 Coefficients of stochastic profit frontier model with MLE

Variables

Coefficients Standard

Deviation Coefficients

Standard Deviation

The variance-ratio

Although fertilizer costs accounted for the

second-highest proportion of production costs,

coefficients of fertilizer cost variables in both

Winter-Spring and Summer-Autumn crop were

statistically insignificant Compared to

recommended quantities, majority of farmers in

the study sites did not tend to overuse inorganic

fertilizer, but fertilizer application rate was still improper leading to the negligible impact of fertilizer quality fluctuation represented in the fluctuation of fertilizer cost on rice yield so it was difficult to determine the effect of fertilizer cost on profit

Table 6 The average pure nitrogen, phosphorus, potassium application rate in the study sites

(kg/ha) *

(Source: * Pham Sy Tan & Chu Van Hach, 2014)

Coefficients of pesticide cost variables in both

Winter-Spring and Summer-Autumn crop were

statistically significant and negatively related to

efficiency If pesticide price increases 1% and

all other factors remain constant, profits will

decrease by almost 0,19% and 0,23% in

Winter-Spring and Summer-Autumn crop, respectively In this survey, the proportion of farmers applying pesticide dose equal to the recommended dosage instructed on pesticide container labels was 39% The rest farmers, based on their own experience or their

neighboring farmers’ advice, increased

pesticide dose or mixed two or more types of

pesticides in sprayers before application The

average number of pesticide applications was 5

times per crop season Farmers in study sites

applied more times of spraying pesticide than

the farmers participated in “1 Must- 5

Reductions” model (Can Tho Department of

Agriculture and Rural Development, 2013 cited

from Nguyễn Tiến Dũng & Lê Khương Ninh,

2014) Improper use of pesticide caused

increases in pest incidence (Nguyễn Phan Nhân

& cs., 2015) When pest increases, farmers have

to use more pesticides to cope with the

situation These two actions push up production

costs and reduce profits

Coefficients of seed cost variables are

statistically insignificant High seeding rate

(131 – 350 kg/ha) combined with improper

fertilizer and pesticide use causing the

negligible impact of seed quality fluctuation on

rice yield so it was difficult to determine the

effect of seed cost on profit

Land preparation cost in Winter-Spring crop

had a negative coefficient If land preparation

cost increases 1% and all other factors remain

constant, profits will decrease by almost 0,26%

The majority of farmers did not realize the benefits of the agricultural cultivation Rice - Fish model, so they maintained a high level of investment in the plowing stage leading to a decrease in profits Coefficient of land preparation in Summer-Autumn crop was statistically non-significant Because of disadvantageous weather conditions, there was

no considerable difference in yield and profit under different land preparation level

Coefficients of family labors for farming activities in both Winter-Spring and Summer-Autumn crop is statistically significant and negatively related to efficiency If total working hour that family labor spent on rice production increases by 1% and all other factors remain constant, profits will decrease by almost 1,88%

and 2,27% in Winter-Spring and Summer-Autumn crop, respectively Part of the reason was the limited labor quality, low technical level, the high average age of farmers causing a decrease in labor productivity Low labor productivity required increasing working hours while yield remains unchanged so profits will decrease

Table 7 Frequency distribution of farm specific profit efficiencies in rice production

Profit efficiency score (%)

Number of

Number of farmers Index (%)

Due to the limit farming techniques in Lung

Ngoc Hoang nature reserve, the average profit

efficiency score is 58,51% and 47,38% for

Winter-Spring and Summer-Autumn crop,

respectively The efficiency level largely varies

across farms due to the big gap in farming

techniques and the ability to choose optimal

inputs across farms Farmers exhibited a wide

range of profit efficiency, ranging from 10,23%

to 88,37% in Winter-Spring crop, 31% of

farmers have profit efficiency score lower than

50% In Summer-Autumn crop, the profit

efficiency score ranged from 3,09% to 84,31%,

53% of farmers have profit efficiency score lower than 50% The results implied that a considerable amount of profit can be obtained

by improving technical and allocative efficiency in rice production

3.4 Environmental impacts in rice production

The results showed that to produce one kilogram of rice in Lung Ngoc Hoang Nature reserve global warming impact was 930,0g

CO2-eq., the acidification impact was 1,8g SO2 -eq., and the eutrophication impact was 0,99g

PO43--eq

Table 8 Contribution to the environmental impact of input materials used in the production of 1 kg of rice

Environmental

impacts category

CH4 emissions from rice soil

Contribution to the environmental impact of

input materials used in the production of 1 kg of

rice was shown in Table 8 The impact of

global warming in the production of one

kilogram of rice was largely due to CH4

emissions from rice soil (94,19%) The reason

is that farmers keep the high water level in the

rice field, ranging from 10 – 20 cm and applied

constantly flooding water regime from 7 days

after sowing to 15 days before harvest The use

of nitrogen fertilizer caused the most acidified

(94,94%) and eutrophicated (98,03%) mainly

due to the NO3-, NOx, NH3, N2O emission In

conclusion, the water management and the N

fertilizer application rate were the two main

factors causing environmental impacts in rice

cultivation

4 CONCLUSIONS AND

RECOMMENDATIONS

The average profit efficiency score was 58,51%

and 47,38% for Winter-Spring and Summer-Autumn crop, respectively The profit loss across farms derived from the big gap in farming techniques and the ability to choose optimal inputs such as fertilizers application rate, pesticide application techniques, land preparation, labor quality The improper fertilizer application, especially N fertilizer, affected the economic efficiency, and also made

up 94.94% and 98.03% of substances causing acidification and eutrophication

There is a need for more research on the impact

of intrinsic factors (experience in rice growing, education level of surveyed farmers, farm size…) and external factors (infrastructure system, the assistance of extension workers) on economic efficiency The cited emission values related to the on-field activities might not be representative of rice cultivation in Lung Ngoc

Hoang Nature reserve Therefore, it is

necessary to carry out more studies on

measuring emissions from rice cultivation in

the study sites to calculate the environmental

impact more appropriately

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