Relative Price Index Approach for Comparing Farming System Models
K.K. Saxena, K.P. Singh, V. S. Kadian & S.N. Singh
Department of Agronomy, CCS Haryana Agricultural University,
Hisar –125 004 (Haryana) India.
Abstract
Several types of deterministic and probabilistic models have been used for
making comparison of various systems. In agricultural systems particularly
farming systems, numbers of methodologies and approaches have been suggested
for developing models based on resource use efficiency, output and economic
analysis. Most of the models and indices used so far have been lacking in their
consistency due to variation of prices from year to year. Thus studies were
conducted at CCS Haryana Agricultural University to work out an index based on
fixed prices (base 1982) which has been termed as Link Relative Index (LRI). The
LRI of arable farming 2.5 acre (1.0 ha) irrigated land and LRI of arable farming +
one crossbred cow on 2.5 acre (1.0 ha) irrigated land (farmer’s practice) have
been considered as standard LRI(100). It was observed that Link Relative Index
(LRI) computed on the basis of price index is an efficient index for comparing
various farming system models. On the basis of these studies it is revealed that
computed LRIs gave a good measure of comparison among various farming
system models and this approach can be used for identifying suitable farming
systems for various farming situations. The pattern of net income and coefficient
of variation also suggests that LRI computed in this study is an efficient index for
comparing farming systems .
Introduction
Integrated mixed farming systems are being recommended for small holdings in
developing countries (Macadam, 1988; Singh et al.,1993; Devadoss et al., 1985
and Reijntjes et al. 1996). Various methodologies and approaches for comparing
economic viability and adaptability of these farming system models have been
advocated under different situations (Morley and White, 1985; Bennett and
Macpherson, 1985). However, these approaches lack consistencies due to
variations in prices during different years. Keeping these facts in view, a new
approach, based on fixed price of a base year has been developed and relative
price indices have been worked out for various farming system models and used
for comparing them.
Materials and Methods
The data on various items of expenditure viz.; green fodder, dry fodder,
concentrate, labour, depreciation on fixed cost and interest on working capital,
etc. and income viz.; sale of the milk, appreciation in value of animals, crop
produce and by-products, sale of followers, etc. were recorded for various farming
systems which were in operation at different size holdings ranging from 1.0 acre
(0.4 ha) to 4.0 acres (1.5 ha) irrigated land at the research farm of Department of
Agronomy, Chaudhary Charan Singh Haryana Agricultural University, Hisar
from 1984-85 to 1995-96. The economics of various farming systems for different
years (Table 1) were worked out on the basis of the prices of inputs and outputs
prevailing during that year. Yearly net income was converted into modified net
income on 1982 prices by considering annual inflationary factor of prices in Hisar
district (Statistical Abstract, Haryana, 1995-96). Pure arable and arable farming +
one crossbred cow on 2.5 acres (1.0 ha.) land were considered as the farmer’s
practice as about 35% of the total farmers in Haryana belong to this size of land
holding. The net income based on 1982 prices of these farming systems were
considered as 100 (base). Indices relative to these two farming system models
were worked out separately and termed as link relative index (LRI) by using
following formula:
NI
Link Relative Index (LRI)  1 x 100
NI0
NI0 - mean net income of arable farming/farmer’s practice on 2.5 acre (1.0 ha) (base 1982 prices).
NI1 - mean net income of the system (base 1982 prices).
The LRI were computed by taking either arable farming or farmer’s practice as
the standard base among farming system models.
Results
LRI computed based on pure arable farming showed that highest LRI was
obtained with mixed farming on 2.5 acres (1.0 ha.) land with three crossbred
cows, which was followed by mixed farming on 2.5 acres (1.0 ha.) land with three
buffaloes. Other farming system models viz.; arable farming + 1 crossbred cow
on 2.5 acres (1.0 ha) land, mixed farming either with crossbred cows or buffaloes
on 4.0 acres (1.5 ha) or 1.5 acres (0.6 ha) or 1.0 acre (0.4 ha) land gave lesser LRI
than the standard one. Negative LRI observed with mixed farming of buffaloes
on 1.0 acre (0.4 ha), 1.5 acres (0.6 ha) and 4.0 acres (1.5 ha) land. The results
clearly indicate that LRI of mixed farming of three crossbred cows on 2.5 acres
(1.0 ha) land was 2.76 times to arable farming on 2.5 acres (1.0 ha) land and that
of mixed farming of three buffaloes on 2.5 acres (1.0 ha) land was 1.26 times. In
the case when LRI were computed on the basis of arable farming + 1 crossbred
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cow on 2.5 acres (1.0 ha) land, a value of LRI of 550 was obtained with mixed
farming + three crossbred cows on 2.5 acres (1.0 ha) land which was followed by
mixed farming of 3 buffaloes on 2.5 acres (1.0 ha) land. Arable farming + 1
crossbred cow on 4.0 acres (1.5 ha) land, arable farming on 2.5 acres (1.0 ha) land
and mixed farming with 1 crossbred cow on 1.5 acres (0.6 ha) land gave higher
indices than the farmer’s practice. Other models gave lower indices than the
farmer’s practice. This index also proved to be a good indicator for comparison
of various farming systems.
Discussion
When we compare different farming system models on the basis of average actual
net income, the differences cannot be compared precisely due to variations in
prices in different years and, therefore, it is necessary that the net income for all
years should be brought to a particular level so that the income can be converted
into actual net income on a standard price base. In this case, the prices of 1982
were considered as the base level prices and inflationary measures of different
years were taken into consideration for converting the price into actual price.
The C.V.s worked out for various values of indices gave wide variations in
income obtained during different years due to factors like consumption of inputs,
cost of inputs, prices of outputs, etc. However the values of C.Vs in most of the
cases were within the tolerance limit. This indicates that LRI calculated on the
basis of these net income based on fixed based prices is a good measure for
comparing farming systems models. During some years C.V.values were very
high due to wide fluctuations in weather conditions, which affected the overall
productivity and production, and thus income in different farming system units.
References
Bennett D. and Macpherson D.K., (1985). Structuring a successful modelling
activity. In Agricultural Systems Research for Developing Countries. Ed. J. V.
Remenyi. 70-76.
Devadoss S., Sharma B.M., and Singh C. (1985). Impact of farming systems
onincome and employment of small farms in Theni Block (Tamil Nadu).J.
Farming Systems. 1(1&2). 48-57.
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Morley F.H.W. and White D.H. (1985). Modeling biological systems. In
Agricultural Systems Research for Developing Countries. Ed. J. V. Remenyi. 6069.
Macadam R.D. (1988). System agriculture – an alternative approach to
agriculture education, research and extension for rural development. Proc.
Workshop on Syst. Agri. in Education Learning to deal with Complexities, 27-39
July, 1988, Hyderabad, A.P. India, p 3-10.
Singh K.P., Singh S.N., Kumar Harish, Kadian V.S. and Saxena K.K. (1993)
Economic analysis of different farming systems followed on small & marginal
land holdings in Haryana.Haryana J. Agron. Vol 9 (2). 122-125.
Reijntjes C., Haverkort and Water-Bayer A. (1996). Farming for future, 250 p.
Macmillan Education Ltd., London and Basingstoke
Acknowledgements
The authors acknowledge the contribution of multi-disciplinary research team of
farming system group of Department of Agronomy, CCS Haryana Agricultural
University, Hisar (India) during the course of studies conducted for developing
integrated farming system models.
Corresponding Authors Contact Information:
Dr. K.K. Saxena, Professor of Statistics, Department of Math & Stat, Chaudhary
Charan Singh Haryana Agricultural University, Hisar. Tel. No. 0091-166244400. e.mail : aks@hau.nic.in
Dr. K.P. Singh, Professor of Agronomy and Controller of Examinations, CCS
Haryana Agricultural University, Hisar, Haryana-125 004(India), Phone: 911662-31518 (O), 35076(R), Fax : 91-1662-34613, coe@hau.nic.in, Theme 1
Poster Manuscript, Small farm diversification and competitiveness.
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Table I Net Income, net income (1982 base price),LRI and C.V. of different farming system models
Sr.
No
.
Farming System Model
1.
2.
3.
4.
Arable farming
Arable farming + one CB cow*
Mixed farming + three CB cows
Mixed farming + three buffaloes
5.
Arable farming
6.
7.
Arable farming + one CB cow
Mixed farming + one buffalo
8.
Arable farming
9.
10.
11.
Mixed farming + one CB cow
Mixed farming + two CB cows
Mixed farming + one buffalo
12.
Mixed farming + two buffaloes
13.
14.
15.
Arable farming + one CB cow
Mixed farming + four CB cows
Mixed farming + four buffaloes
Av. actual
net income
($)
Av.net
income
on 1982
prices ($)
Link Relative
Index based on
arable farming
on 1 ha.land
ANI
FSM
On 2.5 acres (1.0 ha) land-84-85 to 90-91
146
115
100
98
58
51
441
317
276
194
145
126
On 1.0 acre (0.4 ha) land-91-92 to 92-93
18
46
21
96
44
38
-17
-7
-6
On 1.5 acres (0.6 ha) land-91-92 to 92-93
23
59
27
125
58
50
42
20
17
-7
-19
-8
-227
-103
-89
On 4.0 acres (1.5 ha) land-93-94 to 95-96
233
76
66
135
45
39
-343
-114
-99
Link Relative
Index based on
arable farming +
1CrossBred cow
(Farmer’s practice)
C.V.
(%)
200
100
550
251
52.5
26.8
37.4
73.9
36
14.0
76
-12
0.8
----
46
10.0
101
34
-14
26.5
41.0
----
-178
----
131
78
-197
26.5
66.0
----
* Farmer’s practice; CB = Crossbred (Hariana x Holstein freezen)
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