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Economics of Sugarcane Production in Pakistan: A Price Risk Analysis

Published by:
Publication date
Number of Pages
Type of Publication:
Articles & Journals
Focus Region:
Asia and the Pacific
Focus Topic:
Market / Trade
Type of Risk:
Type of Risk Managment Option:
Risk reduction/mitigation
Mohammad F. Hussain, Sofia Anwar, Zakir Hussain
International Research Journal of Finance and Economics

The paper examined the economics of sugarcane production and its competitiveness in the up-and-coming open trade economy. The study also analyzed the extent of policy bend and agricultural safeguard. The data on cost of production series of sugar cane crop were collected from the Agricultural Prices Commission (APCom). Punjab and Sindh, the two major sugarcane producing provinces were the focus of the study The Policy Analysis Matrix (PAM) was selected as analytical framework. The crop budgets were constructed both in financial and economic prices. The time series data from 1990-2002 on world prices of sugar cane and fertilizers (DAP and Potash) were utilized to estimate the risk prices. These risk prices were later on utilized to estimate the economic risk prices. The Nominal Protection Coefficient for inputs (NPI) and output (NPC) and the Effective Protection Coefficient (EPC) was used to estimate the policy distortions. The Domestic resource Cost ratio (DRC) was applied to show comparative advantage. Sugarcane is an important cash crop and provide raw material to nearly 78 Sugar factories. The excess supply and demand of sugar was cyclical in nature. Therefore, analysis was performed keeping in view both import and export parity prices. The analysis lead us to conclude that Pakistan (Punjab and Sindh) has no comparative advantage in producing sugar at export parity prices (price risk scenario), however, crop can be grown as an import substitution crop to cater the needs of sugar industry.