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An economic evaluation of a livestock production project of Bali, Indonesia

University of British Columbia

This research was undertaken to determine the profitability of investing research funds into the Three Strata Forage System (TSFS) project, a cattle production project funded by the International Development Research Centre (IDRC) and carried out in the village of Pecatu, Bali. The purpose of the project was to increase the production of cattle and productivity of the traitional farming system by introducing different grass, ground ground legumes, fodder shrubs and trees, and changing the pattern of land allocated to these forages. A TSFS plot foregoes 0.09 hectares of crop production to produce 0.09 hectares of grass and ground legumes (strata 1), 2000 shrubs (strata 2) and 42 fodder trees (strata 3) on the perimeter of a 0.25 hectare crop field. Cattle are fed exclusively with forages obtained from the plot, in contrast to the traditional system where cattle are tethered on marginal land and fed with feed obtained from other locations on the farm. The TSFS researchers have claimed that the TSFS will "not only increase the quantity and quality of the forages, but it could also increase the stocking rate [of cattle] and carrying capacity of the land, increase the soil fertility, reduce the soil erosion, increase the firewood supply, increase the farm income, induce other on-farm activities, and induce better ecological balance of the environment" (Nitis et al, 1989). In this study, the claims made by TSFS project researchers have been evaluated using financial analyses. Using data collected from farms in Pecatu, Bali, the values of TSFS production inputs are estimated from local market prices and regressions estimating farm production relationships. The results of the financial analyses were then used to infer the social welfare effects of the TSFS. The results of the analyses show that the TSFS plot incurs negative returns, relative to a traditional crop field. Elements of the TSFS system, such as improvements to the local ecosystem, are believed to have a minimal effect on the final estimates of the profitability of the plot and are excluded from the analysis. The large negative returns of the plot indicate that there are resource allocation costs associated with the transfer of high value crop land to the low value forage production advocated by the TSFS. The grasses and ground legumes introduced by the TSFS project were not familiar to farmers in Pecatu. However, the farmers were willing to experiment with the new varieties, with varying degrees of risk averseness and success in adoption (in accordance to the findings of Antle and Crissman (1990)). The tree and shrub forages of the TSFS were already known to farmers in Pecatu; the introduction of the TSFS did not appear to affect the use of tree fodder resources but may have increased the use of forage shrubs. The results of financial analysis of individual project forages indicate farmers have preferences for specific forage species. While farmers agreed to participate in the TSFS project due to financial incentives, they found they could reduce the costs of the TSFS by adopting profitable aspects of the TSFS, using a more flexible approach to land allocations and choice of forage species. As the shrubs, grasses and ground legumes are well-known throughout Asia, it appears that the only new management techniques introduced by the TSFS are the planting arrangement and feeding system - and these aspects have resulted in negative returns. Therefore, any positive welfare effects associated with the project are due to an increase in the rate of adoption of the forages included in the TSFS - although these effects are not large enough to offset the losses imposed by an inefficient allocation of land and labour resources to forage production. Reviewing all resource allocation effects of the TSFS, and given the size of the payments needed to obtain farmer participation it is clear that the net welfare effects are negative. Notwithstanding the optimistic claims of the project literature, the forages produced by the TSFS regime are not valuable enough to match the profitable crop activities they are supplanting. There is evidence to suggest that TSFS researchers have been prone to misjudge the true costs and benefits associated with the TSFS plot. This arises not only as a result of overly optimistic claims of project benefits and understated project costs, but a pervasive disregard for the rationality of traditional farmers. For future research projects, it is recommended that the funding agency, IDRC, require ex ante economic analyses, to determine the true social costs and benefits of a proposed technology. In this way, projects of net negative social value can be identified and improved before research resources have been allocated to the generate an inefficient technology.

Text

2010-11-03

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http://hdl.handle.net/2429/29772

Agricultural Economics

University of British Columbia

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