Supply response of sugarcane farmers in Thailand

Abstract

Sugar is one of the major exports of Thailand and sugarcane is the most important raw material used in producing sugar. Time series data for 8 years from 1957/68 to 1974/75 were analysed to estimate a supply response function for sugarcane farmers in 4 regions of Thailand, viz. Central, Eastern, Northern and North-eastern regions. A priori, farmers' decisions on the sugarcane planted area were expected to be influenced by relative expected profitability per rai of sugarcane, the level of rainfall at the sowing period, the influence of the Sugarcane Farmers' Association, the activity of quotaman, the cost of inputs, and Government intervention. Relative expected profitability per rai is defined as expected price per tonne of sugarcane times its expected yield per rai (i.e. gross return) divided by the product of expected price per tonne of the competing crop and its expected yield per rai. Expected yield was found by regressing yield over time. Farmers' price expectation formations were specified using the Nerlovian Expectation and the Naive models. Due to unavailability and unreliability of data, many variables were inevitably dropped. The general model was simplified and adjusted. Good fits, therefore, were not obtained. However, it was found from the study that farmers in two regions, viz. Eastern, and North-eastern regions have an inelastic supply response function. It is only farmers in the Northern region which have an elastic supply response function ranging from 2.00 to 5.52 depending on differing expectation models and the use of differing techniques. Policy recommendations, consequently, were not made because of the inadequacy of the results obtained.