Let us get back to what Beni wrote.
1 how many rice farmers have only 5 acres? I know that there is an increase in size of plots but have no figures.
2. The cost of production figure at $80000 per acre seems high. What is the marginal cost of production per acre for small farmers as against large farmers?
3. Beni has not addressed the issue of market prices as against cost of production in his diversification proposal. The cost factors small versus large operations will come into play. Also, the issue of market saturation within the country and how we compete in the international market if the aim is to export.
4. His production numbers are sketchy and seem to be optimistic. obviously, the income stream seems very weak. Goats growing to be 100 lbs. in one year? 2 gallons of milk per day for the whole year?
5. Banks need to see a strong income stream if they are to lend start-up money for infra-structure, etc. will need an agric development bank.
6. Beni might want to do a demonstration project, put his money where U.S. Mouth is. Why is he not doing this if there is money to be made?
what do people here think?
So what you think is the reason for the article? 5 acres does seem small for a rice farmer.
How would you calculate the marginal cost for no. 2? Lets say the 5 acre farmer has to buy a combine compared to a 5000 acre farmer buying a combine.
It would not be wise for the farmer who has 5 acres of land to purchase a combine, unless he plans to use it to cut other farmers' rice. The larger farmer will have a lower marginal cost becUse of the size and the efficiencies that result. The marginal cost in no. 2 will be the added cost as one increase a unit of production, in this case a bag of paddy.
the days of the small farmer are slowly going because we need to be very efficient if we hope to successfully compete in the international rice market. In the old days, it was difficult to survive on five acres but farmers did it because of family labour and their labour. Additionally, farmers worked "day hand" for others so when they needed the extra labour, they were able to get it without additional monetary costs. Additional labour was available to be hired. Later, farmers paid to have their fields ploughed and for combines to reap. Rice production has been mechanized, the children do not want to work on the paddy fields any more and the green revolution introduced Varieties that are heavily dependent on pesticides and fertilizers, thereby increasing the cost of production. In this environment, the small farmer is continually squeezed out. Many small farmers, anecdotal evidence suggests are renting out their land to larger farmers and receive a monetary rent or a certain number of bags of paddy per acre rented.
You do have the concept of marginal cost correct. However, I do not think you could do a marginal cost analysis to compare a 5 acre guy to a 5,000 acre guy. I think average cost per acre might be more useful.
In terms of marginal costs if the 5 acre guy reaps 150 bags the cost of his last bag might be pretty much the same as his first. For the large guy with 150,000 bags his marginal cost for last bag could be close to $0 or it could be the cost of a new combine if he needs a new combine to cut the last bag.
Marginal costing is all well and good as long as you have achieved critical mass and have assets to leverage beyond critical mass.