Economics of cost and returns of coffee production in Kodagu district of Karnataka

Introduction

Coffee is an important plantation crop and a major source of farm income in the traditional coffee-growing regions of Karnataka. Kodagu is one of the prominent coffee-producing districts of the state, where coffee cultivation forms an important component of the agricultural economy. The profitability of coffee production depends not only on yield and price realization but also on the level and composition of cultivation costs. Increasing expenditure on hired labour, manure, fertilizers, irrigation and other farm operations makes the assessment of cost and returns essential for understanding the economic viability of coffee cultivation. The economic performance of a plantation enterprise is commonly assessed through standard cost concepts such as Cost 'A', Cost 'B' and Cost 'C'. These concepts help in separating paid-out expenses from fixed and imputed costs and provide a comprehensive measure of profitability. Cost and return analysis also enable comparison among different farm-size groups and helps identify whether the returns generated from coffee are sufficient to cover both explicit and implicit costs. Therefore, the present study was undertaken with the specific objective of estimating the cost and returns of coffee production among small and large farmers in Kodagu district of Karnataka.

Materials and methods

Kodagu district was purposively selected for the study. Three taluks, namely Madikeri, Virajpet and Somvarpet, were selected for the investigation. A total of 90 coffee growers were included in the sample, comprising 45 small farmers and 45 large farmers. Small farmers were defined as those operating less than 10 hectares, whereas large farmers were those operating more than 10 hectares. Primary data relating to coffee cultivation were collected from the selected growers and used for estimating per-hectare cost and returns.

Tools of analysis

Estimation of Production Costs and Returns: The cost of coffee production was estimated on a per-hectare basis using the standard cost concepts Cost 'A', Cost 'B' and Cost 'C'. Cost 'A' included paid-out cultivation expenses, Cost 'B' included Cost 'A' together with rental value of land, interest on fixed capital and amortization cost, while Cost 'C' further included the imputed value of family labour. Gross income was estimated from the value of coffee output. Net returns were obtained by deducting the respective cost from gross income, and the Benefit-Cost ratio was calculated as the ratio of gross income to the corresponding cost.

Results and discussion

Cost of cultivation of coffee

The per-hectare cost of cultivating coffee for the two farm-size groups and the overall sample is presented in Table 1. The cost of cultivation was estimated using the standard cost concepts Cost 'A', Cost 'B' and Cost 'C'. At the overall level, Cost 'A' was ₹1,32,057.55 per hectare, representing 67.11 per cent of Cost 'C'. Cost 'B' amounted to ₹1,95,669.31 per hectare, while Cost 'C' was ₹1,96,791.61 per hectare. Thus, the inclusion of rental value of land, interest on fixed capital, amortization and family labour considerably increased the total cost from Cost 'A' to Cost 'C'. Among the farm-size groups, small farmers incurred a higher total cost of cultivation than large farmers. Cost 'A', Cost 'B' and Cost 'C' for small farmers were ₹1,36,816.43, ₹2,00,908.38 and ₹2,01,858.58 per hectare, respectively. In the case of large farmers, the corresponding values were ₹1,27,298.68, ₹1,90,430.24 and ₹1,91,724.64 per hectare. The lower Cost 'C' among large farmers indicates a modest advantage in per-hectare cost management at the larger farm scale. Human labour constituted the most important paid-out component of cultivation cost. For small farmers, hired male labour amounted to ₹91,298.97 per hectare, accounting for 45.23 per cent of Cost 'C', while hired female labour accounted for 9.86 per cent. For large farmers, hired male labour was ₹87,479.55 per hectare, representing 45.63 per cent of Cost 'C', and hired female labour accounted for 6.30 per cent. Manure accounted for 5.60 per cent and 6.56 per cent of Cost 'C' among small and large farmers, respectively. These results show that labour and other operating inputs were the major contributors to coffee cultivation expenditure. [1] also emphasized the economic viability of coffee-based production systems in Kodagu.

Costs, returns, gross income and B:C ratio from coffee cultivation

Conclusions

The study revealed that coffee cultivation in Kodagu district was economically viable and profitable for both small and large farmers. The overall Cost 'C' was ₹1,96,791.61 per hectare, while gross income and net return were ₹3,38,262.62 and ₹1,41,471.01 per hectare, respectively. Hired human labour was the major component of cultivation cost. Large farmers incurred a comparatively lower Cost 'C' of ₹1,91,724.64 per hectare and obtained a higher net return of ₹1,43,950.07 per hectare. The overall B:C ratio of 1.72 at Cost 'C' confirms the economic feasibility of coffee production. Therefore, improved labour management, efficient input use and cost control can further strengthen the profitability of coffee cultivation in Kodagu district.

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