Working Papers   144

Profitability and Technical Efficiency of Chilli Farms in Cambodia


Published: 12-Jun-2024
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Abstract/Summary

In this study, we examine the revenue, costs, profits and technical efficiency of chilli farms in Cambodia. We employ a representative sample of 542 chilli farming households from Banteay Meanchey, Battambang, Kampong Chhnang, Kampong Cham, Tboung Khmum and Kandal. The sample was randomly selected using a two-stage stratified sampling design, where villages were chosen in the first stage as the primary sampling unit and households engaged in chilli production were selected in the second stage as the secondary sampling units. The selection of primary sampling units was proportional to the number of households engaged in chilli farming in each sampled village, and the secondary sampling units were randomly chosen using a systematic sampling approach. Face-to-face interviews were conducted by experienced and qualified enumerators using tablets, and data collection was monitored and cleaned daily. Researchers     employed two analytical frameworks: (1) a revenue-costs framework to calculate profits and (2) a stochastic frontier analysis with a Cobb-Douglas production function to estimate technical efficiency and to investigate its determinants. The analysis is conducted at the plot level, encompassing a total sample of 719 plots.

The results show that bird’s eye, lady’s finger (cayenne pepper), white chilli and Hawaii (sweet) pepper are popular varieties, with bird’s eye and lady’s finger being the most cultivated. The average cultivated land area for chilli farming is 0.21 hectare (ha), yielding an average of eight     tonnes of fresh chilli per hectare. Farmers can sell fresh chilli at an average price of KHR5,310 (USD1.32)/kg, and dried chilli for KHR10,000 (USD2.5)/kg. On average, farmers could attain accounting profits of KHR18.1 million (USD4,500)/ha. This constitutes approximately 50 percent of the total revenue of KHR36.5 million (USD9,125)/ha. The cultivation of bird’s eye chilli tends to provide the highest profits compared to other varieties. Investment consists of expenditures on materials, inputs, hired labour, rent for land use and capital depreciation. Specifically, costs related to inputs (such as seeds, fertiliser and pesticide) and hired labour for land preparation, plantation, care and harvest contribute to 43 percent and 33 percent of the total costs, respectively. About 81 percent of the total hired labour costs are allocated to harvest activities, reflecting the multiple harvests required for chilli cultivation.

The results also indicate that there remains room for improvement in chilli yields, as 71 percent of the plots demonstrate technical efficiency levels of 60 percent or lower relative to the production frontier. Additionally, only about two percent of the plots could attain a technical efficiency level of 80 percent from the frontier, and none could achieve 100 percent efficiency. Farmers operating plots with technical efficiency close to the frontier could achieve an average yield of 15.25 tonnes/ha (95 percent CI: 7.96-22.60) on plots with an average land size of 0.39 ha (95 percent CI: 0.25-0.70). Several factors, including land size, household size, geographical location, and the presence of diseases and insects, are potential determinants influencing the technical efficiency of chilli farming. For instance, smaller land sizes may contribute to lower yields, as can the prevalence of diseases and insects. When asked about the challenges in chilli cultivation, farmers identified low and fluctuating chilli prices, along with issues of diseases and insects, as the main concerns.

The Ministry of Agriculture, Forestry and Fisheries, along with other relevant ministries, could further enhance efficiency of chilli cultivation by exploring the following initiatives.

  • Consider the feasibility of expanding cultivated land size, especially for households managing plots smaller than 0.2 ha     
  • Provide extension services tailored to optimising input utilisation and addressing issues related to diseases and insects
  • Explore technological applications aimed at enhancing production efficiency and reducing costs, with a specific focus on mitigating input and labour expenses, given that chilli farming is identified as labour-intensive   
  • Investigate extending and enhancing production during the wet season (June-October), as chilli farmers commonly encounter challenges in cultivation, leading to comparatively lower yields and quality, consequently reducing prices and profits     
  • Continue efforts to reduce production costs with a particular focus on minimising expenditures associated with fertiliser, pesticides, electricity and fuel     



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