Determinants of Seed Cotton Prices: A Case Study of Small Cotton Growers in District Khanewal, Pakistan *Manan Aslam, **Dr.Abdul Ghafoor and ***Shafqat Rasool *Program Coordinator (Agribusiness Management)∕ Lecturer Institute of Applied Sciences, University of Management and Technology, Lahore, Pakistan

Outline Introduction Objective Methodology Major Findings Conclusion

Introduction: Basic Facts of Agriculture Agriculture is the backbone of Pakistan’s economy and it accounts for 21.4% to GDP It is a dominant driving force for growth and the main source of livelihood for 43.7 percent of the country’s population Agriculture sector comprises of crops, livestock, forestry and fisheries sub sectors Major crops include wheat, rice, cotton, and sugarcane which contribute 25.6 percent whereas minor crops include fruits, vegetables and condiments which contribute 11.6 percent value addition in agriculture Source: Pakistan's Economic Survey

Basic Facts of Agriculture …. Cotton Cotton as ‘white gold’, is an important cash crop in Pakistan. The Pakistani cotton industry is a vital component of the country’s economy, accounting for 1.4 % of Gross Domestic Product and 6.7 percent in agriculture value addition Cotton is cultivated on an area of 2806 thousand hectares, with production of 12.8 million bales for the year On global basis, Pakistan is the fourth largest cotton producing country of the world, after China, India and USA Pakistan is the third largest consumer, consuming 10 percent of the world cotton production. Source: Pakistan's Economic Survey

One of the most important and sensitive issues in cotton marketing in Pakistan is its pricing system. Both seed cotton and lint cotton are priced mostly on the basis of subjective assessment Some quality conscious millers and ginners do evaluate cotton on the basis of quality parameters The situation is now changing and the cotton sector in Pakistan is becoming more systematic and modernised Introduction…..

Objective of the Research This study aimed at estimating the impact of the major quality attributes on the prices of seed cotton using a hedonic price model

Methodology Data This study is based on primary data collected from 40 cotton growers of Khanewal district for the year This district has major share in total cotton production and area in the Punjab province. A stratified random sampling technique (equal allocation) was used to select the sample. At first stage, two tehsils of district Khanewal (Khanewal city and Kabirwala) were selected randomly. At the second stage, four villages from tehsil Kabirwala (Chah Jamalwala, Chah Meharanwala, Mouza Baraywala and Mouza Pulbagar) and four villages from tehsil Khanewal (Nanakpur, 168/10R, 120/10R and 170/10R) were selected randomly. Then at the third stage, forty cotton growers (twenty growers from each tehsil including five from each village) were selected randomly.

Methodology Analytical Technique I have adopted the model suggested by Hudson et al. (1995) and Bowman (1989), and use the notation given by the Rosen (1974 ). Unlike general price level models of an agricultural commodity, determined by supply and demand variables, hedonic models determine implicit prices of specific attributes embodied in a product on the basis of the value (utility or productivity) end-users ascribe to these attributes. A hedonic price function relates the price of a product (good or service) to the various attributes or characteristics embodied in it

Hedonic Regression Model I used hedonic regression model to check the most important variables affecting the prices of seed cotton. P=f (Z1,Z2,Z3,Z4,Z5) Ln P = βo + β1lnZ1 + β2lnZ2 + β3lnZ3 + β4lnZ4 + β5lnZ5+μi Where P= Prices of seed cotton (Rs./ Maund) Z1=Fiber color of seed cotton Z2=Fiber length of seed cotton Z3=Fiber strength of seed cotton Z4=Low evidence of contamination Z5=Less use of pesticides on seed cotton βo is the intercept, βs are slope coefficients, μ is the random error ln = Natural log Methodology

Major Findings Collinearity Statistics of VariablesVariablesTolerance Variance Inflation Factor (VIF) Fiber color Fiber length Fiber strength Low evidence of contamination Less use of pesticide

VariablesCoefficient Standard Error T-ValueSignificance (Constant) Fiber color * Fiber length * Fiber strength * Low evidence of contamination Less use of pesticide R2R2R2R Adjusted R F- Value Summary of Estimated Hedonic Price Model for Seed Cotton Major Findings

Conclusion This study estimated the impact of major quality attributes (staple length, strength, color, low evidence of contamination and free from pesticides etc.) on the prices of seed cotton in Punjab, Pakistan. The findings of this study confirmed that prices of seed cotton were highly dependent on fiber color, length, and strength of seed cotton. So in order to improve the cotton pricing system in Pakistan, an awareness campaign should be started to inform the farming community about the importance of these quality traits, so that cotton growers may be motivated to produce quality seed cotton.

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