Crop Profitability Per Hectare

The cost of production per hectare for each crop in each district is figured out by multiplying the per kg cost (calculated at province level by the CRS) by the yield in a specific district. While the revenue is generated by taking the product of yield and its respective product price. The product prices are obtained from the Agricultural Marketing Information Services (AMIS) website. By definition net revenue (NR) is arrived by subtracting total cost (TC) from total revenue (TR). Hence,
NR=TR-TC
Where, TR=P * Q; TC=TVC+TFC and TVC=∑(P xi * Q xi )
TVC = Total Variable Cost
TFC = Total Fixed Cost
P = Price of Crop
Q = Quantity of Crop
Pi xi = Input price
Q xi = Quantity of Input

Selection of Suitable Districts Based on Minimum Cultivated area for a given Crop The cost of production data shows that almost all crops are grown in different districts. However, some crops were grown in very small patches for some local need, or on some exceptionally suitable location of otherwise non-suitable districts for some crops. Using data for districts with very small, cultivated areas for a crop can result in outliers and can be misleading. In order to resolve this issue, a baseline of a 20% area under a crop compared to the maximum area under that crop in a district is selected as criteria for including districts in economic suitability comparison (i.e. high, medium, low suitability/profitability comparisons).

Economic Suitability Criteria In order to develop an economic suitability map from the existing crop suitability maps, subjective criteria are developed. 66th percentile using districts with maximum returns for a crop as criteria is considered highly suitable; 33rf percentile as moderately suitable and the remaining as a marginal suitable district.
Highly suitable: > 66th percentile of maximum profit district
Moderately suitable: > 33rd percentile of maximum profit district
Marginally suitable: below 33rd percentile of maximum profit district



Reference: Ahmad, A., Khan, M.R., Shah, S.H.H., Kamran, M.A., Wajid, S.A., Amin, M., Khan, A., Arshad, M.N., Cheema, M.J.M., Saqib, Z.A., Ullah, R., Ziaf, K., ul Huq, A., Ahmad, S., Ahmad, I., Fahad, M., Waqas, M.M., Abbas, A., Iqbal, A., Pervaiz, A., Khan, I.A. 2019. Agro-ecological zones of Punjab, Pakistan – 2019. Rome,FAO


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