Research Paper on Understanding Khyber Pakhtunkhwa, Pakistan’s Tobacco Farms’ Profitability, Supply, and Input Demand

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Title: Understanding Khyber Pakhtunkhwa, Pakistan’s Tobacco Farms’ Profitability, Supply, and Input Demand

Abstract: Numerous studies focus on different aspects of tobacco processing and cigarette manufacturing, but little is known about the profitability, supply-demand dynamics, and input demand of Pakistani tobacco farms. Our study closes this gap by using survey data from 140 tobacco farms and a profit function approach to analyze farm-level profitability, input demand, and output supply. The findings demonstrate that tobacco farming is not particularly profitable and that farmers are sensitive to changes in market prices for inputs and output. The most significant factor affecting output supply and demand for inputs is the price of tobacco, and farmers’ reactions to rising tobacco prices in the study area are positive but inelastic. The use of variable inputs, such as labor, mechanical power, pesticides, and farmyard manure, is significant when deciding how to allocate resources for the production of tobacco. As a result, an increase in the price of green tobacco leaves would result in a significant rise in the need for agricultural inputs like fertilizers, labor, machinery, pesticides, and farmyard manure. The rising cost of inputs in the study area has a negative impact on tobacco production. Land area is one of the fixed factors that significantly affects tobacco productivity in the province. As the first study to quantify input demand and output supply at the farm level, the results show that rising tobacco production necessitates higher output prices as well as reasonable input prices.

Keywords: tobacco supply; trans-log profit function; profitability; input demand; Khyber Pakhtunkhwa

Paper Quality: SCOPUS / Web of Science Level Research Paper

Subject: Economics

Writer Experience: 20+ Years

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