Farmers reported selling more crops, but when corrected for inflation, gross revenues declined over time. The costs and benefits of developing markets have been unevenly distributed with small holders unable to capitalize on market opportunities and wealthier farmers engaging in input intensive cash cropping. Farms growing vegetables had an average gross margin of US$137 per year compared to US$12 per year for farms growing only staple crops.
However, the area under production is small and, while vegetable production is likely to continue Key words: Agriculture, Cash crops, Gross margin, Household economics, Market inequity, Poverty Introduction Cash cropping has been promoted by development specialists as a mechanism to alleviate rural poverty in countries such as Nepal. Programs have capitalized on existing transportation networks, the proximity to urban centers or niche markets (Panday, 1992). But there are concerns that agricultural commercialization by-passes the poor.
The cash and land quality requirements of capital intensive farming may limit the capacity of poorer farmers to invest, while the risks associated with yield and price variability may limit their willingness to participate in commercial production Both the Agricultural Perspective Plan (APR, 1995) and the ninth National Plan (GON, 1998) of Nepal promote the intensification of agriculture and increased cash crop production. In the Mid-hills of Nepal near Kathmandu, potato and tomato production have increased dramatically in the last 10 years (Brown and Shrestha, 2000).
But, vegetable production is demanding of soil, water, and human resources. A systematic assessment of cash cropping is required to determine the impact on household well-being. The aims of this paper are five-fold: 1) to determine the relative profitability of vegetable production in the Mid- hills of Nepal; 2) to assess the economic impact of incorporating vegetables into the dominant cropping patterns; 3) to analyze the variability between households; 4) to assess the impact of fluctuations in price; and 5) to evaluate temporal changes in household well-being with the incorporation of vegetable production.
Methods The relative profitability of agricultural production between farms provides a mechanism to compare the economic status of farming households with diversified cropping systems. An indication of the profitability of each farm can be obtained by computing gross margins, defined as total returns less total variable costs. Total returns are equal to the value of all crops produced (including crop residues), irrespective of whether the crop is sold. Total variable costs include: the purchase of seed, fertilizer, and pesticides; hiring oxen; and all labor involved in cultivation activities.
Labor includes the time spent in planting, irrigation, fertilizing, spraying, weeding, harvesting and transportation and selling and includes the opportunity cost of family labor. The gross margin can thus be viewed as the return to fixed costs (land and livestock) and management. Gross margin analysis, in this context, focuses on production or income with respect to agriculture. As it does not take into account the time value of money, gross margins are not sensitive to interest rates, and are a good first approximation of financial feasibility.