Economic Safety Margin of Bombax ceiba Production in Selected Areas of Bangladesh

Abstract

Bombax ceiba (L.) is a medicinal plant that is grown commercially by the farmers in Bangladesh for
its’ roots, where farm revenues are inherently volatile, subject to debilitating diseases, lack of quality
varieties, and the vagaries of harsh weather. This study was carried out to determine the profitability
of Bombax ceiba root production by assessing costs and returns, their relations, and also the risk-
bearing abilities through breakeven and margin of safety analyses. A total of 31 sample Bombax
ceiba root producers were purposively interviewed. The overall cost of Bombax ceiba root
production was determined to be Tk. 409855.16 per hectare, where labor cost accounting for the
major portion of the total cost. The gross and net margins were about Tk. 436431.30 and Tk.
264209.01, respectively. Regression analysis showed that gypsum, TSP, and irrigation have
contributed significantly and positively to yield increase (increase revenue), and seed, human labor,
and urea cost have caused negative relations on yield. The breakeven analysis indicated that Bombax
ceiba root production has a high level of risk-bearing ability in terms of price, yield, and costs. The
risk levels were also cleared by the margin of safety percentage, which showed that a 39.11 percent
fall in yield or price would result in a profit of just breaking even. It also provides farmers with a
comfortable margin of safety on the variable, fixed, and total costs at 111.18, 153.41, and 64.46
percent, respectively. The findings indicated that complete absorption and sale of Bombax ceiba
roots should be ensured. The policy should be focused on reducing excess labor use if any in Bombax
ceiba roots production activities and a contract marketing system might be a good option to increase
revenue and reducing risk and price instability.