| Summary: | This study analyzed 42 years’ time series data from 1970-2011 for the acreage response
of sugarcane to price and non-price factors in Khyber Pakhtunkhwa. Data was tested for
major expected problems of time series i.e. Autocorrelation and Stationarity. For
autocorrelation Durban h statistics was used and the value (0.539) indicates no serial
Autocorrelation in the data set. While Augmented Dickey Fuller test was used for detection
of Stationarity and the data was stationary at lag one. The study follows Nerlovian Partial
Adjustment linear and non-linear models for acreage response. While Vector Auto
Regression technique was used to estimate the effect of price and non-price factors on
acreage allocation decisions of the farmers for sugarcane in the study area. The empirical
results show that short run and long run elastisities are inelastic for all the variables and
statistically significant at 5% significance level except average rainfall. Further, the
influence of price, yield, and lag area are positive and significant in affecting acreage
allocation decision. This means that if price, yield and lag area are enhanced, the acreage
allocation of sugarcane might improve in-elastically. The relatively low values of coefficients
obtained from the regression analysis indicates that sugarcane producers in making acreage
allocation influenced more by their ideas of expected price than by previous year price.
Similarly the magnitude of the linear and log coefficient of yield (0.676) and (0.208)
suggesting that if rising trend in sugarcane yield persists it will help farmers’ expansion of
sugarcane cultivation in future. Further, the relatively high value of the coefficients of
lagged area (0.300) and (0.298) of sugarcane suggests that their area allocation adjust
quickly for changes in expected profit. As the literature shows that mostly price is the main
factors in shifting the area allocation of any crop while this paper shows that lag area was a
main factor because the land of Khyber Pakhtukhwa is suitable for sugarcane production
and mostly they produce Gurr from sugarcane which they used for self-consumption. .
Improved technological innovations will boost the sugar-cane production. Hence, the
Government should explore ways to make available the same to the farmers.
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