A Cost-benefit Analysis Of Tobacco Production In Shandong

Tobacco is an important commercial crop in China. The development of tobacco industry is beneficial to promote the increase in agricultural efficiency and in farmers’ income, and it’s an effective path to stimulate rural economy and solve the problem of rural surplus labor force. And tobacco industry is an important source of government tax revenue.Tobacco is also a kind of special crop. It is strictly limited by the national price policy and production plan because of China’s restrictive management in tobacco industry. Besides, a tobacco tax of 20% must be paid in the purchasing link. Shandong province was the earliest area that produced tobacco in mainland of China with an advantage of natural ecological conditions; climate and landscape here was suitable for growing tobacco. After years of development, comparatively stable planting areas, perfect infrastructures and mature producing technologies have been formed in Shandong province. At this stage, there are still some problems in the tobacco industry of Shandong. The quality of tobacco is not prominent in the increasing competitive market; the price of production materials and labors continues to rise, and the cost of producing tobacco increase a lot which ratchet up the income pressure on the farmers; the enthusiasm of the farmers has been seriously dampened because of the production risks and income instability. In this background, the study on cost and benefit of tobacco production has more practical significance and necessity.Since the mean product of Shandong tobacco industry is the flue-cured tobacco, this article takes the production status of the flue-cured tobacco in Shandong province as an object of study, and systematically studies the cost and benefit levels of tobacco production in Shandong from the year of 2004 to 2013 by descriptive analysis, comparative analysis and econometric models analysis. Firstly, this article analyzes the fluctuate rule and structural situation of the cost indicators, including the total cost, production cost, land cost of Shandong flue-cured tobacco production in the observation period. The cost advantages and disadvantages of tobacco production in Shandong are highlighted through the comparative analysis of cost indicators with other provinces. Secondly, this article detailedly studies the annual fluctuation of production value, profits and rates of profits to cost of Shandong flue-cured tobacco production, and compares the above indicators of Shandong province with that of the other provinces. Thirdly, this article establishes an econometric model to analyze the main influence factors on the benefit of tobaccoproduction in Shandong, and determines the influence degree of each factor to the tobacco benefit by using the Eviews software. Finally, according to the results of the above analysis,the main conclusions and pointed countermeasures are proposed. Specific as follows:The total cost of the flue-cured tobacco industry in Shandong province showed a tendency of continuous growth. From the year of 2004 to 2013, the total cost of flue-cured tobacco production in Shandong almost tripled, and the labor cost increased the most among the components. Although the production value, profits and rates of profit to cost showed a trend of increase, these three indicators fluctuated frequently from year to year. Thus it can be seen that there is a high income risk in the flue-cured tobacco production.By contrasting the cost and benefit indicators of Shandong flue-cured tobacco production with that of national average, Heilongjiang province, Yunnan province, Fujian province and Hunan province, it showed that the total cost of flue-cured tobacco production in Shandong was at a high level, and its production value had the absolute advantage among the national average and the other provinces. The disadvantage in cost made the advantage in profits and rates of profit to cost of Shandong flue-cured tobacco production less obvious than the production value, but the growing tendency of rates of profit in Shandong province was a sharp contrast with the downward trend in other areas. The flue-cured tobacco industry in Shandong province has a certain development potential.The regression analysis results showed that labor cost and production were the most significant factors on the benefit of Shandong flue-cured tobacco production, followed by land cost; price and material expense and service fee had no significant influence on the benefit. Production and land cost were negatively related to the profits of Shandong fluecured tobacco production, and labor cost was the positive factor in increasing the profits.Thus it can be seen that it is important to control the reasonable production of flue-cured tobacco, improve the quality of the output and increase labor input for the flue-cured tobacco industry in Shandong province.According to the cost-benefit analysis of the flue-cured tobacco industry in Shandong,some countermeasures were put forward to increase the benefit. The construction of organized and large-scale of the tobacco industry in Shandong should be strengthened to realize the transformation from retail production to collective production. The professional talent team construction for tobacco industry in Shandong should be promoted, and the extension of specialized producing technology should be accelerated. The government of Shandong province should increase the subsidies and strengthen the power of support to thetobacco industry, and expand the team of tobacco growers by incentive policies. We should also perfect the infrastructure construction and the information platform construction.