Net Benefit of Organic Tea Production
Attributes
Medium: Animals, Plants and/or Others
Country: Vietnam
Analytical Framework(s): Economic Analysis, Other
Study Date: 2007
Publication Date: 2008
Major Result(s)
| Resource/Environmental Good | VND, thousand currency units (2007) |
VND, thousand currency units (2014)1 |
USD, thousand currency units (2014)2 |
|---|---|---|---|
| net present value | 2,946,540.00 | 5,035,224.34 | 235.70 |
About the Inflation Adjustment: Prices in Vietnam (VND) changed by 70.89% from 2007 to 2014 (aggregated from annual CPI data), so the study values were multiplied by 1.71 to express them in 2014 prices. The study values could be expressed in any desired year (for example, to 2026) by following the same inflation calculation and being sensitive to directional (forward/backward) aggregations using your own CPI/inflation data.
Study Note: This research had the following objectives: 1. To examine the efficiency of organic tea production as compared to conventional tea farming practices in the Thai Nguyen Province of Vietnam. 2. To determine the risks in the decision-making process of switching to organic farming in the Thai Nguyen Province of Vietnam. 3. To assess the environmental impacts of organic, clean and conventional tea farming methods. 4. To determine the government's role in assisting farmers to make the switch to organic tea production. 5. To develop policy recommendations to ensure food security and income stability for (non-organic) tea growers in their transition to organic tea farming.
Study Details
Summary: The transition to organic tea production will have economic and environmental impacts on tea growers in particular and on society as a whole. This study evaluated these impacts using panel data from 180 tea-producing households in four representative teaproducing villages in Thai Nguyen Province in 2007. Soil, water and tea samples were also collected on a monthly basis for eight months from March to October 2007 to monitor amounts of agrochemical residues in the soil, water and tea products. The Stochastic Production Frontier (SPF) Model was used to analyze production and profit efficiency of different tea production systems. A probit model was used to determine the factors affecting the adoption of organic tea production. The risks and uncertainty involved in the conversion to organic tea production in the province used the Monte Carlo simulation. A Cost Benefit Analysis (CBA) from both private and social perspective of three tea production methods was carried out - organic, clean and conventional. The results showed that organic tea production had high production and profit efficiency levels of 0.998 and 0.836, respectively, and also yielded high social benefits (with an NPV of 2,946,536 thousand VND). Organic tea production also contributed substantially to the reduction of agrochemical residues in the soil, water and tea products (which fell to zero for water and tea products after one year of conversion). However, organic tea production had a lower NPV of private benefits in the short-run. Premium pricing and outside support (technical training, extension services, etc.) significantly contributed to farmers' decisions to switch to organic tea production. If these two factors were removed, organic tea production would not be adopted. The premium price policy scenario showed a stronger effect (90%) than a tax on conventional tea production (9%) on the adoption rate of organic tea production.
Site Characteristics: In Vietnam, tea is grown in more than 39 provinces while being highly concentrated in 14 northern mountainous and midland provinces 1 , which account for 61% of the total production area of the country. The total planted area reached 122,700 ha in 2006. Tea in Vietnam is exported to more than 59 countries. As stated in Vietnam's National Policy Framework and its ten-year Strategic Plan, organic farming especially organic tea production, is encouraged by the Ministry of Agriculture and Rural Development (MARD).
Comments: According to the International Foundation of Organic Agriculture Movement (IFOAM), the four approved principles of organic agriculture are: i) organic agriculture should sustain and enhance the health of the soil, plants, animals and humans as one entity, ii) organic agriculture should be based on living ecological systems and cycles, iii) organic agriculture should be built on relationships that ensure fairness with regard to the common environment and life opportunities, and iv) organic agriculture should be managed in a precautionary and responsible manner to protect the health and well-being of current and future generations and the environment.