Partial Budget Analysis of Effects of Crop Management Intensity on Profitability of Three Watermelon Cultivars

Abstract

ABSTRACT A field study on watermelon [Citrullus lanatus (Thunberg) Matsumura and Nakai] in 1997, 1999, and 2000 revealed that management intensity affected profitability. Management intensity reflected a combination of cultural practices and levels of usage. Low intensity management (LM) included only soil fertilization and weed control. High intensity management (HM) additionally involved plastic mulch, drip irrigation, insect pest control, and plant disease control. Use of partial budget analysis simplified evaluation of the effect of management intensity on profitability, which was defined as a difference in net return between HM and LM. The difference in net return between HM and LM (Δπ) was based on market price (P), changes in yield (ΔY), and changes in production cost (ΔI) due to increased intensity of management: Δπ = P × ΔY - ΔI. We used means of daily wholesale market price for midseason (July to August) at Dallas, TX, for seeded and seedless red melons each year, means of yield difference between HM and LM for each cultivar each year, and concurrent estimates of production cost difference between HM and LM in our empirical analyses. HM was more profitable than LM in two of the three years with increased net return up to almost 8,000 $·ha−1, but the level of profitability varied among cultivars and years. Triploid (seedless) cultivar had higher yield difference between HM and LM and received higher prices, resulting in larger profits than did diploid open-pollinated or diploid hybrid (both seeded) cultivars in all three years. The difference in net return between HM and LM corresponded positively with yield differences between HM and LM, but not in proportion because of differences in production cost between HM and LM and in market price among years. In our sensitivity analyses, we introduced the concept of rate of change in net return as Δπ%. Based on mean values of the market price and differences in yield and in production cost between HM and LM over this 3-year study as modes of variation, we demonstrate that the rate of change in net return between HM and LM was more sensitive to the yield difference and market price than to the cost difference between HM and LM. This is the first time information of production cost and profit based on this model of partial budgeting has been developed for watermelon. When yield difference was small or when market price was low, the rate of net return increased more effectively in response to increasing management intensity. Therefore, higher yield brought about by HM can easily compensate for the higher cost incurred by HM.