Abstract
Planned production of medicinal plants is virtually non-existent or in some cases at a very preliminary
stage in Bangladesh. Medicinal plant producers encounter some outstanding sources of risks: yields, prices and the total volumes that markets can distribute, which also make risky the farm revenues. As a
result, most of the time farmers take switching decision to next alternative crops. They need a business
of medicinal plant production that is resilient in the face of political, environmental and economic instability. Therefore, the study is conducted to provide explicit formalized information as to whether
the medicinal plant production is returned more profits considering the embedded risks, whether the
production business is sustainable and how farmers prefer to participate in medicinal plant practices.
The research is carried out in the districts of Bogura and Natore in Bangladesh, selecting three most
important medicinal plants of Aloevera (Aloe vera), Shimulmul (Bombax ceiba), and Ashwagandha (Withania somnifera). The sample size is 196 in total. Data collection was done during 2017 to 2019. The study
applies the Profitability Analysis, Monte-Carlo simulation, Family Farm Income (FFI), Net Present Value
(NPV), Real Option Value (ROV), Principal Components Analysis (PCA), and Factor Analysis (FA)
techniques to explain the research objectives. Yield, price, and market risks of medicinal plant
production are considered in the stages of simulations. It has resulted that the medicinal plant
production is profitable in the study area and farmers have the opportunity to earn more profit from
Aloevera compared to Shimulmul and Ashwagandha. But, simulation on profit analysis showed a higher
probability of loss respectively at 65%, 62% and 70% in the case where producers' yield achieves its
minimum value and also at 86%, 80% and 64% in the case of minimum price scenario. Conversely, the
simulated profits are found with a fewer probability of loss, in the case where producers' prices or yields
achieve their mean value. Thus, farmers should take risk reduction strategies emphasizing more on
yields for Ashwagandha production and price for Aloevera and Shimulmul. The study also found a
probability of losses at below 70% level for the risk of market absorptions. Therefore, farmers must
exploit more efficient marketing channels - and not solely rely only on the distribution of their yield to
the local traders. In the analysis of business sustainability, simulated FFIs result indicates that the
farmers who have allocated land about one hectare may sustain in the business of medicinal plant
production which is found more for Aloevera production. Then, the study abridged the viability of
investment in medicinal plant production as the possibilities of negative NPV (<0) are found at the risk
of 13.2%, 15.4% and 19.9%. But, considering the flexibility of time value, ROV reduces the risks by
increasing the NPV to 61%, 33% and 35% respectively. It shows that the business of medicinal plant
production is financially viable and sustainable, where Aloevera has the more possibility to make the
value of future medicinal plant premiums, followed by Ashwagandha and Shimulmul. Motivation
analysis shows that landless farmers as well as female-headed households are highly potential to
participate in the medicinal plant production business. They are mostly inspired by the company agent
and group of farmers. The study also found the importance of farmer groups as well as off-farm income
in supporting farmers to participate in contract marketing. In conclusion, the study suggests that farmers
should go for a contract marketing system to reduce price risk. To reduce yield risk, farmers need to
emphasize input use and management practices following medicinal plant production guidelines. In
addition, research is needed for medicinal plant varietal development to reduce market risks, and
absorption of the whole production should be ensured. This can be improved by establishing processing
industries of medicinal plants. To motivate the farmers for the business of medicinal plant production,
they should be organized and mobilized in more groups, and linked with pharmaceutical companies.
The Government can take some initiatives to link farmers with the relevant line departments.