EFFICIENCY AND PROFITABILITY ANALYSIS OF RICE PRODUCTION AND MARKETING IN TARABA STATE

ABSTRACT

The study analysed  the profitability and efficiency of rice production and marketing in Taraba State. Data were obtained by primary source. A total number of 239 respondents (148 farmers, 91 marketers) were selected using multistage sampling techniques. Data were analysed by simple descriptive statistics, gross margin, stochastic frontier, regression model and marketing efficiency model. The findings revealed that farmers and traders were active at 34 years and 37 years, respectively and had average education of 11 and 10 years, respectively. Farmers had an average farm size of 4.1 hectares while marketers purchased average of 42 bags of rice per month. The mean family size of 7 and 6 persons were observed for farmers and traders respectively. The t-test results show that the profitability of that of rice farmers significantly differ (P=0.000) from that of rice marketers with the average gross margin of farmers being N253617.23 per year and that of traders being N3371877 per year.  The mean technical efficiency of farmers was 85.2% while the mean marketing efficiency of traders was 65.06%. Education (1.20), sex (-0.12), family size (0.13) and membership of cooperative (1.46) had significant effect on farmers technical inefficiency. On the other hand, age (2.72), experience (-2.79), credit (2.03) and selling price (2.10) had significant effect on marketers marketing efficiency. The major constraints facing the rice farmers were: lack of storage facilities (16.22%), lack of credit facilities (54.04%), high cost of fertilizer (60.8%), high cost of improved seed (13.51%), inadequate farm machineries (10.81%), land tenure system (9.4%), insecurity (13.51) and climatic change (55.41%). The major constraints faced by rice marketers were: lack of credit facilities (87.91%), lack of storage facilities (25.27%), high cost of transportation (43.96%), inadequate improved variety (8.49%), price fluctuation (12.09%), activities of middle men (7.69%) and market malpractices (5.46%). Based on the findings, it is recommended that more women should be encouraged to go into rice farming, government should support farmers and traders by giving them credit facilities at affordable rates to increase the scale of operation and in turn make more profitable and efficient, production and marketing efficiency should be encouraged by providing farmers and marketers with opportunity to acquire more knowledge through the formal education system, government should provide central storage facilities in the area as well as good road network that will help reduce transportation costs, the current fertilizer distribution system should be strengthened to ensure the right quantity and quality of fertilizers get to farmers at the right time, the government should engage in climate change mitigation policies as well as encourage adaptation to climate change among local citizens and price stabilization policies should be put in place to increase profitability market efficiency.

 

 

 

1.0                                                  INTRODUCTION                                                                   

1.1 Background to the Study

The study of economic history provides us with ample evidence that an agricultural revolution is a fundamental pre-condition for economic development. The agricultural sector has the potential to be the industrial and economic spring-board from which a country’s development can take off. Indeed, more often than not, agricultural activities are usually concentrated in the less-developed rural areas where there is a critical need for rural transformation, redistribution, poverty alleviation and socio-economic development.

Agriculture in Nigeria is a major branch of the economy providing employment for 70% of the population (Olomola, 2007). The sector is being transformed by commercialization at the small, medium and large scale enterprise. Major crops include beans, sesame, cashew nuts, cassava, cocoa, beans, groundnut, gum arabic, Kola nut, maize (corn), melon, millet, palm-kernels, palm oil, plantains, rubber, sorghum, soybeans, yams and rice (Olomola,2007). The agricultural sector is  estimated to contribute only 22 percent of GDP (CNBC, 2015).

Rice belongs to the family “Gramineae” and genus “Oryza”. There are about 25 species of Oryza. Of these only two species are cultivated, namely Oryza sativa Linus and Oryzaglaberrima stead. The former is originated from North Eastern India to southern China but has spread to all parts of the world. The latter is still confined to its original home land, West Africa (FAO,1996 ). Rice (Oryza Sativa Linus) is one of the main staple foods for 70% of the population of the world. Africa produces an average of 14.6 million tons of rough rice in the years 1989-1996 on 7.3 million ha of land equivalent to 2.6 and 4.6 percent of the world total production and rice areas respectively. Africa also consumes a total of 11.6 million tons of milled rice per year, of which 3.3 million tons (33.6 %) is imported (FAO, 1996).

National Rice Development Strategy (2009) revealed that local rice demand is growing quickly due to population growth and urbanization. Nigeria’s estimated annual rice demand is put at 5 million metric tons while annual production on the average, was about 2.21 million tons of milled rice product leaving a deficit of 2.79 million tons which is bridged by importation. Domestic demand for rice was projected to rise to 7.5 million tons by 2013 on the assumption that demand rises at 10% per annum, with demand for local rice growing at half the rate of the imported rise (NRDS, 2009). This increase in demand is because rice has changed from being an elitist to a staple food for many Nigerians. Many local dishes are prepared with rice because of its relative ease in terms of local production; rice is now one of the main cereals produced by Nigerian farmers; it is cultivated in virtually all the agro-ecological zones of Nigeria. It covers both the upland and the swamps depending on the variety (KNARDA, 2007).

 

1.2 Statement of the Problem

Agricultural marketing is the main driving force for economic development and has a guiding and stimulating impact on production and distribution of agricultural produce. The increasing proportion of the population living in urban centers and rising level of income require more organized channels for processing and distributing agricultural products (Takele, 2010). Nigeria, Cote d’Ivore, Zaire and Madagascar are among the biggest producer of all types of rice in Africa. Consumers in these countries require that the domestically produced rice should satisfy minimum level of quality, health and food security standards. Generally, besides the lag in rice production, much of the food produced locally is distributed under poor marketing structure which hinders the flow of resources and virtues in the industry (Baksh, 2003).

Mohammed (2007) stated that  improving marketing facilities for agricultural crops in general and rice sector in particular enable farmers to plan their production more in line with market demand, to schedule their harvest at the most profitable times, to decide which markets to send their produce to and negotiate on a more even footing with traders. Besides, a proper marketing system also enables to increase production and market efficiency.

Rice marketing covers the performance of all business activities in the flow of paddy and milled rice, from the point of mutual production until they are in the hands of the ultimate consumers. This must be at the right time, in the right place and as convenient as possible, at a profit margin that will keep the marketers in operation. Dawit (2005) explained that the flow of agricultural produce from the producer to the consumer involves a long chain of intermediaries, who, without creating value- added, merely keep in stretching the chain. He further pointed out; the involvement of these superfluous intermediaries has constrained the development of the sector and deprived the farmers of equitable returns.

However, the nature of the product on one hand and lack of organized market system on the other have resulted in low producers’ price. Besides there are challenges associated with rice production and marketing mainly on knowledge of grading, market information, excessive intermediaries, price, seasonality, and limited number of buyers and lack of markets.

A number of studies have been carried out on rice in the study area. Examples of such studies include: Tijani and Bakari (2014) on determinants of allocative efficiency of rain-fed rice production, Ogbanje et al. (2014) on technical efficiency of Fadama II grain farmers, economic analysis of rain-fed rice production in Gassol Local Government Area of Taraba State by Alam et al. (2014) and effect of climatic change on rice in Taraba State (Emodi and Bonjoru, 2013). Despite the growing interest in rice production and marketing as a source of livelihood for many farmers and income generating crop in the study area, relatively little or no research has addressed both production and marketing of rice in terms of the profit margin of rice farmers and marketers, the level of efficiency in production, marketing efficiency, and factors influencing production and marketing efficiency. Hence, this study attempts to fill these gaps.

 

1.3        Research Questions

The following research questions were addressed in this study:

  1. What are the socio-economic characteristics of rice farmers and marketers in the study area?
  2. What is the profitability level of rice farmers and marketers in the study area?
  3. What is the production efficiency level of rice farmers?
  4. What are the factors affecting production efficiency of rice farmers?
  5. What is the marketing efficiency of rice in the study area?
  6. What are the factors influencing marketing efficiency?
  7. What are the major constraints faced by rice farmers and marketers?

 

1.4 Objectives of the Study

The broad objective of this study was to determine the efficiency and profitability analysis of rice production and marketing in Taraba State.

The specific objectives were to:

  1. describe the socio-economic characteristics of rice farmers and marketers in the study area;
  2. estimate the profitability of rice production and marketing;
  3. estimate the production efficiency of rice farmers;
  4. determine the factors affecting production efficiency of rice farmers;
  5. determine the marketing efficiency of rice marketers;
  6. analyze the factors influencing rice marketing efficiency;
  7. identify the major constraints of rice production and marketing in the area.

1.5 Statement of Hypotheses

Based on the specific objectives, the following hypotheses were tested:

H01: The profitability of rice marketers is not significantly different from those of rice farmers.

H02: Socio-economic characteristics of farmers in the study area do not significant affect their production efficiency.

H03: Socio-economic characteristics of marketers in the study area do not significant affect their marketing efficiency.

1.6 Significance of the Study

Production and Marketing are important aspects in the development process. We cannot have more of production unless the goods produced are actually sold out and selling depends on the proper marketing conditions. The knowledge of the profitability and efficiency analysis of rice production and marketing is important to all producers and to all actors in the marketing system. It will also be a source of information to policy makers, private investors as well as other researchers.

Given that resources are often very scarce, the need to understand how efficiently resources are used in the production and marketing of rice and factors that influence this will enable policy makers to channel the appropriate packages that can boost the rice subsector in the area.

The study will also benefit researchers who may wish to replicate similar studies in other states, regions or countries based on same crop or alternative enterprise.

1.7 Scope and Limitations of the Study

Although rice marketing chain in Taraba State may involve a number of actors, this research will focus on rice producers and marketers only. The study covered one year production and marketing period. The activities of rice farmers and marketers within this period were investigated to determine their socio-economic characteristics, profitability, production efficiency, factors affecting production efficiency, marketing efficiency, factors influencing marketing efficiency and constraints.

The major limitation of this study was the inability of both the farmers and marketers to keep up-to-date and accurate records. However, this was overcome by the use of memory recall. Also the respondents were not willing to reveal some sensitive information like age, financial records among others. The researcher overcame this by assuring the respondents of the confidentiality of any information obtained and also by keeping the questionnaires anonymous.

1.8  Definition of Terms

  1.  Production: The process whereby some goods and services called input are transferred into other goods called product or output.
  2. Marketing: Is the economic process by which goods and services are exchanged between the producers and consumers and their values determined in terms of money prices.
  3. Analysis: A careful study of something to learn about its parts, what they do and how they are related to each other.
  4. Performance: It is the assessment of how well the production or marketing process is carried out.
  5. Profitability: Is the ability for a business to earn profit. A profit is simply the revenue left over after you have paid all cost and expenses related to your business activities.
  6. Production efficiency: is the ability to produce a good using the fewest resources  

possible.

  1. Marketing efficiency: Measure of availability (to all participants in a market) of the information that provides maximum opportunities to buyers and sellers to effect            transaction with minimum transaction cost.
  2. Marketing channel: is the path of a product as it moves from the producer to the    final consumer.

 

  1. Marketing chain: the linked entities that brings a specific product from   

production to consumption.

  1. Marketing cost: The total cost associated with delivering goods or services to

customers.

  1. Marketing margin: is the difference between the value of a product or a group

of products at one stage in the marketing system.

  1. Intermediaries: a person who acts as a link between people in order to try and

bring about an agreement (go-between).

  1. Markets: is a setting in which price making force ( demand and supply) operate.
  2. Marketing Structure is the characteristic of the organization of market which seems which seems to influence strategically the nature of competition and pricing within the market.
  3. Marketing services: they are services rendered during buying and selling.