Economic Analysis Of Irrigated Rice Production

The Economic Analysis Of Irrigated Rice Production Complete Project Material (PDF/DOC)

Abstract

The main focus of the study is on economic analysis of irrigated rice production in Kura local government area of Kano State, Nigeria. The Research was carried out in 10 selected villages in Kura local government area. The 10 villages were selected from the 26 villages in the local government and 10% of the farmers in each of the selected 10 villages were used as respondents. The study made use of primary data, collected through structured questionnaire. Descriptive statistics, multiple regression model, gross margin analysis were used as analytical tools. Farmers’ average age was found to be 43 years which represents an opportunity for more active years in the study area. The study revealed that farmers have 5 household size on the average. Farmers experience in cultivation of rice was an average of 25 years in the study area. Furthermore, land acquisition for the cultivation of rice is largely through inheritance with average farm size of 1.18 hectares. Most farmers do not have contact with extension agents and also about 42% of farmers have had access to credit between the ranges of ₦1000 to ₦10,000. About 73% of the farmers do not belong to any cooperative membership.

Farmers’ age, farming experience, farm size and credit if increased will lead to increase in output of rice. This average seed rate was about 11.18% – 28.94% lower than recommended rate of 80-100 kilogramme/hectare. Also, the inorganic fertilizer used was an average of 381.4kg/hectare which is lower than the recommended 730kg/hectare. The output level was however at an average of 6,516.95kg/hectare which is higher than the expected 3-6tonnes. Farm size, seed, fertilizer and agro chemicals were positive factors of production. Labour was negative which implies that an increase in the use of labour would decrease farm output. The sum of the elasticities of production of the five variable inputs was 1.055, indicating increasing returns to scale.

The total variable inputs (seed, labour, fertilizer and agro-chemical) was estimated to be N142, 844.70/hectare. The gross farm return was N391, 017/ hectare. The gross margin per hectare was therefore, N248, 172.30. Late discharge of water, high cost of fertilizer and poor price at harvest time ranked highest in that order in the list of constraints faced by farmers in the study area. It was concluded that the production of irrigated rice was found to be profitable and has the potential of contributing to improved livelihoods of the farmers in the study area. It was therefore recommended that the Government should liaise with the appropriate authorities for decisions on water release schedule in consultation with farmers.

Chapter One

1.0 Introduction

1.1 Background to the Study

Rice has been an important food for most people in sub-Saharan Africa particularly West Africa where the consumption of cereals mainly sorghum and millet has decreased while that of rice has increased as a result of shift in consumers’ preference, urbanization and increase in population. Rice is notably palatable and can digest easily (Cadoni and Angelucci, 2013). It is grown approximately on 3.7 million hectares of land in Nigeria, covering 10.6% of the 35 million hectares of land under cultivation, out of a total arable land area of 70 million hectares (Cadoni and Angelucci, 2013). Where 77% of the farmed area of rice is rain-fed, of which 47% is lowland and 30 percent upland (Cadoni and Angelucci, 2013). The range of grown varieties is diverse and includes both local (such as Dias, Santana, Ashawa, Yarsawaba, and Yarkuwa) and enhanced varieties of traditional African rice (such as NERICA) (Bayou 2009).

In Nigeria, demand for rice had been increasing at a much faster rate than in any other African countries since mid-1970 (FAO, 2001). Nigeria consumes 50 percent of the total 10 million metric tons of rice for which only 3 million metric tons is produced in Africa (Oryza marked report – Nigeria, 2004). Furthermore, during the 1960s, Nigeria had the lowest per capita annual consumption of rice in the West Africa sub region with an annual average of 3kg. Since then, Nigeria per capital consumption levels have grown significantly at 7.3 percent per annum (PCU, 2002). Consequently, per capital consumption during the 1980s average 18kg and reached 22kg in 1995 to 2000. In an apparent move to respond to the increase in per capita consumption of rice, local production increased at an average of 9.3 percent per annum.

These increases have been traced to vast increase in rice area totaling an annual average of 7.9 percent and to a lesser extent through increase in rice yield of 1.4 percent per annum. In spite of this, the production increase was not sufficient to match the consumption increase. In a bid to address the demand-supply gap, government, at various times, has come up with different policies and programmes. It is observed that those policies have not been consistent (Ogundele and Okoruwa, 2004). The erratic policies reflected the dilemma of securing cheap rice for consumers and a fair price for the producers.

Nigeria is the largest producer of rice in West Africa and the second largest behind Egypt in Africa. Rice is cultivated in upland and swamp ecosystems in Nigeria. Upland rice accounts for about 30-35% of total rice while swamp rice accounts for about 25% of rice production in the country with yields as high as 2 to 8 tonnes/hectare (Idiong, 2006). Its production in the country rose from 2.4 million metric tonnes in 1994, to 3.9 million metric tonnes in 2005 (CBN 2006). In spite of the increase in production of about 1.8 percent, the demand for rice surpasses supply (Adeoye 2003; Ojehomon et al., 2004). Consequently, the country has been importing to bridge the supply-demand gap. Considering its vast agricultural land and suitable ecology, Nigeria is endowed to produce enough rice to satisfy domestic demand and has the potential to export to other countries (Babafada, 2003). However, domestic rice production has not increased sufficiently to meet the increased demand despite the various policy measures put in place to facilitate production. FAO (2004) estimates indicated that Nigerian rice import increased from 2,630 metric tonnes in 1970 to 1.876 million metric tonnes in 2002. Total import also stood at 1.9 million tonnes in 2003 (GAIN 2004). Today rice is cultivated in virtually all the agro-ecological zones in Nigeria. Despite this, area
cultivated to rice appears small. Estimate of locally produced rice for year 2002 was 2.9 million tonnes (FAOSTAT 2003). Also, only about 6.7% of the 25 million hectares of land cultivated to various food crops was cultivated to rice between 2000 and 2002 (Osiname 2002).

1.2 Problem Statement

Despite recorded increase in rice production over the years, the demand for the commodity in Nigeria outstripped it supply. For example, Paddy rice production had increased between 2001 and 2006 from 2.75 million to 4.0 million tonnes, followed by a decline in 2007 to 3.5 million tonnes and a positive peak in 2008 was witnessed in which the output was estimated at 4.3 million tonnes. From 2008 to 2010 production statistics showed a decreasing trend in production from 4.3 to 3.5 million tonnes (FAOSTAT, 2012). On the other hand, the consumption pattern keep increasing from 3.05 million in 2001 to 5.95 million tonnes in 2012 (IRRI, 2013). This shows a wide gap between production and consumption of the commodity.

This phenomenon led various governments to come up with policies and programmes that would ensure efficient bridging of the gap. However, the policies were erratic and so unable to achieve the designed goals and objectives of increasing rice production in particular, and achieving agricultural growth and equity in general. Existing low level of productivity in food grain production reflect low level of technical, allocative and economic efficiencies. Therefore, increasing agricultural growth is an indication of appreciable growth in agricultural production process that is linked to farm profit (Ogundari, 2006).

The demand for rice in Nigeria as at 2011 was estimated at 19.2 million tonnes against the production level of 4.5 million tonnes (CBN, 2012). This has created a demand production gap of about 14.7 million tonnes to be met. Diagne et al. (2011) in their work on historic opportunities for rice growers in Nigeria stated that less than 10% of the 3.4 million hectares of irrigated land that could be used for irrigated rice production in Nigeria are currently cultivated. Rice yields in irrigated areas are between 3 and 3.5 tonnes/per hectare, which are much lower than the potential yields estimated at between 7 and 9 tonnes/per hectare (Diagne et al., 2011).This study seeks to provide answers to the following research questions:

What are the socio-economic characteristics of irrigated rice producers?

What are the levels of inputs and output in irrigated rice production?

What is the technical relationship between inputs and output in irrigated rice production?

Are resources efficiently utilized in irrigated rice production?

Is irrigated rice production profitable?

What are the constraints associated with irrigated rice production in the study area?

1.3 Objectives of the Study

The broad objective of the study was to evaluate the economics of irrigated rice production in Kura Local Government Area of Kano State.

The specific objectives were to:

Describe the socio economic characteristics of irrigated rice producers in the study area;

Determine the input and output levels in irrigated rice production;

Determine the technical relationship between inputs and output in irrigated rice production;

Determine whether or not resources are efficiently utilized in irrigated rice production;

Determine costs and returns in irrigated rice production; and

Identify the constraints associated with irrigated rice production in the study area.

1.4 Hypothesis

The following hypothesis was tested:

There is no significant relationship between farmers’ socio-economic characteristics with their output in irrigated rice production in the study area

1.5 Justification of the Study

Rice is one of the few crops recommended for rapid production expansion in Nigeria. Various studies have revealed that rice can be produced in all States of Nigeria (Hardcastle, 1959; Davis, 1962; Blackenburg, 1971; Filani, 1980). Although the bulk of rice in Nigeria is produced in swamp and upland areas, potentials exist for increased output through irrigation (Davis, 1962; Colin, 1965; Adeniyi, 1986).

The provision of adequate food for the rapidly growing population also requires that irrigated rice production be expanded. This will depend, to some extent, on determining the production function for irrigated rice production, the efficiency of resource use in irrigated rice production and the constraints associated with irrigated rice production. Policy makers will also find the results of the research useful in policy formulation. Furthermore, the study will help to add to the wealth of knowledge in the area of income generation on farming.

Chapter Five

5.0 Summary, Conclusion and Recommendations

5.1 Summary

The study examined the economics of irrigated rice production in Kura Local Government Area of Kano State. The specific objectives were to determine the socio- economic characteristics of the farmers in the study area, identify the socio-economic characteristics of irrigated rice producers that influence output of irrigated rice, determine input and output levels in irrigated rice production, determine the technical relationship between input and output, determine whether or not resources are efficiently utilized in irrigated rice production, evaluate the costs and returns in irrigated rice production, and identify the constraints associated with irrigated rice production in the study area.

Primary data were used for this study and these data were collected with the aid of structured questionnaire. Purposive and proportional sampling methods were used to select 200 respondents from ten villages in Kura LGA. These villages were Riga, Angolas, Korie, Kusawa, Rakaona, Yakashe, Karfi, Butalawa, Duka and Goro. Descriptive statistics, multiple regression analysis production function and gross margin analyses were employed to analyze the data.

The results of the socio-economic characteristics of the farmers revealed that for age distribution, 17% were between 21-30 years, 28% of the farmers were between 31-40 years and 10% were between 61-70 years of age. For farming experience, about 34% had between 11-20 years of farming experience, about 29% had 31-40 years of farming experience and about 5% had farming experience between 41-50 years. For marital status, 26% were single while 74% were married. For household size, about 49% had 1-4 members, 40% had 5-8 members and 10% had 9 -12 members.

For formal education, 27% had no formal education, about 24% had primary education, about 38% had secondary school education and 12% had tertiary education. For farm size, 64% had farm size between 0.1-2.0 hectares, about 26% had between 1.1-2.0 hectares and about 10 % had between 2.1 and 3.0 hectares. For method of land acquisition, about 49% obtained their farmlands through inheritance, about 21% rented their farmland, about 22% purchased their farmland and about 8% borrowed their farmland. For extension contact, about 87% had no contact with extension agent while 10% had contact with extension once in a year. For credit, about 24% had no access to credit, 42% obtained between N1000- N10000 and 21% received between N10001- N20000. For membership of cooperatives, about 73% did not belong to any cooperative association, about 13% had 4-6 years of membership and about 10% had between 7-9 years of cooperative membership.

The results of the multiple regression analysis showed that the socio-economic variables that significantly influenced the output of irrigated rice are were age, farming experience, farm size and amount of credit received.

The inputs and their average quantities used in irrigated rice production were land (1.18 hectares), seed (71.06 kilogrammes per hectare), labour (241.23 man-days per hectare), fertilizer (381.41kilogrammes per hectare) and agro-chemicals (7.46 litres per hectare). The average output of irrigated rice in the study area was estimated to be 6,516.95 kilogrammes per hectare.

The results of production function analysis for irrigated rice production showed that seed was positive (0.440) and significant at 1% level of probability, farm size (0.128) and fertilizer (0.455) were positive and significant at 5% level of probability and agro- chemicals (0.128) were positive and significant at 10% level of probability implying that increases in seed, farm size, fertilizer and agro-chemicals would lead to increases in output of irrigated rice. Labour was negative (-0.096) and significant at 5 % level of probability, implying that an increase in the use of labour would decrease farm output in the study area.

The results of the efficiency of resource use in irrigated rice production in the study area showed that farm size, seed, fertilizer and agro-chemicals with resource use efficiency ratios of 16.65, 30.88, 5.18, and 7.90 were under-utilized in the production of irrigated rice, while labour with efficiency ratio of 0.39 was over-utilized.

The cost and returns showed that the total cost of production was N148, 844.70 per hectare and the gross returns was N391017.30 per hectare. The gross margin was, therefore, N248, 172.30 per hectare.

The constraints to irrigated rice production identified by the respondents, in order of their severity were late discharge of irrigation water (23.4%), high cost of fertilizer (22.4%), poor price at harvest (22.32%), pests and diseases (13.63%), high cost of labour (12.09%) and shortages of improved seeds (6.05%).

5.2 Conclusion

Rice is one of the most important cereal foods in the world and the staple food of millions of people. The production of irrigated rice in the study area was found to be profitable and this has the potential of contributing to improved livelihoods of the farmers. Farmers’ socio-economic characteristics were found to significantly influence their output, hence change agents in the study area should be trained to understand the factors influencing the underutilization of most of the inputs meant that farmers’ lacked knowledge on the optimal rates of use of these inputs. The constraints associated with irrigated rice production in the study area must be addressed if the existing low-yielding rice production systems are to be transformed into higher yielding and sustainable production systems.

5.3 Recommendations

Based on the findings of this research, the following recommendations are made:

Farm inputs such as farm size, seed, fertilizer and agro-chemicals positively and significantly influenced the production of irrigated rice in the study area. It was therefore, recommended that timely and adequate supply of inputs be made available to farmers at affordable price in order to enhance the production of this crop by the Government and non-Government organizations.

Since extension contact was significantly determinant of technical efficiency, irrigated rice farmers should through their cooperative societies make arrangements for an extension agents to be visiting at least twice a month, so as to be able to benefit from the farm advisory services that would increase output.

Late discharge of irrigation water was reported as a major constraint in irrigated rice production. Therefore, the Government should liaise with the appropriate authorities for decisions on water release schedule in consultation with farmers.

The study revealed that for every naira spent in irrigated rice production, a gain of 73 kobo was made; it is therefore recommended that farmers should be encouraged to go into irrigated rice production in the study area in order to generate more income. This can be done by direct intervention through empowerment programmes and training by government agencies and donor organizations that will stimulate and sustain farmer’s interest in small-scale irrigated rice production in the study area.

5.4 Contribution of the Study to Knowledge

The study revealed that irrigated rice production in the study area is profitable with gross margin of ₦248,172.30 per hectare despite the problems identified.

It was revealed that irrigated rice farms were economically inefficient in the study area having an economic efficiency of 51% and achieved technical efficiency of 76%.

The study found that late discharge of irrigation water (23%), high cost of fertilizer (22%) and low price at harvest time (22%) were major constraints faced.

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