SMALL-SCALE VERSUS LARGE-SCALE COCOA FARMING IN CAMERO

SMALL-SCALE VERSUS LARGE-SCALE COCOA FARMING IN CAMEROON

ByChi Bemieh FuleAugust 6, 2013

THESIS PRESENTATION

Outline of today’s presentation

Justification of the study

Problem

statement

Hypotheses

Conceptual

framework

Research

methodology

Results

Conclusion

Recommendations

Future research

1. Justification of the study

In 2005, smallholdings were home to 450 million households (2 billion people).

This population constitutes 92% of the 1.1 billion ”dollar-poor”.

Since 2000, more attention was paid to smallholders to achieve sustainable growth and development in Africa eg. via the CAADP programme

However some discriminative land policies among others favour large-scale farming.

Cont’d

Cameroon is fifth world cocoa producer; cocoa contributes to 6% of GDP;

CMR 2000 survey: employs 260,000 farm families; 1-3 ha mean farm size; low yield of 300kg/ha; mean age of trees = 40 years; low maintenance of cocoa farms

In 2006, gov’t targeted to raise annual production from 137,000t to 300,000t in 2015.

Strategy: Identify, multiply & distribute improved cocoa breeds; organize farmers into cooperatives and ease their access to land, credit & technical assistance; etc

In 2011, it was alleged that the revitalization program encouraged large-scale farming (esp. elites) at the expense of already existing small cocoa farmers….

Opportunity or threat

to

small farmers ???

According to economic theory, small-scale farming is more efficient than large-scale farming when using constant returns to scale technologies (manual

labour

) in the presence of high transaction costs.What economic rationale could explain the expansion of cocoa farmlands?

2. Problem Statement

3. Purpose of the study

Compare the economic performances of small-scale and large-scale cocoa farmers’ both at the level of production and marketing.

4. Hypotheses

Small-scale farms have higher yield compared to large-scale farms.Small-scale farmers have a cost advantage over large-scale farmers.Small-scale farms are more profitable to operate than large-scale farms.

5. Conceptual framework

The economics of farm size (Eastwood et al., 2008)HH with heterogeneous endowment in K & L, (relative prices of inputs, land tenancy, level of development & techno), end up having different farm sizes.The efficient farm size increases with HH size in the presence of transaction costs

Assuming CRS techn. & 2 Input - 1 Output

1 Input - 1 Output case

Figure 1. Technical & Allocative eff.

Figure 2. Scale efficiency

Conventional methods: SFA, DEA, OLS, MPM

Farm yield or land productivity (kilograms per hectare) Factors affecting yieldTreeage= mean age of cocoa trees (years)Density= planting density of cocoa trees (trees/ ha)V= socioeconomic variables like age of farmer, level of educ, HH size,... Average Cost per hectare (CFA F per hectare) = expenditures in CFA F, while k stands for wages, equipment, fertilizers, and land,

Profitability (revenue-cost ratio)Factors affecting profitabilityLabour = annual expenditures on the wages (CFA F) Land = annual expenditures on land (CFA F) Phyto = annual expenditures on phytosanitary products (CFA F) Plt.mat = annual expenditures on planting materials (CFA F) Equipt = annual expenditures on farm equipment (CFA F) The betas are the parameters to be estimated while ε is the stochastic term.

Marketing strategiesChannel by which cocoa beans are conveyed to the market (group selling or individual)Reasons for the choice of channelKnowledge about prevailing market price Effective selling price of farmer’s produce

6. Research methodology

Figure 3. Map

of the Nyong & Mfoumou Division of the Centre Region of Cameroon, Central Africa

Primary data from cocoa farmers in

Nyong

and

Mfoumou

Division of the Centre Region of Cameroon.

Selective and Simple Random Sampling Technique

Field survey carried out in March 2013

40 valid questionnaires administered.

7. results

Variable Mean Age (years)51.8 (10.3)Education (years)7.0 (6.0)Experience (years)15.5 (16.4)Farm size (hectares)4.17 (3.71)Tree age (years)31.24 (22.35)

Table 1. Variables described

Fig 2. Input expenditure shares

Farmer characteristics according to Their categories

VariablesSmall-scale(0.25 – 2.00 ha)Medium-scale (2.50 – 4.00 ha)Large-scale (5.00 – 20.00 ha)Age of farmer (years)48.7 (9.1)52,7 (12,63)54,5 (9,48)Household size5 (1.87)5 (3,25)11 (9,16)Education (years)7 (4.0)8 (4,47)9 (6,06)Experience (years)10 (9,7)15,5 (15,5)21,28 (21,31)Training 8 (53.3%)7 (63.6%)12 (85.7%)

Actual farm size in production (ha)

1.35 (0.51)

3.41 (0.73)

7.78 (4.10)

Total cocoa farm size (ha)

2.55 (1.63)

5.00 (2.50)

10.00 (6.14)

Average age of trees (years)

27.9 (21.03)

29.2 (25.9)

36.4 (21.4)

Planting density (no. plants per ha)

1392 (224.92)

1301 (426.11)

1193 (153.76)

Group selling price (CFA F/ Kg)

877.5 (431.7)

995.0(506.4)

917.5(432.3)

Individual selling price (CFA F/ Kg)

735.7 (405.8)

818.7 (414.2)

856.0

(403.7)

Only household size was observed to be statistically significantly different across farmer categories (99% CI)

F

ig

3. The input shares in total expenditures based on farm categories

Farm yield

Level of education and household size are relevant for land productivity (HC1 std errors).

Coefficient

Std. Errorp-valueconst-4.2990311.90030.72053l_Density1.652511.192650.17644l_Treeage-0.2440490.4467090.58902l_educ-1.168990.4759120.02026**l_Experience-0.01451320.3254520.96474l_hhsize1.039960.3959280.01363**l_age-0.4982131.867850.79156

Regression results on log (yield)

Average cost [18€, 1850 €] µ = 152 €

Coefficient

Std. Errorp-valueconst13.86922.02192<0.00001***l_Experience-0.1731260.1603240.28854training-0.1599160.2022360.43510l_age-0.4882220.5175840.35284l_hhsize0.1241080.147450.40641l_Labour0.0926120.02294180.00033***l_Phyto0.0840740.01879510.00010***l_Plt_Mat_-0.4001550.1272520.00365***l_Equipt0.2114340.1134750.07192*

Expenditures on labour, phytosanitary products, planting material and farm equipment are relevant for explaining input costs (HC1 std errors)

Regression results on log (average cost)

*opportunity costs of land and

labour

are zero.

Marketing strategy

Most small-scale farmers prefer to sell their cocoa individually

Most large-scale farmers

practise

group selling, and are board members of the FOs

Large-scale farmers have higher selling prices than small-scale farmers

profitability

Coefficient

Std. Errorp-valueconst9.312241.70189<0.00001***l_hhsize0.762610.2715820.00855***l_educ-0.1677190.1873820.37765l_Experience0.8196970.2352920.00150***l_Treeage0.129040.2203970.56246l_Land-0.1184750.04973620.02354**l_Labour-0.06168110.03751190.11022l_Plt_Mat_-1.180320.184918<0.00001***l_Phyto-0.02364350.03695740.52704

Household size and experience in cocoa farming are determining factors for farmers’ profit margins as well as expenditures on land and planting materials

Regression results on log (profitability)

8. conclusion

cocoa farming in N-M is still being

practised

by

indigens

, who responded to the policy incentive by extending their cocoa farms.

High yield of small-scale farms is explained by the higher productivity of family

labour

None has a cost advantage

Large-scale farmers have more entrepreneurial skills. But the high prices they attract causes a spillover effect to the benefit of other members & free-riders

Small-scale farms are more profitable, based on their actual expenditures

recommendations

Promoting the co-existence of both farmer categories, given their characteristics would benefit the small-scale farmers more.

There is a risk of misallocation (inefficient use) of resources for large-scale farms

Future studies

Sampling technique to include new entrantsCollecting more accurate (& quantitative) dataPerforming more rigorous economic analysis, (NPV, efficiency measurement…)Investigate the sustainability of cocoa production in Cameroon

Thank You !