ECONOMIC ANALYSIS OF RICE PRODUCTION AND MARKETING IN UZO-UWANI LOCAL GOVERNMENT AREA OF ENUGU STATE
The study examined the economics of rice production and marketing in Uzo-Uwani Local Government Area. Using multi-stage random sampling technique, a total of 120 rice producers and marketers were randomly selected. The relevant data for the study were collected through a set of structured questionnaire administered to the selected respondents. The study described the systems of rice production and marketing in the study area, compared the socio-economic characteristics of rice producers and marketers, and their effects on production and marketing of rice, described the rice market and its distribution channels, compared costs and returns of rice production and marketing, identified and examined the major problems of rice production and marketing and made recommendations for enhancing rice production and marketing. The analytical tools used in this study included descriptive statistics, multiple regressions, enterprise budgeting, costs and returns, marketing and gross margin analysis. Result of the study showed that more males than females were involved in rice farming and more females than males in marketing. Majority of both producers and marketers were within the age bracket of 40-49 years. Amongst all the categories of household sizes, those with 1-10 members for both the producers and marketers had more output than others. Majority of the producers and marketers sourced their funds from personal savings. Most farms and markets were of short distances, therefore transport costs was affordable. Most marketers relative to producers were new in rice business. The major socio-economic characteristics that affected the net return from producers and marketers were number of hectares of rice cultivated for the farmers, marital status, number of household members involved in the business and distance from the house to the market for the marketers. The prevalent types of rice production systems in the area were rain fed upland and rain fed lowland. Two methods of rice processing identified were hand pounding system and small mill system. The categories of marketers identified in the area were those who buy paddy rice, store and sell later; those who buy paddy, process and sell; and those who sell both paddy and milled rice. Three main types of markets identified in the area were farm gate markets, designated markets and central markets. The mean sales revenue realized from a 2ha rice farm was calculated using enterprise budgeting to be N240, 000.00. This gave a net profit of N44, 525.00 and return per naira of investment of N1.23.00. In line with the producers output, the wholesaler buys and realized a total amount of N432, 000.00 with net-income of N18.400.00 and return on Naira of investment as N1.45.00. Comparatively, the result showed that the wholesalers made the highest profit in the rice business. Lack of developed/fertile lands, funds, inputs, pest and diseases were found to be the challenging constraints of the producers. While inefficient/high cost of transportation, ineffective storage, inefficient grading and standardization, shortage of labour/manpower are found to be major constraints in the rice marketing-enterprise. Based on the findings of the study, the following recommendations were made feeder roads should be maintained by appropriate government authorities, this will help to retain the affordable transport costs, grading and standardization should encouraged in line with national and international best practices; proper training of both farmers and marketers should be arranged by both government and farmer-associations to encourage record keeping, the financial base of both farmers and marketers should be boosted by Government and donor agencies through the facilitation of loans from financial institutions and granting of subsidies.
TABLE OF CONTENTS
Title Page .. .. i
Certification .. .. ii
Dedication .. .. iii
Acknowledgement .. .. iv
Table of Content .. .. v
Abstract .. .. viii
CHAPTER ONE: INTRODUCTION .. .. 1
1.1 Background Information .. .. 1
1.2 Problem Statement .. .. 6
1.3 Objectives of the Study .. .. 7
1.4 Justification of the Study .. .. 8
CHAPTER TWO: LITERATURE REVIEW .. .. 9
2.1 Rice Production Systems .. .. 9
2.2 Concept of Agricultural Marketing .. .. 10
2.3 Rice Processing Storage and Marketing .. .. 12
2.3.1 Rice Processing .. .. 12
2.3.2 Rice Storage .. .. 14
2.3.3 Rice Marketing .. .. 16
2.4 Marketing Margins and Costs .. .. 17
2.5 Gross Margin Analysis .. .. 18
2.6 Marketing Functions .. .. 18
2.6.1 The Exchange Function .. .. 19
2.6.2 The Physical Marketing Functions .. .. 19
2.6.3 The Facilitating Functions .. .. 21
2.7 Marketing Channels and Agencies .. .. 22
2.8 Market Structure and Conduct .. .. 23
2.8.1 Market Structure .. .. 23
2.8.2 Market Conduct .. .. 24
CHAPTER THREE: RESEARCH METHODOLOGY .. .. 26
3.1 Area of Study .. .. 26
3.2 Sampling Procedure .. .. 27
3.3 Data Collection .. .. 27
3.4 Data Analysis .. .. 27
3.5 Analytical Framework .. .. 28
3.5.1 Enterprises Budgeting .. .. 28
3.5.2 Multiple Regression Analysis .. .. 29
3.5.3 Marketing Margins and Costs .. .. 30
3.5.4 Gross Margin Analysis .. .. 30
CHAPTER FOUR: RESULTS AND DISCUSSION .. .. 32
4.1 Socio-Economic Characteristics of Rice Producers and Markets and Effects on Rice Production and Marketing32
4.1.1 Socio-Economic Characteristics of Producers and Marketers .. .. 33
4.1.2 Socio-Economic determinants of Rice Production .. .. 36
4.1.3 Socio-Economic determinants of Rice Wholesaling on Marketing of Rice .. .. 37
4.1.4 Effect of Socio-Economic Characteristics of Rice Retailers on Marketing of Rice .. .. 38
4.2 Systems of Rice Production .. 40
4.2.1 Rice Production in Uzo-Uwani Local Government Area .. 44
4.2.2 Rice Processing Systems .. .. .. .. .. 44
4.2.3 Rice Market (Structure and Conduct) .. .. .. .. 45
4.3.1 Description of Rice Market .. .. .. .. 46
4.3.2 Marketing Channels of Rice .. .. 47
4.4 Costs and Returns of Rice Production and Marketing .. .. 49
4.4.1 Enterprise Budget for the Average Rice Farmer (2ha) .. .. 50
4.4.2 Marketing Costs and Returns for the Average RiceWholesaler .. .. 51
4.4.3 Marketing Costs and Returns of the Average Rice Retailers .. 53
4.4.4 Comparative Costs and Returns of the Producers, Wholesalers and Retailers .. .. 55
4.5 Major Problems of Rice Production and Marketing .. .. 56
4.5.1 Problems of Rice Production .. .. 56
4.5.2 Problems of Rice Marketers .. .. 59
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION 62
5.1 Summary .. .. 62
5.2 Conclusion .. .. 65
5.3 Recommendation .. .. 65
REFERENCES .. .. 67
1.1 Background Information
Equitable and sustainable economic development cannot ignore basic food commodities particularly in developing countries such as Nigeria. Basic food commodities play important roles in economic development as their availability and costs impinge on food security, expenditures and incomes of households, particularly among poor segments of the population in both rural and urban areas. Of all the basic food commodities, rice is particularly important (Akpokodje, et al, 2001). This is because in Asia, rice constitutes the staple food. In America and Europe, it is frequently taken. In Africa, rice is more important in the urban centres where evidence of rising level of income is more prominent (Lang, 1979; Fulani, 1980).
Nigeria is one of the largest rice producers in West Africa (WARDA, 1981). In Nigeria, also, it is one of the important cereal grains replacing some of the grains and tuber crops. Rice used to be the “white mans” food meant only for the elites and high class individuals in the society. The middle class and the peasants, who constitute a higher percentage of the population, only ate rice at Christmas and other major festive periods. Many of them had the belief that rice symbolized Christmas and vice-versa (Ogbuakanne, 1998).
However, combinations of various factors seem to have triggered the structural increase in rice consumption. According to Akanji (1995), rising demand was partly the result of increasing population growth. Also, increased income levels, following the discovery of crude oil, led to the rise in the demand for the commodity. The most important factor contributing to the shift in consumer preferences away from traditional staples and towards rice is rapid urbanization and associated changes in family occupational structures. As women enter the workforce, the opportunity cost of their time increases and convenience foods such as rice, which can be prepared quickly, rise in importance. Similarly, as men work at great distances from their homes in the urban setting, more meals are consumed away from home where the ease of rice preparation has given it a distinct advantage. The average Nigerian consumes 24.8kg of rice per year, representing 9% of total caloric intake (Rice Web, 2002).
Olufowole and Joshua (1979) reported that, of the 25 varieties of rice recommended to Nigerian farmers, only five were upland varieties while the remaining 20 were for swamp production. The popular variety of upland rice in the study area is FARO 1I while the most popular variety of swamp rice is IRRI 14/16. This is considered to be the highest yielding rice variety, while FARO 25 ranked second.
According to WARDA (1981), IRRI (1990), and Maclean (2002), Nigeria’s rice production made some remarkable gains from 1980 to 1989. The area under cultivation grew from about 400,000 hectares in 1980 to 900,000 hectares in 1989. Paddy rice production increased from about 600,000 tonnes in 1980 to about 1,422,000 tonnes in 1989 and 3.189.833 metric tonnes from 1990 -1999.
Prior to the World Bank Rice Project and River Basin Development Authorities in Nigeria, domestic rice production depended mainly on natural rainfall which was very erratic in nature. Farmers under this system (rain fed) employed traditional practices and inputs resulting in low yields. This was sufficient in meeting the increasing demand for rice (Onwuchekwa, 1988).
The inability of the farmers to meet rice demand coupled with the fact that production capacity was far below the national requirements for rice, forced the Federal Government to import rice to supplement local production and to bridge the gap between domestic demand and supply (Wudiri and Fatoba, 1992). . Rice imports did not decline until 1981 as a result of some policy measures put in place to check the importation of the commodity. Even then, the quantity imported on an annual basis was over 300,000 tonnes. Imports dropped significantly from 1985 when the ban was placed on rice. Although, rice importation began to rise again in 1991, major importation did not begin until after lifting the ban in 1995 (Ladebo, 1999).
The problems of rice farmers include land tenure system, inefficient labour utilization and lack of finance, capital and credit (Agara, 1979; Okorie, 1987). Also, the rice gall midge infestation in Abakaliki in 1988 and Uzo-Uwani in 1989 are examples of constraint to rice production (Emeribe, 1990).
For efficiency and stability of rice production in West Africa, some countries have embarked on new technological strategies to improve land and labour productivity as well as marketing potentials of small-holder rice farmers and middlemen while preserving the resource base on which their future livelihoods depended (WARDA, 1988). These strategies included modernized rice production systems through the provision of machinery and equipment, seeds and agro-chemicals, improved access to technologies and credit. In October, about seven billion naira (US $54 million) was reported to have been distributed through the Agricultural Co-operative and Rural Development Bank (NACRDB) to small scale farmers to expand rice production. .
Based on this, Nigeria launched the Presidential Rice Initiative in August 2002 to improve rice production and processing by enhancing farmers access to subsidized farm inputs and suitable rice varieties coupled with border protection. Against the backdrop of the celebration of international year of rice in 2004, government also reiterated its intention to bolster the sector to reach self- sufficiency in 2005, through the diffusion of Nerica varieties and the launching of a “Nucleus Estate Initiative” (NEI).
Marketing, according to Dixie (1999), is the series of services involved in moving a product (or commodity) from the point of production to point of consumption. Agricultural marketing, according to Kohls and Downey (1998), is the performance of all business activities involved in the flow of agricultural goods and services from the point of initial agricultural production until they are in the hands of ultimate consumers Arene (1998) defined agricultural marketing as all those legal, physical and economic services that make it possible for products from producers to get to consumers, at the place desired by consumers, and at the price agreeable to producers and consumers for effecting a change of ownership/possession.
Olukosi and Isito (1990) defined agricultural marketing from the micro and macro view points. From the micro-perspective, agricultural marketing is the performance of all business activities which direct the forward flow of goods and services to the consumers in order to accomplish the producer’s objective. The macro view-point of agricultural marketing, examines the total system of economic activities concerned with the flow of agricultural products from the producer to the final consumer.
It is obvious that groups with different interests will view marketing differently. This is because consumers are interested in getting what they want at the lowest possible cost. Farmers are interested in obtaining the highest possible returns from the sale of their products. The various firms engaged in doing the various marketing functions are interested in the profitability of their particular business operations (Olukos and Isito 1990). In view of the divergent interests, conflicts of interest can and do arise among the various groups seeking these goals. The process of beginning and trying to solve these problems is what gives marketing its essential dynamic character.
The marketing of locally produced rice is essentially the same all over Nigeria. This involves the performance of all business activities in the flow of paddy and milled rice, from the point of initial rice production until they are in the hands of the ultimate consumers at the right time, in the right place and as convenient as possible, at profit margin so as to keep the farmer in his farming operations (Ihere, 1996). Aderibigbe (1997) divided the marketing of local rice into four stages with a change of produce ownership occurring between each pair of stages. The first stage is production through harvesting. Stage two includes movement from the farms to processing centres while stage three consists of moving the milled rice from processing areas to urban consumption centres. The fourth stage encompasses wholesaling and retailing in the urban centers. The marketing of this rice was until 1976 handled entirely by private entrepreneurs. From 1977, the establishment of the Nigerian Grains Board introduced a limited form of governmental participation in production, processing and marketing of rice and other cereals. The Board purchased milled and paddy rice directly from farmers and provided storage such that rice could be available in the market during non harvest periods. In the third phase commencing in 1986, private individuals were in full charge of the marketing of locally produced rice. (Aderibigbe,1997). This form of governmental organisation, in conjunction with the participation of local farmers, enhanced the production, marketing and distribution of rice in Uzo-Uwani Local Government Area and the country generally.
1.2 Problem Statement
Neglect of agricultural activities has been a very serious problem affecting both producers and marketers of agricultural produce in the country. This situation appears to be aggravated by government and policy makers who have not considered production and marketing of food crops as serious problems to the economic development of the nation (Osuji, 1980; Nwokolo, 1991).
Some experts and researchers have carried out studies/research on rice production and marketing differently, example, Okereke (1991) compared the economics of rice production from traditional farmers. Nwoye (1997) investigated the economics of rice production by small-holder farmers in Anambra State. Okorji and Onwuka (1994) estimated the profitability of rice production at Uzo-uwani area of Enugu State while Ogbuakanne (1998) studied the economics of rice marketing in Orumba Local Government Area of Anambra State of all these, None compared the profits of the producers and marketers (middlemen)in the same study. In Uzo-uwani Local Government Area, there are two basic enterprises in rice business; those involved in the production of rice (farmers) and the people involved in buying paddy, processing and selling to retailers, consumers, or even the farmers. The class of people that make up the latter enterprise are the wholesalers.
Often, people believe that middlemen are making the profit while farmers suffer. This may or may not be correct. Studies have not tried to relate the producer’s margin with marketer’s margin in the same environment and season. This has led to spatially separated conclusions at different points in time. The consequence may be poor policy formulation due to wrong signal. This study is aimed at filling this research gap with special reference to Uzo-Uwani Local Government Area.
1.3 Objectives of the Study
The broad objective of this study is to carry out an economic analysis of rice production and marketing in Uzo-Uwani Local Government Area.
The specific objectives are to:
i. describe the socio economic characteristics of rice producers and marketers/processors;
ii. analyze the effects of socioeconomic characteristics on the net income of producers and marketers;
iii. describe the systems of rice production and marketing in the study area;
iv. analyze rice marketing and distribution channels;
v. compare costs and returns in rice production and marketing;
vi. identify and describe rice production and marketing problems in rice enterprises and
vii. make recommendations for enhancing rice production and marketing in the study area based on the empirical findings. 1.4 Justification of the Study
There is a consensus on the assertion that the economic survival of any nation depends largely on her ability to feed the citizenry and also export the surpluses to earn foreign exchange (Nwokolo, 1991).
It is also hoped that the findings of this study will help to further highlight the activities and roles of producers and marketers in production, processing, distribution and sale of rice. Moreover, the study will make the Nigerian government to appreciate the contributions of producers and marketers in the rice industry and hence seek ways of encouraging them in their various activities. It is finally hoped that information from the study will form a source of reference to students, institutions and researchers and provide a basis for future studies on related issues..