Aspects of profitability that influence smallholder cash-crop preferences in northern Mozambique

Abstract

This study analyses profitability in terms of relationships between various aspects, indicators and cash-crop cultivation preferences. Both financial and pragmatic aspects of profitability were found to be related to cash-crop preferences. Apart from the need to promote a crop with a good farm gate price and to reduce production and marketing costs, promoters need to strengthen the wider system by supporting profitability as well as household consumption requirements. The correlation between indicators of expected profitability improved as more financial and pragmatic aspects were incorporated. Smallholder farmers' rankings of profitability correlated better with cash-crop preferences when the analysis incorporated more aspects of profitability. In addition, the results indicated the institutional support needed to improve the profitability of cash crops. This simple method of identifying smallholder preferences for one cash crop among many is of paramount importance in the design of strategies for improving agricultural market participation.

Keywords:

• Profitability
• cash-crop preferences
• smallholder cash-crop cultivation
• northern Mozambique

1. INTRODUCTION

Profitability in this study was the perception that a cash crop would reward the producer with excess income over expenditure. According to the literature, this is often viewed as the basis for a viable business (Hofstrand, 2006). However, smallholders attached value not only to financial aspects of profitability but also to the means of obtaining a higher profit, such as higher yield, the result of access to inputs, access to extension and experience, and market and price reliability (here called pragmatic aspects). Smallholder farmers in northern Mozambique did not equate expected profitability only with the intention to grow certain cash crops, although they saw the profitability of cash crops as a very important factor influencing market participation (Lukanu et al., 2004). This study defines ‘market participation’ as the percentage of households selling a given crop for cash, and ‘cash crop’ as any crop that can be sold, be it a food cash crop or a promoted cash crop. Some food cash crops are maize, beans and cassava, and the promoted cash crops examined by this study were tobacco, cotton, sesame, sunflower and paprika.

To achieve pro-poor rural growth, the problem of low profitability of cash crops must be addressed explicitly (Heltberg & Tarp, 2002). Boateng et al. (1987) found that smallholders in Ghana preferred to cultivate and market food cash crops rather than a cocoa cash crop because they were more profitable. Omano's (1998) study in Kenya concluded that farmers' preference for food cash crops that brought a lower gross income than cotton was due to the high cost of transporting cotton. This suggested that greater transport costs reduced the perceived profit of cotton in relation to food cash crops, despite the fact that cotton's total gross income (production x price) was higher than that of food cash crops. Smallholders seemed to react more to profitability incentives than to price alone (Anderson, 2003).

This study has the following specific objectives:

1. to analyse both the financial and the pragmatic aspects of profitability that influence smallholder cash-crop preferences;

2. to analyse indicators of expected profitability that best predict smallholder cash-crop preferences; and

3. to investigate the current and projected smallholder cash-crop preferences on the basis of profitability-related aspects and indicators.

Governments, donors and non-governmental organisations (NGOs) in Africa, particularly in northern Mozambique, have attempted to promote cash-crop diversification to prevent smallholders from becoming too dependent on the few existing commercial cash crops such as cotton and tobacco, as promoted by monopolistic agribusiness companies. However, given the limited availability of household labour and the subsequent difficulty in increasing the amount of land cultivated to accommodate new cash crops, smallholders tend to substitute existing cash crops for new ones only if they think that their profitability is better (Lukanu, 2005). Rejection of cash crops after investment means a waste of resources for the donors, the implementing NGOs and the farmers themselves. An understanding of smallholder cash-crop decision-making and preferences will limit this wastage because donors and promoters will have prior awareness of the likely preferences and the underlying factors determining such preferences. With this knowledge, donors and promoters can better tailor the strategies for promoting smallholder participation in agricultural markets to the benefit of all stakeholders.

2. THEORETICAL BACKGROUND

A financially profitable crop is one that will give farmers a positive net income after deducting the total costs from the gross income. However, what affects smallholder cash-crop preferences is what they expect the profitability to be, not the actual calculated financial profitability. Smallholders adopt a positive attitude to a cash crop if, after evaluation, they think that the means for obtaining a good profit are in place. A positive attitude to a particular cash crop can be defined as a learned predisposition to respond in a consistently favourable manner to this cash crop (Schiffman & Kanuk, 1991). When farmers report that they especially like a cash crop, we expect that they will prefer it to others and subsequently cultivate and market it (Lynne et al., 1988).

Figure 1 is a comprehensive diagram of the system that influences profitability. The bottom line shows the purely financial aspects of profitability; that is, production multiplied by price minus costs equals profit. These aspects are expected to influence cash-crop preferences. For example, Sahn and Arulpragasam (1991) have suggested that low expected farm gate prices reduce market participation (a proxy for cash-crop preference). According to Gladwin et al. (2001), smallholders will opt for a non-food cash crop only if the profitability is twice or three times that of food cash crops.

Figure 1: Factors and interactions affecting smallholder participation in agricultural markets

The remaining factors in Figure 1 are pragmatic aspects of profitability: supportive agro-ecological and natural resources; household socio-economic characteristics; access to research and development and extension; policies and institutional infrastructure; physical infrastructure; and access to markets. These factors, isolated or in combination, affect the various aspects of financial profitability; that is, the cost of production, the price received for the crop, and the profit itself. Smallholders perceived yield, labour (a household characteristic), extension and access to markets as very important aspects of profitability that influenced their participation in agricultural markets (Green et al., 2006).

Smallholders attach value not only to financial aspects of profitability but also to the means of obtaining a higher profit (Paarlberg, 1993). Their decisions are influenced more by the risk factors or the pragmatic aspects of profitability than by the financial aspects. For example, Lukanu et al. (2004) found that a reliable buyer was the second most important factor that made smallholders decide to cultivate and market particular crops in southern Niassa. They will not cultivate a cash crop if the marketing system is unlikely to absorb their output (Hornik, 1993). To give another example, Madikizela and Groenewald (1998) reported that lack of market information negatively affected the marketing of smallholders' vegetables in the Eastern Cape, South Africa.

3. SOUTHERN NIASSA CROPPING SYSTEMS

Farmers here generate income by selling both food cash crops and promoted cash crops (Lukanu et al., 2004). Some agencies have been promoting a number of crops in the study area. The João Ferreira dos Santos (JFS) Company promotes tobacco and cotton for export. Most of the NGOs, such as OXFAM, União dos Camponeses e Agricultores a Sul de Niassa (UCASN), Acção Cristã Interdenominacional da Saúde (ACRIS) and World Relief-SempreVerde, and government extension services have been promoting sesame, sunflower, paprika, vegetable and food crops.

The JFS Company efficiently provides extension, inputs, credit and marketing of smallholder tobacco and cotton. It has about 50 years' experience with cotton in southern Niassa, and owns a pre-processing facility for de-seeding cotton and also packaging. OXFAM and UCASN provide extension services and seed and facilitate the buying process for a variety of crops through farmers' associations. ACRIS, a small organisation, provides extension and some inputs for crops and small animal husbandry. At the time of the study, WR-SempreVerde was attempting to copy the JFS Company model that covers crop market research, farmer mobilisation, and production, collection and distribution of the harvested products to buyers in local, regional and international markets.

As southern Niassa has a population density of only 13 people/km², availability of land is not a limiting factor (Instituto Nacional de Estatística, 2001). Smallholders can increase their production by cultivating more land. However, household labour limitations, lack of finance to pay for additional labour, unavailability of casual labour during peak periods and inadequate labour-saving strategies hinder farmers from increasing their cultivated areas (Lukanu, 2005).

Inputs such as pesticide and fertilisers to minimise risks are available only through the JFS Company and only for tobacco and cotton. Other crops are cultivated using the local practices of rotation, fallows, crop mixing or intercropping, burning and cultivation of crops resistant to adverse conditions. The yields for the majority of these crops are generally low because of poor seed quality, low planting density, lack of inputs, late weeding and poor soil management (Bias & Donavan, 2003), and sparse and irregular rainfall.

In southern Niassa it is the smallholders and not the large commercial farmers who produce the majority of the cash crops (99 per cent). The JFS Company exports tobacco and cotton to regional and international markets. Export Marketing and V&M export sesame to international markets. NGOs facilitate the local selling of sunflower seed to supply the oil industry. Export Marketing, V&M and formal and informal traders distribute the remaining food cash crops to cities, provinces, districts and administrative posts in northern Mozambique. These agribusiness companies and Mozambican and Malawian traders also export some food cash crops to Malawi (PAMA, 2003). All the above shows there are substantial marketing possibilities.

4. METHODOLOGY

The research sampling and data collection methods were described in an earlier article in this journal (Green et al., 2006). For this study, Table 1 explains how the data were estimated from the information smallholders provided for each of the specific cash crops investigated. The study uses correlation analysis between profitability aspects and the cash crop on individual factors. A multiple regression analysis is then performed to determine an equation that can be used to predict cash-crop preference. This linear regression model is compared with the suggested indicators of expected profitability for determining cash-crop preferences.

Table 1: Financial and pragmatic aspects of profitability used to estimate indicators of profitability

Data	How estimated
Farm gate price	Price for each crop during 2001/02 survey. Higher unit price ranked 5; lower unit price ranked 0
Yield	Average yield obtained in southern Niassa for each cash crop. Higher yield ranked 5; lower yield ranked 0
Area of cultivated field	Based on available household labour, crop labour requirements during peak period and household consumption requirements (Lukanu, 2005)
Cost of inputs	Based on information from farmers, cash-crop promoters' institutions and government agricultural department. Higher input costs ranked 0; lower input costs ranked 5
Cost of labour	Based on crop labour requirements in person-days multiplied by US$1.1 per day of work (minimum wage in Mozambique for formal employment). Higher labour costs ranked 0; lower labour costs ranked 5
Crop labour requirements	Based on farmers' information about labour for each agricultural operation (Lukanu, 2005)
Reliability of price	Based on farmers' responses when asked what crop they thought had reliable price, i.e. less likely to decrease from promoters' promised prices. Crop with least reliable price ranked 0; crop with most reliable price ranked 5
Access to inputs	Crops classified in terms of access to inputs based on percentage of farmers who indicated lack of inputs as reason for not cultivating the crop. Crops with higher percentage ranked 0; crops with lower percentage ranked 5−indicating lower and higher access to inputs, respectively
Access to extension and experience	Crops classified in terms of access to extension/experience based on percentage of farmers who indicated lack of extension/experience as reason for not cultivating the crop. Crops with higher percentage ranked 0; crops with lower percentage ranked 5−indicating lower access and higher access to extension/experience, respectively
Access to reliable buyers	Based on farmers' responses when asked to rank the six cash crops in terms of reliability of buyers. Crops with most reliable buyers ranked 5; crops with least reliable buyers ranked 0
Profitability	Based on farmers' responses when asked to rank the six cash crops in terms of profitability. Most profitable crops ranked 5; least profitable crops ranked 0
Perceived relative advantage	Based on farmers' responses when asked to rank the six cash crops in terms of advantages. Most advantageous crops ranked 5; least advantageous crops ranked 0−this is the degree to which they perceive one cash crop as better than another taking into consideration what they see as important factors of the farming system (Rogers, 1995)
Desired income from cash crops	Farmers asked to indicate how much cash they would like to generate with the sale of one of their best (ideal or hypothetical) cash crops
Cash-crop preference	Crops classified in terms of assumed preference based on percentage of farmers who marketed that crop. Crops with higher percentage ranked 5; crops with lower percentage ranked 0−indicating higher and lower preference, respectively

Prediction of cash-crop preferences can be performed using logistic regression based on a set of predictor variables. Yet there is a need for quick and routine information to be collected for the design and implementation of agricultural marketing development programmes. Statistical tools can scarcely be used in the field because of the lack of skills and calculating technologies. Most of the data were therefore converted to rankings for simplicity. A rank from zero to five was used to characterise the six cash crops being analysed. This ranking is easy enough for development officers to determine. Aspects of profitability included in this study are described in Table 1 and used as indicators contributing to profitability.

It is important to stress that most of the financial parameters such as costs and profit for each of the cash crops are expressed as US$/household rather than US$/ha. Comparing financial aspects expressed as US$/ha would suggest that the better cash crop is the one that provides more income per unit of area, leading to the conclusion that these are the crops farmers would prefer, and obscuring some of the factors that affect household agricultural income and subsequent cash-crop preferences. In Lukanu (2005) it was shown that the area of a cash crop that a household was able to cultivate depended on the household labour available, household consumption requirements, yield of food crops and crop labour requirements. The estimated average areas that a household could cultivate for southern Niassa cash crops were 1.1 ha for food cash crops, 0.4 ha for tobacco, 0.9 ha for cotton, 2.7 ha for sunflower, 2 ha for sesame and 1.3 ha for paprika. These estimates match the measured data for food crops, tobacco and cotton (PAMA, 2003). Sesame and sunflower are not cultivated as the main crops as they are often intercropped with maize. Data suggest that households cropped an average of about 1.8 cash crops per household. This study therefore uses these areas to compare the amount of income a household would get (or be able to pay for labour and inputs) if it cultivates each of the cash crops discussed in this study. That is, by expressing cost or profit in US$/household, we take into consideration the household's economic system thinking.

5. RESULTS AND DISCUSSION

This section discusses the findings about financial and pragmatic aspects and indicators of expected profitability. It includes a linear regression model for predicting cash-crop preferences. The study attempts to validate the hypotheses underlying this research, and develops a tool that uses rankings and simple operations to predict cash-crop preferences for use by field development officers. The statistics of real numbers and ranks were similar for most of the important aspects of profitability, such as price, yield, reliability of the price and access to extension.

5.1 Financial aspects of profitability influencing cash-crop preferences

The financial aspects of profitability in this study include ranked farm gate price (the value of money per kilo of products paid to smallholder at a specific selling point at village level), yield, input and labour costs. The area of cultivated field is not discussed here. Nji and Sama (1987), Fenwick and Lyne (1999) and Matungul (2002) reported that the size of the cultivated field correlated positively with smallholder participation in agricultural markets or with adoption of crops, since smallholder farmers with more land area produced more and subsequently marketed more, and fixed transaction costs decrease with increased production.

5.1.1 Price and yield

It is expected that, other factors being held constant, farmers will get involved in the market for those cash crops with a higher farm gate price. In the present study, the ranked farm gate price correlated positively but insignificantly with cash-crop preferences (r = 0.257; α = 0.311) (Table 2). Focus group discussions revealed that the future and/or present price had an immediate response in farmers' market participation. Nevertheless, the positive reaction due to the higher prices had only a short-term effect. Smallholders did not prefer a cash crop with a high farm gate price if they ran a high risk because of heavy crop labour requirements, reduced yields, unreliable prices, lack of extension, lack of inputs or lack of reliable buyers for that crop.

Table 2: Gross income and cash-crop preferences in southern Niassa

	Cash-crop preferences		Price		Potential area (ha)	Yield		Gross income/household
	%	Rank	US$	Rank		kg/Ha	Rank	US$/HH
Paprika	1	0	0.50	4	1.3	500	0	325
Sunflower	5	1	0.10	0	2.7	600	2	162
Sesame	7	2	0.13	2	2.0	600	1	156
Cotton	23	3	0.15	3	0.9	771	3	104
Food crops	38	4	0.13	1	1.1	1175	4	162
Tobacco	40	5	0.75	5	0.4	1200	5	360
Pearson R				0.257			0.943
Significance (α)				0.311			0.002
R ^2				0.066			0.889

Ranked yield had a positive effect on smallholders' cash-crop preferences. The correlation between ranked yield and cash-crop preferences was positive and significant (r = 0.943; α = 0.002). Stepwise regression involving all the profitability-related aspects as independent variables and cash-crop preferences as dependent variable suggested that ranked yield was the single most important factor in explaining the variation in cash-crop preferences – 86 per cent (Table 3). Nevertheless, the yield of a cash crop incorporated the effect of good extension (R = 0.771) and access to inputs (R = 0.657) in a package deal provided by the JFS Company for tobacco and cotton and by NGOs for food cash crops, sesame, sunflower and paprika. Yield should therefore not be seen in isolation.

Table 3: Stepwise regression of cash-crop preferences and aspects of profitability

	Unstandardised coefficients		Standardised coefficients (β)	t	Significance	95% confidence interval for B		Correlations			Collinearity statistics
	B	Standard error				Lower bound	Upper bound	Zero order	Partial	Part	Tolerance	VIF
(Constant)	0.143	0.504		0.283	0.791	−1.258	1.543
YIELRANK	0.943	0.167	0.943^a	5.659	0.005	0.480	1.405	0.943	0.943	0.943	1.000	1.000
PRICRANK			0.125^b	0.693	0.538				0.371		0.980	1.021
INPURANK			0.183^b	1.125	0.343				0.545		0.980	1.021
LABORANK			0.053^b	0.276	0.800				0.157		0.993	1.007
PRRERANK			0.250^b	0.941	0.416				0.477		0.405	2.470
ACCINPUT			−0.034^b	−0.136	0.901				−0.078		0.568	1.760
ACCEXTEX			0.250^b	0.941	0.416				0.477		0.405	2.470
ACCBUYER			0.091^b	0.454	0.681				0.253		0.862	1.160
R = 0.943^a. R ^2 = 0.889. Adjusted R ^2 = 0.861. Standard error of the estimate = 0.697. Change statistics: R ^2 change = 0.889, F change = 32.029, df1 = 1, df2 = 4, significance F change = 0.005. Durbin−Watson = 2.754. VIF, Variance Inflation Factor.
^aPredictors in the model: (Constant), YIELRANK (ranked yield).
^bOthers: PRICRANK (ranked price), INPURANK (ranked inputs costs), LABORANK (ranked labour costs), PRRERANK (ranked reliability of the price), ACCINPUT (ranked access to inputs), ACCEXTEX (ranked access to extension and experience) and ACCBUYER (ranked access to reliable buyers).

5.1.2 Inputs and labour costs

The study assumed an insignificant yearly cost for implements because these can be used for many years. However, it is important to mention that more than 12 per cent of the respondents indicated that the price of implements was too high, and all used hand tools for cultivation. Overall the ranked input costs (r = 0.147; α = 0.394) and ranked labour costs (r = 0.486; α = 0.164) did not have any significant relation to cash-crop preferences (Table 4). Crops with the highest cost/gross income ratio received the lowest preference ranking, and those with lowest cost/gross income ratio the highest ranking. This correlation confirms that smallholders preferred cash crops with low input and labour costs.

Table 4: Cost-related profitability and cash-crop preferences

	Cash-crop preferences		Input costs/household			Labour costs/household			Total costs/household
	%	Rank	US$/HH	Costs/gross income (%)	Rank	US$/HH	Costs/gross income (%)	Rank	US$/HH	Costs/gross income (%)
Paprika	1	0	25	8	2	339	104	4	364	112
Sunflower	5	1	22	14	0	181	112	2	203	125
Sesame	7	2	12	8	3	164	105	3	176	113
Cotton	23	3	5	5	4	243	233	0	248	238
Food crops	38	4	0	0	5	262	162	1	262	162
Tobacco	40	5	42	12	1	159	44	5	201	56
Pearson R					0.147			0.486
Significance (α)					0.394			0.164
R ^2					0.022			0.236

Farmers did not quantify the cost of seeds for food cash crops, as these were part of their own stock, or for cottonseed, as the JFS Company supplied this to the village chief's compound for collection by interested producers. WR-SempreVerde started subsidising sesame seed from the 2002/03 agricultural season to reduce the cost and stimulate smallholders' preference for sesame. This strategy, together with others, allowed WR-SempreVerde to increase the number of farmers served from 500 in 2001/02 to about 7000 in 2003/04.

The cost of labour was rarely quantified as this was mostly done by household members. The low significance of the relationship between labour costs and cash-crop preferences also shows that smallholders did not include labour costs when deciding to cultivate a cash crop. Nevertheless, we need to take labour and total costs into consideration when a household hires labour. Overall, the cost of producing tobacco was about 56 per cent of the total gross income. The proportion of farmers cultivating and marketing tobacco was likely to continue to increase, partly because they could use the income from tobacco sales to pay attractive wages to hired labour. Hiring labour for other crops was too risky, with potential losses.

6. PRAGMATIC ASPECTS OF PROFITABILITY INFLUENCING CASH-CROP PREFERENCES

The pragmatic aspects include the reliability of price, access to inputs, access to extension and experience (i.e. knowledge), and access to reliable buyers. These are the conditions that need to exist to convince smallholders that they can realise a good profit and make them decide to cultivate a given cash crop.

6.1 Reliability of price

The ranked reliability of price was positively and significantly related to cash-crop preferences (r = 0.829; α = 0.021). This rank represents smallholder perceptions of the possibility of getting the same price as the promised one, or higher (Table 5). Farmers distrusted buyers who paid less than the promised price or downgraded the quality of their products in order to pay lower overall prices. When asked to suggest what advice should be given to promoters, 42 per cent of smallholders said buyers need to be reliable in terms of prices.

Table 5: Pragmatic aspects of profitability and cash-crop preferences in southern Niassa

	Cash-crop preference		Reliability of price	Access to inputs		Access to extension/experience				Access to reliable buyers
	%	Rank	Rank	Lack (%)	Rank	Lack of extension (%)	Lack of experience (%)	Total (%)	Rank	%	Rank
Paprika	1	0	2	13	2	5	45	50	0	2	3
Sunflower	5	1	0	26	1	3	8	11	1	9	1
Sesame	7	2	1	30	0	4	4	8	2	6	2
Cotton	23	3	3	1	4	3	0	3	4	19	0
Food crops	38	4	4	0	5	0	0	0	5	0	5
Tobacco	40	5	5	1	3	5	0	5	3	1	4
Pearson R			0.829		0.600				0.829		0.429
Significance (α)			0.021		0.104				0.021		0.198
R ^2			0.687		0.360				0.687		0.184

The ranked reliability of price was positively and significantly related to ranked yield (r = 0.771, α = 0.036) and ranked access to inputs (r = 0.771, α = 0.036). It was also highly (but not significantly) related to ranked farm gate price (r = 0.600; α = 0.104), ranked access to extension/experience (r = 0.657; α = 0.078) and ranked access to reliable buyers (r = 0.600; α = 0.104). This means that the reliability of the price for a given cash crop will be high for high yielding crops and/or those crops with access to inputs, access to extension/experience and access to reliable buyers. Farmers seemed to believe a promoter's information about price if the promoter was also taking risks by investing its resources to provide inputs/credit, and to provide extension and ensure purchase of the crops it was promoting.

6.2 Access to inputs

Production may be increased by increasing the cultivated area or by increasing yield (intensification) (Larson & Frisvold, 1996). Smallholders are too short of labour to increase the size of the cultivated land (Lukanu, 2005). They can obtain a stable yield using traditional practices such as timely sowing, weeding and harvesting, and planting drought-resistant, disease-resistant, pest-resistant and weed-resistant crops. However, quality seed, fertilisers and pesticides were needed for an immediate increase in yield.

The correlation between the ranked access to inputs and ranked cash-crop preference was positive and high but not significant (r = 0.600; α = 0.104) (Table 5). Inaccessibility of inputs, mainly seed, was an important factor affecting non-cultivation of sesame (30 per cent), sunflower (26 per cent) and paprika (13 per cent). ACRIS, WR-SempreVerde, OXFAM and UCASN had introduced paprika into the southern Niassa cropping system. However, because of limited coverage by these NGOs, most of the farmers were unaware of paprika or of extension services that provided seed support. The NGOs that promoted sesame and sunflower reached only a few of the study villages.

One of the key strategies in the Green Revolution in Asia and Latin America was the provision of inputs (Feder & O'Mara, 1982). Accessibility to inputs by itself implies a change in the environment. Farmers will make their decisions according to new criteria and may value other crops that have accessible inputs (Hornik, 1993). In fact, many smallholders in this study (61 per cent for implements and 53 per cent for other inputs) pointed to the need for inputs when making suggestions about the support they needed to improve their participation in the agricultural market with new cash crops.

6.3 Access to extension and experience

Overall, a small percentage (<5 per cent) of smallholders said lack of extension was a factor preventing them from cultivating and marketing cash crops (Table 5). However, the percentage who did not cultivate because they lacked experience was large for paprika (45 per cent), followed by sunflower (8 per cent) and sesame (6 per cent). No farmers reported lack of experience as a problem for cotton and food crops because of the number of years that they had been involved with these crops (Table 5). The study analysed extension and experience together because provision of extension can help transfer the knowledge, skills and practices required to overcome the lack of experience. Overall, the correlation between the ranked access to extension and experience and cash-crop preference was positive and significant (r = 0.829, α = 0.021).

The ranked access to extension and experience also related positively and significantly to ranked yield (r = 0.771, α = 0.036) and with ranked access to inputs (r = 0.771, α = 0.036). There is a relationship between extension and experience and access to inputs because farmers who have access to extension often have concomitant access to inputs, whether by direct buying, through credit from the JFS Company or through subsidised inputs from NGOs. In addition, the correlation between the ranked access to extension/experience and other factors such as the ranked input costs (r = 0.657, α = 0.078) and ranked reliability of the price (r = 0.657, α = 0.078) was high although not significant. In practical terms, the analysis suggests that access to proper extension support is essential to the improvement of yield, facilitation of accessibility to inputs, and provision of more reliable information about price and buyers.

The focus group discussions also revealed that the majority of households that adopted and continued with the cultivation of certain cash crops had always been able to obtain good yields because of their contact with extension workers. The importance of an effective extension service in overcoming the lack of experience can be observed with tobacco introduction in southern Niassa. Tobacco is a newer cash crop than sesame and sunflower, but no farmer said lack of experience was a reason for not cultivating it. Good extension networks and services by the JFS Company had reached, in less than 4 years, 40 per cent of the respondents cultivating tobacco.

6.4 Access to reliable markets

Reliability of the market ensures that smallholders sell their products and realise profits. The ranked access to buyers was positively but not significantly related to cash-crop preferences (r = 0.429; α = 0.198). Farmers will be less likely to decide to cultivate a given cash crop if they feel that the market is not accessible or the buyers are unreliable. They cited the need for reliable buyers when saying why they participated (22 per cent) or when advising promoters (20 per cent) on how to improve agricultural market development activities in their villages.

The ranked access to reliable buyers was low for cotton although the JFS Company rarely fails to buy cotton and, although the same JFS Company buys tobacco, more than 19 per cent of farmers who did not cultivate cotton blamed the unreliability of the buyer. The company ensures that tobacco buying starts in February/March to avoid side-selling, but buys cotton very late, starting from August/September. In addition, tobacco has fixed buying points where farmers can go when they have sufficient quantity, while cotton has fixed days and a fixed place for farmers to sell it. Failure to sell the cotton on that day and at that place means farmers have to transport it to another selling place. Farmers often transport cotton to the selling place and accumulate it there to wait for the buyers. The JFS Company's failure to come on the promised day causes frustration and makes farmers stop cultivating cotton. That is, although cotton and tobacco were being bought by the same accessible company, the market for tobacco was more reliable and organised than the one for cotton. Therefore, other factors being held constant, more farmers would prefer to cultivate tobacco than cotton.

6.5 Summary of aspects of profitability

Figures 2 and 3 suggest that yield, followed by reliability of price and access to extension and experience, was closely allied to smallholder preferences for specific cash crops. Ranked yield was the single most important aspect, which explained more than 86 per cent of the variation in cash crop preferences. Yield is positively related to the use of inputs and extension recommendations. The link between the provision of extension and inputs and an increase in the yield of cash crops will therefore positively influence smallholder cash-crop preferences. In addition, smallholders will consider the farm gate price to be reliable if the promoter provides extension and inputs, and guarantees to buy the products. The other factors that positively influenced cash-crop preferences were, in order of importance, access to inputs, access to buyers, labour costs and reliability of farm gate price.

Figure 2: Trend lines for gross income and cash-crop preferences (5 = tobacco, 4 = food crop, 3 = cotton, 2 = sesame, 1 = sunflower, 0 = paprika)

Figure 3: Trend lines for pragmatic aspects of profitability and cash-crop preference (5 = tobacco, 4 = food crop, 3 = cotton, 2 = sesame, 1 = sunflower, 0 = paprika)

7. INDICATORS OF EXPECTED PROFITABILITY

Indicators of expected profitability are estimated by identifying the various financial and pragmatic aspects of profitability, and by calculating the expected profitability. The hypothesis of this study is that the greater the number of aspects of profitability incorporated in the indicator for expected profitability, the better this will predict the farmers' cash crop preferences. The following indicators are analysed: Profit1, which takes into consideration only gross income and total costs (including labour); Profit2, which takes into consideration gross income and actual input costs; the ratio between the Profit2 of promoted cash crops and food cash crops; ranked profitability; the perceived relative advantage of a cash crop (the degree to which smallholders perceive the benefit of one cash crop as better than another); and the average ranked profitability. The multiple regression model using statistically selected factors was also used to determine cash-crop preferences.

7.1 Profit1

There is a positive but insignificant correlation (r = 0.355; α = 0.245) between Profit1 (net income) and cash-crop preferences (Table 6). This indicator incorporates the selling price and production costs (all inputs and labour costs). According to Profit1, tobacco (US$159/household) was the only profitable cash crop. Smallholders experienced losses with other crops (US$20/household for sesame, US$39/household for paprika, US$41/household for sunflower, US$100/household for food cash crops and US$144/household for cotton) if labour costs were taken into consideration.

Table 6: Indicators of expected profitability and cash-crop preferences

	Cash-crop preference		Profit1/household (US$)	Profit2/household (US$)	Profit2 food cash crops	Crop labour requirement (person-days)	Ranked profitability (rank)	Perceived relative advantage (rank)	Profit2 average ranking (rank)	Regression model
	%	Rank
Paprika	1	0	−39	300	1.9	307	3.9	3.2	1.5	0
Sunflower	5	1	−41	140	0.9	164	1.3	1.1	1.3	1
Sesame	7	2	−20	144	0.9	146	2.8	2.3	1.9	2
Cotton	23	3	−144	99	0.6	220	2.8	3.0	2.9	3
Food crops	38	4	−100	162	1.0	237	3.4	4.4	3.8	4
Tobacco	40	5	159	318	2.0	145	5.0	4.8	3.8	5
Pearson R			0.355	0.065	0.064		0.508	0.732	0.947	1.000
Significance (α)			0.245	0.452	0.468		0.152	0.049	0.002	0.000
R ^2			0.125	0.004	0.004		0.258	0.535	0.896	1.000
Profit1 was estimated as the difference between gross income and total costs. Profit2 was estimated as the difference between gross income and input costs (excluding free labour)−this was what households considered to be profit (i.e. the money they are paid on selling).

7.2 Profit2

Profit2 (gross margin) is estimated by subtracting the input costs from the gross income without taking labour costs into consideration, because unremunerated household members are involved in the cultivation process. This is the profit according to the households; that is, the money that is paid to them after deducting the actual cost of inputs (thus excluding the value of unpaid labour). As expected, the relationship between Profit2 and cash-crop preference is weaker (r = 0.065; α = 0.452) than the one estimated above with Profit1 (Table 6). This is possibly because Profit2 incorporates only three aspects of profitability: price, production and input costs. Tobacco continued to be the most profitable cash crop (US$318/household).

7.3 Ratio between Profit2 of promoted cash crops and food cash crops

The hypothesis is that farmers will opt for a promoted cash crop only if its Profit2 is more than twice the Profit2 of food cash crops. The hypothesis seems to hold in this research because only tobacco, with a Profit2 that is twice the Profit2 of food cash crops, had more smallholders participating in its market (40 per cent) than food cash crops (38 per cent) (Table 6). The Profit2 for other crops was less than twice the Profit2 for food cash crops, and none of these crops were preferred above the food cash crops.

This indicator can predict the possible preferences for a promoted cash crop or crops above food cash crops. In the 2000/01 season, when the JFS Company was at an early stage of introducing tobacco in southern Niassa, more than 63 per cent of the respondents sold food cash crops while only 21 per cent sold tobacco (Lukanu et al., 2004). In the following agricultural season, with awareness and knowledge about the high profitability of tobacco, the total percentage of respondents participating in the marketing of food cash crops dropped to 38 per cent while that for tobacco increased to 40 per cent.

This tendency to participate in marketing highly profitable promoted cash crops to the detriment of food cash crops has implications for food security. A balance needs to be maintained between the two. Concentration on only one type may result in a shortage of food or cash to buy food.

Table 7 suggests that by cultivating tobacco and paprika instead of food cash crops, farmers will improve their income by 97 per cent and 86 per cent, respectively (if Profit2 is taken into consideration). However, by cultivating cotton instead of food cash crops they will lose 39 per cent of the income they would have obtained by cultivating only food cash crops. The Ministry of Agriculture and Rural Development/ Michigan State University Research Team (1997) also found that low-input cotton production had a negative effect on income and seasonal cereal reserve among smallholders in Nampula. Farmers' preference for cultivating cotton was more related to market and income guarantees. As farmers put it, ‘cotton has a boss’, the JFS Company, which guarantees the buying and payment, as opposed to food cash crops whose market could be disrupted because of possible excessive external supply. Income from sesame and sunflower can be considered as an addition to food cash crops because these are less likely compete with food crops. They are sown in January–February when most of the food crop activities have been completed and they can be mixed or intercropped with maize.

Table 7: Variation in income due to the substitution of food cash crops by promoted cash crops

	Tobacco	Food cash crops	Cotton	Paprika
Profit2	318	162	99	300
Variation (%)	97	0	−39	86

This study suggests that there is also a need to use the right strategies, such as good prices, input support, credit availability and reliable buyers, to increase the profitability of food cash crops. These incentives will increase the percentage of smallholders cultivating and marketing food cash crops, and thus prevent food insecurity at household and regional levels.

7.4 How farmers ranked profitability

Smallholders ranked tobacco (5) as the most profitable crop, followed by paprika (3.9), food cash crops (3.4), sesame and cotton (2.8) and sunflower (1.3) (Table 6). The correlation coefficient between the ranked overall profitability and cash-crop preference was positive but still insignificant (R = 0.508; α = 0.152). Nevertheless, this correlation was better than any other discussed above, perhaps because farmers took into consideration many aspects when ranking crops based on profitability. Besides price, yield, input costs, labour costs and labour requirements, farmers said they opted for tobacco because the price was reliable (equal to or higher than the promised price), there was a demand from the buyers, it assured money, and they knew what the profit would be. This finding further confirms the finding that indicators that incorporate more aspects of profitability are likely to correlate better with the percentage of farmers participating in the agricultural market.

7.5 Perceived relative advantage

Perceived relative advantage is the degree to which smallholders perceive one cash crop to be better than another (Rogers, 1995). Again, tobacco (4.8) was ranked as the most advantageous cash crop, followed by food crop surplus (4.4), paprika (3.2), cotton (3), sesame (2.3) and sunflower (1.1). The correlation coefficient between farmers' perceived relative advantage of a cash crop and cash-crop preference was positive and significant (r = 0.732; α = 0.049) (Table 6). That is, the greater the perceived relative advantage of a cash crop, the more farmers actually preferred to cultivate it. Smallholders took into consideration many more aspects of a cash crop than just the financial aspects of profitability when deciding which was advantageous. Unlike their ranked profitability, food cash crops were highly ranked in terms of their perceived relative advantage because they provided both income and food and were easy to cultivate because of experience. In addition, tobacco was ranked highly in terms of its relative advantage because of its high profit (high price, high yield and low cost in relation to its gross income), reliability of price, access to extension and inputs, and access to reliable buyers. It can be concluded that indicators of expected profitability that incorporate more financial and pragmatic aspects of profitability correlate better with cash-crop preferences than those indicators that incorporate fewer aspects of profitability.

7.6 Average estimated ranked profitability and cash-crop preferences

The average estimated ranked profitability is calculated by averaging the ranked financial and pragmatic aspects of profitability discussed earlier: price, yield, input costs, labour costs, reliability of the price, access to inputs, access to extension and experience, and access to markets. There is a highly positive and very significant correlation (r = 0.950; α = 0.002) between the average ranked profitability and cash-crop preferences (Table 6). The average estimated ranked profitability was 3.8 for both tobacco and food crops, 2.9 for cotton, 1.9 for sesame, 1.5 for paprika and 1.3 for sunflower. That is, cash crops with a higher average ranked profitability are more likely to be preferred. This suggests we can accurately predict smallholder preferences for a cash crop in a region by simply ranking all the different aspects of profitability and summing and then averaging the rankings as provided by the farmers. This simple and quick method of predicting smallholder cash-crop preferences can be taught to field development officers, who may be less able to use statistical methods because of the complex analyses required and lack of statistical tools or software in the field.

This further confirms the finding that indicators of expected profitability that incorporate more aspects of profitability correlate better with cash-crop preference than those indicators that incorporate fewer aspects (R = 0.950; α = 0.002 versus R = 0.508; α = 0.152). Smallholders prefer to use all the required information of the farming system in their decision-making to be more certain of profit and reduce the risks of possible failure.

8. REGRESSION MODEL

The study also determined a multiple regression model involving cash-crop preference as the dependent variable and the ranked financial and pragmatic aspects of profitability discussed above as independent variables. Table 8 provides the statistical information about the models, which suggests that cash-crop preference (CCP) can be estimated from profitability aspects using the following equation:

As the statistics suggest (r = 1, the model explains 100 per cent of the variation), the model can predict the smallholders' likely cash-crop preference with great accuracy using ranked price (PRICRANK), ranked yield (YIELRANK), ranked labour costs (LABORANK), ranked access to extension and experience (ACCEXTEX), and ranked access to reliable buyers (AABUYER).

Table 8: Regression model information for estimating cash-crop preferences (PREFRANK)

	Un/standardised coefficients		95% confidence interval for B		Correlations			Collinearity statistics
	B /β	Standard error	Lower bound	Upper bound	Zero order	Partial	Part	Tolerance	VIF
(Constant)	−1.205	0.000	−1.205	−1.205
PRICRANK	0.182	0.000	0.182	0.182	0.257	1.000	0.169	0.864	1.157
YIELRANK	0.332	0.000	0.332	0.332	0.943	1.000	0.153	0.213	4.699
LABORANK	0.286	0.000	0.286	0.286	0.486	1.000	0.220	0.588	1.701
ACCEXTEX	0.523	0.000	0.523	0.523	0.829	1.000	0.284	0.294	3.399
ACCBUYER	0.159	0.000	0.159	0.159	0.429	1.000	0.137	0.741	1.350
VIF, Variance Inflation Factor.

Other types of statistical analyses were not computed because of a limited number of crops (six crops) and low variability in the data (zero to five and often whole numbers). The regression analysis method excluded the ranked input costs, ranked reliability of the price and ranked access to input. The proportion of these variables' variances not accounted for by other independent variables in the model is relatively small, suggesting strong collinearity with other factors. These minor variables were dependent on access to extension and access to reliable buyers, mainly through a package deal offered by the JFS Company and NGOs operating in southern Niassa.

8.1 Current and projected cash-crop preferences

The present study represents data collected during the 2001/02 agricultural season. On the basis of the findings of the present study, this section attempts to explain smallholder cash-crop preferences during this period and also some changes that occurred from 2001/02, and to predict some choices of cash crops if some aspects of profitability are altered.

8.1.1 Tobacco

Tobacco is consistently the crop of choice because it has the highest average estimated ranked profitability (3.8, together with food crops) (Table 6). It has the characteristics and support needed to encourage more smallholders to prefer it as a cash crop, and its profit is high – twice that of food cash crops. Its estimated gross income is also the highest. Most importantly, farmers perceive it as the most profitable and advantageous cash crop.

The tobacco price was particularly high at the time of the study, with a tendency for continual increases and a guarantee that buyers would pay as promised. The price increase was, in part, stimulated by the competition between two tobacco giants in Niassa Province, STACOM (northern Niassa) and the JFS Company (southern Niassa). This situation stimulated side-selling to the other company, mainly by smallholders situated on the road between Cuamba (the JFS Company headquarters) and Lichinga (STACOM headquarters). As a result, the two companies tended to pay increasing prices and provided an organised buying network to attract smallholders and keep side-selling down.

8.1.2 Food cash crops

The average estimated ranked profitability for food crops (3.8) suggests that food cash crops are favoured equally with tobacco (Table 6). This is in line with the percentage of smallholders participating in the market (38 per cent for food crops versus 40 per cent for tobacco) but different from what the other indicators of expected profitability had suggested. According to smallholders, the food cash crops have the following advantages: guarantee of household food, high yields, low input costs, reliable price, and access to inputs, experience and reliable buyers. Farmers will continue to cultivate food cash crops for sale as long as their profitability is more than one-half that of the most profitable promoted cash crops. It is possible and necessary to increase the percentage of farmers marketing food cash crops by helping them increase yields (to about 1800 kg/ha) by using appropriate practices and inputs.

Figure 4 suggests that, if no change occurs in other crops while increasing the yield of food crops to a magnitude greater than that of tobacco, the projected preference for food cash crops using the average estimated ranked profitability will be higher than that for tobacco. However, smallholders will still prefer tobacco if the projected preference is estimated using a regression model. To sum up, it is possible to maintain or increase the percentage of farmers cultivating food crops by helping them increase their yield.

Figure 4: Projected cash-crop preferences if yield of food crops is increased

9. CONCLUSIONS

To improve smallholder preference for a certain cash crop, promoters need to maintain a system that includes both the financial and pragmatic aspects of profitability discussed here. Preference for a specific crop can be improved by introducing a cash crop that has a high farm gate price, high yield, lower cultivation and marketing costs, a reliable price, and accessible extension, inputs and reliable buyers. Smallholders also consider household consumption when deciding to cultivate a given cash crop.

It is possible to estimate preference for a new cash crop using either the estimated average ranked profitability or the regression model. Either of these can give an idea of the likely smallholder market participation for this crop. Analysing the underlying factors used to estimate the indicators of expected profitability will reveal the farmers' perceptions of the strengths and weaknesses of each crop. This information will help promoters decide on the viability of promoting specific crops using well-tailored support systems.

The profitability of a cash crop is an incentive for smallholders to participate in the agricultural market. However, they consider more than just the financial aspects of profitability (production, price and costs) when deciding whether to cultivate a cash crop. Pragmatic aspects of profitability have a strong influence on their decision. They take into account such aspects as farm gate price, yield, input costs, labour costs, the reliability of prices, access to inputs, access to extension and experience, and access to reliable buyers and markets. They also consider household consumption. That is, they look at the whole farming system when assessing profitability.

Promoters therefore also need to take into account this system into which a cash crop is being introduced. The analyses described in this study can give them an idea of the likely market participation for a particular crop. Promoters need to do more than just sell an idea: when promoting a new crop they need to establish a complete package that will improve the financial and pragmatic aspects of profitability and not interfere with the food security at the smallholder and regional levels.

The authors wish to thank the farmers, the João Ferreira dos Santos Company, German Agro Action, OXFAM and Acção Cristã Interdenominacianal da Saúde for their cooperation, and to acknowledge World Relief International and the Swedish International Development Agency (Sida) in Mozambique for allowing the authors to use WR-SempreVerde facilities to collect the data used in this study.