Abstract :
[en] This study considered the determinants of agricultural production and profitability with special reference to crop production in Musanze District. Data collection was conducted through well structured questionnaire administered on 107 respondents selected purposively. The methods of data presentation used were descriptive statistics, and the methods of analysis were production function analysis using the Ordinary Least Square (OLS) approach to estimate the parameters of the Cobb-Douglas production function and the gross margin, the financial sustainability and the BC ratio to analyse the profitability of agricultural production.
The results revealed that majority of the farmers’ organizations (53.27%) grow Irish potato, bean (27.10%) and corn (11.21%). The overall agricultural production is positively related to inputs used which include labour, fertilizers, seeds and pesticides. The test of significance of estimated parameters shows that inputs in the form of labour, fertilizers and seeds are statistically significant at the 5% level. The estimated R2 shows that 66% of the variations in agricultural production are explained by the specified independent variables. Also the significance test and the normality test of residuals show that the estimated model is reliable. The sum of input coefficients (0.99) shows that agriculture records decreasing returns to scale.
In the short run, the profitability analysis shows that agricultural production is a profitable business in the study area. This is reflected by the gross margin of RwF 3,289, the net income of RwF 2,273, the BC ratio of 1.47, and the return to labour of RwF 1,287 given the daily minimum wage of 700 RwF paid to the worker. Likewise, the analysis shows that all individual crops (potato, wheat, corn, tomato, onion, and cabbage) are profitable except for bean. Similarly, the results of the long run profitability analysis show that the BC ratio is 1.003102. The corresponding NPV is RwF 4,912.84; the IRR is 17.046% with the discount rate (the prevailing lending interest rate) of 16.749%. The sensitivity analysis shows that the agricultural profitability is responsive to the increase of total operating costs, the decrease in average price, the decrease in total production, as well to the increase in the discount rate.
Consequently, farmers should improve their equipment and allocate rationally the inputs to attain the least-cost combination. Besides, the government and other stakeholders in agriculture should guarantee markets to farmers and enhance all necessary extension services. These were reported as restraining factors to materialize the agricultural benefits.
