SMALL-SCALE VERSUS LARGE-SCALE COCOA FARMING IN CAMEROON

ByChi Bemieh Fule

August 6, 2013

THESIS PRESENTATION

OUTLINE OF TODAY’S PRESENTATION

1. Justification of the study2. Problem statement3. Hypotheses4. Conceptual framework5. Research methodology6. Results 7. Conclusion8. Recommendations 9. 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. HYPOTHESES1. Small-scale farms have higher yield compared to

large-scale farms.2. Small-scale farmers have a cost advantage over

large-scale farmers.3. 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 yield

Treeage= 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 profitability

Labour = 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

0.251.001.502.002.503.003.504.004.505.005.506.006.507.0011.0012.0020.00

0.00

2000.00

4000.00

6000.00

8000.00

10000.00

12000.00

14000.00

16000.00

Fig 1. Total Physical Product (kg)

Y

Out

put (

kilo

gram

s)Fig 2. Input expenditure shares

FARMER CHARACTERISTICS ACCORDING TO THEIR CATEGORIESVariables Small-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 size 5 (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)

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

Small-scale Medium-scale Large-scale0%

10%

20%

30%

40%

50%

60%

0%

39%

13%15% 17%

51%

36%

17%20%

27%

13%

8%

22%

14%

9%

Land Labour Phyto Plt.mat. Equipt

FARM YIELD

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

Coefficient Std. Error p-value

const -4.29903 11.9003 0.72053

l_Density 1.65251 1.19265 0.17644

l_Treeage -0.244049 0.446709 0.58902

l_educ -1.16899 0.475912 0.02026 **

l_Experience -0.0145132 0.325452 0.96474

l_hhsize 1.03996 0.395928 0.01363 **

l_age -0.498213 1.86785 0.79156

Regression results on log (yield)

AVERAGE COST [18€, 1850 €] Μ = 152 €

Coefficient Std. Error p-value

const 13.8692 2.02192 <0.00001 ***

l_Experience -0.173126 0.160324 0.28854

training -0.159916 0.202236 0.43510

l_age -0.488222 0.517584 0.35284

l_hhsize 0.124108 0.14745 0.40641

l_Labour 0.092612 0.0229418 0.00033 ***

l_Phyto 0.084074 0.0187951 0.00010 ***

l_Plt_Mat_ -0.400155 0.127252 0.00365 ***

l_Equipt 0.211434 0.113475 0.07192 *

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. Error p-value

const 9.31224 1.70189 <0.00001 ***

l_hhsize 0.76261 0.271582 0.00855 ***

l_educ -0.167719 0.187382 0.37765

l_Experience 0.819697 0.235292 0.00150 ***

l_Treeage 0.12904 0.220397 0.56246

l_Land -0.118475 0.0497362 0.02354 **

l_Labour -0.0616811 0.0375119 0.11022

l_Plt_Mat_ -1.18032 0.184918 <0.00001 ***

l_Phyto -0.0236435 0.0369574 0.52704

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 entrants Collecting more accurate (& quantitative)

data Performing more rigorous economic analysis,

(NPV, efficiency measurement…) Investigate the sustainability of cocoa

production in Cameroon

THANK YOU !