Determinants of market participation and its effect on profit margins among smallholder wheat producing farmers in Rwanda

Abstract Marketing agricultural produce is crucial for alleviating poverty, increasing income, and ensuring food security. In Rwanda, wheat is an essential cash crop that sustains the livelihoods of many smallholder farmers. Despite government efforts to boost wheat production to meet rising national demand, smallholder farmers’ market participation remains limited, with a low market share. Research on the causes of low market participation by smallholder wheat producers in Rwanda remains scarce. This study examines the determinants of market participation and its effect on profit margins among smallholder wheat farmers in Rwanda. A sample of 149 farmers from Nyamagabe District was selected using a multistage sampling approach. A double-hurdle model was used to analyze determinants of market participation, and propensity score matching (PSM) evaluated the effects of market participation on profit margins. The findings revealed that 62.4% of farmers participated in the wheat market, with 29% using formal marketing channels. The double-hurdle model identified land size, access to market information, wheat quantity, total production cost, access to a road network, and access to credit as key determinants of market participation. Additionally, market information, wheat quantity, access to roads, and credit were also positively associated with the intensity of market participation. The PSM results indicated that market participants, particularly those using formal marketing channels achieved higher profit margins. The study recommends that strategies to enhance market participation and profitability for wheat farmers should focus on boosting wheat productivity and improving access to institutional support. Leveraging digital platforms for market information can help reduce transaction costs and improve market access, ultimately fostering community prosperity.