Economics of smallholder tobacco production and marketing in Mpanda District

Masters Dissertation

Tanzanian tobacco has significant contribution to GDP, employment, and industrial raw materials. This study was stimulated by the decrease in tobacco income in Mpanda District from 2010-2012. The decrease in income from tobacco production has made it plausible to conduct a study on tobacco profitability as low profit could increase poverty among smallholder tobacco farmers in the study area. The overall objective of this study is to analyse the economics of smallholder tobacco production and marketing in Mpanda District. Specifically the present study aims at (i) determining the profitability of tobacco production in Mpanda District. (ii) determining the influence of socio-economic factors, particularly farm size on tobacco profitability to farmers in Mpanda District and (iii) determining the contribution of tobacco production to the household cash income. A Gross Margin was used to estimate profitability of tobacco farming. A multiple linear regression model was employed to determine the effect of changing farm size on profitability. Furthermore, descriptive statistics were employed to determine cash contributed by tobacco in relation to other crops. Results show that tobacco has the second largest contribution after paddy. Results show that the GM for tobacco is Tshs 1 111 734/ha while paddy gross margin is Tshs 1 277 060/ha. Furthermore, the results show that maize, beans, and groundnuts Gross Margins were: Tshs 456 527/ha, Tshs 480 957/ha, and Tshs 441 200/ha respectively. Moreover, the results show that tobacco profitability is significantly influenced by farm size, farmers’ education level, and extension services. The study concludes that tobacco farmers can increase profit by cultivating moderate farm size and perform farm intensification. The current study recommends increase in farm size, recruitment of more extension officers; adopting modern farming technology that minimizes tobacco labour intensity so as to increase profitability of tobacco farming and hence increase its contribution to household income.