Effect of Market Factors on Rice Profitability in Rwanda

Abstract

Rice is regarded as an important crop generating income for smallholder farmers in Rwanda. Despite the importance of rice, no studies have been carried out to investigate the determinants affecting the profitability of the crop.This study was conducted with the aimof investigatingthe determinants of profitability of rice production among smallholder farmers in Rwanda. A multi stage sampling technique was usedto select respondents. The data collected included both primary and secondary data. The primary data were collected from 200 rice farmers by use of structured questionnaire containing both open-ended and closed questions. Multiple Linear regression analysis was used to determine factors influencing profitability of rice. The regression model found that the market factors with a significant positive effect on rice farming profitability were: marketedquantity and selling price. On the other hand, the cost of transportation had a significant, but negative influenceon rice farming profitability. The benefit-cost ratio (BCR) was 1.22, meaning thatrice production is profitable for smallholder farmers (BCR>1). This benefit Cost ratio means that for every one USDinvested in the rice farming, a small holder farmer earns 1.2 USD. Though this BCR is positive, the level of profit is low and can be improvedto benefit smallholderfarmers in rice farming. The study recommends the following: introduction of labour saving technologies in rice farming, such as mechanisation; to continue investing in the establishment of different infrastructures in rural areas;support farmers in establishing well-functioning markets in order to ensure favorable prices for farmers;farmers are advised to implement good agricultural practices, which would result in increased production, thus leading to increased surplus for the market.