Productivity, Efficiency, and Competitiveness of Small-Scale Organic Cotton Production in Tanzania

TY - ABST

T1 - Productivity, Efficiency, and Competitiveness of Small-Scale Organic Cotton Production in Tanzania

AU - Mgeni, Dotto

AU - Henningsen, Arne

PY - 2012/7

Y1 - 2012/7

N2 - Cotton is known as the “white gold” of Africa since it is the only export crop in which the continent’s share in the world market has increased over the past decades. Total cotton production as well as productivity grew particularly in Western and Central Africa. In contrast, cotton production grew much less in Eastern and Southern Africa and the increase in production was mainly a result of expansion of land under cultivation and the number of producers, rather than of improved productivity (e.g. Poulton et al., 2004; Delpeuch and Vandeplas, 2011). Organic production methods could be an attractive option for cotton farmers in Eastern Africa, because in this region, the use of chemical inputs is anyway virtually absent, the labor cost is low, and organic cotton has a higher sales price than conventional cotton. In order to scrutinize this option, we use microeconomic production theory and stochastic frontier models to thoroughly analyze organic cotton production in Tanzania. Our study is based on a unique data set of 180 small-scale organic cotton farmers in the Meatu region in Tanzania. This data set does not only provide information on input and output quantities, prices of traded inputs and output, as well as socio-economic and agronomic factors, but also on the shadow prices of all sparsely traded inputs, i.e. land, labor, and organic fertilizer. Hence, we can not only analyze productivity, technical efficiency, and scale efficiency, but also allocative efficiency, profitability, and competitiveness. Traditionally, the measurement of allocative efficiency assumed that all inputs can be freely traded at a given price on a perfectly functioning market. This assumption was relaxed by Tauer (1993) who suggested an approach that can additionally account for quasi-fixed input quantities, which cannot be adjusted in the short run. However, land, labor, and organic fertilizer can neither be traded on a perfect market nor are their quantities completely fixed for cotton production, but these input quantities can be adjusted by adjusting their use for other activities of the household. Hence, these inputs face non-constant shadow prices, which are determined by their opportunity costs. In order to account for the endogeneity of these shadow prices when calculating allocative efficiencies, we use the approach for modeling imperfect markets developed by Henning and Henningsen (2007). Based on our results, we can evaluate the current situation of organic cotton production as well as the potential and the directions for improving its profitability and competitiveness. Unfortunately, we did not finish the empirical analysis before the submission deadline. However, we will definitely include the results in our presentation at the conference.

AB - Cotton is known as the “white gold” of Africa since it is the only export crop in which the continent’s share in the world market has increased over the past decades. Total cotton production as well as productivity grew particularly in Western and Central Africa. In contrast, cotton production grew much less in Eastern and Southern Africa and the increase in production was mainly a result of expansion of land under cultivation and the number of producers, rather than of improved productivity (e.g. Poulton et al., 2004; Delpeuch and Vandeplas, 2011). Organic production methods could be an attractive option for cotton farmers in Eastern Africa, because in this region, the use of chemical inputs is anyway virtually absent, the labor cost is low, and organic cotton has a higher sales price than conventional cotton. In order to scrutinize this option, we use microeconomic production theory and stochastic frontier models to thoroughly analyze organic cotton production in Tanzania. Our study is based on a unique data set of 180 small-scale organic cotton farmers in the Meatu region in Tanzania. This data set does not only provide information on input and output quantities, prices of traded inputs and output, as well as socio-economic and agronomic factors, but also on the shadow prices of all sparsely traded inputs, i.e. land, labor, and organic fertilizer. Hence, we can not only analyze productivity, technical efficiency, and scale efficiency, but also allocative efficiency, profitability, and competitiveness. Traditionally, the measurement of allocative efficiency assumed that all inputs can be freely traded at a given price on a perfectly functioning market. This assumption was relaxed by Tauer (1993) who suggested an approach that can additionally account for quasi-fixed input quantities, which cannot be adjusted in the short run. However, land, labor, and organic fertilizer can neither be traded on a perfect market nor are their quantities completely fixed for cotton production, but these input quantities can be adjusted by adjusting their use for other activities of the household. Hence, these inputs face non-constant shadow prices, which are determined by their opportunity costs. In order to account for the endogeneity of these shadow prices when calculating allocative efficiencies, we use the approach for modeling imperfect markets developed by Henning and Henningsen (2007). Based on our results, we can evaluate the current situation of organic cotton production as well as the potential and the directions for improving its profitability and competitiveness. Unfortunately, we did not finish the empirical analysis before the submission deadline. However, we will definitely include the results in our presentation at the conference.

M3 - Conference abstract for conference

T2 - Asia-Pacific Productivity Conference

Y2 - 24 July 2012 through 27 July 2012

ER -