Financial Analysis Of Contract Farming In Rice Production In The Derived Guinea Savannah Zone Of Nigeria

Abstract

Rice the most widely consumed staple food in Nigeria is produced mostly by small scale farmers who are constrained on information about production methods, market opportunities, access to capital, lending and credit which have led to under utilization of the production capacity, low rural income, rural poverty and food insecurity. This study therefore, looks at the possibility of ameliorating the constraints through contract farming (CF). The study was carried out in Kwara State Nigeria. 120 respondents were chosen by means of stratified random sampling from two rice producing Local Government Areas (LGAs) (Patigi and Edu) comprising 68 contact farmers (CFs) and 52 non contact farmers (NCFs) on who the questionnaire designed for the study was served. Descriptive statistics, budgetary analysis, benefit cost ratio, Chi-square and Ordinary Least Squares ((OLS) analytical tools were used. Findings revealed that male farmers dominated rice farming. Majority of them were highly educated but cultivating on marginal land size of 1 hectare. They have large family size with modal class of (6-10). The net farm income of CFs stood at ₦26,400.82 while NCFs was ₦2,277.49. The ratio of B/C was 1.66 for CFs and 1.05 for NCFs. Chi-square analysis revealed significant difference in the profitability levels. Farmer’s age, farm size and variable costs are major determinants of participation (P-value <0.05). Based on findings, the study recommended that Government should encourage both contract and non contract farmers by empowering them through allocation of land and working capital to increase rice production and assist in the handling of production cost to ensure increased income and reduction of rural poverty