A Comparative Economic Analysis of Tobacco and Groundnut Farming in Urambo District, Tabora Region, Tanzania

Abstract

Using 2007/2008 cropping season survey, data on 121 randomly selected smallholder farmers from three villages, this study provides a comparative economic analysis for tobacco and groundnut farming systems. Cross-sectional research design was adopted and was completed by household interviews based on a structured questionnaire. Purposive, multistage and random samplings were carried out. A Random sampling procedure was used to obtain a sample size of 121 respondents of which 60 were tobacco farmers and 61 groundnut farmers. Cobb-Douglas production function, gross margin analysis and descriptive statistics; and independent samples t-test statistics were used as analytical tools. Results revealed that a gross margin per acre for groundnut was lower than that of tobacco by 569 231.90 TZS equivalent to $ 497.62. However, result revealed no significance difference in profitability yielded by the two farming while a comparison of household income contribution by tobacco and groundnut enterprises gave a significance difference with p-value <0.000 in terms of income generated by the two crops. In this study, an increasing return to scale exists in both farming systems. Therefore, an increase in all inputs by one percent increases tobacco and groundnut by more than one percent. However, by comparing the two cropping enterprises, if all factor inputs are varied by the same proportion, the percentage by which output will increase in tobacco was larger than that of groundnut. The study concluded that tobacco farming activity was more profitable enterprise than groundnut farming. It also contributed more income to farmer than what groundnut farming it does. In tobacco farming hired labour revealed the negative relationship with the output; however this had a positive relationship in groundnut farming. Contrary to tobacco, groundnut seed varieties had the negative response in groundnut output.

Key Words: Income, Profitability analysis, Cobb-Douglas production function