Economic analysis of hass-avocado production and export market in Rungwe District-Tanzania
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Date
2023
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Sokoine University of Agriculture
Abstract
The production and exportation of avocados in Tanzania have been steadily increasing
over time. Despite this observed growth, there is still great potential for the production
and exportation of the Hass avocado variety. This highlights the need for strategies to
capture the available potential. To develop appropriate strategies, a clear understanding of
the current situation in the country's avocado industry is required. Nevertheless, there is a
lack of literature on the economic viability of the avocado business, especially in Rungwe
District. Additionally, there is limited knowledge in the public domain regarding the
factors that affect avocado production farmers’ willingness to participate in the export
market. Therefore, the focus of this study was to conduct a comprehensive analysis of the
economics of avocado production and the export market in the industry, specifically in
Rungwe District. The study selected a sample of 360 farmers from a pool of 4,000
avocado out-growers. Out of the selected farmers, 36 were randomly chosen from ten
selected wards, using a probability proportional to size. A questionnaire was administered
to the farmers, while key informants were interviewed using a guide. The collected data
underwent various analyses, including descriptive analysis, cost-benefit analysis, severity
index analysis, and a binary logit model. The results obtained from primary data indicated
the current status of avocado production, productivity, and cultivated area. Positive
growth was observed in terms of quantity produced, cultivated area, and exported volume.
The Cost-Benefit analysis using the Dolye Model revealed a positive net present value
(NPV) of 55,075,088 TZS per acre. The benefit-cost ratio was greater than 1 at 1:9, and
the internal rate of return (IRR) was 63.78%, surpassing the 10% discounting factor.
Similarly, the primary data showed a positive NPV of 57,333,143 TZS per acre. The
benefit-cost ratio exceeded 1 at 1:8.78, and the IRR was 70.0145%. However, variations
were observed due to differences in plant population per acre among farmers, compared to the standard farm size for avocados. Consequently, the study employed severity index
analysis to rank and identify the constraints. Furthermore, socio-economic factors were
assessed to determine their influence on farmers' willingness to participate in the export
market. Significant factors influencing farmers' willingness included education, age, non-
farm activities, formal employment, credit access, and extension access. Based on the
study's results and the available literature, it can be concluded that the avocado industry
has significantly improved in terms of production area, output, productivity, and exports.
The return on investment has been positive and higher than the prevailing discounting
rate. Additionally, the study identified constraints and factors that affect farmers'
willingness to participate in the export market. As a result, the study recommends further
improvements to catch up with competitors from leading avocado producers. It calls for
the implementation of effective policies in the Horticulture subsector to support and
promote farmers and exporting companies in increasing production and exports. Local
governments in potential avocado production areas, such as Rungwe District, should
prioritize and encourage avocado production in order to exploit the untapped potential at
the international markets. Moreover, farmers and other stakeholders should collaborate as
associations to address the constraining factors related to avocado production and export.
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Keywords
Economic analysis, Hass-avocado production, Export market, Rungwe District, Tanzania