Economic analysis of smallholder’s cashew nuts production and marketing under market liberalization: a case study of Coast region

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Sokoine University of Agriculture


This study investigated the effect of market liberalization on smallholder cashew nuts production and marketing. Specifically the study aimed at assessing the effect of market liberalization on cashew nuts production, analysing the relative profitability of crop enterprises competing with cashew nuts in resource use, studying the marketing practices of traders, evaluating market efficiency and examining the effect of export price, exchange rate and amount of cashew nuts produced on cashew export. Multistage and simple random techniques were employed for selecting farmers. For traders, systematic and simple random techniques were used. Both descriptive and quantitative techniques were used. Descriptive analysis included the use of means, percentages, and other summary statistics. Quantitative analysis involved the use of regression analysis, gross margin, buyer’s concentration ratio, market integration and co-integration and error correction method. A regression result shows that lagged cashew nuts price, farm size, credit availability and amount of labour used had significant positive influences on cashew nuts output (P< 0.05). While, sulphur price and price of competing crops had significant negative influences on cashew nuts output (P< 0.05). Amount of sulphur used and area under competing crops had no significant influence (P> 0.05). Pineapple was found to have highest gross margin per hectare followed by cassava and cashew. However, cashew was found to have highest return to labour. The degree of market transparency was found to be poor due to lack of proper market information. Lack of capital and higher market fees act as barrier to entry in cashew nut trading activity. This results to lack of competition a tendency towards oligopolistic market as indicated by strong level of concentration ratio. Overall, only 180 Tshs was realized as marketing margin and 55 Tshs was realized as profit margin. This situation is caused by high marketing fees and transport cost as they account for 33 and 16.7 % respectively of the marketing margin. Export and domestic markets are highly integrated in the long run but the rate of adjustment to equilibrium is low. The quantity of cashew nuts exported was determined by exchange rate, nation income (GDP) and amount of domestic cashew nuts production.


Masters Dissertation


Smallholder’s cashew nuts production, Coast region