The Profitability of Coffee and Maize among Smallholders: A Case Study of Limu Awraja, llubabor Region

Abstract

Coffee production has declined significantly in Limu Awraja, Ilubabor Region, in recent years. The objective of this study is to compare the p r o f i t ability of coffee and maize, the two main crop enterprise Of the area. Profitability is examined from the perspective of the farmer ("private profitability") as well as from the perspective of society ("social profitability"). This paper also examines labor use patterns and the relative advantages and disadvantages of the two crops. Following informal and formal surveys conducted from 1987 through 1989, researchers interviewed 24 farmers in 1989 on the costs and returns of their maize and coffee enterprises. In the analysis of private profitability, all costs incurred and returns earned by the farmers are used. In the analysis of social profitability, distortions caused by government policies are removed. Thus, inputs and outputs are valued at their real costs and values to the economy. For example world reference prices are used to estimate the real value of coffee exports. The altitude of the survey zone ranges from 1650 m to 1850 m and the topography is hilly. The soils are from red brown to dark brown clays and rainfall averages 1525 mm per year. The area's population is 129 000 and M u slim Oromos nredominar.p. The major crops include coffee (the main rash crop), maize, enset, and sorghum (the main food crops). Average area cultivated is 0.8 ha, with half under coffee and most of the rest under maize. Most farmers own oxen or a share of an ox; the average number per family is 0.71. Smallholder coffee is characterized by nnpatterned spacing, uncapped, free branch growth, and tree populations over 6000/ha. Shade percentage is about 30% and fertilizer use and p lanting of new coffee berry d i s ease-resistant varieties are rare. Smallholder yields average about 433 kg/ha of clean coffee. About half of the coffee is sold as fresh red cherry to pulping stations and about half is sold as jenfel or dried cherry. Maize production reguires less labor and less capital than coffee production. Maize fields are planted year after year, and crop rotation is not common. Seeds are broadcast after three plowings are done. Fertilizer and improved seed are not available. Farmers allocate about 235 workdays per hectare to coffee production per year, almost twice as many workdays as allocated to maize. Concerning private profitability, net returns to land, labor, And management for maize are 1175 ETB./ha. which is higher than the net returns for coffee by 273 ETB/ha. Net returns per workday for maize are 8.9 ETB./workday, over 2.3 times that of c o f f e e . Sensitivity analysis shows that the results are stable even when there are significant changes in parameters. In deciding which crops to grow and how to manage them, farmers tatce into account, many other factors than profitability. Maize is superior to coffee on most of these criteria. Kor example, maize is better for the farmers in ensuring food security, in providing more fI exlhi Iltv in management and as a complement to livestock production. Ooffee. on the other hand, can be stored for longer periods and is more suited to conserving the soiI. The analysis of social profitabiIlty shows that coffee is more profitable than mai ze from society1 s perspective. Concerning socia l profitability net, returns to land, labor, and management for coffee are KTH/ha, 41% higher than net returns to mai ze. Net returns per workday for coffee are K.ft KTB/workday, st.i I I lower than that of mai z e . Sensitivity analysis shows that, the results are not very sensitive to changes in important parameters such as yields, product prices, or the value of foreign exchange.