Profitability of coffee production among smallholder farmers in Mbozi District, Songwe Region, Tanzania

Abstract

The study was conducted in Mbozi District, which is located in Songwe Region of the southern highlands of Tanzania. The district is among the key producers of Arabica coffee due to its favourable agro-ecological zone, such as favourable rainfall, fertile soil, and suitable altitude. The district has a population of 510,599 people, among whom the majority are living in rural areas, depending on agriculture as their main source of income. The main cash crop produced is coffee. The coffee industry contributes around USD 100 million annually to the national economy. Coffee production accounts for over 70% of the district's economy and over 85% of its internal council revenue. In addition, coffee contributes approximately five percent of Tanzania’s total export. Despite its contribution, the profitability of coffee production among smallholder farmers remains largely undocumented. This study aimed at addressing the knowledge gap by assessing the profitability of coffee among smallholder farmers at Mlowo Ward in Mbozi District. The profitability study is guided by the Production Function theory, which states that “a profit maximization farmer selects the best inputs to get the best output levels and achieve the best profit.” A cross-sectional design was used to collect data from a sample size of 228 smallholder farmers. The sample size was determined by Cochran’s formula, and multistage sampling techniques were applied to reach all respondents effectively. Descriptive statistical analysis was used to analyze demographic characteristics of respondents, and the gross margin approach was used to determine the profitability of coffee production. The results indicated that the Profitability Index (PI) was 3.1, meaning coffee production is profitable; however, the level of profit attained is relatively low due to inefficiency in production. Based on these findings, the study recommends that smallholder farmers adopt modern and improved production practices for efficient production and to improve the profitability of coffee. Finally, the government should create an enabling environment to ensure farmers have access to improved agricultural inputs and enhanced extension services.