Price risk management among tomato producers in Wakiso District

Abstract

Agriculture contributes 22.5% of Uganda’s GDP but its growth rate is below the average GDP growth as a result of different risks and uncertainties. Horticultural crops such as tomatoes are high value crops that have wide market opportunities globally but are also most affected by price risks. Tomato production contributes significantly to the total household income for many farmers engaging in its production. It is not clear how tomato farmers respond to mitigate the price risks and factors that influence their choice of management strategies. This study sought to find out how smallholder farmers choose management strategies for price risks to enable them to make informed sustainable decisions. The specific objectives included: (1) to analyse characteristics of farmers that produce tomatoes, (2) to find out the price risks management strategies employed by small holder tomato farmers and (3) to find out the social economic factors that determine the choice of management strategies employed by the tomato farmers in Buloba Parish and Lukwanga Parish. A survey was conducted in two parishes that is Buloba and Lukwanga and data was collected using a semi-structured questionnaire and in person interviews using a sample size of 70 tomato farmers. Descriptive statistics were used for analysis of farmer and market characteristics, and farmer’s perceptions. Logit regression analysis was used to examine the factors affecting the choice of price risk management strategies adopted by smallholder farmers. Descriptive results showed that 22.86% females participated in tomato production. 38.57% of farmers had a non-agricultural source of income and price risks were recognised to occur at least once a season by 95.71% of the farmers. Insufficient storage facilities were perceived as the highest cause of price risks (97.14%) and crop diversification as the highest price risk strategy adopted by smallholder farmers (94.29). Results of the logit regression revealed that post-secondary and secondary educational level, and plot size were significant causes of the adoption of control of sales volumes as a remedy for price risks. While plot size was the only significant factor for the adoption of income diversification as price risk management strategy. The findings of this research reveal that farmers have limited sources of income and should be opened up to value chains to widen their income sources. Farmers lack cold storage facilities for the tomatoes and the government and any relevant institution should provide appropriate facilities to the farmers in case of price shocks that may arise. More information should be given to farmers through extension on how and which crops to invest in to yield sufficient yields in case of crop diversification. Farmers should be introduced to formal price risk management strategies such as contract farming and insurance to save them from great losses in their instabilities since most farmers are learned.