The effect of collective action on profit efficiency among smallholder coffee farmers in Mateete sub-county in Sembabule district

Abstract

Collective action can be measured in form of participation and membership to organized groups, including coffee farmers’ production and marketing groups. It is widely agreed that collective action may be vital to the enhancement of rural economic growth and poverty reduction, two outcomes that are driven by the level efficiency among farmers. There has been significant effort to organize coffee farmers into marketing groups, but not much is known about the extent to which collective action can really transform into increased profit efficiency in Uganda. The main objective of this report is to examine the level of profit efficiency and how this is affected by participating in collective action among coffee farmers. The study compared farmers that operated through collective action and farmers that conduct coffee growing and marketing on the individual basis. Cross-sectional data was collected from a total of 90 coffee farmers, who were interviewed using semi-structured questionnaires. In addition to a number of descriptive statistics, gross margin approach was used to compare profit efficiency of coffee farmers participating in collective action and their counterparts that do not participate in collective action. Multiple regression model was used to assess the effect of participating in collective action on profit efficiency of the two categories of farmers. The study findings shows that coffee farmers who engage in collective action are more profit efficient than their counterparts. The use of herbicides in weed control has a positive effect coffee profit efficiency. Also, farmers who engage in collective action enjoyed higher average prices and profits of UGX 3,679 per kg and UGX 1,289,976 per farmer seasonally respectively than farmers who market their coffee individually. Coffee farmers who market their coffee on the individual basis sell their coffee at a price of UGX 2,800 per kg and also enjoy a relatively lower profit of UGX 730,878 per farmer seasonally. The study findings further show that participation in collective action has a positive and significant effect on profit efficiency of farmers, and this may be transmitted through opportunities created to facilitate a high bargaining power for high price for coffee output and low purchase price for inputs. The study therefore recommends that the establishment of farmer groups be increased at sub county level to encourage more farmers to sell via collective action. Other supporting services can also be provided to enable organized coffee farmers acquire proper coffee drying and storage facilities that are vital in proving quality standards of coffee marketed through collective action.