Performance indicators by labor-saving technology use

The preceding crop budgets show that labor costs are the largest production cost - irrespective of state, ecology or production cluster. Farmers have responded to this through the use of labor-saving technology, including the use of traction and herbicides during land preparation and weeding. Indeed, the use of these technologies implies substantial labor-savings (Table 69). So far, the cost of these technologies has been included under the variable input costs, whereby other factors (state, ecology or production cluster) determined the share of producers using the technology. However, this blurs the effect of the technology use, as each category comprises both technology users and non-users. The present section therefore singles out labor-saving technology to assess its affect in view of the high labor costs.

drastically lower labor costs and relatively favorable returns. Herbicide-use also has a favorable effect on the returns – but its effect is less pronounced and more variable (eg Figure 13). The producers that used both technologies achieved the most attractive returns.

It is interesting to note that traction-users obtain relatively low gross revenues – typically reflecting low yields. However, the saving in production costs more than outweighs the relatively low

revenues. This suggests that traction-users use relatively extensive production practices – but that this still is an attractive option in terms of cost control. The advantages of labor-saving technologies hold both over states and ecology.

Table 78 Crop budget in selected field by labor-saving technology use (Naira per ha, unless indicated otherwise) None Traction only Herbicides only Herbicides & Traction Total N 90 15 206 Gross revenue 68 400 41 900 53 200 37 700 56 200 - Paddy revenue 64 600 38 800 52 900 37 200 54 100 - Maize revenue 3 800 3 100 300 500 2 100 Variable inputs 5 200 6 500 7 700 12 100 7 300 - Traction services 0 2 900 0 4 500 1 000 - Seed 2 500 1 300 2 000 2 200 2 200 - Fertilizer 2 700 2 300 2 800 2 500 2 700 - Herbicide 0 0 2 900 2 900 1 400 Hired labor 22 800 11 300 19 600 11 600 18 900

Total operating cost

(incl. Interest) 29 500 18 700 28 700 24 900 27 600

Family labor (imputed

value) 48 000 16 500 28 900 4 200 31 800

Imputed fixed cost 500 500 500 500 500

Total production cost 78 000 35 700 58 000 29 500 59 900

Value added (Naira/ha) 63 200 35 400 45 600 25 600 48 800 Current margin (Naira/ha) 39 000 23 200 24 600 12 800 28 600 Operating ratio a 43% 45% 54% 66% 49% Production cost (Naira/kg paddy) a 35.6 27.8 30.5

Gross margin (return to land & mgt,

Naira/ha) -9 500 6 200 -4 800 8 200 -3 700

Gross ratio a 114% 85% 109% 78% 107%

Return to labor, mgt &

land (Naira/day) a 248 362 269

Labor productivity (kg

paddy/day) a 9.4 12.8 11.1

Positive gross margin

(share of hh) 47% 47% 44% 68% 50% 38 63 20.1 27.8 777 252 22.2 11.4

a _{Ratio-indicators based on averages for independent variable averages as mentioned in Table – i.e. averaging before}

Figure 13 Cumulative distribution of production cost (Naira per kg) by use of labor-saving technology

6.4 Discussion

The preceding analysis shows that rice producers typically obtain variable but somewhat limited returns to rice production. Paid expenses are easily recovered, but the average remuneration of households resources barely covers its estimated opportunity costs. The fact that the surveyed rice producers adhere to rice production has a number of likely causes. First, rice producers may have limited alternatives to use their labor remuneratively. This implies that the assumed opportunity cost of non-paid labor may overestimate the actual cost – i.e. rice producing households may not always be able to obtain the implied remuneration on-farm or off-farm. Second, rice producers may have limited alternatives to generate cash income. Rice production is indeed widely perceived as source of cash/income by the rice producing household and is primarily produced for the market. Third, rice producers may have limited alternatives in terms of using lowlands productively. Lowland rice is found in lowlands which are typically waterlogged or subject to flooding. Without substantial investments, these lowlands often have limited other productive alternatives to rice – particularly during the rainy season. This also implies that the current opportunity costs for using such lowlands for rice are limited. Lowland rice also allows for diversification of crops and ecologies used – adding to the portfolio of activities pursued and reducing household income risk. Consequently, rice

cultivation in general, and lowland rice in particular, may still be attractive to farmers even when the estimated returns appear somewhat limited.

The returns to rice production are variously affected by ecology, production technology and location. The preceding analysis has highlighted the favorable effects of: (i) water management and improved varieties (particularly in terms of higher yields and revenue); and (ii) labor-saving technology (particularly in terms of reducing labor use, being the major production cost). The effect of location reflects the combined effect of production costs, produce value and productivity differentials. Although certain tendencies are clear, a number of issues should be recalled. First, the data reflect survey data for 252 households. This implies that we cannot control for all factors – or single out the effect of one specific factor for that matter. Indeed, the surveyed rice producing households differ in terms of their resource base, activities and efficiency – and in part this is associated with each other and with ecology, technology use and location. Also, being single-survey data, there are certain measurement errors we can not fully control for. This particularly affects labor use – which in itself is the major production cost – but also some other variables. Therefore data presented here should be seen as indicative estimates, which can be made more reliable by more exact measurements.

technology divisible. Finally, the data presented here refer to rice producing households only. Returns for households that contemplate starting rice production may be different – for instance in terms of access to markets and services (e.g. rice processing, rice traders, rice seed) and start-up costs (eg learning costs). Similarly, households that have abandoned rice production may have done so for reasons that are less evident amongst current rice producers.

Whatever the limitations of the dataset, the foregoing analysis does highlight substantial scope and need for (i) higher yields and (ii) lower production costs in general, and labor costs in particular. Such improvements would imply significant increases in the returns to rice production. Also, the two are complementary and not necessarily contradictory. For instance, the use of improved varieties can imply significant yield increases with relatively similar production costs. Similarly, integrated crop management practices can reduce production costs while maintaining yield levels, for instance through improved labor and input use efficiency.