www.iaard.net IAARD Journals eISSN:2455-4464 International Journal of Economics And Business Management IAARD-International Journal of Economics and Business Management, 2017, 3(2),43-51 Analysis of the Gross Margin for Smallholder Onion Production in Fogera District of Amhara Region, Northwestern Ethiopia Taye Melese 1 and Dr . Ponguru CS Reddy 2 1 Department of Agricultural Economics, University of Gondar, Ethiopia. E-mail: [email protected] 2 .Department of Agricultural Economics, University of Gondar, Ethiopia. E-mail [email protected] …………………………………………………………………………………………………………………………………… Abstract: Onion crop is one of the most important horticultural crops among smallholder farmers because they derive benefits such as income, source of food, health care and rural employment. In Fogera district; onions have been perceived to have high market value, resulting in trade-offs with staple food. This study was aimed at estimate the smallholder onion producers’ farm gross margin and to identify constraints and opportunities of onion production and marketing in Fogera District of Amhara Regional in Northwestern Ethiopia. A stratified random sampling technique was employed to select 150 onion producers from four sample kebeles in the study area. Both descriptive and SWOT analysis were used to analyze the data. The gross margin analysis of onion production shows that, the gross income obtained from onion production was ETB 65,528 per hectare and the total cost per hectare was ETB 36,249 on samples households. Labor cost was the items occupying maximum share in total cost (43.66%) followed by input cost (33.34%), other cost include food expense, phone, post harvest loss etc (18.68%).Opportunity cost of land (2.44%) and animal power cost (1.88%) consists of the minimum cost share. Despite higher potential of the area for onion production, the smallholders are challenged by different endogenous and exogenous constraints ranging from production to marketing chain. Lake of reliable supply seed, unplanned production, Crop pest and quality issues are some of production constraints whereas market constraints are characterized by output and input price fluctuation, asymmetry of price information and limited buyers of the product affecting the bargaining power of smallholder producers. Based on the findings, the study suggests that the government and stakeholders should focus on encouraging the use of labour saving technologies and the government and other policy makers should increase marketing information and ability of onion farmers through avenues like mass media, extension service, and other means of capacity building. Keywords : Gross margin analysis, onion, production, SWOT ……………………………………………………………………………………………………………………………………... 1. Introduction The demand for Alliums is worldwide and their use Ethiopia has a variety of vegetable crops grown in is not limited to any climate or associated to any nationality. different agro ecological zones produced through commercial They are consumed universally in small quantities and used as well as small farmers both as a source of income as well as in many homes almost daily, primary as a seasoning for food. Various types of vegetable crops are grown in Ethiopia flavoring varieties of dishes. Onion contains vitamin B and under rain-fed and/or irrigation systems (Alemayehu et al ., traces of vitamin C, carbohydrate and small percentage of 2010) 1. The major economically important vegetables proteins. In Ethiopia Alliums is for home use in flavoring of include hot and sweet peppers, onion ( Allium cepa ), tomato local dishes, like hot pepper; it is indispensable ingredient of (Solanum lycopersicum ), carrot, garlic ( A. sativum ) and the traditional sauce or “wot”. Besides it’s an important cash cabbage ( B. oleracea var. c apitata ). According to the crop to the farmers. Generally onion consumption is much Ethiopian Investment Agency (2012) 2, green beans and peas, higher than most other vegetables. Onion has significant okra, asparagus, cauliflower, broccoli, celery, eggplant and contribution to the national economy· cucumbers have also recently emerged as important export vegetables. Onion is considered as one of the most important In Fogera districts, where the study focused, onion vegetable crops produced on small scale in Ethiopia. It also crop is one widely horticultural crop grown in the area. The occupies an economically important place among vegetables entire onion production in the districts is mainly for market in the country. The area under onion is increasing from time sometimes which is utilized much for home consumption. to time mainly due to its high profitability per unit area and According to the Fogera district office of agriculture in 2015 ease of production, and the increases in small scale irrigation production season the district contributes 2,167,880 quintal areas. The crop is produced both under rain fed in the of onion with 9854 hectares. This indicates that the district “Meher” season and under irrigation in the off season. In contributes of the regional onion production. Despite the many areas of the country, the off season crop (under potential of the district for onion production, its productivity irrigation) constitutes much of the area under onion is low compared to the potential yield obtained in the production. Despite areas increase, the productivity of onion research centers and there is marketing problem evidenced by is much lower than other African countries. The low low farm-gate prices in the study area. These poor prices productivity could be attributed to the limited availability of among small-scale onion farmers have led to low household quality seeds and associated production technologies used, income. The nature of the product on one hand and lack of among the others (Akililu. et.al, 2015)3. organized market system on the other hand frequently resulted in low producers’ price (profit margin). Hence, this Taye Melese and Dr. Ponguru CS Reddy Page No.43 IAARD-International Journal of Economics and Business Management, 2017, 3(2), 43-51 study attempts to estimate the smallholder onion producers’ 1216.3 mm, with Belg and Meher cropping seasons. Its farm gross margin and identify constraints and opportunity altitude ranges from 1774 up to 2410 meters above sea level associated with production and marketing of among small- allowing a favorable opportunity for wider crop production scale onion farmers in Fogera district. and better livestock rearing. The district is characterized by subsistence mixed farming system in which production of 2. Research Method both crops and livestock is common economic activity. The 2.1. Descriptions of Study Area current land use pattern includes 59.03 % cultivated land, This study was conducted in south Gondar, 22.73 % pastureland, 18.24 % water bodies and the rest for specifically in fogera district. It is one of the 126 districts in others .Most of the farmland was allocated for annual crops the region. It has an area of 117,405 hectares divided where cereals covered 52,759.99 hectares; pulses cover administratively in to 32 Kebeles (30 rural and 2 urban). The 9819.98 hectares; oil seeds 6137 hectares; root crops 1034.29 population size was 233,529. The total number of households hectares; and vegetables 882.08 hectares . Crop production who engaged in agriculture was 42,746 of which 26,277 are takes the lion’s share of consumption and income generation onion producers. The capital is Woreta located at the North of the household. Cereals crops widely produced in the area East on the main road to Gondar from Bahir Dar (Fogera include teff, finger millet, rice and maize, pulse crops like district agriculture office, 2015) 4. chickpea and noug are the major crops grown. Moreover, vegetables and root crops produced in the area include The District is known for its plain nature where flat onions, potato, tomato, pepper, cabbage and sweet potato land accounted nearly 76 %. The mean annual rainfall is (Fogera district agriculture office, 2015) 4. Figure 1: Map of the Study Area Source of Data: Source: (IPMS, 2005) 5 2.2. Source of data, Methods of Data Collection and agricultural office experts were consulted. There are two Sampling procedure urban and 30 rural Kebeles in the district, out of which 12 In this study both quantitative and qualitative were administrative Kebeles are producing onion. These Kebeles collected from primary and secondary sources. The cross- were selected purposively and stratifies based on agro sectional survey was conducted using structured ecology (lowland and upland agro ecology). From each of questionnaire, key informant interviews, and focus-group agro ecology two Kebeles Administrations (KAs) were discussions. Focus group discussions were held with two randomly selected based on lottery method, (Four KAs were groups based on predetermined checklists and a total of 10 selected). Then, the intended sample size from each sample key informants were interviewed from different organizations Kebeles were determined proportionally to household size of and institutions. The sample frame of the study was the list of onion grower farmer. Finally using the household list of small farmers in fogera district and Kebeles Administrations small onion producers, the predetermined size which is 150 (KAs). A stratified stage sampling technique was used to of the sample farmers from each Kebeles were randomly draw sample units. In the selection process fogera districts selected using systematic random sampling technique.