From subsistence to market production to market subsistence From From subsistence to market production Implications for rural household food security in Uganda Proscovia Renzaho Ntakyo Renzaho Proscovia Proscovia Renzaho Ntakyo From subsistence to market production Implications for rural household food security in Uganda Proscovia Renzaho Ntakyo Thesis committee Promotor Prof. Dr E.H. Bulte Professor of Development Economics Wageningen University & Research Co-promotor Dr M.M. van den Berg Associate professor, Development Economics Group Wageningen University & Research Other members Prof. Dr E.S. van Leeuwen, Wageningen University & Research Prof. Dr E.J.V. van Nederveen Meerkerk, Utrecht University and Radboud University Nijmegen Dr H.P. Weikard, Wageningen University & Research Dr M.A. Slingerland, Wageningen University & Research This research was conducted under the auspices of the Wageningen School of Social Sciences (WASS) From subsistence to market production Implications for rural household food security in Uganda Proscovia Renzaho Ntakyo Thesis submitted in fulfilment of the requirements for the degree of doctor at Wageningen University by the authority of the Rector Magnificus, Prof. Dr A.P.J. Mol, in the presence of the Thesis Committee appointed by the Academic Board to be defended in public on Tuesday 15 May 2018 at 11 a.m. in the Aula. Proscovia Renzaho Ntakyo From subsistence to market production: Implications for rural household food security in Uganda, 183 pages. PhD thesis, Wageningen University, Wageningen, the Netherlands (2018) With references, with summary in English ISBN 978-94-6343-270-2 DOI https://doi.org/10.18174/445408 To Doris and Mark Contents Page Chapter 1 Introduction 1 Chapter 2 Effects of market production on rural household food consumption 19 Chapter 3 Market production household resource allocation and food security: 53 The gender dimension Chapter 4 Does market production affect technical efficiency? A food-cash crop in a subsistence farming system in western Uganda 89 Chapter 5 Smallholder food marketing behaviour: Exploring the role of informal credit and traders in stabilization of food crop prices 113 Chapter 6 Synthesis 141 References 151 Summary 168 Acknowledgements 171 Biography 173 Education Certificate 174 Chapter 1 Introduction 1.1 Background Over the years, agriculture has remained the main source of livelihood in Africa. It is the most important productive sector for rural people in sub-Saharan countries. As demonstrated by the green revolution in Asia, if strategically planned, agriculture is a potentially powerful means of breaking the cycle of poverty and hunger. However, most African countries have not been able to realize a successful agricultural revolution, largely due to underinvestment in the sector and other relevant non-agricultural sectors such as technology development, physical infrastructure, institutions and health (Diao et al., 2007). In recent decades, agriculture in African countries has been subjected to a number of reforms that aim at transforming subsistence agriculture into market oriented production. The structural adjustment programs in the 1980s and 90s, which included agricultural trade liberalization and privatization, led governments across sub-Saharan Africa to withdraw from produce marketing as well as providing other services to farmers. This was meant to encourage entry by private traders and foster competition, which in turn would improve producer prices. This, in turn, was expected to attract more investments by farmers to produce for the market. However, liberalization policies have had diverse effects on market prices. For example, farm prices have become unstable and unpredictable, adversely affecting household income and food security (Barrett, 1997; Ellis & Freeman, 2004; Kherallah et al., 2002). The agriculture sector in Africa relied heavily on traditional export crops such as coffee, tea, cotton and cocoa. While these traditional exports still have a high potential to drive rural economic growth if farmers and traders manage to improve quality and identify niche markets, they may not benefit all small holder farmers. Considering the increasing population and ongoing process of urbanization, the greatest market potential for most African farmers may lie in domestic and regional markets for food crops (Diao & Hazell, 2004). Increased market integration of traditional food crops has been part of a development strategy by most African governments towards reduction of poverty and food insecurity in rural areas. This is based on the presumption that agricultural growth in the food sector can offer the greatest poverty reduction across most of rural Africa (Diao et al., 2007). However, the agricultural sector is dominated by small scale farmers who face a number of challenges (including limited access to improved technologies, productive resources, credit and markets) which limit their potential productivity in both food and cash crops (Kherallah et al., 2002). Their 1 productivity growth will largely depend on government support, otherwise, rural households will remain trapped in the cycle of poverty and hunger (Jayne et al., 2010). Despite various agricultural reforms and a large population engaged in agriculture, the food security situation in Africa has not changed significantly. Food insecurity remains a significant and persistent challenge in sub-Saharan Africa. About 25% of the population in Africa still suffers from hunger and under nourishment due to low food availability and limited access to nutritious foods (Fan, 2015; FAO, 2015). More than a third of Africa’s children are stunted, a situation that exposes them to a range of physical and cognitive challenges (Benson, 2004). Under nutrition is the major risk factor causing over 2.9 million deaths (28% of all deaths) in Africa annually (Benson, 2004). This situation has been largely attributed to subsistence production characterized by low productivity and consequently low returns. The hunger problem is compounded by fragmented small land holdings, due to rapid population growth (Ellis & Freeman, 2004). For instance, in Uganda the average acreage per household has decreased from 2.0 hectares in 1992/93 to 0.9 hectares in 2005/06 (Uganda Bureau of Statistics, 2007). A large rural population, of which some are landless, wide spread poverty, and dependence on rain-fed agriculture, have contributed to hunger in Africa (Vermeulen et al., 2012). In addition, shocks such as climatic fluctuations, conflict, and poor health due to diseases such as HIV and AIDS have directly or indirectly affected food availability, access and utilization (Webb et al., 2006). Byerlee et al., (2006) argue that development of market-oriented food systems could be the best option for sustainable agricultural productivity and food security. Market production involves increased use of purchased inputs which in turn produce marketable surpluses (Martey et al., 2012). Market-oriented production can impact food security through direct and indirect effects. Direct effects are gains from increased economic access to food as a result of increased income which can be used to purchase food, while indirect effects are gains derived from investing income from the cash crop into production of staple crops. Market production plays a significant role in reducing regional food insecurity. Local food shortages caused by imbalances in food distribution due to ecological differences in some rural areas can be addressed through market production (Maxwell, 1996). It further allows (productivity- enhancing) specialization in production and access to a variety of food, hence reducing the burden for households to produce all that they have to consume (Timmer, 1997). This is, however, only feasible when a well-functioning agricultural marketing system exists. The functioning of markets is critical for market-oriented households to sell their produce and 2 raise sufficient income for non-food consumption, as well as to acquire the food they do not produce themselves. In situations of missing markets and market imperfections that characterize most rural areas in developing countries, market-oriented production, if not properly supported, can be a threat to food security, especially for the resource poor households. Poor infrastructure -especially poor roads in rural areas, pushes up transport costs and makes it difficult for farmers to access markets. This affects both sellers and buyers. Sellers will not get competitive prices due to limited competition of traders, and buyers will pay high prices which might affect the quantities purchased. In most rural areas, local farmers tend to produce similar crops, and for similar reasons of poor infrastructure, food outflows exceed inflows. Therefore, during the lean season there is less food in the local markets, and this puts market-oriented households at risk of food insecurity. Moreover, poor households who cannot produce sufficient quantities of high quality foodstuffs may not compete on the market. The implication is that they cannot raise enough income for food and non-food consumption. Food price volatility equally impacts on food security of market-oriented households. Most farmers sell their produce at low prices soon after harvest and buy food at higher prices during the lean period (Stephens & Barrett, 2011). This is partly attributed to inadequate support services and weak institutions. Lack of agricultural insurance and limited access to financial institutions in the rural