Profit efficiency analysis of red onions production in Sironko district of Uganda

Abstract

This study assessed the profit efficiency of red onions smallholder farmers in Sironko district of eastern Uganda. A structured questionnaire was employed to collect data from 216 randomly selected red onion producers. Data analysis was done using descriptive statistics, gross margin, and the Cobb-Douglas type of stochastic profit frontier function model. Results showed that red creole and Afri seed were the only varieties of red onions that were grown in the study area. Onion production was characterized by limited access to credit, extension services, and farmers’ group membership. The gross margin (GM) and returns on investment (ROI) analyses revealed that red onion production was profitable in Sironko district. An average of UGX 884,500 (~USD 241) for Afri seed producers and UGX 1,724,414 (~USD 469) for red creole were obtained per acre of land. Although the farmers made profits, their profitability could be improved by up to 19% through harnessing factors that influence profit efficiency. These factors were cost of seeds (p < 0.01), cost of fertilizer (p < 0.1), cost of pest control (p < 0.05), cost of weeding (p < 0.1), farming experience (p < 0.1), extension services (p < 0.1) and selling price (p < 0.1). The study recommends that to improve the profit efficiency in onion production, the focus should be on the provision of tailored agricultural extension services and affordable credit facilities to the farmers. Further, appropriate policy instruments and agri-business strategies such as agricultural subsidies and price support schemes are needed to spur onion profitability.