Economic Analysis of Contract Farming on Oil Palm Production in Delta-State, Nigeria

Abstract

This research analyzed the factors and profits involved in oil palm production in Delta State. Four local government areas were purposively selected for this re- search namely Aniocha South, Aniocha North, Ika South and Ika North LGAs. From each of these local governments, (4) communities were randomly selected and in each of these communities, (9) oil palm farmers were also randomly se- lected making a total of (36) farmers for each local government area and a total of (144) respondents for the study area. It was found out that oil palm production enterprise for owner managed farms were dominated by farmers above (65) years of age with (54.3%) and for the contract managed farms, farmers within the age bracket of 46-65years (52.7%) dominated the age range. Budgetary anal- ysis clearly showed that oil palm production as an enterprise was profitable in the study area with contract managed farms making more profits than the owner managed farms. Budgetary analysis clearly showed that contract managed farms with (16.2%) of the farmers, made income level of above ₦950,000 as against (5.7%) of farmers in the owner managed farms who also made income level of above ₦950,000. The average net revenue/ha for owner managed farms was ₦10,319.81k per hectare as against ₦23,743.50 for contract managed farms im- plying contract managed farms generated more revenue. Probit regression anal- ysis revealed that age, farming experience, farm size of oil palm, quantity of oil produced and farm size of other crops explained about 64.57% of the variation in the quantity of oil palm production. Inadequate funds, price instability, pests and diseases, inadequate/expensive inputs were all the major constraints facing the oil palm farmers in the study area. It is recommended that financial support/ loans, price fixing by governments, adequate input supply, good roads and subsi- dies on inputs needed for oil palm production be provided at a very subsidized rate as it will help increase output in oil palm production in the study area.