Factors Influencing The Profitability of Pig Production in Eswatini
Factors Influencing The Profitability of Pig Production in Eswatini
Factors Influencing The Profitability of Pig Production in Eswatini
ABSTRACT
The demand for pork is higher than the local production, hence the gap is filled by imports which
indicate potential market opportunities that can be exploited by local pig producers. The
objective of the study was to determine the profitability and factors influencing the profitability
of pig production in Eswatini. A stratified sampling technique was used in selecting a random
sample size of pig producers for the research. The study used primary data collected from 107
pig producers from the four regions of Eswatini. Data were analysed using descriptive statistics
descriptive statistics such as percentages, frequency, gross margin model and multiple linear
regression. The findings indicated that most farmers were females with an average age of 44.5
years, with 48.5% attaining high school education, and have less than 10 years pig farming
experience. Most farmers kept the large white breed, fed their pigs concentrates, members of
local pig farmer cooperatives, obtained extension services have market located within 40
kilometres. The results showed that pig producers earned an average gross margin of E 4.29, a
rate of return on investment of 47% and a cost efficiency ratio of 69% per kilogram of pork. The
factors influencing pig farmers’ profitability were pig production experience, access to market
information, access to extension services and target market. The study recommends that farmers
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should familiarize themselves with the media and attend workshops in order to be aware of new
developments in the pig industry. Government should try to subsidize the cost of production of
pigs in order to increase the level of returns, and make the business more attractive to people.
Index words: Pig Farmers, Pig Production, Profitability, Cost Efficiency, Gross Margin
INTRODUCTION
Eswatini’s agricultural sector is the second largest contributor to the economy after the
manufacturing sector (International Trade Administration (ITA), 2019). Agriculture plays an
important role in income generation particularly for the rural community; in provision of raw
materials for the manufacturing industries and in the generation of export products for foreign
exchange (Dlamini & Dube, 2014; Thompson, 2017). Livestock involves poultry, dairy, piggery,
goats, sheep and beef production (World Bank, 2011; Thompson, 2013). Livestock plays an
important role in Eswatini, both economically, culturally (Centre for Coordination of
Agricultural Research and Development for Southern Africa (CCARDESA), 2018; Dlamini &
Huang, 2019) as well as serving as a source of food and income for most households, especially
in the rural areas (World Food Programme (WFP), 2016).
Pig production in Eswatini is one of the developing industries which is not well established yet
(Ngwenya, 2017). Commercialization of smallholder pig production in Eswatini was officially
launched in 1990 (Swaziland National Agricultural Union (SNAU), 2014). Since then pig
production has remained relatively low in Eswatini, failing to meet the domestic demand over
the years (Taiwan International Cooperation and Development Fund (ICDF), 2015). In order to
meet domestic market demand for pork, the country has heavily relied on imports (Ndwandwe &
Weng, 2018).
Recent studies revealed challenges such as the inability of farmers to access high-value markets,
unaffordable pig feed prices (Mavuso, 2017); the lack of storage facilities for pork products,
distant markets, poor marketing structure (Maseko, 2000; Zwane, 2017) and lack of abattoirs
(Masuku et al., 2011). Maseko (2000) and SNAU (2014) considered the poor marketing structure
as a major factor impeding the development of the pig industry. The purpose of the study was to
determine the profitability of pig production in Eswatini. The specific objectives were to describe
the socio-economic characteristics of pig producers; to determine the costs and returns in pig
production and identify the factors influencing the profitability of pig production in Eswatini.
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Pig production in Eswatini is mainly carried out by smallholder farmers. Pigs serve as a source
of food and are sold mostly in local markets as a means of earning income (MOA, 2012).
Commercial pig producers use mainly the Large White, Duroc and Landrace crossbreeds in place
of indigenous pigs (Ministry of Agriculture and Cooperatives (MOAC), 2004). Eswatini’s pork
industry has been stagnant over the recent years, failing to meet the domestic demand for pork
(Masuku et al., 2011; Ndwandwe & Weng, 2018). Domestic production levels show stagnant
growth: 816, 900, 856, 724, 967, 967, 1,115 and 1,482 tonnes between the years 2011, 2012,
2013, 2014, 2015, 2016, 2017 and 2018, respectively (MOA, 2018). National accounts statistics
have shown that the pig industry has had very little contribution over the years (Dludlu, 2014;
SNAU, 2014).
Farmers produce pigs individually, while some affiliate to farmer’s organisations. Co-operatives
coordinate pig producers with regards to marketing, access to finance, procurement of inputs,
and create improved linkages with other value chain actors such as input suppliers, retailers,
butcheries and consumers. Co-operatives also facilitate bulk purchasing of inputs from suppliers
so that members can share transportation costs and enjoy bargaining power (SNAU, 2014). The
local marketing of pork has two channels; formal and informal. The informal market involves the
direct sales of pigs to consumers at the farm gate. Farmers can sell their pigs either on cash basis
or on both cash and credit basis (Masuku et al., 2011). In the formal market producers supply
their pigs to abattoirs/butchers/wholesalers/retailers /processors (Mavuso, 2017). Eswatini Meat
Industries operates the main abattoir and remains the only meat exporter in the country (Wane et
al., 2019).
Age has been used as a measure of experience especially for operations that have been
continuing over time (Birachi, 2006). Age is an important factor that influences the probability of
adoption of new technologies because it is said to be a primary latent characteristic in adoption
decisions. Ephraim (2003) described the insignificance of gender of the farmer suggesting that
female controlled farms are more efficient even though gender is not an important factor in
explaining efficiency. Education level is very useful in technology adoption for improved animal
productivity. Education increases the efficiency of searching for and processing information
(Birachi, 2006). It is believed to be important as it enlightens farmers on how best to strategise
and to adapt to better marketing conditions (Wongnaa et al., 2014). Productivity and profitability
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of pigs is connected to trained and skilled employees (Isberg, 2013). High level of experience
makes certain information and search costs easier or cheaper for farmers (Pingali et al., 2005).
According to Essa et al. (2011), access to credit contributes positively to technically inefficiency.
This implies that farmers who utilize credit are less efficient than those who do not. Access to
credit generally improves efficiency by leveraging cash constraint to buy better quality inputs
and services (Jabbar & Akter, 2008). Market information relates to timely and accurate prices,
buyer contacts, distribution channels, buyer and producer trends, import regulations, competitor
profiles, grade and standards specifications, postharvest handling advice and storage and
transport recommendations (Adjognon, 2012). Information is essential for farmers, since it
allows them to allocate resources in a way that reflects relative scarcity and meets market
demand. Expensive, imperfect and asymmetric information generates problems for farmers such
as increased risks associated with marketing, inefficient allocation of resources, higher
transaction costs and poor decisions about marketing (Urquieta, 2009).
Access to market information gives farmers knowledge about prevailing prices in various
markets (Urquieta, 2009). Limited access to market information is one of the marketing
constraints in developing countries (World Bank, 2011). A majority of marketing systems in
developing countries are characterised by transaction costs, poor access to appropriate and timely
information and high transport costs (Arua, 2007). Poor market infrastructure may increase risks
for all market participants or shift risks to participants who are less able to manage them.
Transaction costs amongst other factors influence the choice of marketing outlets used by
smallholder farmers (Siyaya, 2013).
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Exotic breeds are preferred mainly because of their rapid growth rate, easy feeding and high
littering ability (Njuki et al., 2010).
Duniya et al. (2013) employed descriptive statistics, multiple regression model, t-test of
significance and net farm income to analyse the profitability of swine farmers in Zangon Kataf
and Jema Local Government areas of Kaduna State, Nigeria. The results showed that
profitability of swine farmers was influenced by socio economic characteristics such as
production experience, herd size, age and level of education. Sanders et al. (2012) studied the
determinants of profitability in Niche swine production. Profitability was measured by the net
margin. The multiple regression analysis showed that profitability across producers was
explained by feed costs, labor efficiency, production efficiency, management experience, and the
production of more specialized niche pork.
Obayelu et al. (2017) utilized the budgetary and ordinary least square regression model to
examine the economics and determinants of pig production in Ogun State of Nigeria. The
findings showed that experience, access to credit had positive and significant effect on the level
of output and revenue generated by pig farmers. Nabikyu and Kugonza (2016) conducted a study
to determine the drivers of profitability in pig farming in Wakiso district in Uganda. A multi
linear regression model was used to measure the factors affecting profitability among the
farmers. Results revealed that the profit per pig was influenced by family size, making and
keeping of a farm budget, extension services, veterinary services and breed of pigs. Ngwenya
(2017) used a multiple linear regression model to assess the determinants of commercialization
among the smallholder pig farmers in the Manzini region of Swaziland. The study showed
distance to market had no significant influence on the level of commercialization of smallholder
pig farmers in the study area. Umeh et al. (2015) conducted a technical efficiency analysis of pig
production in Nigeria. The study revealed that most of the farmers (60.0%) were in farmer
association and derived huge benefits. The author recommended that pig farmers should affiliate
to pig farmers’ association around them so as to have access to relevant information about new
technologies or practices.
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METHODOLOGY
This study employed a descriptive and quantitative research design with a purpose of
determining the profitability of pig production in Eswatini. The target population were 426 pig
producers in Eswatini. The study adopted a stratified sampling technique. Farmers were stratified
according to the four administrative regions of Eswatini, Hhohho, Manzini, Shiselweni and
Lubombo. The study used 25% (Cooper and Schindler, 2013) of the total farmer population
selected from each strata hence the total of 107 farmers. A structured questionnaire consisting of
both open and closed-ended questions was administered to sampled pig farmers through the use
of face to face personal interviews. The questionnaire was reviewed by experts in the
Department of Agricultural Economics and Management to establish content and face validity.
Questionnaires were further pretested using farmers who were not part of the sample and a final
questionnaire was prepared using responses obtained from the farmers.
Data on socio-economic variables were analyzed using Statistical Package for Social Sciences
(SPSS) to obtain descriptive statistics. The gross margin model was used to determine the
profitability of pig farmers. The multiple linear regression model was used to analyse the
determinants of profitability among pig producers. Gross margins were used to determine the
relative profitability of pig farmers. Average gross margins per farm were computed as a
difference between average revenue (per year) and average total variable costs (per year). Gross
margins per kilogram of pork were obtained by calculating difference in average revenue per unit
and average variable cost per unit. The Gross Margin model is presented in the following
equation
GM = TR – TVC
Where: GM = Gross Margin per kg of pork (E/kg); TR = Total revenue from pork (E);
TVC = Total variable cost incurred in pork production (E)
The cost efficiency ratio at farm level was calculated using the following formula
Where: CER = Cost efficiency ratio; Px = Price of inputs; Qx = Quantity of variable inputs
Qy = Quantity of output; Py = Price of output
ROI allows the determination of net returns (profit) per amount of money invested in production
and helps the farmer to form sound and economically viable decisions on the farm. ROI is a
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profitability ratio suitable for measuring the efficiency of different enterprises. It was estimated
using the equation below.
Where: ROI = Returns per lilangeni invested; TR= Total revenue; TVC= Total variable costs
A multiple linear regression model was used to evaluate the determinants of the profitability of
pig farmers. The model used for farmers’ gross margins was expressed as:
Where: Yi = Gross margin in E/kg (derived as TR – TPC, where TR = Total Revenue (or
returns) from sales, TPC = Total Production Cost); β0 = the intercept of the regression equation ;
β 1 to β12 = estimated coefficient of the explanatory variables; Xi = explanatory variables-X1 =
Age of farmer in years; X2 = Gender of the farmer (Dummy, 1 = male, 0 = female); X3 =
Education level of the farmer (1=primary, 2= secondary 3=high school, 4 =tertiary); X4 =
Experience (Years in pig farming); X5= Distance to market (Kilometres); X6 = Access to credit
(Dummy. 1=Yes, 0=No); X7 = Access to market information (Dummy. 1=Yes, 0=No); X8 =
Type of feed given (1= concentrates, 2= formulated, 3= kitchen waste, 4 = other); X9 = Access to
extension services (Dummy. 1=Yes, 0 =No); X10 = Breed of the pig (1=landrace, 2= large white,
3=Berkshire, 4 =Duroc, 5=hempshire, 6 =indigenous); X11 = Group membership (Dummy.
1=Yes, 0 =No); X12 = Target (1= direct to consumer, 0 = intermediary); ei = disturbance term
The findings shown in Table 2 indicate that a majority (58.9%) of respondents were females,
while males accounted for 41.1%. This result agrees with Abiyong et al. (2019) study where a
majority of pig farmers were females. The findings indicate that the respondents were aged
between 20 and 85 years old, while the mean age for the sampled farmers was 44.5 years. This
also conforms to Dorh et al. (2019) and Abiyong et al. (2019) study where a majority of the pig
farmers were aged between 36 and 45 years with an average age of 44 years. This implies that a
majority of the pig producers were in their youthful age and were strong enough to perform the
laborious and productive activities. The findings also show that, about 45.8% respondents
attained high school. However, only 35.5% of respondents have attained a tertiary education.
This indicates that the literacy level of the respondents is high, where less than 5% of the
respondents had primary education. This finding is in line with previous studies (Ogunniyi &
Omoteso, 2011).
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The findings further show that, respondents who had less than 10 years’ pig farming experience
formed 82.2% and 16.8% respondents ranged between 10 and 20 years of experience, while the
mean value was 6.14 years of experience. This result is in line with the study by Obayelu et al.
(2017) and Ibitoye et al. (2016). This implies that most of the respondents were experienced pig
farmers. Most (60.7%) pig producers kept the large white breed, while 28% kept the landrace
breed. Uddin and Osasogie (2016) also found that Nigerian farmers stocked more of large white
breed in their farms. This is technically justified because large white breeds are highly prolific,
disease resistant and are widely used for upgrading local breeds. Table 2 shows that most
(93.5%) pig farmers fed their pigs concentrates. However, 6.5% used formulated feedstuff. This
finding corroborates to Dorh et al. (2019) where 93% of the pig farmers used formulated
feedstuff to feed their pigs.
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The results in Table 3 indicate that 93.5% of respondents obtained extension services from the
government, while 6.5% indicated to have no access to extension services. Farmers need
extension services in order to be aware of new developments in the swine industry. Extension
services enable farmers to manage their pigs well, resulting into higher production rates; hence a
higher proportion of the stock of pigs may be sold. About 83.2% of farmers are members of local
pig farmer cooperatives while a majority (91.6%) of farmers has a market located within 40
kilometres.
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About 72 % of the farmers accessed credit from banks (25.2%), cooperatives (32.7%) and money
lenders (9.3%). Only 28 % of the respondents were found to have not accessed credits. On the
contrary Obayelu et al. (2017) found that 68.3 % of the respondents were not beneficiaries to any
agricultural or production credit in Ogun State, Nigeria. Access to credit is regarded as one of the
crucial elements in elevating agricultural productivity as it allows the purchase of raw materials
and other enterprise inputs. About 88.8 % of pig farmers have access to market information. The
main sources of information for the famers are farmers and friends (36.4%), the media (29%)
and workshops (14%). The results further show that the target market for most pig farmers are
the butcheries (35.5%), individual consumers (27.1%) and restaurants (26.2%).
The findings in Table 4 show that feed costs represent 67.40%, labour cost account for 12.68%, ,
while transport (5.38%) and vaccines represent 3.66% of the total cost of production. Water
accounted for 3.17%. The average gross revenue was E48974.18 per farm. The average gross
margin per respondent was E15228.75. The average gross margin per kg was E 4.29. The cost
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efficiency ratio was 69%. The rate of return on investment in the study area was 47%. This
means that for every E1.00 invested, E47 is gained in the piggery business.
The coefficient of experience (0.764) had positive influence on the farmer’ revenue. This means
that a unit increase in years of experience leads to an increase in the returns by E 0.764. This
finding is in consonance with Duniya et al. (2013) where similar result was obtained in a study
carried out on measurement of pig production profitability in Zangon Kataf and Jema’a Local
Government Areas of Kaduna State, Nigeria. The coefficient for target market was significant at
10% level of probability and positively related to the gross margins. The coefficient was 0.767
indicating that, when the farmer switched from selling to intermediaries to selling directly to
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consumers, the gross margins per kilogram increased by E 0.767. It was hypothesised that a
farmer would choose the marketing channel that would increase his/her gross margins.
The findings show that information of pork markets was statistically significant and positive at
5% level of probability. Access to market information increased pig producers’ gross margins by
E 11.85. Market information dissemination is an important issue for producers to help them
decide on marketing their products. The findings however are in contrary with Bahta and Baker
(2015) who found that farmers who had less access to market information proved more efficient.
The relationship between access to extension services and gross margins was found to be
statistically significant at 1% level of probability and positively related to gross margin. This
result is in consonance with Antwi and Seahlodi (2011) who found that access to quality
extension service had a positive and significant effect on pig farmers’ net incomes in the
Gauteng Province of South Africa. This implies that those farmers who received veterinary from
extension officers had higher chances of earning larger profit than other farmers who did not
have extension services. According to the findings, pig producers who got veterinary services
earned a gross margin of E 1.88 more income than those who do not get the service.
The gross margins analysis for pig producers showed that feed costs represented 67.40%, labour
cost account for 12.68%, while the cost of transport and vaccines represent 3.66% of the total
cost of production. Water and transportation of pigs to the market accounted for 3.17% and
3.08% respectively. To reduce costs, farmers should form groups when buying inputs so that
they get discount and free transport from the input suppliers. This might help minimize
production costs such as those of feed, medication, slaughtering, slicing and transportation of
pigs to the market. To reduce costs of water, farmers can use more storage containers such as
tanks, earth dams than to rely on local water service providers. Farmers can also grow yellow
maize because it constitutes the largest part of pig feed in order to produce formulated feed
which could help reduce their costs. The average gross revenue was E48 974.18 per farmer per
year. The average gross margin per respondent was E15 228.75. The average gross margin at
farm level was E 4.29 per kilogram. The rate of return on investment in pig production was 47%
and a cost efficiency of 69%.
The multiple linear regression analysis showed that farmers’ experience was statistically
significant at 5% level of probability and positively related to the gross margin. The coefficient
for experience (0.764) had positive influence on the farmers’ gross margins. The coefficient for
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target market was significant at 10% level of probability and positively related to the gross
margins. The findings show that information of pork markets was statistically significant and
positive at 5% level of probability. The relationship between access to extension services and
gross margins was found to be statistically significant at 10% level of probability and positively
related to gross margin. It can be concluded that experience, access to market information, access
to extension services, target market were the significant factors that affect profitability of pig
producers. The null hypothesis that socio-economic and institutional factors have no influence on
the profitability of pig farmers was rejected.
The government should set policies and strategies in order to enhance pig producers and small
scale market agents participate fully in pork markets. This can be done through establishing new
acts and guidelines in order to foster the pig industry. Government should try to subsidize the
cost of production of pigs in order to increase the level of returns, and make the business more
attractive to people. Government should also provide training for farmers to be able to access
information about the pig industry. Policies that would guarantee adequate access to credit
facilities by the pig farmers are strongly advocated. This will enable producers to effectively
raise pigs and also expand the scale of production.
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