Economic analysis of cassava bioethanol production by small holder farmers in Northern Uganda
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The study examined profitability of producing bioethanol and factors that drive cassava farmers to produce bioethanol from Cassava. The data used was collected using structured questionnaire administered to 243 randomly selected smallholder cassava farmers in the districts of Apac, Kole and Lira in Northern Uganda. Gross margin analysis was used to assess the profitability of bioethanol production from cassava grown and from cassava chips bought from the market and profitability of dry chips and fresh tubers. Sensitivity analysis was performed to incorporate uncertainty into economic evaluation and to determine the best possible scenario of maximizing benefit from bioethanol production without compromising other competitive uses of cassava. Bivariate probit and probit models were used to assess the drivers of farmers’ decisions to produce bioethanol and production of dry chips. Gross margin analysis demonstrated that all three cassava products; Fresh tubers, dry chips and bioethanol are profitable although dry chips are more profitable than bioethanol and fresh tubers. However, for two categories of bioethanol producers, those who grow cassava and process bioethanol get more returns on investment than those who buy cassava chips and process bioethanol. Sensitivity analysis results revealed that 40% decrease or increase in price of dry chips and firewood contributed remarkable change on profitability of bioethanol.The bivariate probit results demonstrated that growing improved cassava variety, having big land size, allocating more land proportion of land under cassava, engagement in off-farm work, profitability of bioethanol, positively influenced farmers’ decisions to produce bioethanol while sex of household head, Pentecostal Christian, profitability of dry chips, condition of the road negatively influenced farmers’ decisions to produce bioethanol. Implications of the study is that favourable policies on access and use of land, providing farmers with better inputs such as improved planting materials, providing subsidy on improved planting materials expand the production and hence market and increase the value of bioethanol hence raising the selling price and profits due to increased demand. Alternatively, policies to deliberately buy locally produced bioethanol from farmers and further processing to meet various market niches could be explored to encourage more production. In addition, there is need to promote cultivation of cassava to meet twin goal of food and fuel. Otherwise, without increased production, farmers’ priority would be to produce cassava for food and any intervention to promote production of bioethanol from either cassava grown or bought would increase vulnerability to food insecurity.