Analysis of Cost and Returns in Rice Production among Contract and Non-Contract Smallholder Producers in Benue and Niger States, Nigeria

This study analyzed the costs and returns of rice production among contract and non-contract smallholder producers in Benue and Niger States, Nigeria. A multi-stage sampling design was used to select 400 contract and non-contract rice producers. Primary data were collected using a well- designed questionnaire. Data were analyzed using descriptive statistics, farm budgetary technique, and ordinary least squares (OLS) regression model. The results indicated that contract farmers had higher institutional support, with 73.5% having access to credit compared to only 12.5% of non-contract farmers. The cost-benefit analysis showed that contract rice producers incurred higher total costs than non-contract rice producers, largely driven by higher investments in labor and chemical fertilizers. However, contract farmers achieved significantly higher total revenue and net profit than their non-contract counterparts. The gross margin ratio for contract farmers (0.63) also outperformed that of non-contract farmers (0.578). The regression analysis (R2 of 0.94 for contract and 0.84 for non-contract) showed that educational level, household size, farm size, and cooperative membership significantly and positively influenced net farm income for both groups. Notably, credit access was a major driver for contract farmers, while farming experience was more critical for non-contract farmers. The t-test results (t = 8.277 for costs and 2.980 for returns) confirmed significant differences between the two groups. The study concluded that while contract farming requires higher initial capital, it significantly improves the profitability and financial stability of rice producers by providing better access to inputs and credit.