THE EFFECTS OF PRICE VARIATION ON PRODUCTION AND MARKETING OF RUBBER IN EDO AND DELTA STATES OF NIGERIA

Abstract

The study was to determine the effects of price variation on the production of natural rubber in Nigeria with focus on Edo and Delta States being the major producing belt responsible for about 35% of the country’s output. Other objectives were to determine the international market concentration among rubber producing countries using the Herfindahl Hirschman Index from 2007 to 2017, the relationship between producer price and output of natural rubber using co-integration model and the determination of technical efficiency and profitability of natural rubber production among 162 smallholder rubber farmers in Edo and Delta States using data envelopment analysis and gross margin analysis respectively. Results of the study showed that the international export market for natural rubber was moderately concentrated with five countries having a total market share over 80% throughout the period with a Herfindahl Hirschman Index ranging from 2,039 to 2,458 for the entire period, while the import market was not concentrated thus indicating the possibility of collusion among major exporting countries to influence price, results also showed the producer price of natural rubber was led and predicted by output and not the other way round with a speed of adjustment of 0.72% towards the long run from a previous deviation in equilibrium and a 0.142 change in output was responsible for a 1% change in price. The mean technical efficiency was 0.477 while the average gross margin was found to be N150.2 per hectare per annum. Among factors that affected efficiency, the age of plantation was found to be significant at 5%. The study recommended the establishment of commodity trading institution for the country to provide a hedge against the adverse effects of the international market price changes on local production, the development of high yielding varieties of natural rubber and sensitization of rubber farmers to increase the adoption of good agronomic and tapping practices.