Abstract:

Apple production was identified by the National Agricultural Research Organization
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as a priority crop in Southwestern Uganda and has been widely promoted in the districts of Kabale, Kisoro, Kanungu and Rukungiri. This study focused on assessing
the economic and financial viability of the apple enterprise in the highlands of Kabale
where the crop was first introduced. Data were collected from 136 farmers, selected
using multistage sampling technique and analysed using descriptive statistics,
production and cost function models. Costs of production and returns at a research institute and farm level were analyzed to assess financial viability in apple
production. While a Cobb-Douglas type production function was estimated to assess
critical factors affecting apple production. The study further estimated a Cobb-
Douglas cost function to determine cost elasticities of the major inputs.
Analysis of costs and returns indicated that labour costs accounted for the highest
percentage (41.8%) of total production costs followed by organic fertilizer (27.5%).
The NPVs of stream of profits obtained using sensitivity analysis with respect to
yields and prices were all positive and the study concluded that apple production was
a profitable enterprise. The scenario assuming average yields and a premium price of
apples was more profitable with NPVs of Ug. Shs 95.8 and Ug. Shs 591.5 million at
28 and 6 percent discount factors, respectively. Estimates of the apple production
function reflected organic fertilizer, farmers’ experience and labour, as the most
critical inputs. In addition, increasing returns to scale were exhibited. Further analysis
revealed economies of scale in apple production depicting labour and fertilizer with high cost elasticities. The study therefore recommends that apple production should
be promoted as a cash crop in southwestern Uganda with support of soft loans and
sufficient extension services. Furthermore, improving small orchard management
should be the means to meet any increased demands. There is need for further
research to determine the demand for apples in Uganda and also establish the
financial viability of apples as an intercrop.