Crop Production/Industries, Research and Development/Tech Change/Emerging Technologies, Downloads July 2008-June 2009: 6,

Laker-Ojok, Rita

English

Research Papers in Economics

Page 1
POLICY SYNTHESIS
for USAID - Bureau for Africa
Office of Sustainable Development
Number 27 October 1996
RETURNS TO OILSEED AND MAIZE RESEARCH IN UGANDA
By
Rita Laker-Ojok
Food Security II Cooperative Agreement between U.S. Agency for International Development, Global Bureau, Economic Growth Center,
Office of Agriculture and Food Security and Department of Agricultural Economics, Michigan State University 
BACKGROUND: As a result of political instability
and poor macroeconomic policies from 1972-86,
Uganda underwent a dramatic reversal of the
agricultural and structural transformation process it
had achieved in the 1960s.  By the time Uganda
opened up again to the international community after
the fall of Amin, its economy was on the verge of total
collapse, and it had suffered a near total breakdown of
agricultural research, seed multiplication, output
markets, input distribution networks, and extension
services. Virtually no new agricultural methods or
technologies were introduced between the late 1960s
and early 1990s.   Worse, many productivity-
1
enhancing technologies fell into disuse during this
period, leaving Ugandan yields much lower than those
of other developing countries with similar agro-
ecologies.  National fertilizer consumption fell from
1.4 kg/ha in the 1960s to 0.2 kg/ha in the 1990s.
Farmers in Eastern and Northern Uganda, where
animal traction had been well established for 50 years,
suffered tremendous losses of livestock as a result of
the political instability and were suddenly  forced back
into hand hoe cultivation.  The result has been a
vicious circle of low input/low productivity
agriculture that has proved very difficult to break.
Beginning in the late 1980s, USAID, in collaboration
with the Government of Uganda (GOU), began
rehabilitating the physical infrastructure at several
research stations and strengthening human capital for
food crop research, extension, and university teaching.
Maize, sunflower, and soybeans were selected as the
primary focus of research activities.  USAID also
provided a small amount of funding for groundnut and
sesame research in the early 1990s.   In late 1992,
these  programs also began to receive funding under
the World Bank-funded Headstart for Agricultural
Research and Extension project (HARE).
Unlike other economies where consumers depend on a
single staple, staple food crops in Uganda are highly
varied and regionally concentrated.  They include, in
order of importance, cooking bananas, cassava, sweet
potatoes, beans, millet, maize, sorghum, and
groundnuts. Sesame, sunflower and soybeans occupy
a small area in comparison to the staples above, but
area is expanding in response to increased domestic
and export demand for edible oils.  Sesame has
attracted considerable attention in recent years as a
potential “non-traditional” export. In the early 1990s,
sesame was the third largest foreign exchange earner,
following the traditional “cash crops” of coffee and
cotton.
This summary presents information as of the date of the
1
original studies (1991-92). 
FS II Policy Synthesis No. 27
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OBJECTIVES AND METHODS: The Ugandan
studies had three principal objectives: (1) to determine
the rate of return to investments since 1986 by USAID
and GOU in soybean, sunflower, and maize research;
(2) to determine the potential returns to future
investment in research on each of the major oilseeds in
Uganda (soybean, sunflower, groundnut, and sesame);
and (3) to systematically consider the impact of other
aspects of the technology transfer system (extension,
input markets, and product markets), as well as key
fiscal policies, on returns to oilseeds research.  
The steps followed for the rate of return analysis
included: (1) calculation of benefits both with and
without research, including determination of the area
and yield levels for traditional and improved
technologies; (2) analysis of incremental production
costs per year attributable to adoption of the
technology; (3) calculation of annual research and
other related costs, including rehabilitation, training,
and extension; (4) calculation of the annual net
benefit, the incremental gross benefit minus total
costs; (5) deflation of the stream of annual
incremental net benefits to reflect the real value in
constant prices; (6) calculation of the internal rate of
return (ROR); and (7) sensitivity analysis to test the
stability of the ROR and the relative importance of its
various components, e.g., price, yields, adoption.  
Key data for the ROR analysis were obtained through
a combination of primary data collection (for
information on yields and production practices) and a
review of secondary sources. Information on the effect
of marketing and other institutions on technology
adoption was obtained through secondary data and in-
depth interviews with key informants at different
levels of the subsector, including researchers,
extension agents, traders, policymakers, processors
and producers.  
RESULTS:  The first new maize, soybean and
sunflower varieties  were released in 1991: these were
the first variety releases in Uganda in over 20 years.
They included (1) Longe 1, a medium-maturity, open-
pollinated maize variety, resistant to streak and
Northern Corn Blight, with a yield advantage over
local varieties ranging from 25% (zero inputs) to
400% (with fertilizer and good management); (2) Nam
1, a medium-maturity, high-yielding, non-lodging
soybean variety that is highly resistant to shattering;
and (3) New Sunfola, a sunflower variety with an
estimated 10-20% yield advantage and 25% more oil
content than “traditional varieties” of Russian and
Kenyan origin.  
Much of the groundnut and sesame germ plasm and
research results were lost or destroyed during the
political insecurity in Northern Uganda between 1987-
89.  Current groundnut research efforts  focus on the
development of varieties resistant to rosette virus
disease.   Several varieties have been developed and
are now being tested in multi-locational trials.  In
1991, efforts to reestablish the sesame germ plasm
bank were begun, and cross-breeding work was
resumed to improve yields and reduce shattering.
Intercropping trials with millet and maize, work on
seed rate recommendations, and on-farm trials were
also initiated in the early 1990s.
ROR to Maize, Soybean and Sunflower.  Because the
new varieties under consideration were only released
in late 1991, the ROR to maize, sunflower, and
soybean is a hybrid between ex post and ex ante
analysis.  The analysis uses known costs and projected
benefits.  An investment is  considered profitable if the
ROR equals or exceeds the opportunity cost of capital
(assumed to be 10-15% in Uganda).
The projected returns to investments in maize and
sunflower were very profitable for both maize and
sunflower for the period 1985-2006.  The RORs
ranged from 27-51% (maize) and 10-66%
(sunflower), depending on costs included in the
calculation and assumptions about yield, the inclusion
of hybrid as well as open-pollinated sunflower
varieties, and prices.  Returns to soybean research
were lower, ranging from -6 to 20%, and were
unprofitable in most scenarios.  In sensitivity 
FS II Policy Synthesis No. 27 
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analyses, the maize ROR was fairly robust to changes The projected ROR to groundnut research from 1985-
in assumptions about costs, yields and prices.  The 2006 is very high, ranging from 23-46%.  The results
high ROR to sunflower research, however, is very are fairly robust to changes in assumptions regarding
sensitive to the ability of the research station and the yield  and  adoption  rates.    The  ROR  to  sesame
national seed scheme to multiply and distribute hybrid research and related investments in the same period is
sunflower seed in addition to New Sunfola. During the also very high, ranging from 15-50%.  However, these
late 1980s, a number of promising imported hybrids results are much more uncertain, since (unlike the
were tested that doubled or tripled the yield of local other crops examined) there is no past experience with
varieties and Sunfola.  The hybrids also had an oil adoption of improved sesame varieties on which to
content of 50% under farmer management.  However, base projections of future adoption.  It is also not
because  of    doubts  about  the  Uganda  Seed  Project’s clear when the research system may be ready to
ability to undertake hybrid seed production, research release new varieties.
was redirected to the identification of suitable  open-
pollinated varieties, as a short-term solution until the
seed problem was resolved.
A number of factors contributed to the lower returns
to soybean investment.  First, the direct cost of
research on soybeans was high because of the
complementary investments required for rhizobium
production and promotion.  Second, researchers have
been unable to identify a variety that significantly
increases yield while meeting the demand
characteristics of the local market.  The smaller size
of Nam 1 makes it less acceptable to some consumers.
Third, while edible oil can be extracted from soybeans
using technology available in Uganda, the demand for
soybean cake for livestock feed is very limited.  Low
per capita incomes constrain the demand for meat and
dairy products and hence the demand for feed
ingredients.  Thus, the potential expansion of soybean
production in Uganda will be limited by demand
constraints.  
ROR  to Groundnut and Sesame. Because no new
varieties had been released for these crops by 1992,
the calculation of these RORs is purely an ex-ante
analysis.  The ROR calculation incorporates the
known costs of research in recent years together with
projected costs under the HARE project.  The
benefits, however, lie entirely in the future.  This
necessitates predictions concerning farmers’ adoption
response, market conditions, and institutional support
for technology transfer.  
SUBSECTOR CONSTRAINTS TO
TECHNOLOGY ADOPTION.  The ROR analysis
clearly demonstrated that even in Uganda, with its
history of political instability, the potential returns to
agricultural research are excellent for many
commodities,  even when the high costs of physical
rehabilitation, training, and extension are included.
However, the generally high returns to research need
to be interpreted within a broader context.  The
profitability of research depends on technical
improvements in other subsector stages, and improved
coordination between different subsector stages, e.g.,
input production and distribution, product marketing,
and processing.  For example, a high ROR to
sunflower and other oilseed research depends on a
sustained increase in area and production.  Farmers
now limit sunflower area, complaining of low prices
and the lack of markets for sunflower.  At the same
time, edible oil processors in Uganda complain bitterly
about the lack of raw materials.  The answer to this
paradox is that processing throughput is constrained
by lack of materials, resulting in a serious
underutilization of production capacity and high unit
costs of production for oil.  Processors cannot simply
raise prices to cover their costs of production because
of the inflow of inexpensive Kenyan oil.  High costs of
processing are passed back to the farmers in the form
of low farmgate prices offered for oilseeds.  If
sunflower yields remain low, the returns to oilseed
production will be unattractive compared to
alternative crops and raw material availability will 
FS II Policy Synthesis No. 27
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continue to be a constraint.  Development and require painful and expensive new investments to
dissemination of higher-yielding hybrids are overturn.   
potentially important ways to improve gross margins
for farmers, increase their interest in producing Finally,  the  prioritization  of  research  efforts  between
sunflower, and break out of the vicious circle of low different commodities has important regional equity
capacity utilization.  implications.  This is especially true for sesame and
If Uganda is to realize the full potential gains from keen  interest  in  expanding  sesame  and  sunflower
hybrid and improved open-pollinated oilseeds and production in order to diversify their sources of
maize varieties, a major effort will be required to income.    Given  the  historical  concentration  of
establish an efficient and financially viable system of economic  activities  and  development  in  the  south,
seed multiplication and distribution.  Past government efforts to increase incomes in the northern region are
interventions have distorted the input supply sector, of particular interest.  The attention that the Ugandan
undermining the economic base, and deterring the government gives to economic development for this
private sector from responding to the farm level region could have implications for future political
demand for goods and services.  These distortions are stability in the country.
gradually being dismantled, but greater efforts are
required to promote the efficient operation of a
competitive private seed sector.
UNCAPTURED BENEFITS: Not all positive
impacts of agricultural research are easily captured by
a ROR analysis that focuses primarily on benefits
from increased production.  For example, agricultural
research on maize and oilseeds has important gender
implications for the Ugandan farming system and the
distribution of income within the household.  All of the
commodities examined are less firmly situated within
the male sphere of influence than are the more
traditional cash crops such as coffee, cotton, tea, and
tobacco.  Women participate fully in the production
and marketing of maize and oilseeds.  
Another benefit that is difficult to quantify is the
extent to which research investments have not only led and can be obtained through USAID’s development information system
to an immediate research output, but have also
strengthened the human capital base and institutional
capacity of the country.  Institutional and human
capital developments are investments that will have
positive payoffs far into the future and across a broad
spectrum of commodities and research efforts.  The
history of research in Uganda illustrates very well the
impossibility of turning research off and on.  It takes
only a short lapse in research support to result in
massive losses in human and physical capital that will
sunflower.  Farmers in Northern Uganda have shown
*Primary funding for this research was provided by the Technology
Development and Transfer Unit of the Productive Sector Growth and
Environment Division, Office of Sustainable Development, Bureau for
Africa, USAID (AFR/SD/PSGE/TDT).  Supplemental local currency funds
were provided by USAID/Uganda under the Manpower for Agricultural
Development Project.  The research was conducted under the Food Security
II Cooperative Agreement Between AID/Global Bureau, Office of
Agriculture and Food Security, and the Department of Agricultural
Economics at Michigan State University.  The views expressed in this
document are exclusively those of the authors.
Laker-Ojok is Director, AT (Uganda) U-Press Project, Kampala, Uganda,
and former Visiting Specialist, Michigan State University.
This paper summarizes two reports entitled: “The Rate of Return to
Agricultural Research in Uganda: The Case of Oilseeds and Maize,”
International Development Working Paper No. 42, and “The Potential
Returns to Oilseeds Research in Uganda: The Case of Groundnuts and
Sesame,” International Development Working Paper No. 45. They can be
obtained by writing to:
MSU Bulletin Office
10-B Agriculture Hall
Michigan State University
East Lansing, Michigan 48824-1039
The papers are also forthcoming as a SD Publication Series technical paper,
(CDIE).  CDIE Reference No. PN-ABS-730 (IDWP 42).  The CDIE
Reference No. for IDWP 45 is pending.

Returns to Oilseed and Maize Research in Uganda

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