Tobacco, maize or soya: choosing between two plans with scarce December labour and credit
Two farmers in Dedza, each with 1.6 ha of comparable land and two adult family workers, are planning the season. Mr A plans 1.0 ha of hybrid maize and 0.6 ha of soya bean. Mr B plans 0.8 ha of burley tobacco and 0.8 ha of hybrid maize. The per-hectare figures they have agreed are: maize yields 3.5 t at MK 350/kg, with costs of MK 25,000 for seed, MK 180,000 for fertilizer and MK 120,000 for hired labour; soya yields 1.0 t at MK 900/kg, with costs of MK 30,000 for seed, MK 8,000 for inoculant and MK 60,000 for labour; burley yields 1,200 kg at MK 2,200/kg, with costs of MK 40,000 for seedlings, MK 260,000 for fertilizer, MK 300,000 for curing fuel and MK 400,000 for hired labour. Labour demand is 55 person-days per hectare for maize, 70 for soya and 220 for burley, and both farms face a severe labour shortage in December and January. Mr B would need a loan of MK 700,000 at 30% interest repaid after marketing; Mr A needs MK 200,000.
1. Calculate the whole-farm gross margin, the return per person-day of labour and the net position after interest for each farmer.
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Mr A
- Maize: 3.5 t × MK 350 = MK 1,225,000; costs 25,000 + 180,000 + 120,000 = MK 325,000; gross margin MK 900,000/ha × 1.0 ha = MK 900,000.
- Soya: 1.0 t × MK 900 = MK 900,000; costs 30,000 + 8,000 + 60,000 = MK 98,000; gross margin MK 802,000/ha × 0.6 ha = MK 481,200.
- Whole-farm gross margin = MK 1,381,200.
- Labour = 55 + (0.6 × 70) = 97 person-days → MK 14,240 per person-day.
- Interest = 30% × 200,000 = MK 60,000 → net MK 1,321,200, or MK 13,621 per person-day.
Mr B
- Burley: 1,200 kg × MK 2,200 = MK 2,640,000; costs 40,000 + 260,000 + 300,000 + 400,000 = MK 1,000,000; gross margin MK 1,640,000/ha × 0.8 ha = MK 1,312,000.
- Maize: MK 900,000/ha × 0.8 ha = MK 720,000.
- Whole-farm gross margin = MK 2,032,000.
- Labour = (0.8 × 220) + (0.8 × 55) = 176 + 44 = 220 person-days → MK 9,236 per person-day.
- Interest = 30% × 700,000 = MK 210,000 → net MK 1,822,000, or MK 8,282 per person-day.
Mr B's plan earns about MK 501,000 more in total, but uses 123 more person-days and returns about 40% less for each day of labour once finance is included.
2. Which plan would you recommend, and under what conditions would you change that recommendation?
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On these figures I would recommend Mr A's plan, despite the lower total gross margin.
Reasoning:
- Labour, not land, is the binding constraint. December–January labour is scarce and cannot be bought reliably at the assumed wage; Mr B needs more than twice the person-days, most of it in exactly that window, for transplanting, weeding and reaping.
- Mr B's advantage depends on the tobacco price holding. At MK 1,678/kg his net position equals Mr A's; a fall of about 24% from MK 2,200 erases the whole advantage, while his MK 700,000 loan at 30% still has to be repaid.
- The loan is a cash-flow risk before any income arrives, and curing fuel at MK 300,000 must be bought in advance.
- Food: Mr A produces 3.5 t of maize against Mr B's 2.8 t, which matters for household food security before the marketing season.
Change the recommendation if:
- Mr B has a firm contract or a reliable price well above MK 1,700/kg and secure access to hired labour in December.
- The family has spare labour (for example, adult children at home) so the person-day constraint is not real.
- Mr A's soya price is uncertain and no buyer is lined up, in which case the soya gross margin of MK 802,000/ha may not be realised.
A defensible compromise is 0.8 ha maize, 0.6 ha soya and 0.2 ha tobacco as a trial, keeping the credit small while testing labour and curing.
3. Identify the main risks in each plan and say how the farmer should manage them.
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Mr A - maize and soya
- Yield risk: drought and fall armyworm on maize; soya is sensitive to waterlogging and to poor inoculation.
- Price risk: soya prices are thin and buyer-dependent; maize prices usually fall at harvest.
- Management: use certified seed and correctly stored inoculant, plant soya on the better-drained block, scout for armyworm weekly, and store maize rather than selling at harvest if storage is secure.
Mr B - burley and maize
- Production risk: tobacco needs seedlings on time, careful curing and a lot of skilled labour; curing fuel must be sourced and dry.
- Financial risk: MK 700,000 borrowed at 30% before any income, repaid only after marketing; a poor cure or a rejected grade can leave the loan uncovered.
- Market risk: auction prices are volatile and grades are set by buyers.
- Management: borrow only against a realistic grade mix, buy curing fuel early, keep a maize block for food, and start with a small tobacco area until curing skills are proven.
For both: keep a small reserve, avoid borrowing for consumption, and record actual costs and yields so the budgets are corrected with real figures next season rather than reused unchanged.