Abstract
Smallholder rice farming in Tanzania is an important economic activity that has the potential to livelihood improvement of smallholder farmers, yet their profitability remains low due to several challenges they face. This study analyzed costs and benefits associated with smallholder rice farming, determined profit distribution among farmers and assessed risk bearing ability of smallholder rice farmers under changing circumstances of total variable costs, price and yields. The study was conducted in Mvomero and Mbarali districts and adopted a cross-sectional research design, the sample size was 382 smallholder rice farmers selected from three Agricultural Marketing Co-operative Societies during 2021 cropping season. Data were collected through a questionnaire-based survey and key informant interviews. Data were analyzed using Statistical Package for Social Sciences (SPSS) and excel whereby Enterprise Budgetary Technique and Sensitivity Analysis were performed. The study found an average Return on Investment of 0.42, Benefit Cost Ratio of 1.42 and Profit Margin of 24%. The level of profitability differed among co-operatives where 'Umoja wa Wakulima Dakawa' (UWAWAKUDA) had the highest return per acre (524 417 TZS) followed by Kapunga (414 111 TZS) and Madibira (316 638 TZS). Furthermore, smallholder rice farmers' Gross Margins were significantly affected by changes in Total Variable Costs, output price and yield per acre. The study concludes that rice production is a profitable business in the study area. Therefore, the local government, co-operatives and other stakeholders should improve drivers that lead to increased profitability such as the water infrastructures, organize markets and build farmers' capacities to improve yields and profitability among smallholder rice farmers.