Sugarcane supply response in Eswatini : a thesis presented in partial fulfilment of the requirements for the degree of Masters in Agribusiness at Massey University, Manawatu, New Zealand

Abstract

The Kingdom of Eswatini’s sugarcane production is a critical contributor to its economy, providing significant export earnings and employment. Despite its importance, there is limited empirical evidence on how sugarcane farmers respond to price and non-price factors, with previous studies suggesting a predominance of non-price influences in developing countries. The study aims to quantify the supply response of sugarcane farmers in Eswatini to variation in both price and non-price factors, hence providing important insights for policymaking. The study is grounded in Nerlove’s adaptive expectations and partial adjustment framework. The Engle-Granger two-step approach for cointegration and Error Correction Model (ECM) has been employed in this to capture both long-run equilibrium relationships and short-run dynamics. Annual time series data from 2000 to 2022, comprising sugarcane area harvested, sucrose prices, maize prices (as a substitute crop), and fertiliser prices, were analysed. The empirical results reveal that the area harvested for sugarcane is significantly influenced by sucrose prices, maize prices, and fertiliser prices. The long-run model indicated that maize prices significantly influenced negatively sugarcane area harvested both current and lagged by two years, highlighting a strong substitution effect. Current fertiliser prices are also negative and significant. While the sucrose price was statistically insignificant in the long run, its lagged change had a positive and significant impact in the short run, indicating an adaptive and delayed response by farmers, likely due to biological and institutional constraints inherent in sugarcane production. The error correction term was negative and statistically significant, confirming a stable long-run cointegration relationship and a relatively rapid adjustment of short-run deviations back to equilibrium. Eswatini’s sugarcane supply response is highly sensitive to relative crop profitability and input affordability. The findings show a necessity for integrated agricultural policies that consider the competitive dynamics with other crops, the mitigation of rising production costs, and ensure timely and credible price information. It is recommended that targeted input subsidies be implemented, promoting efficient irrigation technologies, strengthening extension services, and addressing land tenure constraints to enhance the sector’s resilience and responsiveness.