INTRODUCTION Background Information Cashew (Anacardium occidentale L.

) is a tropical nut crop that belongs to the family Anacardiaceae, which consists of about 75 genera and 700 species (NAKASONE and PAULL, 1998). BEHRENS (1998) described cashew as a tropical tree species that originated from South and Central America. The tree is widely cultivated in many tropical countries of the world and Tanzania is among the countries. Cashews are an important export for Tanzania and an important source of income for small farmers in the southern coastal region. The sector has made a remarkable recovery since the near collapse of the 1980s. The recovery is credited to the economic reforms which begun in 1986, especially trade liberalization and exchange rate adjustments, and to the sector reforms begun in the mid-1990s, that eliminated the monopoly of the Cashew Nut Marketing Board. The recovery was also aided by decision to export raw nuts rather than process them locally which meant that farmers were paid more quickly and they could afford to apply sulfur dust to control powdery mildew which increased yields. However, very little is known about the costs and returns to cashew production for the millions of smallholders who produce it and depend upon it as a source of income and food security (Paulo .N, 2000). The industry is not likely to expand further, or even maintain current production levels, unless problems facing the sector are addressed. The problems include defining a more constructive role for the Cashew Board, reversing the decline in export crop quality, assisting farmers with financing input costs, and reducing high taxes on exports; replanting with improved varieties and developing a competitive private sector processing. But all these activities need investing in research especially in economic efficiency in the production and marketing of the cashew nut.
Tanzania has a comparative advantage in cashew nut production (Donald Mitchell, 2004). If those problem addressed above are well solved the country can utilize that potential in the cashew world market.

METHODOLOGY USED The objective of this paper is to check the efficiency of input use in cashew nut production system in Tanzania. The desk review approach was used to gather some secondary data which are appropriate for this study. In the study I have used Cobb Douglas production function to check the efficiency of input use. The frame work of the model is

Y =A Xb Zc
Where by Y, output, X is the budget allocation in agricultural sector and Z represent amount of rainfall in the given year. A, b and c are parameter to be estimated. The analysis will use the following data.

year 1998/99 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

production(MTS) AB in Mean Billions(TSH) Rainfall(mm) 106442.045 37.04 83.645 121207.384 48.36 81.715 122289.778 53.16 66.858 67369.044 58.79 79.617 92153.302 84.54 96.556 78566.927 130.67 57.689 71918.326 154.21 79.179 77446.375 118.1 54.597 92573.188 123.2 102.5 99106.72 131.9 84.739

Source: (TMA, MOF, Cashew Nut Board of Tanzania) By the use of Ms-Excel software and linearization of Cobb-Douglas production has make it easy to estimate those coefficients as follow.

lnY = lnA +blnX +clnZ

whereby lnA is the intercept coefficient, b is the coefficient of X which represent budget allocation in agriculture sector in Tsh and c coefficient of Z which represent the average rainfall in mm.

LITERATURE REVIEW Cobb Douglas Production Function In economics, the CobbDouglas functional form of production functions is widely used to represent the relationship of an output to inputs. It was proposed by Knut Wicksell (18511926), and tested against statistical evidence by Charles Cobb and Paul Douglas in 19001928. Parametric approaches have been extensively used to estimate input-output relationships in a firm or in an industry in order to study the efficiency of resource allocation. The most celebrated of them is the Cobb-Douglas production function. The Cobb-Douglas function has been widely used in the early stages of empirical applications of production theory (Corbo and Meller, 1979; Berndt and Christensen, 1973). The function has been used in many studies in the agriculture sector to check the efficiency of input use like capital, fertilizers and labour in agriculture. For example in the study which was done in Turkey, the factors affecting trout production were studied using the Cobb-Douglas production function. The explanatory variables in the model explained 99.4% of the variation in trout production. The partial percentage of the feed-use variable was 99%, whereas that of all other variables was 1% Bozo lu .M, (2007). Paranjape and Borade (1978) conducted study on resource use efficiency in Alphanso mango production in Deogad taluk of Ratnagiri district. The regression co-efficient for age, cost of plant protection chemicals were significant at 0.01 level in both Cobb-Douglas and Linear functions. The co-efficient of human labour was significant at 0.01 levels in both functions while the coefficient for proportion of bearing trees was significant at 0.01 levels in Cobb-Douglas function and at 0.05 levels in Linear function. Thomas and Gupta (1987) in a case study worked out the cost of cultivation of banana in Kottayam district of Kerala. The Cobb-Douglas production function was used and the result showed increasing returns to scale. The response of gross income to an increase in the expenditure on suckers, plant protection chemicals, baskets, transportation and marketing was highly significant and positive. Binuomote et al, (2008) in the study that analyzed the Technical Efficiency (TE) of poultry egg producers in Oyo state of Nigeria using a Cobb-Douglas stochastic production frontier function. The data for the study were collected using structured questionnaire administered on random samples of 51 poultry egg producers. The results showed that, the TE of farmers varied between

0.10 and 0.99 with a mean of 0.823. About 90% of the farmers surveyed had technical efficiency score of >0.70. The analysis showed that stock of birds is the most important determinant of poultry egg production while years of experience, management system, educational level and family size are the socioeconomic characteristic influencing the farmers technical efficiency. The findings show that further productivity gains linked to the improvement in TE may still be realized in poultry egg production in Nigeria. AROUNA et al, (2010) in the study done in Benin, quantified cashew nut production farmers efficiency using a stochastic production frontier and a cost function combined with numerical classification. Primary data were collected from a stratified random sample of 262 farmers in Benin. Using numerical classification, they distinguished three classes from cashew nut producers with an average plantation area of 3.6; 8.9 and 20 hectares. The results showed that scale effect was absent because larger farmers were not more efficient than the small ones. Results also revealed significant inefficient of input use in cashew nut production in Benin. Yet, about 39 % and 61 % of the cashew nuts farmers were technically and economically inefficient, respectively, indicating that farmers could increase output and households income through better use of available resources. The study also revealed that the farmers who were technically and economically inefficient have less experience in cashew nut production, less contact with the extension structure and are not member of a farmers association. Review of Production of Cashew Nut in Tanzania Ancardium occidentale L. (cashew nut) is native to Brazil and was introduced in the 16 century by Portuguese colonists and missionaries to East Africa as well as India. The crop is widely believed to have remained in the coastal areas mainly meant for local consumption until it gained economic importance after the Second World War (Schachinger, 2001). In the period between World War 11 and the early 1970s, Tanzania developed one of the largest cashew nut industries in the world, with an initial export of 7,000mt to India (Schachinger, 2001). Today the Tanzanian industry accounts for at least 8 percent of the total 1.8m mt world production and it ranks among the largest exporters of raw nuts. Cashew nut trade was started by private traders, but they became marginalised by the government when it introduced a single marketing system in the 1960s. The key players in the primary marketing system were local primary societies, regional cooperative unions and a national marketing board (Schachinger, 2001).
th

The major production areas in Tanzania are the coastal areas, from Tanga in the north to Mtwara in the South. In the South, cashew is produced inland up to around 1,000 meters above sea level. The growing period for cashew nuts is about 5-6 months. Cashew is by far the most important crop in these regions and it covers a wide area of arable land both in pure stand and intercropped fields where it is intercropped with cassava (Lamboll, 1991).

Cashew nut production is not very difficult to manage. Their soil conditions are not very critical but they tend to grow best in deep friable sandy loam or loam soils with average ph levels of between 6.5 and 7.5. The soil needs to be well drained as cashew trees do not tolerate stagnant water and flooding. Precipitation ranging from 800mm to 1600mm is ideal and they will require a distinct dry period of two to four months. The cashew nuts need to be managed against three major problems of PMD, fungal disease and fungal infection. Research conducted at the Naliendele Research Station came up with recommendations that spacing under a mono cropping regime should be 69 trees per hectare. The main challenges to production of cashew nuts are: powdery mildew disease, Anthracnose fungal disease (colletrotrichum spp) and Helopelitis and Trips.

FINDINGS The key stakeholders in the cashew nut sector in Tanzania are farmers, Cashew nut board of Tanzania, Tanzania government through it ministry of agriculture and other government agency, input supplies and farmers cooperatives. Each of these stakeholders has different roles which they perform in the production process. Cashew nut production requires labour, land, water by means of irrigation or rainfall, sulphur dust and sulphur blowers along with other pesticides. Some of the input supply used to be a preserve of the Cooperative Unions with provision of subsidized inputs to farmers on credit. With the introduction of the liberalization programme in 1991/92, most cooperatives collapsed or had their functions curtailed as they were exposed to the vagaries of market forces. This destroyed input credit schemes in the face of an eruption of the cashew nut fungus disease. The demand for sulphur and the accompanying spray equipment (blowers) was not met. In order to deal with this problem, an input trust fund is a voluntary membership contribution made by cashew farmers into a common fund in order to purchase agri-inputs. Farmers set aside a percentage of their income from cashew nut sales and this is pooled into a fund which is then used to procure and distribute cashew nut inputs. Each contributing member is given a passbook which indicates the savings they have made towards the purchase of inputs as well as draw downs against the fund. The fund is typically managed by a secretariat employed by the ITF members and these staff manages the procurement and distribution logistics of the agri-inputs. However, in this paper I have tried to check the relationship between production trend in cashew nut production and budget allocation in agriculture sector as one input and rainfall as another input. The OLS regression was used to estimate the Cobb Douglas production function by the use of Microsoft excel software at 5% level of significance. The obtained results were as follows: Table 1.
Standard Error 1.571745076 0.128258493

Intercept X Variable 1

Coefficients 11.71169734 -0.219095482

t Stat 7.451397506 -1.708233718

P-value 0.00014305 0.131346824

X Variable 2

0.156331135

0.320179574

0.4882608

0.640287687

The intercept has the value of 11.71169734 which is the value of ln A. this explain by how much the production of cashew nut will be with no influence of budget allocation in the sector and when there no rainfall. The coefficient of the budget variable is -0.219095482 which shows that the increase in budget allocation in agriculture sector reduce production by 21.9%. This may be attributed by the fact that, as the agriculture sector budget improve people tend to move from the production of cashew nut, also the increase in budget might have no significant effect on the productivity, because the estimated parameter was not significant at 5% level. In the case of rainfall the coefficient was positive 0.156331135 but was not significant at 5%. But a can say that as rainfall increases the productivity also increases. The fitness of model was also checked and results tables were given as follow; Table 2. Multiple R R Square Adjusted R Square Standard Error Observations Table 3. ANOVA df Regression Residual Total SS MS F 2 0.129964425 0.064982212 1.715158 7 0.26520909 0.037887013 9 0.395173515 Significance F 0.247629291 Regression Statistics 0.57348007 0.328879391 0.137130646 0.194645865 10

The R Square was 32.8% which suggest that 32.8 % of relationship between the independent variable and dependent variable was explained by the model. However this is very low, it might be attributed by the following reasons, the variable like budget allocation is to general, it hasnt specified how much have been allocated to the sector, also there are some other variable which we havent included in the model which might have some influence in the productivity of the cashew nut. The F test was significant, because it was 1.715158 and it is > 0.247629291 at 5% level of significance. This shows that the entire model was significant in explaining the relationship between independent variable and dependent variable.

Challenges and Constraints Facing the Cashew Nut Sector in Tanzania There are several major problems facing the cashew nut sector in Tanzania. Some of the issues have been identified in the paper written by Donald Mitchell in 2004. These issues are as follows y Export Quality Has Deteriorated The quality of Tanzanias raw cashew nut exports has deteriorated since the marketing liberalization of 1994/95. The decline in quality can be traced to changes in the grading system. Before liberalization extension agents in the villages supervised the sorting of cashews into three grades: standard, under, and rejects. The failure to grade cashew nuts in the villages has several undesirable consequences. It reduces the incentives for farmers to produce high-quality nuts because they receive an average price regardless of quality. It deprives local workers (mostly women) of hourly wages for sorting and grading. It reduces the price that traders in Tanzania and importers in India will pay for nuts because they do not know the quality. It increases transport costs throughout the marketing chain. And the unsorted nuts do not store well because wet or rotten nuts contaminate good nuts. y Farmers Are Unable to Finance Production Costs The cash costs of inputs and labor required to produce cashews were estimated to be about 79 Tsh a kilogram of raw nuts produced (Donald Mitchell, 2004). This was 25 percent of the 315 Tsh received by farmers for raw cashew nuts during the November-December selling period in the 2000/01 season. However, as world prices declined later in the season and the quality of the cashew nuts deteriorated the cash costs share of the sale price rose to as much as 40 percent. Few farmers can tap formal sources of credit to finance such costs, and most must either finance the cash costs through savings or through village lenders, traders, or input suppliers. Past repayment performance has often been poor, which severely limits the number of farmers who can obtain credit (Donald Mitchell, 2004). The problem of financing production costs is not unique to cashew producers in Tanzania. y More Aggressive Replanting with Faster Maturing Varieties Tanzania has a good climate for cashew nut production, especially in the southern coastal region bordering Mozambique. However, most of the trees in Tanzania are old, and yields are relatively low. The Research Station in Mtwara developed new clones in the early 1990s that are faster maturing than traditional varieties and yield twice as much, but they have not been widely

adopted. A more aggressive replanting program should be undertaken to make Tanzania a low cost producer of cashews. y Climate change problem The climate changes especially changing in the normal rain pattern also influence the productivity of Cashew nut. Therefore some measure like developing varieties that are drought resist and irrigation scheme should be undertaken. y The Cashew Boards Role Remains Ambiguous The Cashew Board of Tanzania was created to regulate and promote quality in the marketing and export of raw and processed cashew nuts. It is also responsible for advising the government on matters relating to the cashew nut industry and for carrying out other functions deemed necessary by the Ministry of Agriculture. The Cashew Board collects a 3 percent levy on the fob value of exports and 1 percent plus license fees for traders is used to fund Board operations. Two percent is used by the Cashew Industry Economic Development Fund. The fund has the status of an NGO and is managed by a board of trustees. Its aim is to promote and sustain the cashew industry. Half of the amount raised goes for research and development, and the remainder is used to fund cashew processing and an integrated cashew management package, which offers grafted seedlings, polyclonal seeds, top-worked trees, and fungicides, including sulfur dust, to participating farmers (Government of Tanzania 2000). A World Bank mission in 1995 concluded that the commodity boards in Tanzania had potentially conflicting responsibilities of both regulating and marketing certain commodities, including cashews (Akiyama and Larson 1995). This conflict had largely been resolved in the cashew industry by the privatization of marketing. However, events in the 2000/01 marketing season point to new conflicts. According to reports in the international press, the Cashew Board has been directed to release 900 million Tsh ($1.1 million) to cooperative societies to buy the remaining cashew crop from farmers, according to the Public Ledger (March 26, 2001). This raises concerns that the Cashew Board may be returning to its role of competing with the private sector in cashew marketing. Other recent actions of the Cashew Board also raise question about its role and its contributions to the sector. Government officials and Cashew Board members traveled to cashew importing countries on a marketing promotion mission, again impinging on a private sector responsibility (Public Ledger, March 26, 2001). While such delegations may serve a useful purpose, their financing raises questions about whether such trips represent a good use

of funds. If the funds came from the export levy on cashews, farmers might rightly ask whether they got their moneys worth. And there is a conflict of interest in the way the export levies that fund the boards operations are calculated. The board calculates export prices rather than using exporter records. This encourages overstating export prices in order to inflate export levies. Exporters, for their part, have an incentive to underinvoice in order to reduce their levies and taxes. Thus both the Cashew Board and exporters have incentives to incorrectly report export prices.

CONCLUSION Cashews are an important export for Tanzania and an important source of income for small farmers in the southern coastal region. However, the industry is not likely to expand further, or even to maintain current production levels, unless problems are addressed. These include defining a more constructive role for the Cashew Board, reversing the decline in export crop quality, assisting farmers with the financing of input costs, and reducing high taxes on exports. Beyond correcting these immediate problems, there is an opportunity for the industry to expand in several directions. Replanting with improved varieties would reduce costs and make Tanzania a more competitive exporter. Developing a competitive private sector processing industry would create jobs and reduce dependence on India as the market for raw nuts and also it will encourage farmers to produce more and efficient. These growth opportunities are unlikely to happen without public sector support, but the challenge is to define the public-private partnership that will provide the needed changes to allow the sector to grow.

Reference:

A. M. Theodoridis, A. Psychoudakis and A. Christofi, (2006): Data Envelopment Analysis

as a Complement to Marginal Analysis. Corbo V. and Meller P., The Translog Production Function: Some Evidence From Establishment Data, Journal of Econometrics, Vol. 10, 1979, pp. 193-199. Berndt E.R. and Christensen L.R., The Translog Function and the Substitution of Equipment, Structures, and Labor in U.S. Manufacturing 1926-68, Journal of Econometrics, Vol. 1, 1973, pp. 81-114. Wikipedia, Cobb-Douglas. http://en.wikipedia.org/wiki/Cobb Douglas. M. Bozo lu, V. Ceyhan, H. Avni Cinemre, K. Demiryurek, O. Kilic, (2007): Important factors affecting trout production in the Black Sea Region, Turkey: Department of Agricultural Economics, Faculty of Agriculture, Ondokuz Mayis University, Samsun, Turkey. Paranjape, A.L. and Borade, S.G., 1978 Resource productivity in Alphanso mango production in Deogad tehasil of Ratnagiri district of Maharashtra.: Collage Magazine, Collage of Agril. Dapoli, 78: 36-42. Thomas, E.K. and S.K. Gupta., 1987, Economics of banana cultivation. A case study in Kottayam district of Kerala. Indian J. Agric. Econ., 42(3): 458. S.O. Binuomote, J.O. Ajetomobi and A.O. Ajao, (2008): Technical Efficiency of Poultry Egg Producers in Oyo State of Nigeria. International Journal of Poultry Science 7 (12): 1227-1231, 2008. ISSN 1682-8356 AROUNA, Aminou; ADEGBOLA, Patrice Ygu; ADEKAMBI, Soulmane Adymi, (2010): Estimation Of The Economic Efficiency Of Cashew Nut Production In Benin. Contributed Paper presented at the Joint 3rd African Association of Agricultural Economists (AAAE) and 48th Agricultural Economists Association of South Africa (AEASA) Conference, Cape Town, South Africa, September 19-23, 2010. ECI Africa Consulting, (2003): Cashew Nuts Sub-Sector Study; Work supported by the U. S. Agency for International Development through the Private Sector Enterprise Support Activities Programme; contract number PCE-1-00-99-00002-00 TO 817. Government of Tanzania, World Bank, and IFPRI (International Food Policy Research Institute). 2000. Agriculture in Tanzania Since 1986: Follower or Leader of Growth? World Bank Country Study. Washington, D.C.: World Bank. Akiyama, Taka and Donald Larson, Tanzania: Export Crop Liberalization Review Mission Aide-Memoire, July 1995.

World Bank. 1995. Tanzania: Export Crop Liberalization Review Mission. Aide-Memoire. Washington, D.C. Donald Mitchell, (2004): Tanzanias Cashew Sector: Constraints and Challenges in a Global Environment. Africa Region Working Paper Series No. 70