Analysis of risk attitudes and social capital in pineapple marketing: The case of small-scale farmers in Luwero district, Uganda

Development partners are promoting and encouraging small-scale farmers to venture into horticultural farming as a development tool to enhance their livelihoods. While previous empirical studies provide an indication of how small-scale farmers’ choose to participate in markets, the role of farmer risk attitudes and social capital in the choice of low or high value market outlets has hardly been analyzed. This study therefore examined the producers’ risk attitudes and social capital dimensions that may explain the differences in the choice of market outlets. Data were collected from 272 households in four sub-counties in Luwero district in central Ugnada using multi-stage sampling during the period of March through May 2016. The empirical analysis in this study was based on primary data collected in face to face interviews using semi structured questionnaires. Data analysis was done using descriptive statistics and Multinomial Logit regression model. Results indicate that gender, marketing under contract, risk attitudes and trust significantly influenced choice of export market at the one per cent level while education level, farm size, market distance and density of membership influenced it at the five per cent level. Trust, frequency of attending group meetings and density of membership influenced market decision outlet choices and production information flow in market transaction associations which ensure that benefits of social capital are reaped by farmers. Findings showed that choosing high value markets was associated with farmers being risk seekers and having higher trust level for transaction partners. The implication of these findings is that development strategies that target commercialization of small-scale agriculture through high value market access should pay attention to farmers’ risk perceptions and trust. The study therefore recommends that to support farmers become more risk takers and increase trust for transaction partners, there is need to create awareness among farmers about how to guard against market risks and benefits of high value market access. This can be achieved by encouraging farmers reduce agricultural risks by building up self-insurance strategies through participation in off-farm activities. Furthermore, social capital stakeholders should encourage development of trust between farmers and transaction partners. This can be through establishing product price floor and ceiling which would reduce price information asymmetry between farmers and traders.