Is agricultural lime a profitable investment for African smallholders? Evidence from Rwanda

Soil acidity is a major constraint to crop production in tropical regions and agricultural lime is one option available to farmers for reducing soil acidity and improving the productivity of acid soils. However, there remains substantial uncertainty around the potential economic returns on lime investments by smallholders due in part to yield gains that accrue over several years beyond the year of lime application. Using survey data from Rwanda, we estimate the crop-specific yield response to lime application, and the potential financial benefits smallholders can expect from investing in lime. Cobb-Douglas and translog production functions were used to estimate the yield response to lime on maize, bean, and Irish potato production plots. Returns to investments in lime were evaluated using current farm-gate crop prices and lime prices at local agrodealers’ shops. Results indicate that compared to Irish potato, maize and bean have a higher yield response to lime in the season of application, but lower net financial gains, as the yield increment from the baseline scenario is low. Reliable returns on investment to lime were observed for fields growing Irish potato, while applying lime to maize and bean plots was only profitable at a 50% lime price subsidy. Results imply that it is essential to consider market-oriented crops when promoting agricultural lime in acid soils under smallholder. In cases where lime is applied to improve yield of staple crops, the results justify government lime subsidies to smallholders in Rwanda. Our results suggest targeting lime subsidies to areas with lower yields, associated with severe soil acidity, as the yield response to lime is higher in such regions.