Derivation of Latent Factors for Measurement of Performance of Interdependent Agricultural Value Chains: An Exploratory Factor Analysis

Abstract

Agriculture remains the best opportunity for rural households to escape poverty, generates employment and rural non-farm multiplier. In spite of challenges, it remains the best opportunity to improve food security and incomes for smallholder producers even in arid regions. The realization of meaningful benefits requires deep understanding of interdependent and dynamic agricultural enterprises to generate incomes and food security for smallholder households. The reality of smallholder farmers has been understood mostly from fragmented enterprises ignoring the interconnectedness and dynamic interactions of different agricultural enterprises. The lack of measurement scale and tested and validated constructs that measure the performance of agricultural value chains as a system at smallholder level in arid landscapes such as the Zambezi Valley motivated this study. Exploratory factor analysis technique identified 24 out of 50 variables derived from transaction costs common in agricultural value chains. The ULS extraction and oblique rotation derived seven factors: farm specific; household specific; livestock specific; inputs and livestock markets; crop marketing; crop value addition; and location specific from variables that hanged together, with meaningful and parsimonious interpretation. Further research is required to validate the ability of extracted factors to measure the performance of interrelated, interdependent and dynamic enterprises combinations for smallholders.