Nigerian Agricultural Policy Research Journal. Volume 1, Issue 1, 2016. http://aprnetworkng.org Cost and Returns Structure in Garri and Fufu Processing in Rivers State, Nigeria C. Uche Department of Agricultural Economics and Extension, University of Port Harcourt, Nigeria Corresponding author email: [email protected] Abstract The cost-returns structure of processors was studied based on the agricultural zones. The study dealt with cash (paid) cost and non-cash (estimated) cost items such as family labour, fuel (wood) etc. in Garri and Fufu processing and the returns in monetary terms to the processors. Fufu had the highest margin and returns in terms of product and; the Fresh-Water Salt-Water Transition Zone had the highest profit prospect, highest revenue expectation, and mark-up. In quantitative terms, monetary returns was low because of very low investment and may be inadequate for expansion of the industry. The result presents the picture of subsistence. Family labour and processed cassava tubers were not valued by the processors because the tubers were sourced from their farms, however, the market price was inputted in estimates . Key WordsMargin, agricultural marketing, Cost and Returns, Profit analysis 1. Introduction true cost of production and processing is All economic activities consist of transferring essential to pricing and investment. resources (Land, labour and various forms of capital) into goods and services which serve In cassava processing, input costs are under the needs and desires of people. These the control of the processing household and activities cannot be accomplished without include cash (paid) costs on land, labour, some forms of costs. Costs are sacrifices management and capital. Some of these costs made to achieve an aim or in the course of are non-cash (estimated) costs such as family achieving an aim. Cassava processing, a rural labour, fuel (wood) etc. Major cost factors in economic activity, all the same, involves some cassava processing are the cost of purchase degree of costs. Information on the cost of raw cassava tubers, labour hire and fuel structure of cassava processing in Nigeria is (wood) purchases or its estimate (if gathered limited. However, the various types of cost from the processors farms). factors could be identified. Understanding the Nigerian Agricultural Policy Research Journal. Volume 1, Issue 1, 2016. http://aprnetworkng.org FAO (2006) and IITA (1996) have identified from farm to processing site is critical to retain labour as one of the major cost factors among the quality of cassava and cost of others and have emphasized on its reduction if transportation is a major component. FAO the traditional processing of foods of cassava (2006) also corroborates from their survey that origin are to become the basis for transportation is a major cost component in commercially viable local industries. FAO cassava processing. Tuber grating is another (2006) is of the opinion that new improved significant processing cost identified by ITTA. processing technologies will be required and Presently, this is done mechanically and the commercial cassava processors and services of machine owners are sought producers would need to find ways of reducing whenever the need arises. This cost however labour cost. varies with quantity to be processed. IITA, has over the years invested into ways of reducing Though labour supply among these processors this very cost in pilot projects. A type of grater is by the households themselves, the designed by IITA has increased output and opportunity costs have not been adequately reduced cost by 20% per unit (IITA, 2007). represented in the available literatures. This High energy cost is another cost factor in may also vary from state to state and cassava processing and may be a limitation to enterprise to enterprise. IITA (1996) has the rural dwellers in adopting new post harvest confirmed that it has been established that the technology. Bokanga (1996) opines that the post-harvest stage of cassava requires more adoption of cassava post harvest technology labour than other staple crops. Bokanga especially at the rural and semi-urban settings (2004) has revealed that one hectare of in Nigeria seems to be hampered by its fuel cassava containing 10 tonnes of roots (the (energy) consumption. He submitted that most average root yield in Africa) needs available cassava processing machines are approximately 721 man-hours to harvest and driven by petrol, diesel or electrical energy, process; of this labour time, 212 man-hours and for most rural households, these are are needed for harvesting, 156 man-hours scarce and expensive energy sources. The handling and 353 man-hours for processing. cost of acquiring simple processing machines Another variable cost factor in cassava also is prohibitive for the small farmer and in processing at the rural level is transportation: the more humid cassava producing areas; the This is more evident when the farms where the use of dryers is critical (FAO, 2006). tubers were harvested are far from processing There may be evident though unreported fixed sites or where the markets where they are costs in the processing of cassava among purchased are also far from the processing these rural processors. However, there were site. According to Dada, Siyanbola, Afolabi and scanty documented statistics on this. Income Oduola (2007), transportation of fresh tubers taxes, interests on borrowed capital and Nigerian Agricultural Policy Research Journal. Volume 1, Issue 1, 2016. http://aprnetworkng.org depreciation on processing equipment are returns associated with producing a product costs, which would be incurred whether or not Hawkes and Libbin (2013) have stated that there was production. enterprise budgets can estimate costs and returns on enterprises. Most enterprise The long run success of the cassava budgets also list physical resources needed for processing industry will depend on the prospective new producers of a commodity. profitability of the venture. Over most of the This knowledge may be an urgent ingredient in past century, profits from enterprises have trying to make the cassava processing industry been primarily in the hands of those who find viable, profitable and competitive. ways to reduce costs and expand production fast. A relentless, never-ending search for new 3. Research Methods sources of profits has been a necessity for The study area is Rivers State. Rivers State is survival (Ikerd, 1997). However, recent one of the six states that make up the south literature has not captured the extent of geopolitical zone of Nigeria. It is bounded to profitability of the cassava processing industry the north by Imo, Abia and Anambra; to the in contemporary Rivers State. This may affect east by Akwa Ibom State; to the south by the pricing and investment decisions. Atlantic Ocean and, to the West by Bayelsa Garri and fufu are widely recognized and and Delta States. Its capital is Port Harcourt. utilized throughout the South of Nigeria in our The state lies at latitude 4o45` and 4.87o north food menu. These cassava derivatives, must and longitude 6o50` and 6.93o east and however provide an adequate return to cover covers an area of 10,432.3 sq km with a the processors costs of production and ensure population of 5,198,716 (census figures) and a profits. Obtaining higher prices or reducing population density of 468 people per square costs can generate increased profits. kilometer (Inemesit, 2013). Information on cost and returns in cassava The state has three agricultural zones processing in Rivers State is presently scanty. according to the delineation of RSADP and Cost and returns relationship must be CPECWC (2002) the delineation was followed examined carefully by every producer of any for detailed coverage and to capture a good commodity, whether in agriculture, view of cassava processing activities during manufacturing or service industries (Hawkes sampling. The zones are: the Marine Costal and Libbin, 2013). Zone; the Fresh-Water, Salt-Water Transition The basic building blocks of cost and returns Zone; and Fresh-Water Upland Zone. Five analysis are enterprise budgets; this seem to Local Government Areas were randomly be absent among the rural folks who process selected from each of the zones of the State cassava, perhaps, because of ignorance. An summing up to 15 Local Government Areas. A enterprise budget includes all costs and community was randomly selected from each Nigerian Agricultural Policy Research Journal. Volume 1, Issue 1, 2016. http://aprnetworkng.org of these Local Government Areas and 10 processors in the various agricultural zones in processors were also randomly selected from Rivers State considered both the cash (paid) each community; bringing the total number of cost like hired labour, grating cost and non- those interviewed and studied to 150. cash (estimated) costs such as family labour, fuel (wood) etc in their processing activities. Relevant arithmetic tools were used to capture The returns were assessed based on the the specific objectives of this study. The current monetary value of Garri in the market. research objective was investigated using The cost-returns structure of Garri producers in mark-up and gross margins to measure the the various agricultural zones in Rivers State is contribution of each enterprise of Fufu and presented in Table 1.1. Garri to the processors profit. Cost items include labour used in processing whether The Gross margin is seen to be generally low, hired or estimate of family or self-provided so also was the mark-up. Margin represents labour, purchasing cost of raw tubers or the number of kobo gains there are in each estimate of self provided ones and other Naira sales and the mark-up a predetermined miscellaneous expenses that were observed in percentage of cost of production to be added the course of the study. The items on returns to the selling price. A low margin implies that were the value of output/kg/N obtained from the given enterprise cannot pay its expenses the sale of Garri and Fufu.