The role of storage in the economy
In most countries grains are among the most important staple foods. However they are produced on a seasonal basis, and in many places there is only one harvest a year, which itself may be subject to failure. This means that in order to feed the world’s population, most of the global production of maize, wheat, rice, sorghum and millet must be held in storage for periods varying from one month up to more than a year. Grain storage therefore occupies a vital place in the economies of developed and developing countries alike.
The market for food grains is characterized by fairly stable demand throughout the year, and widely fluctuating supply. Generally speaking people’s consumption of basic foods such as grains does not vary greatly from one season to another or from year to year. The demand for grain is ‘inelastic’, which means that large changes in the market price lead to relatively small changes in the amount of grains which people purchase.
Market supply, on the other hand, depends on the harvest of grains which is concentrated within a few months of the year in any one area, and can fluctuate widely from one year to the next depending on climatic conditions. New varieties that have shorter growing periods, and variation in climatic conditions and farming systems in different regions of a country, can help to even out the fluctuations in market supply. But even in a country such as Indonesia, which has diverse climatic and farming conditions and where 90 per cent of rice land is under short duration high yielding varieties, about 60 per cent of production is harvested within a three month period (Ellis et al. 1992).
The main function of storage in the economy is to even out fluctuations in market supply, both from one season to the next and from one year to the next, by taking produce off the market in surplus seasons, and releasing it back onto the market in lean seasons. This in turn smooths out out fluctuations in market prices. The desire to stabilise prices of basic foods is one of the major reasons why governments try to influence the amount of storage occurring, and often undertake storage themselves.
Costs and incentives to store
Both producers and consumers benefit from stable prices, which reduce the uncertainties associated with planning farm investment and household expenditure. However storage involves costs, and the only way in which these costs can be recuperated is through a price spread. If storage is to be profitable, people who store grain must receive a price on sale which at least covers the costs of storing the grain since harvest. These include:
The cost of the store itself (often a rental cost);
Labour and supervision;
Storage and spillage losses; and
Cost of capital invested in the grain.
In practice, the costs of storage depend on the commodity stored, on the type of storage system, and on unpredictable and variable factors such as pest incidence and climatic conditions. Storage costs also depend on the circumstances of the person, the business or the institution who is storing. The most variable component of storage costs is the cost of capital. For a small farmer or trader, capital may be scarce and costly, and their only access to loans may be from money lenders charging rates of 10% or more per month. On the other hand a Government Marketing Board may have preferential access to loans at low interest, at rates of as low as 10% per annum. There is, therefore, no single cost of storage.
Who stores and why?
Farmers, traders and governments all have reasons for storage other than the profitability of the storage enterprise itself. Storage is a component within a farming system, a trading enterprise, or a government policy, and may be undertaken because of its contribution to other activities or objectives within these broader contexts.
For small farmers the main purpose in storing grains is to ensure household food supplies. Farm storage also provides a form of saving, to cover future cash need through sale, or for barter exchange or gift-giving. Grain is also stored for seed and as inputs into household enterprises such as beer brewing, or the preparation of cooked food. When there are significant inter-seasonal price variations, small farmers often store for speculative gain, that is to say they ‘play the market’. This is most common in more prosperous areas, such as the Southern Highlands of Tanzania and southern Mali, which produce a mixture of cash and food crops, and where farmers’ financial circumstance make it easier for them to sell when the price is best. Speculative considerations are even more important in the storage decisions of large-scale commercial farmers.
Despite the desire to store grain in order to cover food requirements and future cash needs, farmers often sell a large proportion of their produce at harvest, when prices are low. This is frequently the case with deficit producers, who must satisfy cash needs immediately after the harvest, only to buy in food later in the season.
There is an ongoing debate about whether farmers are forced to sell because of debt and economic dependence on others, or whether they sell because they regard storage as too costly (in terms of time), or too risky (given the risk of losses and unpredictability of future prices), or unprofitable in relation to other investments such as cattle. There is no single answer to the debate, since there is much variation in the circumstances under which individual farmers operate, both within and between nations. The ‘forced sales’ situation has been documented by some authors in South Asia (e.g. Crow, 1987), while the ‘wise farmer’ been found to apply in South-East Asia by Mears (1980) and Ellis et al. (1992). In the Sahelian countries of Africa, conflicting findings have been reported. Carefully documented work by Dione (1989) has shown head taxes in Mali to have resulted in forced sales, but Berg and Kent (1991) report several authors who have reached opposite conclusions.
Another reason for not storing is the unpredictability of future prices, which often makes storage a risky business. This is particularly the case in countries such as Mali where prices vary widely from year to year, and do not follow a steady monthly trend. From Figure 1.1
it can be seen that Malian prices normally rise between harvest time and the lean season, but farmers who engaged in speculative storage in 1989 suffered significant losses. Storage was particularly risky as Mali was passing from a period of scarcity, when prices levels were related to the cost of imports, to a period of surplus, when they were related to the price at which Mali could export. Movement between surplus and deficit in the Sahelian countries probably explains the wide variation in Mali’s prices from year to year.
Farmers may sell their grain at any time from maturity (sale of the standing crop) onwards. Sale at or before harvest has the advantage that the farmer is saved the cost and time involved in preparing the crop for storage. Transport, threshing, winnowing and drying are all passed on to other levels in the marketing chain, leaving the farmer free to attend to the next crop, or to other farm or off-farm activities. It has been estimated that post-harvest activities account for one quarter of the total cost of production even for small farmers in poor countries (Greeley, 1991 p.5). Early sale also reduces the risks of losses in postharvest activities, and this is particularly advantageous in cases where the harvest occurs in the wet season.
The role of traders in cereal storage varies enormously between different parts of the world and between different crops. In most African countries traders carry out very little interseasonal storage of coarse grains, but buy and sell quickly, earning a moderate profit on each transaction. Most storage is carried out by farmers, and to a lesser degree by Government marketing boards and consumers who buy in anticipation of future household needs. Given a general situation of capital shortage, long-term storage of staple grains is insufficiently profitable to attract the interest of traders, who can earn more money by investing in fast moving consumer goods.
However the opposite is often true with rice in Africa. This crop is generally produced as a cash crop for the urban markets, but does not have a major demand for use as a staple in rural areas. Often much of the rice is imported and this has encouraged the emergence of large traders able to obtain finance major shipments and to negotiate advantageously with the authorities. Even when sourcing supplies from local producers, traders and millers must hold stocks to cover the needs of their urban clientele, and cannot rely on steady supplies arriving from rural areas.
In Asian countries, traders have a much larger role in interseasonal storage. The two major cereals are rice and wheat and both of these must be milled before reaching the consumer. This is unlike the situation in most of Africa where coarse grains such as maize, millet and sorghum are the main staples. Typically African consumers buy these grains whole, and either grind them at home or take them to be ground at small custom-mills.
Large millers who become involved in the marketing chain tend to have good banking connections and can obtain capital at reasonable cost. Studies by the Natural Resources Institute (NRI) in Indonesia and Pakistan indicate, that wherever Government policy is conducive, millers enter the storage business on a large scale. In Indonesia, traders and millers store about 50% of that part of the rice crop which is carried over from the first harvest (Ellis et al., 1992). Indeed it is common for them to store beyond the point when storage is profitable in its own right. This is because storage is only part of a business activity which involves milling and distribution of milled rice; millers must store in order to keep the mills running out of season, and to maintain supplies to regular customers. Losses on storage are more than compensated for by the gains on other operations.
In Pakistan, the millers’ role in wheat storage has been limited by Government subsidies to public sector institutions, which procure about 60% of the marketed portion of the wheat crop. Rather than procuring wheat themselves, millers found it cheaper to procure from these Government institutions which carried out most of the long-term storage. However, when the Government raised their selling price in 1989 and thereby improved the incentives for millers to store, these responded promptly by buying up more stock.
In the future, storage behaviour in African countries will probably evolve towards the Asian pattern. The liberalisation of cereal markets will encourage the development of the private trade, the reform of banking systems should gradually increase traders’ access to capital markets, and increased urbanisation and sophistication of tastes will favour the emergence of large milling enterprises.
As already mentioned, Government may become involved in storage for the purpose of stabilising prices and revenues to farmers. Related to this is Governments’ overriding concern for national food security, which is fundamental to political stability. Governments therefore use storage to balance national supply and demand over time, and to minimise the risk of politically embarrassing shortages. They are thus attempting to supplement, and in some cases to replace, market mechanisms, on the assumption that the market can only achieve the balance with an unacceptable degree of supply and price fluctuation.
Governments do not involve themselves in the grain market only for reasons of national interest: they are often concerned with rewarding or placating particular lobbies or sectional interests. In developed countries farmers’ interests often receive a high priority in Government decisions, out of proportion to their numbers. High ‘support prices’ encourage production in excess of demand, and surpluses have to be stockpiled at the taxpayers’ expense. In many developing countries, the interests of the civil service and ruling party often take priority. Large national food reserves tend to be supported by the civil servants whose job it is to manage them, and by politicians who sometimes use their procurement and distribution as a means of dispensing patronage.
Governments may keep different types of storage reserve, depending on how much they wish to intervene in the grain market. Some of the options are:
a food security reserve to be sold or distributed for free at times of extraordinary shortage or famine. Such reserves can be found in Sahelian countries like Mali and Chad. They are of limited size (e.g. 10% of the normal volume of grain marketed crop), and are usually limited to the amount thought necessary to tide the country over until the arrival of food aid or imports. They are not designed for the purpose of stabilising prices to producers and consumers. This is reflected in Figure 1.1 which shows that, since a reserve was created in Mali, monthly average retail prices have fluctuated by up to 260% of the lowest figure.
a price stabilisation stock, as in the case of Indonesia. Here the Government has no monopoly role in grain procurement and distribution but buys and sells grains in competition with private operators. Average interseasonal retail price increases in Java are only 11% of the lowest monthly figure (Ellis et al, 1992). How much this extraordinary low figure is due to Government stockholding and how much to the stockholding activities of millers is a matter of debate.
national storage reserves designed to supply most or all consumer needs in urban areas, and in rural deficit areas. In this case the Government has either a statutory trading monopoly, or a monopoly of all interregional shipments, and is the only party allowed to store significant quantities of grain. Between the 1960s and the early 1980s, such systems were the norm in many African countries, before the onset of liberalisation. Even now, the grain marketing systems in some countries, including Zimbabwe and Kenya, are still partially structured in this way.
Such Government operations usually benefit from public subsidy (intended or de facto) and capital investments are largely financed by overseas aid. Indeed subsidies are necessary if the public sector is to carry out functions which would not be profitable to the private sector. However, in some countries subsidies have allowed the State to ‘crowd out’ private sector competition. In the case of Pakistan for example, this phenomenon has resulted in the State handling about 60% of the marketable surplus. In many countries, such competitive advantages are outweighed by the high cost of fulfilling Government requirements (e.g. to buy and sell at fixed politically-determined prices, and to supply civil servants’ consumption needs), overstaffing and slow decision-making processes. In such countries e.g. Tanzania in the 1980s, the official marketing agency may become insolvent and be gradually displaced by private sector competition.
Even relatively efficient Government trading operations face the problem that the more grain they buy, and the more they succeed in stabilising prices throughout the year, the less the incentive for private sector storage’. The responsibility for storage then falls very heavily on Government, and the private traders and millers concentrate on buying and selling quickly. Consequently, the Government finds that it has very high storage costs which it cannot recover through sale prices which have been politically determined. In the end the Treasury or Government banks must bale out the Government enterprise, thereby increasing the budgetary deficit.
Since 1981, there has been a major move to liberalise grain marketing systems in developing countries, and this has been stimulated by both donor pressure and the massive budgetary deficits stemming from the operation of Government marketing boards. Many African Governments are opting for the first of the above options i.e. a limited food security reserve.
Some countries do not appear to need any reserve stocks but can rely on international trade to assure food security and to stabilise prices. This is particularly the case with some deficit countries in Africa, such as Swaziland and Namibia, who have good communications with the world market and are close to major grain suppliers.
Lastly there are some countries where it would seem most appropriate for Government to maintain some sort of price stabilisation role. Such is the case in landlocked countries like Zimbabwe and Malawi, whose production fluctuates between surplus and deficit. If the Governments of these countries totally withdraw from price stabilisation, prices are likely to be subject to very wide interannual fluctuations, with adverse effects on production incentives and consumer welfare (Pinkney, 1993). Nevertheless these countries still have major scope for liberalisation. By improving port facilities and communications with the outside world, and by developing intra-regional trade, they can greatly reduce the required level of stockholding.
The move towards liberalisation in developing countries contrasts with the situation of the developed countries, where Governments are still heavily involved in the grain trade. Developing country officials often ask why they should be asked to liberalise while rich countries fail to do so. The answer is simply that these countries have the wealth to support their farmers at the expense of their non-farming majorities.
Farmers, traders and governments all have reasons to store grain, but they also have reasons for limiting the amount of storage. The unit costs of storage tend to be constant (or to decrease slowly) as larger quantities are stored, but the benefits fall off as more is stored. In deciding how much to store, the benefits must be balanced with the costs involved
Improvements in large-scale storage and handling
How improvements have taken place
Until now, most large-scale storage of cereals in developing countries has been carried out by Government marketing boards, which have developed their activities with the technical and financial assistance of donors and international financial institutions. This has resulted in the building of large numbers of grain stores and mills, with a gradual increase in scale and the degree of technical sophistication. In some countries this has helped maintain food security and feed urban populations growing at 5% or more per annum. However there has also been much wastage, with stores often being inadequately located, inappropriately designed, and poorly managed and maintained. Stores have been built to support Government monopolies, on the assumption that no storage would be carried out by the private sector, but in the event of liberalisation, much of the capacity has been found unneeded and poorly located. Thus the National Milling Corporation in Tanzania has over 400,000 tonnes of storage capacity for which it must find new uses, to which must be added the large storage capacity of the State-sponsored cooperative unions.
Most grain stores have been designed for bag handling, reflecting the low cost of manual labour and the lack of spare parts and maintenance support needed for mechanical handling equipment. However bulk handling has been introduced throughout the developing world, with results which leave much to be desired. Too often, Marketing Boards have been unable to make good use of these facilities and they have become rusting monuments to inappropriate development assistance.
In international development assistance programmes, there is often much support for ‘modern’ capital-intensive systems. This was observed in a study commissioned by the Pakistan Agricultural Research Council (Courter, 1991). Between 1983 and 1987 no less than five feasibility studies advanced the case for investments in bulk handling. All the studies had used questionable assumptions, and four out of the five studies had assumed reductions in storage losses of 5% or more simply by switching from bag to bulk handling. Given that loss surveys have revealed storage losses of between 1.5% and 3.9% such reductions would have been impossible.
The case for bulk handling
There are, however, instances when bulk handling is economically justified in developing countries. This is usually at bottle-necks in the marketing chain, and where grain has to be handled in large volumes and at great speed, for example at port facilities, railway terminals or at mills. In such cases, investment in bulk handling facilities will often result in major cost savings, due to reduction in demurrage charges and down-time. The investment in one capital asset (bulk-handling equipment) produces major savings in the use of other capital assets (ships, trains, mills etc.). In most developing countries, labour costs are unlikely to be significant in the calculations, but bulk handling will reduce the risk that labour problems, strikes etc. will slow operations or bring them to a halt.
Bulk handling tends to be least viable for the long-term storage of grain, where stocks are only turned over once a year or less. In such cases the savings in labour and bags are unlikely to cover the high capital cost in silos, handling equipment etc. With well-run bulk storage complexes it may be possible to achieve a marginal reduction in storage losses but, due to poor operation and maintenance, losses are sometimes increased.
Bulk handling may also result from changes in farming methods. The introduction of combine harvesters in certain countries provides an incentive to start handling the grain in bulk. From the tank of the harvester the grain can be transferred mechanically to a bulk truck, from there to a bulk store or silo, and from there to a mill. This completely eliminates the use of the bags in the system, and overcomes problems of labour shortage and congestion which sometimes occur with a bag handling system. However in irrigated or high rainfall areas, the main benefit to the farmer may be by making it easier for him/her to plant a second crop on the same land.
Even where the economics of bulk handling are favourable, there are other reasons for caution. Most notably one should carefully assess whether the operating company or Marketing Board can obtain power, fuel, spare parts and qualified staff at all times and in sufficient quantities to operate and maintain bulk handling machinery. It should also be noted that some commodities, including milled rice and small grains, are difficult to handle in bulk. Paddy rice and wheat varieties such as Mexipak are abrasive, and require the use of special equipment such as rubber bucket elevators. Bulk handling also poses problems for commodities which must be handled in many different grades or small lots. For further guidance on how to decide between bag and bulk systems readers are referred to a useful bulletin published on this subject by NRI (Friendship and Compton, 1991).
Appraising the case for improvements
Technical improvements must be appraised within the context of a total commodity system. This includes the chain of activities linking farmers and consumers, suppliers of goods and services to the participants in that chain (banks, equipment suppliers etc.) and Government policy and regulatory activity. A four step approach is recommended based on an appraisal of the case for bulk handling in Pakistan (Courter, 1991):
Step 1: Fully understand the policy environment
As Governments gradually move towards more liberalised systems, public policies towards grain marketing are in a state of flux. If planning is possible at all, it is important to plan for tomorrow’s system and not for today’s. One needs to ask the following questions:
- · What types of reserves does the Government wish to hold?
- · Where?
- · What is the level of stockholding considered desirable?
- · What pricing regime will the Government operate?
- · Will the system be subsidised and by how much?
- · What will be the role of the private sector?
- · Is this system sustainable?
- · Can it be financed, managed and maintained?
- · How is the system likely to change in the future?
Step 2: Understand the operating company (e.g. Marketing Board! which is supposed to implement the project
Here one needs to carry out an institutional appraisal, with a view to understanding the way in which the company operates, the capability of staff and their perceptions of the current situation and any proposed changes. This will involve interviewing Directors and company staff from Chief Executive down to the level of store attendant.
Step 3: Identify possible improvement scenarios
In the Pakistan study, there were various alternatives to consider, involving different logistics, storage technologies, and mechanising different stages in the marketing chain, as follows:
(a) Alternative logistical arrangements:
The public sector handling system at the time of the study was more complicated than the system illustrated in Figure 1.3
having additional handling and storage operations which might be eliminated by rationalisation. It would be unwise to convert this existing system to bulk handling as this would compound logistical inefficiencies. For this reason it was assumed that bulk handling would be introduced within a rationalised system of the type illustrated above. The economics of bag and bulk alternatives are compared along this logistically efficient system.
(b) Various alternative storage technologies:
Standard warehouses (‘house-type godowns’);
Concrete silos; Steel silos; Bulk warehouses; Open bulkheads (grain held outdoors between pre-fabricated steel walls and covered with PVC sheeting).
Using standard warehouses, with grain stored in bulk within bag walls.
(c) Mechanisation of different stages in the marketing chain, as follows:
Converting only the mills for reception and handling grain in bulk (preliminary calculations showed this to be the most obvious place to start conversion);
Bulk handling from reclaim (i.e. unloading of grain for dispatch) at the storage centre to the mill;
Bulk handling from reception of grain at the storage centre to the mill;
Bulk handling from the market to the mill;
Bulk handling throughout the whole chain, from harvest to mill.
Step 4: Appraise the improvement scenarios and draw conclusions
The scenarios considered involved various permutations and combinations of logistics, storage technology, and the stages of the chain to be converted to bulk. For each scenario, the case for bulk handling was appraised alongside the bag handling alternative, using costbenefit analysis (CBA). Only those costs likely to differ between the two alternatives were included in the calculations. The methodology of CBA and its application in the Pakistan project are discussed in Annex 1.
Table 1.1 shows the results obtained for just one of the scenarios considered, i.e. deciding which type of store should be used when building new long-term storage facilities. The cheapest technology is the permanent plinth, cost per tonne estimated at US$6. 1 per tonne, compared to warehouses $13.9, concrete silos $14.8 and bulk warehouses $9.4. The cost of the open bulkhead system ($6.8) is similar to the permanent plinths, but this technology is unproven under Pakistani conditions, and effective pest control is likely to prove difficult.
This finding was interesting because investment programmes had concentrated on funding the construction of warehouses and to a lesser extent bulk storage, but had completely ignored the possibility of building permanent plinths, which were suitable in the dry conditions of Pakistan. To store the same quantity of grain, plinths require a capital investment of less than one sixth that for standard warehouses and about one eighth that for concrete silos.
The other analyses did however confirm that there was a good case for using bulk handling in port facilities, in the intake and handling of wheat at flour mills and (subject to thoroughgoing reform of the railways) for long-haul shipment by rail.
Improvement to storage on the farm
The case for improvements in storage
As indicated previously, storage involves substantial costs and risks as well as potential benefits for farmers. Storage competes with other activities valued by farm family members, and it is necessary to understand where storage fits in to the entire farming system and household economy in order to assess the need for interventions and the probability of their uptake.
Over the past two decades the need for economic and social analysis in the planning and design of storage interventions has become more widely recognized. This stems from the realization that any ‘improvements’ in storage will only be attractive to farmers, traders or governments if the perceived benefits substantially outweigh the costs. Technical superiority is generally insufficient (although it can be attractive for its prestige value), and farmers and traders are likely to tolerate quite high storage losses before undertaking complex or expensive changes to their storage systems. An understanding of the reasons why people store, and the systems within which storage occurs, is necessary in order to estimate how the benefits and costs of innovations are likely to be assessed by the intended users of the technology.
Rates of adoption of new storage technologies at the farm level have often been disappointing (Phillips 1981; Compton, 1992). In some cases, projects have failed because they were promoted on the basis of assumptions which turned out to be false. Sometimes it was incorrectly assumed that storage ranked high among farmers’ lists of priorities. From such experiences it can be concluded that, before storage projects are implemented, there is a general need for more research into the economic and social factors involved.
It is also now generally accepted that local, established storage systems are usually well adapted to local conditions, and losses from grain storage are already low and acceptable to farmers (Greeley 1987, Compton 1992). This is not to say that improvements cannot be made. Indeed, the following factors point to an increased need for improvements in the handling and storage of grain at various levels in the system.
(i) Increasing urban demand
Due to demographic changes urban population in most developing countries is growing at 5 % or more per annum. In addition many countries, particularly those in Asia, are experiencing massive increases in intensive animal production, creating large markets for feed grains. For example, Indian poultry production grew by about 9% per annum in the 1980s. Consequently an increasing proportion of grain production is destined for the market rather than subsistence use, increasing storage requirements on the farm and elsewhere in the marketing chain.
(ii) Changes in government policy
Structural adjustment programmes and market liberalization in a number of African and Asian countries are increasing the role of the private sector in storing produce which is surplus to subsistence requirements. It was noted previously that in most African countries, traders and millers are not heavily engaged in storage, and this means that farmers in surplus producing areas are having to greatly increase their storage activity.
(iii) Changes in the farming system
On-farm and off-farm storage systems have been affected by technical change in other aspects of the farming system. The green revolution has involved the adoption of new varieties which are often more susceptible to storage losses (Golob and Muwalo, 1984). It has proved difficult for plant breeders to combine higher yields with storage durability, since the very qualities which lead to higher yields, and therefore (potentially) increased income also make the grain more attractive to pests. Thus, high yielding varieties of maize tend to give large, soft grains with less husk cover than traditional varieties.
Short duration varieties have allowed for increased cropping intensity. This can give rise to further storage problems when one of the harvests occurs in the wet season, making it difficult for farmers to dry the grain sufficiently for storage. Farmers in some areas have responded to the situation by growing high yielding varieties for immediate sale, and traditional varieties for storage and on-farm consumption (Giga and Katarere, 1986).
High yields also imply that farmers may need to manage the storage or sale of larger quantities of grain within a shorter space of time, which in itself may cause problems and encourage farmers to sell at harvest, in order to free up the labour for field preparation of the next crop. In some cases labour constraints at harvest lead to early or late harvesting of the crop, with consequent losses (Compton, 1992).
(iv) Changes in the pest population
A major change in the incidence of pests can prompt farmers to seek new storage technologies. In Tanzania the larger grain borer, a destructive pest of stored maize and cassava, was introduced from its native habitat in Central America in the early 1980s. Farmers were reported to have suffered up to 30 per cent losses from the new pest. In response to their demands the government, with donor assistance, implemented a successful extension programme to control the pest.
The larger grain borer has now spread to a number of other East and West African countries, including Kenya, Togo and Ghana, but losses in these countries have not yet reached the levels recorded in Tanzania.
What factors must one consider in assessing the potential for on-farm improvements?
The first step in the identification of appropriate technology is the assessment of the needs of potential users. In the case of post-harvest technology, claims of high losses and of the potential for reducing them have provided a major justification for the promotion of new technologies. The issue is discussed below in the next sub-section.
Whether or not there are good quality data on losses, it is also important to investigate the potential demand for the technology by its intended users. Even if losses appear quite high, it may be that post-harvest problems do not rank high among farmers’ priorities. It may also be that they are more concerned to reduce labour or other costs than they are to reduce losses. Mechanical threshers and mills have been widely adopted in Bangladesh even though they tend to increase losses, because of the savings in labour costs (Greeley, 1987). As a result women labourers from poor households have lost a source of income from hand threshing and milling.
Even where there is a demand for loss reducing technical changes, farmers may find it difficult to adopt recommended technologies, because of cash flow problems, labour constraints, lack of materials, or storage chemicals. Small farmers and traders often find it difficult to obtain credit at reasonable interest rates, since formal financial institutions consider loans to them be too risky.
If it is decided that some form of intervention is both desirable and feasible, then the full range of options should be considered. For example, if storage losses are high, then, in addition to investigating storage technologies, the potential for altering cultivation and postharvest activities (e.g. shelling maize instead of storing it on the cob), for introducing varieties with improved storage characteristics, or for experimenting with biological control methods can also be examined. A discussion of a wide range of options is given in Compton (1992).
Notwithstanding these options, the most successful storage technology to date appears to be the use of insecticides. They can easily be integrated into existing storage systems, and often give high returns. The main constraints on increased insecticide use are: availability of appropriate insecticides at the right time; stability of the formulations used; farmer training in the correct types and correct use of insecticide; cost, which sometimes renders their usage uneconomical.
In view of the latter, it may be appropriate to use locally available materials, such as woodash, sand or certain plant materials which control the growth of insect populations. Use of such materials is most likely to be viable where small quantities of grain are involved, for example in storing locally produced seeds. When farmers have to store larger amounts of grain (e.g. a tonne), usage of such materials may prove tedious and cumbersome, and sufficient quantities of them may not be available. At the same time some of these materials may have toxicological effects which have yet to be investigated. Research in the coming years should throw more light on the usability of a range of these materials.
Introducing new store types has often proved difficult. The main reason is that the capital cost of new stores is too high, and often fails to offset the reduction in the value of losses, especially where stores are not used to full capacity. There have been notable successes in the introduction of metal bins in Swaziland, Central America and the Punjab area of India and neighbouring Pakistan, but no such cases are known of in poorer areas of Africa. For similar reasons, mechanical driers have also been difficult to promote. Unless there are severe drying problems, sun drying tends to be preferred since it is cheaper. The improved quality of mechanically dried grain is rarely reflected in a higher price, and therefore provides no incentives for farmer adoption.
As well as assessing the level of losses and the demand for the new technology, one must also appraise the cost-benefit or financial viability of the improvement to the individual farmer. The next three sub-sections discuss the assessment of the three factors highlighted above, i.e. losses, demand and financial viability.
(i) Assessment of storage losses
Losses can occur at several stages of the post-harvest chain, including threshing, storage, transport, milling, wholesale and retail distribution. In order to decide whether it is worth taking action over losses of any sort, one should obtain information on losses at all these stages.
There has been a tendency to overestimate storage losses, and to base estimates on extreme cases or guess-work rather than on sound empirical testing. Figures of 30 per cent or more are not uncommon (Greeley, 1987, p. 13ff). By contrast, the results of detailed field studies suggest that under traditional storage systems in tropical countries losses are typically around 5 per cent over a storage season (Tyler and Boxall, 1984), depending upon the crop, the ambient conditions, the period of storage and other factors. Somewhat higher levels have been encountered in the wetter parts of West Africa and Central America.
Loss figures around the 5% level should not however be considered insignificant. Firstly it should be noted that physical losses are usually accompanied by qualitative losses affecting the mass of the grain in store. Secondly the losses are mainly experienced during the lean season before the new harvest is ripe, thereby having an adverse effect on the food security of farming families at a particularly critical period. In Honduras, farmers’ feelings of insecurity about this period have been an important motive for adopting metal storage bins.
Even where detailed studies are undertaken, there are a number of methodological difficulties involved in estimating losses (Greeley, 1991). Loss assessment methods tend to be slow and to require skilled field and laboratory staff. They are often undertaken on experimental sites, making it difficult to relate the results to on-farm situations.
There are a number of factors which tend to lead to an upward bias in the loss estimates. Firstly, extremes may be taken rather than averages. Ideally the sample size and standard deviation should be quoted with the loss estimate to avoid this. Secondly, removals from store over the season are not always accounted for. Where removals do occur, percentage losses calculated on the basis of grain remaining in store will be overestimates. Another source of overestimates lies in treating partial damage as a total loss, when in fact the damaged grain would be used by farmers for home consumption or animal feed. A fourth source of upward bias lies in the potential for double counting losses at different stages in the post-harvest system. Losses at one level are related to those at other levels.
Another difficulty in using estimates of losses to justify technical change is the problem of assigning to the losses a value which makes sense to the potential user of the technology. The most common form in which losses are expressed is as a percentage weight loss. But what is important from the farmer’s point of view is the use that the grain can be put to, or the market price that will be received. Grain intended for sale may be consumed, or that intended for consumption used as animal feed.
A rapid loss assessment method for estimating storage losses in maize and cassava has recently been developed in Togo (Compton et al. 1992). The method attempts to incorporate farmer criteria in defining categories of loss, and since the measurement occurs in the field, rather than at a laboratory, results can be discussed with farmers on the spot. Such methods could usefully be integrated into post-harvest technology projects.
(ii) Assessment of demand
As in all market research one should start with desk research, including the interviewing of key informants, to gain whatever data are readily available about storage systems, the uptake of improvements introduced in the past and other relevant information.
One should then visit representative villages in the area of interest to analyse the farming system together with the farmers (i.e. carry out a participatory rural appraisal or PRA) to identify opportunities for improvements, taking care to interview a representative sample of farmers and womenfolk, including significant minority groups likely to have an important role in crop storage (e.g. larger mechanised farmers). Out of this activity should come: (a) an assessment of whether any improvements are worth considering in greater depth; (b) a list and description of these ideas or concepts suited to particular groups of farmers.
Selection of technologies may be aided by means of matrix analysis. This involves tabulating the alternative technologies (on a horizontal axis) against the full range of criteria used in their selection (on a vertical axis). Each technology can be scored or ranked in terms of the respondents’ perception of its performance against each criterion. The different steps to be considered in matrix analysis are outlined in the shaded box on the next page, using the appraisal of alternative storage structures as an example. Typical results are displayed in Figure 1.4.
The same approach could be used in assessing pest control systems, or other technologies.
Figure 1.4. Matrix Scoring for three grain storage structures
Durability of structure
Ease of handling
Peace of mind
Low construction costs
Does not attract pests
HOW TO DO MATRIX SCORING
Find a group of key informants who are knowledgeable and willing to discuss. Hold an open-ended discussion with them about on-farm storage. This should be along the lines of a ‘focus-group interview’, with the moderator guiding the discussion in a non-directional manner, with occasional prompts, and asking for clarification of points of interest.
As the discussion proceeds, ask the participants to consider a range of alternative storage structures. Ask them which are of interest, and the pros and cons are for each. Probe for further criteria.
Based on the discussion, make a short list of (a) storage structures worthy of further consideration, and (b) the most important criteria by which the informants appraise their suitability. Then construct a matrix with the storage structures displayed on the horizontal axis, and the criteria on the vertical axis. This can be done on a large sheet of paper, or on the ground (using seeds, stones etc. for scoring).
Make negative criteria positive (e.g. ‘attracts pests’ is written on the chart as ‘does not attract pests’).
Convene a group of villagers to assess each storage structure following the list of criteria. Structures may be scored on a scale of, say, ten points. If many items have to be compared, a smaller scale with less points can be used. The highest total score will indicate the most preferred.
Ask which criteria are most important? If it emerges that some criteria are far more important for the villagers than others then give them more weight by multiplying their scores by a weight factor (e.g. 2).
Adapted from: J. Mascarenhas, Participatory rural appraisal and participatory learning methods, recent experience from MYRADA and South India; Forests, Trees and People Newsletter No. 15/16.
This exercise can be carried out with people representing different social groups.
In this case the metal bin has the highest score. However, if ‘low construction costs’ were of leading importance to the villagers, resulting in the multiplication of its scores by two, then the traditional bin would come out top, with 31 points, compared to 28 and 24 respectively for the other two constructions.
As an alternative to scoring, data may be ranked against each criterion, 1 = best, 2 = next best, etc.. Ranking can be used for up to 7 items. The method is straightforward and rapidly elicits much information on why participants give priority to certain criteria. However ranked data for different criteria cannot be added up. Ranking only conveys an order of preference, but not the degree of liking or disliking.
By this stage it may be concluded that certain technologies are affordable and can be field tested without further research. Where this is not the case however, or where one is approaching a number of villages with different characteristics, one may proceed to appraise the different options through concept testing. This market research technique was introduced by NRI into Swiss-funded storage projects in Central America, and is now used for the rapid appraisal of storage concepts, without going to the expense of constructing prototypes.
In a concept test, respondents (chosen from the target population) are shown a picture or mock-up of the new storage structure with a list of their key attributes, and then answer questions about likes and dislikes, how and when he/she would use the store, willingness to invest in one, preference between alternative concepts and so on. The tests can be carried out in individual depth interviews or in group interviews, or in a combination of both.
The tests can yield some quantitative information e.g. about the percentage of respondents wishing to invest in the structure, about their ranking of technologies etc., but above all it produces in a short space of time a lot of qualitative insights into farmers’ thinking about storage and its place in the farming system and the household economy.
(iii) Assessment of financial viability in on-farm storage and handling
On-farm improvements offer the potential for an increase in net benefits through a reduction in variable costs, such as labour, a reduction in the value of grain losses, or an increase in the market value of the grain as a result of using the technology.
An example of the use of cost-benefit analysis (CBA) on farm-storage projects is that undertaken by Boxall and Bickersteth (1991). They compared seven different storage technologies in terms of the break-even price which the farmer must obtain on one bag of maize to cover storage costs, at two different discount rates. Their findings are presented in Table 1.2, and details of the methodology used are shown in Annex 1.
They found that traditional systems with lower capital costs and no operating costs achieve lower break-even prices in spite of higher losses. Various development programmes had favoured the improved storage crib, but this technology proved the least favourable on account of its high capital costs. Only in areas with particularly high losses would the improved crib be financially viable. The mud bin was the most cost-effective structure because of its durability, cheap construction cost and low losses.
The conclusion reached was that storage technologies currently being recommended under certain development programmes would not, under normal circumstances, be profitable for farmers. Similar findings were encountered in two other West African studies (Al Hassan, 1989; Stabrawa, 1992).
Marketing of new on-farm technology
Having established that a given concept is desired and financially viable, one can then proceed to test-market the technology, by persuading farmers in a given locality to build or install prototypes. As with any other marketing exercises, the test-market will need to be supported by a delivery structure (involving artisans, trainers etc.), after-sales service and maybe credit. The demand for the technology should be monitored through the growth of sales in the target area, and the level of market penetration i.e. the number of units installed/potential number installed. Reasons for non-adoption should be analysed, with a view to either changing the product or the marketing strategy, or revising downward one’s view of market potential. Figure 5 (see Figure 1.5. Schematic presentation of Technology Dissemination) summarises NRI’s approach to technology assessment and dissemination in Guatemala.
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Edited by D.L. Proctor, FAO Consultant
FAO AGRICULTURAL SERVICES BULLETIN No. 109
GASCA – GROUP FOR ASSISTANCE ON SYSTEMS RELATINGTO GRAIN AFTER HARVEST