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- Written by Super User
- Category: Economics and marketing
- Published: 17 June 2013
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Importance of economics
Is the process of evaluating the value of rice in terms of inputs and output.
Inputs involved in rice production( Variables)
Production Costs
Introduction
Making profits in rice farming like in other crop is a goal every farmer is aspiring to attain. The profit margin a farmer gets however depends on how much he/she spends on farm inputs.
Cost of producing irrigated rice variety Basmati (BS370) and rainfed rice variety NERICA1 both of which have a romatic characteristic are presented below
Inputs Costs (KES)
Irrigated (BS370) Rainfed (NERCA1)
Land preparation 4,500 4,500
Nursery preparation 3,500 0
Total cost of seed 1,600 3,100
Cost of transplanting fertilizer (DAP, MAP) 4,000 4,000
Cost of top dressing fertilizer (SA, CAN) 4,000 4,000
Pesticide costs 900 900
Water Management 2000 0
Labour costs paddling/leveling 3,000 0
Labour costs for sowing/transplanting 4,800 4,800
Labour costs for fertilizer application 600 600
Labour costs for weeding 7,200 7,200
Labour costs for pesticide application 600 600
Labour costs for bird scaring 9,000 9,000
Labour costs for harvesting, stacking 6,000 6,000
Labour costs on loading/offloading 2,600 1,800
Labour costs for cleaning and drying 2,600 1,800
Cost of bags 1,300 900
Transport costs 2,600 1,800
TOTAL 60,800 51,000
MARKETING
Introduction
Marketing is a process involving buying and selling of paddy rice (unmilled) and milled rice in their respective markets. Paddy rice, milled rice and rice by products markets spread in different rice growing regions in Kenya are highlighted below.
Paddy Rice markets
- National Cereal Produce Board (NCPB)
- Lake Basin Development Company (LBDC)
- Dominion farms
- Small Scale mills
- Cooperative Societies
- Cross border traders (Tanzania, Uganda Sudan)
- Cap well Industries
- Mwea rice Mill
- Nice rice Millers
- Ahero NIB rice Mill
Milled Rice Markets
- Supermarkets
- Institutions (learning institutions, Orphanage homes and Hospitals)
- Other private companies (NGOs)
- Parkers
- Regional markets (Uganda and Southern Sudan)
Markets for by-products
- Feed manufacturers (Dairy, poultry, fish)
- Cottage industries
Markets for value added products
- Supermarkets
- Institutions (hospital)
Prices (These can change any time)
- Prices for paddy
- Aromatic KES 55/kg
- Non aromatic KES 35/kg
Prices for milled rice
- Aromatic KES 140/kg
- Non aromatic KES105/kg
Prices for by products
- Broken pishori KES 70/kg
- Broken non aromatic KES 60/kg
- Chicken feed KES 40/kg
- Bran meal KES 14/kg
CHARACTERISTICS OF RICE MARKETS
There are three types of rice markets namely Local, National and Regional. The markets have distinct characteristics which define their functions. The characteristics are listed below.
Local
- • Quality is least considered
- • Quantity not sufficient
- • Price fluctuation
- • Segmented markets
- • Prices are low
- • Not branded
- • Weak competition
• Liberalized market
National
- • Quality is demanded (Aroma)
- • Quantity not sufficient
- • Price fluctuation
- • Market is segmented
- • Branded
- • Strong competition
• Liberalized market
Regional
- • Quality is demanded (Aroma)
- • Quantity not adequate
- • Price not an issue
- • Markets are integrated
- • Branded
- • Can be upgraded
- • Strong competition
• Liberalized
GROSS MARGINS (GM)
Introduction
Gross margin is the difference between total costs that vary as farming activities are expanded. Negative GM indicates that a farmer is not making profits but if it is positive it means a farmer is making profit. It is calculated per unit area. Gross Margin per acre (in KES) for irrigated and rainfed rice is shown below.
Item Irrigated Rainfed
Variety: Basmati370 Variety: NERICA1
Gross output (Q)(80Kgbag) 26 18
Price (P)/80Kgbag 4,500 3,600
Total Variable Costs (TVC) 60,800 51,000
Revenue (QxP) 117,000 64000
GM (QP-TVC) 56,200 13800
