4 Mapping the Value Chains
4.2 Mapping Tanzania
4.2.2 Tomatoes in Tanzania
4.2.2.2 Profit Margins along the Value Chain
According to the respondents’ answers the average costs incurred by the tomato producers are 0.14 USD in high season and 0.10 USD in low season per kg of tomatoes. Costs for fertiliser and pesticides make up a significant share of the total input costs.
Labour costs are also expensive for the farmer. An average casual worker earns 1.10 to 1’500-2’500 TSH (1.92 USD) each day. This does not include any form of social insurance.
The sales price of tomatoes fluctuates greatly. It depends on the season, the climate and ultimately the overall yield in the region, as well as demand. For example, in Arusha demand for fresh fruits and vegetables is much higher in the tourist season because of increased demand from hotels and restaurants. The following table shows median selling prices in high and low seasons:
Table 5: Selling prices, cost and profits for tomato farmers in high and low season per kg (in USD)
Figures for Production Level per kg
(in USD) High Season Low Season
Variation 0.01 - 0.23 0.27 - 0.71 Selling prices
Median 0.13 0.50
Costs (Median) 0.14 0.10
Profit (Median) - 0.01 0.40
(Source: Own Compilation) These figures illustrate that the farmers make a loss in the high season (-0.01 USD) whereby in the low season they can realize a high profit (0.40 USD). One must also take into consideration that tomato cultivation in the low season is very risky due to unstable weather conditions. Consequently, only a few farmers take the risk and cultivate tomatoes in this season. Others cultivate less delicate crops or switch to livestock husbandry.
Trade Level
The list of costs, prices and profits focuses on sellers on the Kilombero Wholesale Market. As they are essentially for farmers and retailers their bargaining position is relatively high. This circumstance is reflected in the fact that the wholesalers gain the highest profit of the VC taking account the amounts handled (see fig. 10, 11). Beside the bargaining position low costs also impact on the wholesalers’ profit. The costs includes paid labour, particularly casuals who carry and grade the commodities, markets fees and transport if they buy directly from the farm gates. More detailed information can be found in the table below.
Table 6: Buying and selling prices, costs and profits for tomato wholesalers in high and low season per kg (in USD)
Figures for Trade Level
per kg (in USD) High Season Low Season
Variation 0.05 - 0.13 0.29 - 0.33 Buying prices
Median 0.09 0.30 Variation 0.12 - 0.21 0.37 - 0.87
Selling prices
Median 0.18 0.45
Costs (Median) 0.04 0.14
Profit (Median) 0.06 0.01
(Source: Own Compilation)
An important fact to note here is that the wholesalers, in contrast to all other actors in the VC, benefit more in the high season than in the low season. This is due to the fact that in low season the services provided by the wholesalers as well as by other intermediaries and brokers are required less frequently. As the amount of product on the market is low, sellers and buyers can easily team up without the help of a third party.
Marketing Level
As indicated in the livelihood analysis (see chapter 4.1.3) retailers belong to the poorest actors in the VC. Therefore it might come as a surprise to discover that the profit they make is almost equal to (high season) or even higher (low season) than that of the wholesalers. It should be taken into consideration that the profit shown in the tables does not include the amount of produce the actors trade. Taking that into consideration, figures 10 and 11 demonstrate that the share of profit for the retailers is almost zero.
Apart from the wholesale price retailers are also faced with other costs mainly to finance transport to their location and payment of market fees. Hence their costs are relatively low.
Table 7: Buying and selling prices, costs and profits for tomato retailers in high and low season per kg (in USD)
Figures on Marketing Level
per kg (in USD) High Season Low Season
Variation 0.10 – 0.32 0.27 – 0.77 Buying prices
Median 0.22 0.68 Variation 0.24 – 0.62 0.51 – 1.00
Selling prices
Median 0.29 0.82
Costs (Median) 0.02 0.03
Profit (Median) 0.05 0.11
(Source: Own Compilation) Transport
The actors at transport level are very heterogeneous therefore it is too complex to depict a detailed picture of all their costs and prices here. The following explanation includes short distance transport handcart drivers and carriers as well as some figures for long distance transportation.
Handcart drivers, especially if they own the handcart, have relatively low operating costs. What they fear most is damage to their vehicles and fines by the police. The high competition among handcart drivers regulates the prices they can achieve for
their service. Furthermore, they face a high risk of being involved in an accident.
Their revenue depends on how many tours they can accomplish in a day. Most of them reported that they achieve an average of 2-3 tours per day.
Table 8: Costs and Payments for Handcart Drivers Costs and Payments for Handcart Drivers
(in USD)
High Season / Low Season Tour from Kilombero Wholesale Market to
Arusha Central Market with Onion Bags 0.77 Tour from Kilombero Wholesale Market to
Arusha Central Market with Tomato Crates 0.38
Costs for renting a cart 0.23
Ø Profit/Day 1.92
(Source: Own Compilation) Carriers have no special costs to cover. They only need their own manpower for their work. But their payment is low and irregular. Normally they get 100 TSH (0.08 USD) per rate they carry. Average daily revenue is about 1 USD.
The costs for long distance transportation by trucks or pick-ups are very difficult to calculate. They depend among others on variables such as whether the person transporting owns the mean of transportation or not and on the wage. A farmer in Ngari Nanyuki who owns a small 4 ton truck explained that he charges about 600’000 TSH (460 USD; 2.3 USD/crate) to go to Dar Es Salaam and about 700’000 TSH (540 USD; 2.7 USD/crate) to go to Mombasa. This covers his costs for fuel, road fees and in the case of a border crossing the costs for this.
Consumption
For the consumers there are no costs to be considered such as travelling to the market etc. They have only been asked to state the average price they pay on the market. The result can be seen in the table below.
Table 9: Final Purchase Prices for Consumers Figures on Consumer Level
per kg (in USD) High Season Low Season
Variation 0.09 – 0.31 0.15 – 0.46 Buying prices
Median 0.15 0.46 (Source: Own Compilation)
Conclusion
To conclude, it can be calculated that the farmers achieve a negative profit in high season. But in low season they make the highest profit of all the actors in the VC.
This picture alters if the volumes are considered as well. In this situation the traders claim the highest share of profit for themselves. The share of profit of the retailers in contrast is almost cero. This corresponds with the results of the livelihood analysis.
-0,01 0,05 0,05
0,01
0,11 0,4
-0,05 0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4 0,45
Farmer Intermediary Retailer US$/kg
1. season 2. season
Fig. 9: Profit per kg in USD for actors in the tomato VC of Tanzania (Source: Own Compilation)
-4%
103%
0,2% Farmer
Intermediary Retailer
Fig. 10: Profit share in 1. Season considering the amounts (Source: Own Compilation)
87%
13% 0,3%
Farmer Intermediary Retailer
Fig. 11: Profit share in 2. Season considering the amounts (Source: Own Compilation)
4.2.3 Onions in Tanzania