Farmer Business School

Transcription

1 Farmer Business School Rice production systems Rice, Cow Pea, Egusi Training Notebook and Workbook Nigeria November 2014

2 ABC of the Agricultural Business Community A Agriculture Asset N Nutrition Negotiation B Business Bank O Organization Owner C Credit Calculate P Plan Profit D E F G H I J K L Diversification Debt Enterprise Equipment Farm Food Gain Gross margin Harvest Hectare Income Investment Job Kilogram Kilocalorie Loss Labor Q R S T U V W X Y Productivity Quality Quantity Record keeping Rice Savings School fees Ton Trial Unit Union of producers Value Variable cost Work Warrantage EXport crop EXpenditure Yield M Management Market Z Zero Zone

3 Sustainable Smallholder Agri-Business Programme Foreword The Farmer Business School (FBS) approach has been developed for cocoa production systems in 2010 by GIZ/Sustainable Cocoa Business and local partners from Ghana, Nigeria, Côte d Ivoire and Cameroun. Over 230,000 cocoa producers have been trained by local partners in the 4 countries with the support of the Federal Ministry of Economic Cooperation and Development of Germany (BMZ) and the World Cocoa Foundation. The FBS approach has been adapted to cotton production systems in Ghana, Benin Republic, Côte d Ivoire, Zambia, Malawi and Burkina Faso by the Competitive African Cotton Initiative (ComPACI). Over 40,000 cotton producers have been trained since A first adaptation of FBS to rice production systems has been completed by GIZ ProAGRI in Benin Republic. The present training notebook for rice production systems in Nigeria is based on these experiences. Only FBS-Trainers that underwent a special qualification program including class-room and several learning trainings with farmers under supervision by experienced Country Master Trainers deliver the training in line with the principles of adult and discovery learning and the quality standards of FBS. Request your certificate with serial number at the end of the training Contents 1 Farmer Business School Training and Tools... 2 Module 1 Is farming a business?... 3 Module 2 Know the units to know your assets... 6 Module 3 Manage your farm for enough food... 9 Module 4 Money-Out, Money-In: Know whether you are doing good business Module 5 Decisions for doing good business Module 6 Opportunities to diversify production for more income throughout the year Module 7 Manage your money throughout the year Module 8 How to get good financial services Module 9 Make more money with quality rice Module 10 Benefits from membership in farmer organizations Module 11 Good business with Good Agricultural Practices (GAP) Module 12 Becoming an entrepreneur in practice Plan and evaluate production Evaluate the production year Managing money throughout the year Manage loan and reimbursement

4 Sustainable Smallholder Agri-Business Programme 1 Farmer Business School Training and Tools The skills learned at the Farmer Business School help the farmers to become better entrepreneurs who: Take advantage of improved technologies and market opportunities to increase income Plan and adapt their production to assure food security for their family Lead professional negotiations with buyers, input suppliers, credit institutions and land owners. Manage money, savings and loans. 2

5 Sustainable Smallholder Agri-Business Programme Module 1 Is farming a business? What examples of businesses do you know? Examples of businesses Agriculture My farm is my business Construction business Commerce Start and end of activities Money-out Money-In One needs to start the agricultural work at the beginning of the season One cannot stop the field work before the harvest (or the use of the seedlings) One can start when one has a contract with a client One must respect the conditions of the client One construction site follows the next One can start and stop commerce at any time. for tools, equipment, pesticides, fertilizer, quality seed, services (tractor) and hired labour force for the machines, the materials and the employees to buy merchandise and to pay employees after harvest at moment of sales when the construction is completed all year long Processing of agricultural products maize, processed cassava, local beer One can start the processing at any time if one has the equipment and raw materials One stops the processing when the raw material is no longer available. to buy raw material, equipment and employees all year long as long as you have raw material What do you need and use to do agriculture as business? (Here are some examples) Inputs Tools and equipment Labour Knowledge Money Land Seeds Insecticide Fungicide Fertilizer Machete, hoe, sprayer, drying bay Tractors and implements Family work force Paid workers Good Agricultural Practice Quality seeds and inputs Own money Credit Own land Rented land Sharecropping Main Lesson: The agricultural entrepreneur (man or woman) plans and organizes to have inputs, tools, labour and money necessary for the production ready at the right time. 3

6 Sustainable Smallholder Agri-Business Programme What does one need to know about the market if one wants to do good business? The market for agricultural produce The location of the market Who needs the product and wants to buy it? The quality of product that is demanded by the market The price of the product compared to other markets The market for inputs and equipment The locations of sale Who sells the inputs and equipment? The quality of the inputs and equipment The price of sale of the inputs and equipment. How does the price of agricultural products change? The price of agriculture products change according to the season of the year At times of abundance the prices are lowest. At times of scarcity (during the dry season for example) the prices are highest. The price of agriculture products change between years. The price of a product that is needed by more and more people will rise from one year to the next. The price a product that is produced in greater abundance will fall from one year to the next. Main Lesson To do successful business, the agricultural entrepreneur (man or woman) finds out the prices (of inputs and produce) at different markets. This allows the farmer to plan production, and to make decisions on the purchase of inputs and the sale of produce. 4

7 January Feb. March April May June July August Sept. October Nov. Dec. Sustainable Smallholder Agri-Business Programme Module 1 Agricultural Calendar to plan the production of rice. The times of work mark it by a square The tasks of the entrepreneur Prepare land Buy inputs Sowing Apply NPK 1 st Weeding Spray 2 nd Weeding Apply urea Chasing birds Harvest Thresh, winnow, dry Clean storage place and store Main Lesson : For a good yield, the agricultural entrepreneur (man or woman) plans to do the necessary work in the field and apply the inputs at the right time. 5

8 Module 2 Know the units to know your assets Sustainable Smallholder Agri-Business Programme Measure and calculate the surface of a field The size or surface area of a field is measured in meters squared or hectares. 1 hectare (ha) is 10,000 meters squared (m2). 6

9 Sustainable Smallholder Agri-Business Programme Method Length Width Surface Size Difference/ Measuring tape Rank Group 1 Estimation by steps Measuring tape in meters Group 2 Estimation by steps Cord with knots Main Lessons 1. Measures of the size of field by using walking-steps are not always accurate. 2. The agricultural entrepreneur (man or woman) who underestimates field size risks using too little fertilizer and too little seeds. This can lead to reduced yields. overestimates field size risks using too much fertilizer and to plant too close together. This can lead to reduced yields and unnecessary spending. 3. Accurate knowledge of the size of the farm is important to plan production, to correctly apply inputs, and to correctly space plants and seeds. 4. The agricultural entrepreneur (man or woman) measures his fields with a measuring tape, a cord with knots or a measure band. 5. A field in the shape of a rectangle or square is easy to measure. On such a field it is easier to sow or plant in lines respecting the correct spacing distances. 7

10 Standard Measures and Units Sustainable Smallholder Agri-Business Programme Distance Kilometre (km) : 1 km is 1,000 meters (m) : Length or width of a field Meter (m): 1 m is 100 centimetres (cm). Surface Area Meter squared (m 2 ) Yield per Unit Area Volume Weight Time Agricultural work Hectare (ha) : 1 ha is 10,000 m 2 1 Acre : 4,000 m 2 Yield per hectare : Yield per acre e.g. 400kg seed rice /ha: 160kg seed rice /acre Litres (L) Grams (g) Kilograms (kg) : 1 kg is 1,000 g Ton (T) : 1 Ton is 1,000 kg Minutes (min) Hour (h)= 1 hour has 60 minutes Day (D) = 1 day has 24 hours Man-days (MD): The work of an adult man in one day. Example: Work on one hectare requires 10 Man-days. (10 MD / ha). The work can be done by 1 man in 10 days or by 10 men in 1 day. It is important to specify the number of hours in a work day. Main Lessons Units and measures are important for the agricultural entrepreneur (man or woman). They are necessary To know precisely your assets such as your land and labour. To correctly plan production and the quantities of inputs that need to be purchased in time To apply correct amounts of chemical inputs To know the quantity harvested To correctly evaluate losses or profits To better sell the products. Measures and units are key to do good business in agriculture. 8

11 Sustainable Smallholder Agri-Business Programme Module 3 Manage your farm for enough food These products give us energy and physical strength to work and to grow These products give us physical strength and mental force Maize Rice Beans Poultry Yam Cassava Groundnut Meat Sorghum Maize Eggs Fish Oils give us energy and make the meals tasty Fruits give us energy (sugar) and health Vegetables give us health and make the meals tasty Clean drinking water gives us health Source: based on FAO Family Nutrition Guide Lessons The agricultural entrepreneur (man or woman) knows that each type of food is necessary for a good and balanced nutrition of the family. 9

12 Sustainable Smallholder Agri-Business Programme Food products and their content in energy, protein and fat Food Energy kcal per kg Protein Grams per kg Fat Grams per kg Rice Maize Sorghum Cassava Yam Groundnut Beans Fish (dried) Eggs Meat Based on FAO 2004.Family Nutrition Guide; Explanation: The kilocalorie (Kcal or 1000 calories) is a measure for the energy of a food. The number of kilocalories of one kg of a given food shows you whether the food is rich or poor in energy. Main lesson The agricultural entrepreneur (man or woman) knows that the different types of food ensure a healthy nutrition of the family. 10

13 Sustainable Smallholder Agri-Business Programme How much energy and protein do we need per day? Main lessons The agricultural entrepreneur (man or woman) knows that the members of his family have different needs of food. Very good food for pregnant and breastfeeding women ensures good health and growth of new children. From the 7 th month onward children need good quality meals (without spices!) and breast feeding for good health and growth. Children of a certain age need almost as much food as adult persons. 11

14 January February March April May June July August September. October November December Sustainable Smallholder Agri-Business Programme Nutritional calendar: How do you cover the food needs of your family? Mark a square if the product is sold Mark a circle if the product is eaten What are the months of high prices and the months of low prices for a food item? Mark a triangle in the months you need to buy the product Indicate by a line how long the product is available from own production Sell Eat Rice Sorghum Maize Yam Fresh cassava Beans 12

15 January February March April May June July August September. October November December Sustainable Smallholder Agri-Business Programme Sell Eat Groundnut Meat Fish Fruits Vegetables 13

16 How to have more and better food? Sustainable Smallholder Agri-Business Programme Improving yields Improved varieties Fertilization Associate crops Mulching to conserve moisture Reduce losses in storage Improve management of money to purchase food Raise animals Diversify cropping Other possibilities Produce crops that ripen early or that resist to drought; Harvest water for small irrigation Some families might have the opportunity to establish fish ponds Source: based on FAO 2004.Family Nutrition Guide 14

17 Module 4 Sustainable Smallholder Agri-Business Programme Money-Out, Money-In: Know whether you are doing good business Two farmers are discussing whether they did good or bad business last season. - One farmer doesn t know. Why? - The other knows. Why? And what is the use of knowing? But before we start, let s get familiar with the calculator How to use a calculator What is a Calculator? A calculator is a tool you can use to do addition, subtraction, multiplication and division To put on the calculator Press the ON/AC To clear a wrong number Press C CE To start a new calculation Press the ON/AC to clear Addition (plus) Example: = 14 Type Example: = 30 Type 15

18 Sustainable Smallholder Agri-Business Programme Subtraction (take away) Example: Type 9-4= 5 Example: = 80 Type Example = - 9 Type If you take away a bigger number from a smaller number, the calculator will give you a take away number as in this example. You will know that by the small dash - in front of the answer. Example: = - 49 Type Multiplication (times) Example: 25 x 12 = 300 Type Example: 22 x 27 = 594 Type 16

19 Sustainable Smallholder Agri-Business Programme Division (divide) Example: 26 / 2 = 13 Type Example: 123 / 3 = 41 Type Here are some examples. Try to get the same result. Addition (plus) Subtraction (take away) Multiplication (times) Division (divide) 200 / / / 8 137,5 17

20 Sustainable Smallholder Agri-Business Programme Here we will see how to determine if business was good or bad. We will calculate the money in and money out from different produce. Exercise Sheet 1: Cow pea Steps: - Multiply the quantity with the price in each line. - Sum the money spent ( money out ) on inputs, services and labour - Multiply the yield by the price of sale ( money in ) - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seed kg Packing material Total Input and Service Costs 50kg bags Labor Unit Quantity Price (NGN) Total (NGN) Land Preparation MD Mineral fertilization and manuring MD Spraying herbicide, insecticide, fungicide MD Sowing MD Weeding MD Harvesting1 round MD Sun-drying for 2 to 3 days, removing debris MD Manual threshing and winnowing MD Bagging and Storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss L or J Money-In MINUS Money-Out

21 Exercise Sheet 2 Rice: Sustainable Smallholder Agri-Business Programme Steps: - Multiply the quantity with the price in each line. - Sum the money spent ( money out ) on inputs, services and labour - Multiply the yield by the price of sale ( money in ) - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Packing material 100 kg bags Chasing birds lumpsum Bagging and Transport Total Input and Service Costs lumpsum Labor Unit Quantity Price (NGN) Total (NGN) Land preparation MD Leveling and preparation of patches MD Sowing MD Weeding and Hoeing (x 1) MD Harvest and threshing MD Threshing and winnowing MD Storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

22 Exercise Sheet 3 Egusi: Sustainable Smallholder Agri-Business Programme Steps: - Multiply the quantity with the price in each line. - Sum the money spent ( money out ) on inputs, services and labour - Multiply the yield by the price of sale ( money in ) - Subtract the sum of money-out from the money in - Determine if there was a profit or a loss 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Packing material Total Input and Service Costs bags 100 kg Labor Unit Quantity Price (NGN) Total (NGN) Land preparation MD Making Ridges MD Sowing MD Weeding & hoeing (x 3) MD Harvest and Heaping MD Extract and Wash Seeds MD Dry seeds (sun) MD Shell seeds MD Packaging MD Storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

23 Comparing Results Sustainable Smallholder Agri-Business Programme Please tell what is good and what is bad business and give reasons. Main Lessons 1. To know if you are doing good business with a crop, you need to know the Money In and Money Out with precision. 2. The agricultural entrepreneur (man or woman) tracks the inputs and labour used in a field, and calculates the Money In and Money Out 3. From the Money In the entrepreneur subtracts the Money Out. The result tells him if he made profit or loss. 4. The agricultural entrepreneur (man or woman) makes a profit, if the Money In is greater than the Money Out. In that case he/she does good business. 5. The agricultural entrepreneur (man or woman) makes a loss, if the Money Out is greater than the Money In. In that case he/she does bad business. 6. You recognize a loss with the minus dash in front of the number: - 7. The good agricultural entrepreneur (man or woman) will abandon this crop or use a better technique to make a profit. 8. To make sure that he will make a profit, the agricultural entrepreneur calculates «Money In» and «Money Out» before production. 21

24 Sustainable Smallholder Agri-Business Programme Solution Exercise 1 Cowpea 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seed kg Packing material Total Input and Service Costs 50kg bags Labor Unit Quantity Price (NGN) Total (NGN) Land Preparation MD Mineral fertilization and manuring MD Spraying herbicide, insecticide, fungicide MD Sowing MD Weeding MD Harvesting1 round MD Sun-drying for 2 to 3 days, removing debris MD Manual threshing and winnowing MD Bagging and storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

25 Sustainable Smallholder Agri-Business Programme Solution Exercise 2 Rice 23

26 Sustainable Smallholder Agri-Business Programme Solution Exercise 3 Egusi 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg ## 200 Packing material Total Input and Service Costs bags 100 kg Labor Unit Quantity Price (NGN) Total (NGN) Land preparation MD Making Ridges MD Sowing MD Weeding & hoeing (x 3) MD Harvest and Heaping MD Extract and Wash Seeds MD Dry seeds (sun) MD Shell seeds MD Packaging MD Storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

27 Module 5 Decisions for doing good business Sustainable Smallholder Agri-Business Programme Let us see whether improved seed and techniques can help you to do better business. Exercise 1 Cowpea 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Labor by tractor lumpsum Seed treatment with Apron star 42 WS 10g per 8kg of seed Organic material for fertilization t Herbicide Glyphosate liters Insecticide litre Fertilizer NPK kg bag Fertilizer SUPA 50kg bag Packing material 50 kg bag Total Input and Service Costs Labor Unit Quantity Price (NGN) Total (NGN) Mineral fertilization and manuring MD Spraying herbicide, insecticide, fungicide MD Sowing MD Thinning and 1st weeding 2 weeks after sowing MD nd weeding 4 to 5 weeks after planting MD Harvesting 2 rounds MD Sun-dry for 2 to 3 days, remove debris Manual threshing and winnowing MD Cleaning of storage room MD Bagging and storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

28 Sustainable Smallholder Agri-Business Programme Exercise 2 Rice 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg ,500 Tractor service lumpsum 1 12,500 12,500 Insecticide liter 1 2,500 2,500 Herbicide Glyphosate lumpsum 1 4,600 4,600 Post-emergence herbicide lumpsum 1 4,400 4,400 Fertilizer NPK 50 kg bags 4 4,500 18,000 Fertilizer Urea 50 kg bag 2 4,500 9,000 Packing material 100 kg bag ,000 Chasing birds lumpsum 1 15,000 15,000 Threshing and winnowing lumpsum 1 16,000 16,000 Bagging and Transport lumpsum 1 4,200 4,200 Total Input and Service Costs 109,700 Labor Unit Quantity Price (NGN) Total (NGN) Nursery MD ,200 Level and prepare patches MD ,600 Apply NPK MD ,600 Planting MD ,800 1 st Urea application during tillering MD Weeding (x 1) MD ,400 2 nd Urea application during booting MD Spraying pesticides MD ,600 Harvest and heap MD ,000 Storage MD ,600 Total Labor Needs and Costs MD 53 42,400 Money-Out 152, Money-In Production X Price of Sale kg , Profit of Loss Money-In MINUS Money-Out J or L

29 Sustainable Smallholder Agri-Business Programme Exercise 3 Egusi 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Organic material for fertilization t Insecticide lumpsum Fertilizer NPK kg bag Packing material bags 25 kg Repair of equipment lumpsum Tractor service for land preparation Total Input and Service Costs lumpsum Labor Unit Quantity Price (NGN) Total (NGN) Land preparation MD Making ridges MD Sowing MD Thinning MD Weeding & hoeing (x 3) MD Organic fertilization MD Applying fertilizer (NPK) MD Spraying pesticide MD Trim stems & remove redundant fruits MD Harvest and Heaping MD Extract and Wash Seeds MD Dry Seeds (smoke) MD Shell seeds MD Packaging MD Storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

30 Explanation of Fixed Costs Sustainable Smallholder Agri-Business Programme Certain costs are called «fixed costs». These are costs for equipment, tractor and tools that the farmer owns and are used on various crops or over various years, such as sprayers or irrigation pumps. The Fixed Costs do not vary with the size of the field. Main Lessons 1. The Difference between Money-In and Money-Out shows whether we are making a loss or profit from the use of the land. 2. To know whether they lead to better profit, the good agricultural entrepreneur (man or woman) calculates well ahead of the season to decide what he/she will produce and which techniques to use. 3. During the production season the good agricultural entrepreneur (man or woman) registers money spent for farm operations and inputs. 4. After the harvest, the good agricultural entrepreneur evaluates the profit and identifies what changes are needed to improve the planning and profit for the next production season. 28

31 Sustainable Smallholder Agri-Business Programme Solution Exercise 1 Cowpea 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Labor by tractor lumpsum Seed treatment with Apron star 42 WS 10g per 8kg of seed Organic material for fertilization t Herbicide Glyphosate liters Insecticide litre Fertilizer NPK kg bag Fertilizer SUPA 50kg bag Packing material 50 kg bag Total Input and Service Costs Labor Unit Quantity Price (NGN) Total (NGN) Mineral fertilization and manuring MD Spraying herbicide, insecticide, fungicide MD Sowing MD Thinning and 1st weeding 2 weeks after sowing MD nd weeding 4 to 5 weeks after planting MD Harvesting 2 rounds MD Sun-dry for 2 to 3 days, remove debris Manual threshing and winnowing MD Cleaning of storage room MD Bagging and storage MD Total Labor Needs and Costs MD Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out L or J

32 Sustainable Smallholder Agri-Business Programme Solution Exercise 2 Rice 1. Money-Out Inputs and Services Unit Quantity Price (NGN) Total (NGN) Seeds kg Tractor service lumpsum Insecticide liter Herbicide Glyphosate lumpsum Post-emergence herbicide Propanil lumpsum Fertilizer NPK 50 kg bags Fertilizer Urea 50 kg bag Packing material 100 kg bag Chasing birds lumpsum Threshing and winnowing lumpsum Bagging and Transport lumpsum Total Input and Service Costs 109,700 Labor Unit Quantity Price (NGN) Total (NGN) Nursery MD Level and prepare patches MD Apply NPK MD Planting MD st Urea application during tillering MD Weeding (x 1) MD nd Urea application during booting MD Spraying pesticides MD Harvest and heap MD Storage MD Total Labor Needs and Costs MD 53 42,400 Money-Out Money-In Production X Price of Sale kg Profit of Loss Money-In MINUS Money-Out J or L

33 Sustainable Smallholder Agri-Business Programme Solution Exercise 3 Egusi 31

34 Module 6 Sustainable Smallholder Agri-Business Programme Opportunities to diversify production for more income throughout the year We will determine the best opportunities as follows Rank crops based on Profit or Loss What crops and techniques will you choose? 32

35 What is a risk in agriculture? Sustainable Smallholder Agri-Business Programme The agricultural entrepreneur (man or woman) does not like risks because they are difficult to predict. However, one can determine during the planning what the impact of risks could be on revenues. Market Risks The market price of cow pea may fall from 120 NGN per kg to 80 NGN per kg Production Risks Yield of improved cow pea is only 1,000 kg/ha due to lack of rains Rank crops once more based on Profit or Loss using the table above What has changed? How would you decide? Impact of risks Unit Cowpea current Cowpea improved Surface Area Ha 1 1 Production Kg 350 1, Money-Out NGN/ha 59,900 85,750 Sales price NGN /kg Money-In =Production X price of sale NGN/ha 28,000 80, Profit or Loss? = Money-In MINUS Money-Out NGN/ha -31,900-5,750 Main Lessons 1. Comparing cost and profits of different crops and production techniques helps to make decisions to get better income. This comparison is important to all agricultural entrepreneurs (man or woman) 2. Production decisions are based on these comparisons. 3. The good agricultural entrepreneur knows that a change in prices constitutes a risk on revenue. Risks are a concern for traditional as well as improved varieties and techniques. 4. To evaluate the impacts of Market Risk, the entrepreneur calculates the Money-in with a much lower price ( pessimistic ) than the current price (or last season s price). The risk is acceptable if the pessimistic profit can still satisfy the income objectives. 33

36 Module 7 Manage your money throughout the year Bad management of money How does one know if the money is managed badly? What are the causes? Sustainable Smallholder Agri-Business Programme What must one do to manage money well during the year? One must Plan! The person, who fails to plan, plans to fail! First Step: We have looked at «Money-In» and «Money-Out» for different crops on the farm. Now we look at the expenditures of one household of 6 persons (2 children not yet in school, 2 children in primary school). Can we foresee these expenditures? When is the money needed? Let s calculate how much money is needed for the household in one year. Money Needs of household Can be Period Expenditures (NAIRA) foreseen NAIRA per month NAIRA per year Matches Yes Each month 100 1,200 Salt Yes Each month 200 2,400 Soap Yes Each month 700 8,400 Kerosene Yes Each month 1,000 12,000 Purchase food Yes Each month 8,000 96,000 Sub-total Yes Each month School fees (500 Naira per child, 2 children, 3 times a year) Yes January, April, September Clothing Yes Once a year (December) Happy events Yes Once a year Eid al Fitr (August) Eid al Adha Yes Once a year (October) New Year Yes Once a year (December) Total expenditure for household per year that can be foreseen 3,000 15,000 15,000 8,000 8,000 8,000 8,000 8,000 8,000 The financial calendar helps us to find know How much money is needed for the farm and the household throughout the year? How much money comes in from sales? How much money is available at the end of the year? 34

37 Sustainable Smallholder Agri-Business Programme Module 7 - Financial Calendar based on a farm using current technique (NAIRA) 35

38 Sustainable Smallholder Agri-Business Programme Module 7 - Financial Calendar based on a farm using improved techniques (NAIRA) 36

39 Sustainable Smallholder Agri-Business Programme Let s discuss the results using this overview Can be foreseen? Periodmonth With current production techniques per year (NAIRA) With improved production techniques per year (NAIRA) Money-Out for household yes each month 162, ,000 Money-Out for Production (inputs and labour) yes different months 196, ,150 Money-Out for household and production yes different months 358, ,150 Money-In from production and other sources yes, but can change different months 445, ,000 Money available for hiring labour, other expenditure and savings (NAIRA) Money-In from Production and other sources minus Money-Out for Household and inputs 87, ,850 Difference between the two situations (NAIRA) 313,650 Main Lessons 1. Money is spent (Money-Out) for the farm and the household each month, but the revenue (Money-In) comes only during the months of harvest or sale of produce. Therefore there are months of the year where the expenditures are greater than the revenues. These months are called deficit months. 2. For this reason, the good agricultural entrepreneur plans with the spouse(s) the expenditures for production and household needs. 3. To cover the expenditures in deficit months, the good agricultural entrepreneur saves money from the sales of produce ( surplus months ). 4. Improved techniques may contribute to improve the revenues of the agricultural entrepreneur. 5. The needs for inputs can be identified with calculations of Money-out. This information can be used to make savings in a targeted way or to request for an input credit. 37

40 Solution Financial Calendar - Current technique Sustainable Smallholder Agri-Business Programme Solution Financial Calendar - Improved technique 38

41 Sustainable Smallholder Agri-Business Programme 39

42 Sustainable Smallholder Agri-Business Programme Module 8 How to get good financial services Savings Why is it important to create savings? With savings you can invest in your enterprise and thereby make greater revenue. For example, by buying fertilizer or improved seeds. If you save on a bank account, your money is safe. With savings you protect your money against inflation (inflation is when the cost of living increases). Savings on an account are often necessary to obtain a loan. How can you create savings? What are the advantages and disadvantages? Advantage Hide money at Home 1. The money is immediately available Disadvantage 1. Money is not safe and can be stolen 2. Money can be destroyed (by a fire, for example). 3. There is increased risk of making uncontrolled spending Bring money to a Bank 1. The money is safe at the bank 2. Having savings at the bank facilitates a loan from the bank 3. Saving at the bank helps to control spending because money is not immediately available 1. The money is not immediately available How to paying money into your bank account Go to the bank or village financial institution How to removing money from your bank account Think why you need money, and how much Go to the bank or the village financial institution Fill out the deposit form Fill out the money withdrawal form Your deposit is registered in your savings booklet Your withdrawal amount is registered in your savings booklet 40

43 Sustainable Smallholder Agri-Business Programme Bank deposits Commercial Banks, Rural Banks, Development Banks and Savings and Loans Companies collect money from people who have it to spare or who are saving it from their income. They keep the money safe on your account. If you want to put your money in the bank, you can choose one of the following accounts: A Current Account is an account for business people like you. Money put in this account can be taken out without telling the bank to be prepared for your coming to take out money. You use a cheque to take out money or to pay a bill. The bank charges a fee for the services it has given to you for this account. Savings Account: You will open a savings account to save money to keep it safe or with objective to get a loan. You can take money only when you are present at the bank. The bank pays additional money on the money in this account every three months, every six months or every year. As owner of a savings account you receive passbook from the bank into which money put in and money taken out is recorded. The Fixed Deposit Account helps you to keep money safe and to earn more money. You can only take out your money at a time you have agreed with the bank, let us say six months. The money that is paid on top of the amount in this account depends on how long the money will be in this account. If for any reason, you want to take out the money before the time you have agreed with the bank, the bank charges you a fee. This type of account could be used by a farmer business person planning to put in more money into say fertilizer for rice. What is Credit (Lending) It is money you borrow from a person or a bank promising to pay back this money. This is a service you get and you pay a fee for this service The bank gives you a letter telling you it has agreed to give you the money you have asked for. The bank also shows when you have to pay back the total amount of money. You, the borrower and the bank know what will be the payments of the loan and service fee is being paid, and when is it to be paid. This makes planning very simple for all. Example Aliyu is a rice farmer from Nigeria. He needs NAIRA 36,000 to buy fertilizer for his maize crop (1 hectare). He decides to go to the bank to borrow this money. The bank agrees to give Aliyu the money but told him, he has to pay back NAIRA 41,400 in 6 months. The NAIRA 36,000 Aliyu borrowed is the credit. Aliyu will have to pay NAIRA 5,400 as fee for the money he borrowed. The 6 months is how long it will take until Aliyu has to pay back the money. 41

44 Sustainable Smallholder Agri-Business Programme A common example of Credit is a Loan A loan is money you borrow (credit) from a person or a bank. Money can be borrowed for a very short time (1 month to 12 months). Money can be borrowed for a short time (1 to 2 years) Money can also be borrowed for a long time 3 years onwards. Service fee can be charged every week or every two weeks, every month or every year on the money you borrowed. There are two common types of loans Business loans Personal loans Business Loans This loan is given to business men and women like farmers to make their business (farming) better or to increase the size of their business (example farm increasing from 1 ha to 2 ha). Examples of farm business loans are Input Loan Expansion Loan Other investment loans This is a very short time loan that can be used to buy planting material, seeds, fertilizer, insecticides, and herbicides. This loan helps farmers to increase their farming business by increasing the cropping area. For equipment or machinery, you might need a loan for at least 3 years. Personal Loans This type of loan is not for business. It is rather used to buy things that are needed for the home like a fridge or to pay school fees. Ways by which money can be borrowed You can borrow money as a single person (individual loan). In this case, the bank always asks for things like a building, a car or land to be put down before giving out the money. If you pay the loan back and the service fee in time, the bank will be happy to serve you in the future. You can borrow money as a member of Group (group solidarity loan). The group can be a cooperative or a registered Farmers Association. If you pay the loan back and the service fee in time, the other group members will be happy to keep you in the group. 42

45 Sustainable Smallholder Agri-Business Programme Main Lessons 1. The good agricultural entrepreneur (man or woman) plans expenditures and money entries along the year. This avoids shortages of money and unforeseen loans that are expensive. 2. To meet the needs of money in deficit months, the good agricultural entrepreneur (male or female) makes savings with the surplus money from product sales. It takes discipline to do so. 3. Saving money with bank close by has the advantage that money is safe. Another advantage is that one is obliged to plan for expenses before withdrawing money. 4. There are different types of savings that offer various benefits. Rural banks provide information and advice to inform their customers. 5. There are different types of loans. Choose the type of credit that offers a convenient service fee and delay for reimbursement. 6. The good agricultural entrepreneur (male or female) inquires about the possibilities and conditions for savings and loans before making a decision. 7. The good agricultural entrepreneur (male or female) takes a loan only when being sure to be able to repay on time. For this reason they plan the investments and expenditures required. The Profit calculation and the Financial Calendar are the appropriate tools for this planning. 8. Once a loan is received, the good agricultural entrepreneur (male or female) sticks to the objective of the investment. Otherwise, the agricultural entrepreneur is likely to have repayment problems. 43

46 Sustainable Smallholder Agri-Business Programme Module 9 Make more money with quality rice What are quality problems of rice? Debris and stones Damage from insects Humidity Broken grains after shelling What are the causes? Bad threshing and winnowing SOMEONE has added stones to increase the weight Storage place has not been cleaned Storage place has not been treated against insects Storage place is not well ventilated Drying too short Shelling equipment not well regulated Why all these problems? The producer does not follow rules of quality production! Who can change this? The producer! What is good quality rice? These are some important criteria: Specifications Type of rice Paddy Shelled rice not parboiled Shelled parboiled rice Milled non parboiled rice Milled parboiled rice Moisture content (%) Immature or not well-formed grains % (m/m) Red grains/grains with stripes % (m/m) Foreign organic matter % (m/m) (variety purity) Foreign inorganic matter % (m/m) ( Non applicable ,5 0,5 0,5 0,5 0,5 0,1 0,1 Source : ABeNOR, 2012 ; Cité par ProAGRI FBS Training Notebook Rice, Benin Republic 44

47 Sustainable Smallholder Agri-Business Programme Module 9 Exercise: Benefits from good post-harvest treatment of rice 1. Winnowing, drying and storage badly done 2. Winnowing, drying and storage well done Rice paddy product Kg Money-Out for threshing and winnowing NGN Drying duration Days 3 5 to 10 Cleaning storage area MD 0 2 Results There are debris and stones in the paddy Paddy is badly dried and too moist Nicely threshed and clean paddy Paddy has the right moisture Mice ate 25% of the quantity in storage Mice could not enter the storage Remaining paddy for sales Kg Selling price discussed NGN/kg Price received NGN/kg Money- In (Quantity sold X Price received) MINUS Money-Out for Threshing and winowing NGN Profit from good post-harvest work NGN Main Lessons 1. The quality of paddy rice determines the income of producers, rice millers and trader. 2. Quality problems of paddy reduce the producer price because bad paddy causes losses or additional costs during milling. For this reason, the rice producers and rice millers have a common interest to ensure good quality. 3. The good agricultural entrepreneur (man or woman) can avoid all quality problems of paddy. 4. Calculations show that threshing and winnowing service, good drying and storage of paddy is good business for all agricultural entrepreneurs. 45

48 Sustainable Smallholder Agri-Business Programme Module 10 Benefits from membership in farmer organizations 1. What is the use of being in a farmer organisation? 2. What are the problems and risks of an organization that you know? 3. How do you avoid these problems? 4. What is your conclusion? How can one know if a farmer organization works well? 1. Members pay of annual member fees without pressure and without delay 2. Members accept the costs (deductions on sales) for services without complaints This shows that members trust their producer organization and that the services are well appreciated Remember that a producer organization cannot provide services without the annual member fees. 3. Existence of Rules (bylaws) 4. Existence and application of rules on the control of accounts 5. Regular Report Production 6. Group activities evolve well. Examples: total production and sales volumes increase; Inputs volume procured by producer organization increases This shows that the producer organization functions well Services Advantages Reasons Group sales Group purchase of inputs can help members to get better prices can help members to get them at lower prices Larger quantities are sold together Buyer needs less efforts to get big quantities of produce Higher prices can be negotiated Larger quantities are bought together Members need less efforts to find the agro dealer and to get good quality inputs Agro dealers need less efforts to find input buyers Lower prices can be negotiated Let s see what are possible benefits of being a member of a farmer organization or a farmer group. 46

49 Module 10 Sustainable Smallholder Agri-Business Programme Exercise on advantages of GROUP SALES Let s calculate the additional profits obtained through group sales that give higher prices in the case of improved farm production Group sales Cowpea improved Rice Improved Egusi Improved Unit Individual Sale Group Sale Individual Sale Group Sale Individual Sale Group Sale 2. Money-In NGN Production Kg Price NGN/kg Benefit of Group Sale NGN Total benefit of group sales of cow pea, rice and egusi NGN

50 Sustainable Smallholder Agri-Business Programme Module 10 Exercise on advantages of GROUP PURCHASE of INPUTS Let s calculate the additional profits obtained through group purchase of inputs at lower prices in the case of improved farm production Cowpea Improved Rice Improved Egusi Improved Groupe purchase of inputs Unit Individual Purchase Group Purchase (Discount) Individual Purchase Group Purchase (Discount) Individual Purchase Group Purchase (Discount) Input Costs NGN Benefit of Group Purchase NGN Total benefit of group purchase of inputs NGN What lessons can you learn from these examples? 48

51 Sustainable Smallholder Agri-Business Programme Main Lessons 1. Agricultural entrepreneurs (men or women) form groups or associations to do things they are not able to do alone. 2. Groups or associations of agricultural entrepreneurs (men or women) have a common business objective. To achieve their common goal, the members learn together, from each other and support each other. 3. For service providers, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can more easily seek financial services or information on production techniques from extension. 4. For input suppliers, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can organize grouped purchases of agricultural inputs and can better prices from the input supplier. 5. For buyers of agricultural products, it is easier and cheaper to work with farmer groups or associations than with individuals. A group of agricultural entrepreneurs (men or women) can organize grouped sales of agricultural products like rice. The group can get better prices from the buyer if the quality of the product is correct. 6. Associations or groups of agricultural entrepreneurs that function well have clear rules that are respected. When the rules are broken by members, sanctions are applied. 7. Good leaders of farmer associations play their role to improve the business of all members. 8. Agricultural entrepreneurs (men or women) that are members of wellfunctioning associations or groups do better business. 9. Agricultural Entrepreneurs that are doing better business with the support of their association pay their membership fees without reluctance. 49

52 Sustainable Smallholder Agri-Business Programme Module 11 Good business with Good Agricultural Practices (GAP) To do good business and make more income with improved management the entrepreneur follows the advice given and applies the Good Agricultural Practices to get the most benefit out of inputs and work. Every step is important. One mistake makes you lose money and work. Let us look at the most important steps and discuss how it should be done. Choose the good plot of land and measure it Buy quality seed, herbicides and fertilizer Clean the land with herbicides Safe use of pesticides Prepare the seeds for good germination Establish the nursery Good land preparation on time Establishing bunds 50

53 Sustainable Smallholder Agri-Business Programme Irrigating the field Good leveling Fertilize with NPK Transplant in lines and refilling Apply urea Additional manual weeding Buy quality insecticides and fungicides Fight diseases and insects Chasing birds Harvest on time and dry well 51

54 Sustainable Smallholder Agri-Business Programme Threshing Proper storage Winnowing Drying Marketing Main Lessons 1. Agricultural entrepreneurs (men or women) use the appropriate recommended inputs for their production. 2. He or she knows how to do each operation and takes care that the work is done properly and on time. 3. Timely planting and field operations for higher yields. 4. He or she applies the correct quantities of inputs on time to their crop. Inputs are correctly used to maximize their benefit and to avoid risks for the health of the producer and the environment. 5. Respecting good agricultural practices gives higher yield, good quality paddy and higher income. 52

55 Sustainable Smallholder Agri-Business Programme Module 12 Becoming an entrepreneur in practice The workbook has been presented to you in this session. 1. What have you learned? 2. What will you change? Use the following templates to Plan production Record Money-Out and Money-In Calculate whether you make Profit or Loss Plan expenditure and income from sales and Control the reimbursement of loans 53

56 2 Plan and evaluate production Cropping calendar for plot 1 Size of the Plot (field) Main Crop Variety Associated mixed crop 1 Associated mixed crop 2 Work Planned Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 54

57 Profit or Loss plot 1 Expected before production Plot area : Unit Quantity Price (NGN) Total (NGN) Evaluation after harvest Quantity Price (NGN) Total (NGN) 1. Money-Out Inputs Total cost of inputs Labour (Man-Days) Total Labour needs and costs Total Money-Out Costs of inputs + Cost of Labour M/D M/D M/D M/D M/D M/D M/D M/D M/D M/D M/D M/D NGN 2. Money-In Production X sales price 3. Profit or Loss? Money-In MINUS Money-Out 4. Unit Cost (NGN/kg) Money-Out / Production NGN NGN NGN/kg 55