SUNFLOWER SUB SECTOR/VALUE CHAIN ANALYSIS TANGA REGION VALIDATION WORKSHOP TANGA 25 TH JUNE 2009 1
Outline of the presentation Background Sunflower subsector overview Sub Sector Map & Dynamics Opportunities, constraints, and viable solutions Driving forces Value chain, subsector business development model Proposed subsector development interventions 2
Background to the study Commissioned by SIDO under Rural Business Support Services (RBSS) Sub Component of MUVI Program The study was conducted by MMA The primary objective is to enhance a clear understanding of the sub sector to enable programming of strategic interventions under the MUVI RBSS Program 3
Specific Objectives of the study Specific objective of the study are; Undertake market analysis of sunflower (global, regional & national) and assess critical success factors for the market Analyse sub sector product flow, value addition and information flow Analyse sunflower sub sector and value chain actors, roles & interrelationships Analyse factors affecting the growth and competitiveness (constraints & opportunities) of the various supply channels 4
Specific Objectives of the study Analyse value chain governance, horizontal and vertical integration and impact on RMSMEs Identify potential business solutions (value chain upgrading strategies) that will address constraints and tap the opportunities Identify potential for public and private partnerships in developing the value chains 5
Specific Objectives of the study Offer a set of recommendations based on the value chain analysis specifically: Highlighting specific constraints analyses of the recommended value chains to be supported Organisational and value chains support activities Investment proposal 6
Methodology Steps included: Review of literature Interviews and focused group discussions with representatives of the entire value chain actors Analysis Validation Final reporting 7
Global perspective of Sunflower sub sector Major oil seed crops include Copra, Cotton (cotton seed), palm, groundnuts (peanut), rape (rape seed), Soybean and sunflower. World production of oil crops stands at over 385 million metric tons. The world s demand for oils and fats has doubled for the last 15 years and is projected to reach 217 million metric tons by year 2030. Crude palm oil and soy oil currently account for almost 50% of the global demand of the crops. 8
Global perspective of Sunflower sub sector FAO projects the oil seed industry to maintain growth pace among the major agricultural sectors up to 2010. The global consumption of edible oil is forecasted to grow at 2.5% annually between 1999-2010. Globally exports are projected to grow by about 15 million metric tones by 1020. Brazil and Argentina (Soy oil) and Malaysia and Indonesia (Palm Oil) will increase their share. 9
Global perspective of Sunflower sub sector Sunflower oil world trade has been stable in the last five production years. However, Argentina is still holding a leading position. The volume traded in 2003 reached 3.4 million tons for US$ 1,583 million. Argentina (30%), Ukraine (27%) and The Netherlands (10%) are the main exporters. 10
Sunflower subsector in Tanzania Sunflower production is growing and locally produced sunflower oil is contributing to about 40% of the national cooking oil requirement. With minor sunflower producing regions (e.g. Tanga, Kagera) taking up production, local production is expected to grow further. Sun flower production is a profitable venture at the farmer level with a gross margin of up 60% earned by a farmer. The farm gate prices in many parts of Tanzania fluctuate between TShs 18,000 to TShs 30,000 per 60-65 kg bag (TShs 200-500/kg). 11
Sunflower subsector in Tanzania Tanzania edible oil demand is estimated to be 18,000 tonnes per month. The industry needs 250,000 tonnes a year of edible oil. Domestic production of seeds can not meet the demand of seeds for processing. Sunflower has also been designated as a potential crop for the bio fuel initiative of the Government of Tanzania. 12
Sunflower subsector in Tanga Production Sunflower can be grown in almost all parts of Tanga region using different varieties for different agro-ecological zones. Currently sunflower is grown in the districts of Handeni, Kilindi, Korogwe, Pangani and Muheza with potential in Mkinga, Lushoto and Tanga Production is predominantly by small holder farmers in small acreages of 2-4 acres and maximum 5 acres 13
Sunflower subsector in Tanga It can be estimated a total of 12,000 acres was cultivated in 2008 production period (Handeni about 8000; and 4000) shared between the other districts. Total production of sunflower in 2008 can be estimated at about 6,000 metric tons (Handeni 4,000 mt) Sunflower yield is 520 kilos/acre (8 bags of 65kgs/acre). Limited trade between the region and the rest of the country - limited by small volumes produced 14
Sunflower subsector in Tanga Inputs/Seeds In Handeni, the district council stocks seeds for farmers at a subsidised price (TShs 2,500). Private stockists (agro dealers) of seeds also operate in Handeni and Korogwe. Farmers own seeds are also used. Church based organisations e.g. Passionists Fathers stock seeds for farmers in the surrounding area Pannar seed varieties costs up to TShs 6,000/kg 15
Sunflower subsector in Tanga Processing Total installed capacity for processing is about 52.5 mt/day Currently 8 motorized SME processing installations of Chinese and TEMDO Technologies; Handeni (3); Muheza (1), Tanga (2), Korogwe (1) Pangani (1) ; combined capacity of 12.5 mt/day 16
Sunflower subsector in Tanga Processing 1 medium scale processor in Tanga Town with installed capacity of 20 metric tons a day Hand/mechanical oil press are also available Actual quantities processed is about 6 metric tons/day and only during the production period 17
Focus of study Subsector Definition: Sunflower edible oil for local markets 18
Sunflower Sub sector map 19
Subsector support actors and functions Tanga Regional, Districts and local authorities Confederation of Tanzania Industries (CTI) World Vision Tanzania- Agriculture Sector Development program Tanzania Chambers of Commerce, Industry and Agriculture (TCCIA) The Centre for Agricultural Mechanization and Rural Technology (CAMARTEC) Tanzanian Engineering and Manufacturing Design Organisation (TEMDO) Private sector investments 20
Profitability Analysis Profitability comparison for current and best practices 21
Profitability Analysis Farmers can still increase profitability up to a gross margin of 68% using best farming practices. Production When a farmer sells sunflower seeds = 60% When a farmer sells sunflower oil and seed cake = 75% When a farmer is leaving seed cake with the processor = 64% 22
Processing Profitability Analysis Profitability when a processor buys sunflower seeds, mills and sell oil and seed cake = 39% 23
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Input supply Lack of /scarcity of improved/quality seeds Limited knowledge of the private dealers on what variety suitable for which agro ecological zone Business opportunity for private sector investment in seed supply Opportunity for community seed production and multiplication 24
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Production and farm management Sunflower diseases and pests Inadequate knowledge of best agronomic practices Small acreages for growing sun flower Rain fed farming practices resulting to low yield Private sector trainings in proper agronomic practices Increased production resulting from increased acreages cultivated Private sector investment on weather insurance 25
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Farmer organization Few farmer organisations in Tanga Weak organisations of farmers unable to undertake group marketing Low literacy and weak management of farmer groups Presence of institutions with mandate and willing to facilitate strengthening of farmer groups 26
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Processing Low efficiencies of manual/non motorised processing machines Processing skills are lacking mainly among small holder processors Presence of installed equipments for SME processing Presence of suppliers of processing machines who are willing to give after sale services 27
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Marketing Small volumes and no bulking limits market access Stiff competition between sunflower oil and imported edible oil High demand for sunflower oil due to health reasons The opportunity to increase domestic production and substitute imports for edible oil Models for Farmer Organisations for group marketing exists 28
Tanga region sunflower Sub Sector Dynamics Constraints and opportunities Finance Limited accessibility of financial services for small scale sunflower agricultural enterprises/ farmers Limited financing mechanisms for large scale investment in rain fed sunflower farming Presence of savings and credit cooperative society initiatives to mobilize group finance Financing opportunities available through contract farming 29
Viable business solutions 1. Quality Sunflower Seeds; (a) Community seed production and multiplication (QDS). Estimated demand for seeds: 33.5 metric tons of quality seeds Potential suppliers: TOSCI, ASA; Private companies 30
Viable business solutions 2. Training in basic agronomy, disease control and pest management Estimated Demand: 120,294 Farmers in Handeni currently growing sunflower and more from other districts Potential suppliers: SUA, TOSCI, ASA; private firms 3. Institutional strengthening of farmer s groups and associations Estimated Demand: About 3 farmer clusters in Korogwe, and 2 in Muheza and 6 in Handeni and others in Pangani and Kilindi Potential Supplier: FAIDA Mali, RUDI 31
Viable business solutions 4. Training of SME processors in sunflower processing, entrepreneurship and business management Estimated Demand: 3 farmer clusters (1 in Mashewa and 2 in Handeni Kabuku and Misima) Potential suppliers: TEMDO; private firms 5. Market information provision Estimated Demand: About 3 farmer clusters in Korogwe, and 2 in Muheza and 6 in Handeni and others in Pangani and Kilindi Potential Supplier: Communication and knowledge management strategy for rural business (MUVI component 32
Viable business solutions 6. Financing for sunflower production and processing Estimated demand: More than 120,294 Farmers Potential supplier: PASS, Through contract farming arrangement 33
Sunflower sub sector driving forces Macro economic issues (exchange rates) affect import and export trade of crude oil and sunflower seeds. The zero tariff rates for the East African block Price of SME processed sunflower oil compared to imported oil (1300/liter VS ) A growing local market for sunflower oil Importation of crude palm oil still remains a big driving force Removal of import tariff of 10% in 2009-2010 budget 34
Subsector or Value chain? We identify value chains by looking at key element of a value chain 1. Sharing of economic gains 2. Governance 3. Market focussed collaborations 35
Subsector or Value chain? 1. Economic gains are concerned with the generation and distribution of returns arising from the various functions, e.g. design 2. Governance ensures that interactions between firms exhibit organisation rather than being random 3. Market focused collaboration - different business enterprises work together to produce and market products which meet the needs of a targeted consumer Conclusion: sub sector is at an infant stage of development; no evident of emerging value chain 36
What next? Proposed value chain for development Business Module for the sub sector development Proposed sub sector development interventions 37
Proposed Value Chain 38
SS development Business Module 39
Strategic interventions 1. Promotion of sunflower commercialization in Tanga region Facilitate farmer mobilisation and training in best agronomic practices for sunflower Lobby for sunflower sub sector development to be taken up and promoted in the development agenda of the regional government Identify missing link in demand and supply of critical services Make available to private sector information on investment opportunities in the sub sector. Enhance marketing and a market linkage for sunflower seeds Promotion of a sunflower SS Development Platform in Tanga 40 and link with national forums.
Strategic interventions 2. Development of a comprehensive contract farming business module Develop contract farming modalities between farmer organisations with processors (small, medium and large scale). Assessment of critical services, their providers and their availability Promote private sector service providers to work in the sector 41
Strategic interventions 3. Making seeds readily available and affordable to farmers Initiate a community based seed multiplication approach to seed production (learning from best practices) Engage and certify progressive farmers to produce and multiply seeds Train farmers and extension personnel in seed production Support seed certification at farmer level Encourage private sector seed suppliers to supply seeds in the region. 42
Strategic interventions 4. Enhance availability of financial services Identifying a financial service provider to provide services within the integrated framework of the contract farming module Design a package through which farmers can access credit and later pay for it as a deduction from sale of their outputs 43
Strategic interventions 5. Develop weather crop insurance module to be piloted in the sub sector. Developing the module bearing in mind its application in the crop specific context Testing the module and its application Setting up a framework and structures for its application 44
Strategic interventions 6. Research and develop small and medium scale processing technologies. Research and develop cost effective small and medium processing technologies Identify local entrepreneurs to pilot identified technologies Review and disseminate the improved technologies 45
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