PROFITABILITY AND PRICE VARIATION OF GARRI IN SELECTED MARKETS IN OGUN STATE, NIGERIA ABSTRACT Ilavbarhe, K. O.* and Izekor, O. B. Department of Agricultural Economics and Extension Services, University of Benin, Benin city, Edo State, Nigeria. *Corresponding Author s email: obailavbarhe@yahoo.com A study on the profitability and price variation of garri among markets was undertaken. The study specifically examined the socio economic characteristics of garri marketers, determine the cost and returns of garri marketing, identify the causes of price fluctuations, the variation of the price of garri among marketers and identify the marketing constrains of garri in the study area. Data were collected through the use of a well structured questionnaire administered to 120 garri marketers. Descriptive statistics, gross margin and Pearson product correlation were used to analyze the data. The study showed that 74.2% of the respondents were females, 82.6% were within the age bracket of 21 50 years, 90.8% were married and were educated to some extent. The results of analysis revealed that garri marketing was dominated by wholesalers that accounted for 71.7% of the respondents. Profitability analysis showed that on the average, a marketer incurred a total cost of N 11,150 to N11, 500 per 60kg bag of garri in the selected markets in the two local governments area (LGA) but earned average revenue of N11, 800 to N12, 000 per bag which indicated that a marketer earned a gross margin of N500 to N700 with a marketing margin of N1500 to N1750. This revealed that garri marketing is a profitable venture in the study area. Cost of production and location of market were identified to be major causes of price fluctuations while lack of productive credit and transportation cost were found to be major causes of price variation among marketers. Keywords: Garri, Marketing, Profitability, Price variation, Ogun State INTRODUCTION Cassava is one of the most important food crops in Nigeria, its importance in bridging the food gap cannot be overemphasized. It is reputed for being a hardy crop, producing economic yield under conditions of drought, low soil fertility, locust attack, poor husbandry and other adverse conditions, where other crops cannot survive (Agboola, 1979; IITA, 1990; Sang, 1992). Cassava is grown throughout the tropic and could be regarded as the most important food crop in terms of the area of cultivation and total production (Ano, 2003). As a result of its hardness and high food producing potentials, the crop has assumed a place of prominence among other staple food security crop in the sub Saharan Africa and a mainstay of the rural and increasingly also, the urban population (IITA, 1997). Cassava roots are rich in energy, containing mainly starch and soluble carbohydrate but poor in proteins. These and other features endowed it with a special quality to bridge the gap in food security, poverty alleviation and environmental protection (Clair et al, 2000). The crop has continually played vital roles which include income for farmers, low cost of food source for both rural and urban dwellers as well as household food security (Nweke, 1996). Nigeria was the world largest producer of cassava with an annual production of over 34 million tones of tuberous roots in the 90 s (Nweke et al, 1996). The food and agricultural organization of the United Nations estimated cassava production in Nigeria as at 2002 to be 34 million tons (FAO, 2004). As a food crop, cassava has some inherent characteristics which make it attractive, especially to small holder farmers in Nigeria. It is rich in carbohydrate especially starch, and consequently has a multiplicity of uses and it is available all year round, making it preferable to other seasonal crops such as grains, peas for attainment of food security (FAO, 1995). Cassava as food is products followed by yam as the most important staples of rural and urban households in southern Nigeria both in terms of food and income generation (Nweke et al, 1997). Cassava require more processing than any other crop in Africa, its processing is however simple and do not require sophisticated tools and equipments or much capital input (Sang, 1997). Garri constitute over 70% of the processed consumable form of cassava that is consumed and marketed (Ngoddy, 1977). Garri, a fermented and roasted granular product from cassava was hitherto considered a poor man s food until recently. A report by Phillip et al (2004) reflects that garri is truly a natural food with urban presence. Cassava garri appears to be a food for choice even in the face of alternative food options in urban area (Maziya-Dixon et al, 2004). Garri, a local staple, is a convenient product being stored and marketed in a form in which it is ready to be eaten. It has a long shelf life, a year or more as long as it is not exposed to moisture. It is therefore attractive to urban consumer (Nweke, 2003) because of this; demand for garri is on the increase, higher and above its supply, which has led to rising prices. It has been identified that increase in price are mainly due to fall in production, which has led to increase in demand, rise in population and increase in purchasing power of consumers (Okuneye and Igben, 1987). While some studies have been made on the efficiency of garri processing (Nweke et al, 1997), not much have been done on the variation in NJAFE VOL. 9 No. 4, 2013 82
price of garri after processing and its marketing. It is to this end that this study was undertaken with a view to examine the price variation of garri among marketers with focus on the causes of this variation. The study will also determine the cost and returns to garri marketing and the effect of some socio economic characteristics of marketers on price variation of garri. The knowledge gained will serve as useful guide in policy formulation. METHODOLOGY The study was carried out in Ogun State. Ikenne and Sagamu Local Governments Areas were chosen for the study because of their high rate of garri marketing. Two major and centrally located markets were selected from the two Local Government Areas (LGA), that is Ereke Market from Ikenne and Sabo Market from Sagamu LGA. Random sampling was used to select 120 marketers of garri within the markets, 60 marketers from each of the market were selected. Data were collected through the use of a well structured questionnaire. Data were analyzed by the use of descriptive statistics such as frequency distribution, percentages and means. Gross margin was used to determine the cost and returns to garri marketing while Pearson product moment correlation was used to test the relationship between socio economic characteristics and the price variation among marketers. By way of definition, GM = TR TVC, where, GM = Gross Margin = TR = Total revenue and TVC = Total Variable Cost RESULT AND DISCUSSION Table 1 revealed the socio economic characteristics of respondents. It was observed that 74.2% of the marketers were females. This implies that men have lees interest in garri marketing and is in line with the finding that over 60% of agricultural marketing activities in African is in the hands of women folk (FAO, 1996). The table further showed that 41.7% of the respondents fell between 31 40 years of age accounting for majority of the respondents. However, it was observed that 21.7% were between the age 41 50 years and 19.2% were between 21 30 years old. It therefore showed that 82.6% of the respondents fell between 21 50 years, an implication that most of the respondents are in active age, when they have the ability of going about their business with vigour. On marital status of the respondents, the table revealed that 90.8% were married while 5.8% were single, 1.7% were divorced and 1.7% separated, showing that majority of the marketers were married. However, it also revealed that marital status is no barrier to involvement in the business. On the issue of household size, 81.7% claimed to have between 4 6 household members while 18.3% claimed to have above 6 household members. Table 1 further revealed that 58.3% had primary school education while 40% had secondary school education. This showed that the marketers were educated to some extent. 55% of the marketers claimed to have between 11 20 years of garri marketing experience while 41.7% had less than 10 years experience. Data analyzed showed that 71.7% of the respondents claimed to supply their ware to wholesaler while 10% sell directly to final consumer, 18.3% were found to be producer/ processor of the garri which they sell. Table 2 showed the causes of price fluctuation as observed by the respondents. 56.7% of the respondents claimed that cost of production was responsible for the fluctuations in price of garri, 28.3% perceived it to be as a result of market location while 11.7% and 3.3% opted for seasonal weather condition and number of producer respectively as causes of these price fluctuation. On issue of marketing constrains, 53.3% of the respondents revealed that financial constrains was the major problem in garri marketing, 41.7% suggested transportation to be the major constrain as shown in the Table 3. Table 4 shows the marketing margin of garri in the two selected Local Government Area for the study, it showed that the marketing margin is higher in Sabo market in Sagamu LGA (N 1750) than Ereke Market in Ikenne LGA (N 1500). Adekanye (1998) said a small margin can be regarded as proof that marketing is difficult. In this regard, Ereke in Ikenne LGA is considered to be more efficient than Sabo market in Sagamu LGA. Table 5 revealed that acquisition cost accounted for 91.3% and 90.6% of the total cost for Ereke and Sabo market respectively. The cost of transportation gulped 4.3% and 4.9% of the total cost for the Ereke and Sabo market respectively. Local government and storage cost accounted for equal percentages of 1.7% and 1.8% for both markets. The table also revealed that a market incurs a total cost of N11500 and N11150 per 60kg bag of garri and earns a gross margin of N500 and N700 per bag for Ereke and Sabo market respectively suggesting that garri marketing is a profitable venture in the study area. Some of the causes of price variation among marketers are shown in table 6. The result identified finance problem and transportation cost as major causes of price variation among garri marketers with a mean of 3.62 and 3.55 respectively. Other problems identified include inadequate facilities, low demand and exorbitant market charges. NJAFE VOL. 9 No. 4, 2013 83
Table 1: Socio economic characteristics of respondents Socio economics characteristics Frequency Percentage Sex Male 31 25.8 Female 89 74.2 Age 20 12 10.0 21 30 23 19.2 31-40 50 41.7 41 50 26 21.7 > 50 9 7.5 Marital Status Single 7 5.8 Married 109 90.8 Divorced 2 1.7 Separated 2 1.7 Household Size < 4 - - 4 6 98 81.7 > 6 22 18.3 Level of Education Primary 70 58.3 Secondary 48 40.0 Tertiary 2 1.7 Marketing Experience 10 years 50 41.7 11 20 years 66 55.0 > 20 years 4 3.3 Marketing Status Producers 22 18.3 Wholesalers 86 71.7 Retailers 12 10 Table 2: Causes of fluctuation of garri Causes of price fluctuations Frequency Percentage Cost of production 68 56.7 Location of market 34 28.3 Weather condition 14 11.7 Number of producer 4 3.3 Source: survey Data, 2013 Table 3: Marketing Constraints of Garri Marketing Constrains Frequency Percentage Financial problem 64 53.3 Location of market 50 41.7 Weather condition 4 3.3 Number of producer 24 1.7 Table 4: Marketing Margin for Garri Price/ 60kg bag Ereke Market Sabo Market Selling price 12000 11850 Purchasing cost 10500 10100 Marketing margin 1500 1750 NJAFE VOL. 9 No. 4, 2013 84
Table 5: Cost and return analysis of Garri marketing Item Ereke Market Sabo Market Amount % Total cost Amount % Total cost Acquisition cost 10500 91.3 10100 90.6 Packaging cost 100 0.9 100 0.9 Transportation cost 500 4.3 550 4.9 Local govt. levy 200 1.7 200 1.8 Storage cost 200 1.7 200 1.8 Total 11500 100 11150 100 Gross revenue 12000 11850 Gross margin 500 700 Source: survey Data, 2013 Table 6: Causes of price variation among garri marketers Causes of price variation Mean Standard deviation Finance problem 3.62 0.611 Transportation cost 3.55 1.180 Inadequate facilities 3.25 0.638 Low demand 1.60 0.653 Exorbitant market charges 2.45 10.02 Table 7 showed the relationship between some economic characteristics of the respondent and price variation of garri. It showed positive and significant relationship between the age and price variation which implies that as market ages increases, the variation of the price of garri also increase. Therefore, there will be more price variation among older marketers than younger one. However, sex and educational level were found to have no significant effect on the price variation of garri in the study area. Table 7: Relationship between the socio economic characteristics and garri price variation Variable Correlation co-efficient Probability level Sex - 0.110 0.231 Age 0.264 0.004 Educational level 0.032 0.728 CONCLUSION AND RECOMMENDATION Garri marketing in the study area was found to be mostly dominated by women. The business was also found to be profitable. Finance and transportation cost were identified to be the major causes of price variation among garri marketer while cost of production and location of market was also found to be major reasons for price fluctuation in garri marketing. Age was found to have a positive and significant relationship with price variation and the marketers. Based on the findings that finance is the major problem facing the marketers and cause of variations in prices, it is therefore recommended that there is the need for the provision of credit facilities to the marketers which will eventually enhance marketing efficiency. Also, the marketers are advised to come together to form marketing cooperative from which members will obtain loans at very low interest rate to finance their business. Furthermore, the three tier of government can do their part by renovating existing bad roads especially those that link rural area with urban area. This will help reduce the problem of transportation and location of the market. REFERENCE Ano, A. O. 2003 Studies on the effect of Liming on the yield of two cassava cultivars. In: NRCRI Annual Report 2003:9. Agboola S. A. 1979. An Agricultural Atlas of Nigeria, Oxford University Press, Nigeria.248 Clair, D., A. Frelet, G. Aubert, E. Collins, and E. Boudon-Padieu, 2000. Improved detection of flavescence dorée and related phytoplasma in the elm yellows group in difficult material, with specific PCR primers that NJAFE VOL. 9 No. 4, 2013 85
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