Produce preparation and packaging costs

Contents - Previous - Next

Produce preparation costs

Preparation of produce for the market can often be time consuming. However, money spent at an early stage on preparation and packaging should be more than repaid by higher prices and lower losses. Higher costs can be expected to result in higher returns. Preparation activities, sometimes undertaken by farmers but more frequently by traders, include:

• cleaning, such as removing soil and foreign matter;
• trimming, to remove unwanted leaves, stems or roots;
• sorting, to remove rejects and non-marketable produce (see Chapter 5);
• curing, for example as with onions, garlic or potatoes;
• grading, to separate produce into similar sizes and qualities before packaging, thus increasing the market value of the produce;
• waxing and wrapping, for example as with oranges in some countries, to preserve the produce and make it more attractive to the consumer.

Packaging costs

Most produce needs packaging. Exceptions are generally larger fruits and vegetables such as pumpkins and water melons which may be transported in bulk. Leafy vegetables, such as cabbages, are also often transported in bulk. Here the outer leaves themselves act as a form of packaging by protecting the inner leaves. There is no packaging cost but it should be remembered that the outer leaves are often thrown away before sale and thus there is a cost in terms of product loss.

Packaging serves three basic purposes. Firstly, it provides a convenient way of handling and transporting produce. Costs would certainly be much higher if everything had to be carried and moved without any form of packaging. Secondly, it provides protection for the produce. The efforts which are continually being made to improve bulk packaging are designed mainly to improve the protection offered rather than to increase the convenience of the packaging from a handling point of view. Finally, packaging can be used to divide the produce into convenient units for retail sale and to make the produce more attractive to the consumer, thus increasing the price at which it can be sold. The more sophisticated the packaging, the greater the cost.

Quite often the farmer will provide the packaging, such as jute or gunny sacks for maize and paddy, which is used right through the marketing chain. More complex and expensive packaging, such as plastic crates, will, on the other hand, normally be the trader's responsibility.

A fruit or vegetable may be packed and repacked several times on its way between producer and consumer, depending on the length of the marketing chain. The farmer may use one type of packaging (for example a sack) to take his produce to market. At the market a trader may transfer the produce to a wooden box or plastic crate for transport to the wholesale market. A retailer buying at the wholesale market may then transfer the produce to his own packaging and then repack it (for example in plastic bags) for convenient sale at his shop. All of these various types of packaging involve costs, and need to be taken into account when working out total marketing costs.

The simplest packaging cost to calculate is when the bag, box, crate or basket is used only once. All you then need to know is how much produce the package contains in order to work out the packaging cost per kilogram. Often, however, things are not that simple.

With the use of more sophisticated bulk packaging, every effort is made to use the packages over and over again. In these circumstances you need to make an estimate of how many times the container is used to arrive at a cost per journey. Allowance must also be made for repairs and for the cost of transporting the empty package back to the beginning of the marketing chain. If a trader owns his own vehicle and all his business is in one direction (that is from farms to town) then his cost of returning the containers is negligible. If, however, he has to pay transport costs for the empty containers this can increase his packaging costs significantly. An example of this calculation is shown in Figure 1.

The type of packaging used in a particular country and for a particular marketing chain will depend on the costs and benefits of using it. Thus, plastic crates are likely to be used more for produce marketing in a country where they are manufactured than in a country where a 100 percent import duty is charged on such crates. Sophisticated packaging will be used more when it significantly reduce losses; non-perishable produce will not require expensive packaging because the benefits of using it will be marginal. The possibility of using improved packaging made with local materials should always be studied carefully.

Figure 1
Calculating packaging costs

Assume that oranges are packed 20 kg at a time in wooden boxes which, with occasional repairs, can be used for 10 trips. A box costs $10, repairs and cleaning during its life costs $2 and each time the box is transported back empty to the producing area costs $1.

Then the packaging cost per trip is ...

[(original cost + repairs) ÷ no. of trips] + transport when empty

or

($10 + $2) ÷ 10 trips + $1 = $2.20 per 20 kg

and

$2.20 ÷ 20 kg = $0.11 per kg

Contents - Previous - Next