Improvements in large-scale storage and handling
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How improvements have taken place
Until now, most large-scale storage of cereals in developing countries has been carried out by Government marketing boards, which have developed their activities with the technical and financial assistance of donors and international financial institutions. This has resulted in the building of large numbers of grain stores and mills, with a gradual increase in scale and the degree of technical sophistication. In some countries this has helped maintain food security and feed urban populations growing at 5% or more per annum. However there has also been much wastage, with stores often being inadequately located, inappropriately designed, and poorly managed and maintained. Stores have been built to support Government monopolies, on the assumption that no storage would be carried out by the private sector, but in the event of liberalisation, much of the capacity has been found unneeded and poorly located. Thus the National Milling Corporation in Tanzania has over 400,000 tonnes of storage capacity for which it must find new uses, to which must be added the large storage capacity of the State-sponsored cooperative unions.
Most grain stores have been designed for bag handling, reflecting the low cost of manual labour and the lack of spare parts and maintenance support needed for mechanical handling equipment. However bulk handling has been introduced throughout the developing world, with results which leave much to be desired. Too often, Marketing Boards have been unable to make good use of these facilities and they have become rusting monuments to inappropriate development assistance.
In international development assistance programmes, there is often much support for 'modern' capital-intensive systems. This was observed in a study commissioned by the Pakistan Agricultural Research Council (Courter, 1991). Between 1983 and 1987 no less than five feasibility studies advanced the case for investments in bulk handling. All the studies had used questionable assumptions, and four out of the five studies had assumed reductions in storage losses of 5% or more simply by switching from bag to bulk handling. Given that loss surveys have revealed storage losses of between 1.5% and 3.9% such reductions would have been impossible.
The case for bulk handling
There are, however, instances when bulk handling is economically justified in developing countries. This is usually at bottle-necks in the marketing chain, and where grain has to be handled in large volumes and at great speed, for example at port facilities, railway terminals or at mills. In such cases, investment in bulk handling facilities will often result in major cost savings, due to reduction in demurrage charges and down-time. The investment in one capital asset (bulk-handling equipment) produces major savings in the use of other capital assets (ships, trains, mills etc.). In most developing countries, labour costs are unlikely to be significant in the calculations, but bulk handling will reduce the risk that labour problems, strikes etc. will slow operations or bring them to a halt.
Bulk handling tends to be least viable for the long-term storage of grain, where stocks are only turned over once a year or less. In such cases the savings in labour and bags are unlikely to cover the high capital cost in silos, handling equipment etc. With well-run bulk storage complexes it may be possible to achieve a marginal reduction in storage losses but, due to poor operation and maintenance, losses are sometimes increased.
Bulk handling may also result from changes in farming methods. The introduction of combine harvesters in certain countries provides an incentive to start handling the grain in bulk. From the tank of the harvester the grain can be transferred mechanically to a bulk truck, from there to a bulk store or silo, and from there to a mill. This completely eliminates the use of the bags in the system, and overcomes problems of labour shortage and congestion which sometimes occur with a bag handling system. However in irrigated or high rainfall areas, the main benefit to the farmer may be by making it easier for him/her to plant a second crop on the same land.
Even where the economics of bulk handling are favourable, there are other reasons for caution. Most notably one should carefully assess whether the operating company or Marketing Board can obtain power, fuel, spare parts and qualified staff at all times and in sufficient quantities to operate and maintain bulk handling machinery. It should also be noted that some commodities, including milled rice and small grains, are difficult to handle in bulk. Paddy rice and wheat varieties such as Mexipak are abrasive, and require the use of special equipment such as rubber bucket elevators. Bulk handling also poses problems for commodities which must be handled in many different grades or small lots. For further guidance on how to decide between bag and bulk systems readers are referred to a useful bulletin published on this subject by NRI (Friendship and Compton, 1991).
Appraising the case for improvements
Technical improvements must be appraised within the context of a total commodity system. This includes the chain of activities linking farmers and consumers, suppliers of goods and services to the participants in that chain (banks, equipment suppliers etc.) and Government policy and regulatory activity. A four step approach is recommended based on an appraisal of the case for bulk handling in Pakistan (Courter, 1991):
Step 1: Fully understand the policy environment
As Governments gradually move towards more liberalised systems, public policies towards grain marketing are in a state of flux. If planning is possible at all, it is important to plan for tomorrow's system and not for today's. One needs to ask the following questions:
Step 2: Understand the operating company (e.g. Marketing Board! which is supposed to implement the project
Here one needs to carry out an institutional appraisal, with a view to understanding the way in which the company operates, the capability of staff and their perceptions of the current situation and any proposed changes. This will involve interviewing Directors and company staff from Chief Executive down to the level of store attendant.
Step 3: Identify possible improvement scenarios
In the Pakistan study, there were various alternatives to consider, involving different logistics, storage technologies, and mechanising different stages in the marketing chain, as follows:
(a) Alternative logistical arrangements:
The public sector handling system at the time of the study was more complicated than the system illustrated in Figure 1.3 (see Figure 1.3: Alternative Logistical Arrangements), having additional handling and storage operations which might be eliminated by rationalisation. It would be unwise to convert this existing system to bulk handling as this would compound logistical inefficiencies. For this reason it was assumed that bulk handling would be introduced within a rationalised system of the type illustrated above. The economics of bag and bulk alternatives are compared along this logistically efficient system.
(b) Various alternative storage technologies:
warehouses ('house-type godowns');
Permanent plinths (outdoor storage with bags stacked on plinths and covered by tarpaulins).
Open bulkheads (grain held outdoors between pre-fabricated steel walls and covered with PVC sheeting).
|Bag-cum-bulk||Using standard warehouses, with grain stored in bulk within bag walls.|
(c) Mechanisation of different stages in the marketing chain, as follows:
Converting only the mills for reception and handling grain in bulk (preliminary calculations showed this to be the most obvious place to start conversion);
Bulk handling from reclaim (i.e. unloading of grain for dispatch) at the storage centre to the mill;
Bulk handling from reception of grain at the storage centre to the mill;
Bulk handling from the market to the mill;
Bulk handling throughout the whole chain, from harvest to mill.
Step 4: Appraise the improvement scenarios and draw conclusions
The scenarios considered involved various permutations and combinations of logistics, storage technology, and the stages of the chain to be converted to bulk. For each scenario, the case for bulk handling was appraised alongside the bag handling alternative, using costbenefit analysis (CBA). Only those costs likely to differ between the two alternatives were included in the calculations. The methodology of CBA and its application in the Pakistan project are discussed in Annex 1.
Table 1.1 shows the results obtained for just one of the scenarios considered, i.e. deciding which type of store should be used when building new long-term storage facilities. The cheapest technology is the permanent plinth, cost per tonne estimated at US$6. 1 per tonne, compared to warehouses $13.9, concrete silos $14.8 and bulk warehouses $9.4. The cost of the open bulkhead system ($6.8) is similar to the permanent plinths, but this technology is unproven under Pakistani conditions, and effective pest control is likely to prove difficult.
This finding was interesting because investment programmes had concentrated on funding the construction of warehouses and to a lesser extent bulk storage, but had completely ignored the possibility of building permanent plinths, which were suitable in the dry conditions of Pakistan. To store the same quantity of grain, plinths require a capital investment of less than one sixth that for standard warehouses and about one eighth that for concrete silos.
The other analyses did however confirm that there was a good case for using bulk handling in port facilities, in the intake and handling of wheat at flour mills and (subject to thoroughgoing reform of the railways) for long-haul shipment by rail.
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