Cassava Market Opportunity and sub Sector Analysis
Nigeria is the largest producer of cassava in the world. Its production is currently put at about 34 million metric tonnes a year (FAO, 2002). Total area harvested of the crop in 2001 was 3.125 million ha with an average yield of 10.83 tonnes per ha. Presently, cassava is primarily produced for food especially in the form of gari, lafun and fufu with little or no use in the agribusiness sector as an industrial raw material. But the crop can be processed into several secondary products of industrial market value. These products include chips, pellets, flour, adhesives, alcohol, and starch, which are vital raw materials in the livestock, feed, alcohol/ethanol, textile, confectionery, wood, food and soft drinks industries. They are also tradable in the international market.
In 2002, the President of Nigeria announced an initiative to use cassava as a foreign revenue earner of five billion naira annually three years hence. To achieve this, there is need to develop the domestic market, diversify the use of cassava in industries, curtail the threat of the virulent form of the cassava mosaic virus and entrench national policies that will leverage cassava development in the country (Cassava Competitiveness workshop, 2002). Unfortunately, no supply chain structures exist for the commercialisation of secondary cassava products as primary source of raw materials for agro industries (Ezedinma et al, 2002). At the farm level, production costs for cassava are high relative to other countries. Production is not oriented towards commercialisation but instead farmers produce and process cassava as a subsistence crop (Dixon, 2002). The current status and potential demand for cassava and its secondary products as industrial raw material in Nigeria is neither unknown nor documented. To guide the commercialisation of cassava such documents are important. The absence of a commercial approach to cassava production and marketing in Nigeria justifies a synchronised approach involving several partners in the development of the sector. It has become imperative to provide data that will inform investment on the industrial development of the cassava sub sector. The development of the sector will also require initial activities in capacity building, product development, fabrication and transfer of processing technologies to target beneficiaries and development of clusters to supply identified markets.
Processing Problems and Issues
Cassava tubers consist of 60 to 70 percent water and have a shelf life of 2 to 3 days. Once harvested, the tubers have to be processed or consumed immediately otherwise the tubers begin to deteriorate. Transportation of fresh tubers from farm to processing sites therefore becomes critical for quality and cost reasons; such that transportation is a major cost component in cassava processing. The need for processing arises to stabilise the crop for storage purposes and price stability guaranteeing higher prices for farmers. However, the cost of acquiring simple processing machines is prohibitive for the small farmer and in the more humid cassava producing areas, the use of dryers is critical. There is also a need to ascertain accurately the effect of processing costs on the final price of the cassava products. This will also influence investment decisions especially for emerging agro industries. Unfortunately, credit on capital investments even for small processing plants is difficult to obtain due to risks and past experiences of banks with poor business ethics of clients.
Against this background, the challenge for cassava industrialisation lies with the reduction in the cost of production and transformation to enable the supply of cheaper processed products of desired quality and standards to markets including potential agro industries. This involves the identification of market opportunities, the organisation and training of clients, including farmers, processors, and traders to respond to the demands of existing and potential market opportunities to enhance effective farm agribusiness linkages and agricultural trade.
The general objective of this survey is to provide comprehensive information that will guide investment decisions in the cassava sub sector. The specific objectives are grouped under several headings namely: production, processing and equipments, transportation and cluster development, products and products development, market competitiveness and export.
The specific objectives are as follows
1. Identify the technical, institutional, socio-economic and policy opportunities and constraints for promoting the cassava sub sector
2. Assess the domestic market opportunity for cassava products (chips pellets, flour, starch, ethanol and so on) in Nigeria and suggest how this potential could be realised
3. Evaluate the economics of cassava production and processing costs structures (and profitability) of value adding cassava enterprises and suggest reduction strategy
4. Determine optimal locations of processing plants based on identical markets for various cassava products with markets
5. Provide information on marketing cost structure from rural to urban areas for cassava and its products and determine the break-even distance and volume for cassava transportation
6. Make recommendations on how to make cassava and cassava products competitive within the domestic and export markets
The analysis will follow a vertical agribusiness perspective in which we assume that the cassava sub sector is segmented into four categories were cassava is produced at the farm level by farmers, processed into chips, flour and pellets by processors, and used by agro industries to produce other products like ethanol, dextrin/adhesives, native and modified starch, etc for the other industrial (e.g. textiles, paper, wood, etc) and consumer (food and beverage) markets.
1. Provide information on the production cost for cassava per ha in the cassava producing states in Nigeria
2. Ascertain the cassava varieties available and their actual and potential yield
Processing and Equipments
3. Evaluate the economics of existing cassava processing equipments and new equipment such as flash dryers, solar dryers, centrifuge, washing machine, peeling machine etc.
4. Ascertain the current status of processing technology, and local maintenance capacity in Nigeria
5. Ascertain and evaluate the conversion ratios for different cassava products
Transportation and Cluster Development
6. Provide information on transportation costs from rural to urban areas for cassava tubers, gari, etc on kilometre per tonne basis for 30 km, 60 km and 90 km radius
7. Describe the supply chain requirements and identify preliminary logistic framework for cluster development in the SE, SW, and middle belt of Nigeria
Products and Products Market
8. Provide information on price trends for cassava and cassava-based products relative to other dry grain products like maize, sorghum, and rice
9. Determine the availability and existing use of secondary cassava products and the key agribusiness firms as well as their supply chain structure (e.g. farmer groups, processor groups, etc)
10. Identify and assess the status of existing and potential industries (e.g. food, animal feed, textile, paper, plywood, glue, pharmaceuticals, starch, alcohol and so on) that use or can potentially use cassava products
11. Ascertain the market share and size of use of cassava as raw material in these identified industries in Nigeria
12. Identify existing and potential volumes, prices, quality standards, and delivery schedules for cassava based products used by the various industries in Nigeria
Competitiveness and Export
13. Using Private cost ratio, domestic resource costs, nominal protection coefficient for output and profitability coefficient ascertain the degree of cassava competitiveness in Nigeria
14. Provide information on export quality requirements, delivery schedule, shipping costs and requirements, international prices for cassava based products, and niche markets for Nigerian cassava (e.g. composite pellets, etc)
15. Provide any other information and recommendations that will guide investment decisions in the cassava sub sector
Methodology of the market investment Survey
The market and sub sector study will be carried out through a review of existing documents and surveys. A sub sector is a vertical slice in the commodity chain from input supply to consumption showing all the stages and key players in the chain. In the cassava chain the study will focus on cassava producers, processors and traders as well as banks, input dealers and extension institutions. The study will cover all the major sectors where the cassava and cassava products are (potentially) utilised. These include the food, feed and industrial sectors.
Data will be collected in three stages: first wherever available, published data would be used to establish the structure, conduct and performance of cassava sub-sector. Secondly, a rapid appraisal survey will be conducted using focussed group interviews and key informants to obtain information on trading patterns, transportation facilities, processing costs and marketing systems. The third stage of the study will focus on the captains of industry that use or are potential users of cassava. This industrial survey will among other things focus on the size and volume of different cassava commodities required in the domestic market.
The study will require extensive travels to institutions, industries, and various States of the federation especially the south-south and south east zones of Nigeria. Visits will be made to the Projects Coordinating Unit, of the Federal Ministry of Agriculture and Rural Development located at Abuja, the National Root Crops Research Institute, Umudike, the State Agricultural Development Projects, reputable cassava fabrication centres such as IITA, ARCEDEM, PRODA, Adis Engineering Lagos, Nova Technologies, the Export Processing Zone Calabar, and Chambers of Commerce and so on. Apart from Abuja, various agribusiness firms located in the major industrial areas of Nigeria and particularly the south-south and south east zones the will be visited. These include industries located in Lagos, Ibadan, Kaduna, Kano, Port Harcourt, Onitsha, Nnewi. Aba, Calabar, and so on.
Information to be collected will include production and price data for cassava tuber, cassava based products (gari, chips, flour, starch, etc), and grains such as maize, sorghum, soybean, and rice; availability and cost of cassava processing technology, maintenance capacity, and location of reputable fabricators and large scale processing industries in Nigeria; availability of improved cassava varieties, yield per ha, and suitability for different cassava based products; supply chain requirements, structure for commercialisation and development, market size, segments by product and prices, export limitations, opportunities and incentives, tariffs and barriers and so on.
This study will require a team of three (3) persons (Agricultural economist, Agronomist and post-harvest specialist). An agricultural economist will lead the team and will also collate and document a draft report for the study.
The duration of the survey will be two months while another month will be required to write up a draft of the sub sector survey.
Information on the production cost for cassava per ha in the cassava producing states in Nigeria provided
Information on available cassava varieties and their actual and potential yield provided
The economics of existing cassava processing equipments and new equipment such as flash dryers, solar dryers, centrifuge, washing machine, peeling machine etc evaluated
Information on the current status of processing technology, and local maintenance capacity in Nigeria provided
The conversion ratios for different cassava products evaluated
Information on transportation costs from rural to urban areas for cassava tubers, gari, etc on kilometre per tonne basis for 30 km, 60 km and 90 km radius provided
The supply chain requirements and preliminary logistic framework for cluster development in the SE, SW, and middle belt of Nigeria identified
Information on price trends for cassava and cassava-based products relative to other dry grain products like maize, sorghum, and rice provided
Information on the availability and current use of secondary cassava products and the key agribusiness firms as well as their supply chain structure (e.g. farmer groups, processor groups, etc) provided
Information on existing and potential volumes, prices, quality standards, and delivery schedules for cassava-based products used by various industries in Nigeria provided
Information on the degree of cassava competitiveness in Nigeria using private cost ratio, domestic resource costs, nominal protection coefficient for output and profitability coefficient provided
Information on exports quality requirements, delivery schedule, international prices for cassava-based products, and niche markets for Nigerian cassava (e.g. composite pellets, etc) provided
Selection of the most lucrative investments for detailed analysis based on the initial evaluation
Any other information and recommendations that will guide investment decisions in the cassava sub sector provided such as identification of target communities (producers), processors, middlemen, fabricators, and other key stakeholders, using criteria set in the project focus (market access, supporting services, high probability of success, etc).