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Three Simple Steps to Create Huge Value and Impact in Agriculture
Some leaders try to change the economic situation of farmers by using unsustainable or 'emergency' methods to increase their income “out of thin air”.
Such action works for a short while and creates a deep disappointment once 'the magic' is gone and the government stops pumping money or no longer is actively helping.
So how can we increase the income of hundreds of millions of farmers around the world for a long time and not by "single-shot"?
Well, one way would be by changing farmers' profession.
By large, this is what happened in the past 30 years in China that has become a leading industrialized country with strong immigration from the village to the city (BTW – similar happened in Russia after the regime changed in the '90s).
While it offers some temporary comfort, it doesn't improve the state of farming and farmers. Because the agri-sector is left far behind the leading agricultural countries/economies.
We can also expect that it will leave the problem of food availability as it is, or even worse.
The other option is to improve and increase the direct income of farmers from agriculture activities. This article focuses on the Stages to do exactly that.
To increase the income of farmers from agriculture we need to agree that - the land of the farmer is limited, and so, increasing the income means either:
(a) Increase the value of crops per kg.
(b) Increase the yield per hectare.
(c) And the best is to increase both Value and Yield.
Doing so we create – a sustainable growth of the agri-industry and contribution to the farmer and the country economy.
A Case-Study - Mango
Why I use mango as an example?
Because it is a common crop around Africa and Asia. It is popular and loved by most people, and therefore has high demand by food markets. Mangoes also receive a high price for high quality.
Yet, the current economic situation of farmers growing mango is bad, mainly because of fruit flies, which affect the mango quality and by that its price and availability.
So by demonstrating how we increase the income of farmers growing mangoes, is practically like saying – "Everything is possible".
To make this into a case-study I will use real-life, field cases numbers, which represent much of the Mango industry around Africa and Asia.
Note, although the case-study represents much of the Mango industry, it may not fit 100% to the situation in your country.
However, I believe it will enable you a close and clearer view into the industry in your country, and a good comparison to other locations, plus it will give you the perspective of such an example.
Let's start with the Main 6 Factors, which are the key factors of farm and agri-industry success – we will use our farm as an example -
* Factor 1: Farmer's income (USD/kg) – 0.05 to 0.5. Here we use 0.2 $/kg.
* Factor 2: Yield (kg/Ha.) – 3,000 to 10,000. Here we use 5,000 kg/Ha.
* Factor 3: Fruit fly infestation – 30% to 80%. Here we use 50% fruit loss.
* Factor 4: All expenses per hecare – 900 $/Ha (I used a very low figure).
* Factor 5: Export – in most cases – zero (0).
* Factor 6: National income from mango export ($/Ha) – neglected or zero (0).
Value Creation: Current - Dark Future
Now let's work with the numbers to see it the way the farmer see it –
* Potential Income ($/Ha.) – 5,000kg X 0.2$ = 1,000$
* Expenses and Loss ($/Ha.) – 900$ plus 500$ (due to 50% fruit fly infestation).
* Total Profit ($/Ha.) – 1,000 - 900 - 500 = -400$ (Red = Loss)
Under current situation farmers growing Mango lose money or in rare cases break even.
So a typical farmer is losing hundreds of $$$ per hectare, every year!
This creates strange situations where a country that is a major mango producer imports mangoes for domestic consumption.
That explains well why so many farmers abandon their Mango farms, and the others are under extreme stress of loans from banks.
Note, in reality, it is hard to know which fruit is infested and which is not. So farmers sell also much of the infested fruits and this way manage to 'break-even'.
As a result, the 'trust' and general 'demand' for their produce is compromised and export is impossible.
Please note a part of an email I recently received, clearly presenting the magnitude of the problem…
In the following email, I asked the farmer for the price he gets today for his produce. Below is the answer I received …
No comments needed after the above statement!
So this is the current situation.
From here on we will present a way how can we increase the value, and therefore the farmer income, by hundreds of percent!
Value Creation: Stage 1 - Stop The Bleeding
In Stage 1 we will change only one factor - Factor #3 (fruit fly infestation).
Let's see what happens when the infestation effect and fruit loss is reduced from 50% to near 0% and how will it influence on other factors.
* Potential Income ($/Ha.) – 5,000kg X 0.2$ = 1,000$
* Expenses and Loss ($/Ha.) – 900$ (cost as before) plus 0$ (due to fruit fly infestation).
* Total Profit ($/Ha.) – 1,000 - 900 - 0 = 100$ (Green = Profit)
Effective fruit fly control moves the Mango farmers from the 'Red Zone' (losing) to the 'Blue Zone' (profit).
We see that simply by decreasing the Fruit Fly Infestation, Factor #3, the farmer can change his status from Loss to Profit.
But the influence is not only on the quantity – the higher quality will bring its contribution as well and increase the income if we do it right.
Still, that is the first element and a game-changing difference for the farmer and the country's economy.
The repeated failure to overcome this challenge has spread despair and disappointment among farmers and governments alike.
One may wonder, how do we get to almost 0% of fruit fly infestation?
This is the place to note that Biofeed FreeDome delivers a 21st Century perfect solution to the fruit fly problem, as it is; very highly effective (near zero% of infestation) and chemical-free.
Value Creation: Stage 2 - Bouncing The Value
Now that there is no fruit fly infestation (and no chemical residues) our way to Export – the Factor #6 - is open.
Once again we will change only one factor, this time; Factor #6 (export).
We will enable the farmer to Export his fruits and to increase his income per kg from 0.2$ to 0.5$ (the farmer price at the farm gate).
That means that Factor #6 directly affects Factor #1 - the income ($/kg).
* Potential Income ($/Ha.) – 5,000kg X 0.5$ = 2,500$
* Expenses and Loss ($/Ha.) – 900$ plus 0$ (due to fruit fly infestation).
* Total income/loss ($/Ha.) – 2,500 - 900 - 0 = 1,600$
Effective fruit fly control (Stage 1) and Export (Stage 2) make a remarkable transformation to Mango farmers and the industry.
Wow, when the farmer starts exporting we see that he (and the country) enters a whole different place and 'game'.
NEXT (and last stage)…
Value Creation: Stage 3 - Improving Variables
Now that there is –
(a) High-Quality: no fruit fly infestation and no-chemical residues, and
(b) The gate to exports, and therefore higher value per kg, is open.
Now we can finally study the effect of improving Factor #2, which is - Increasing the Yield per Hectare.
How much can we expect to increase the yield from the current average of 5,000kg?
By 5%, 10%, maybe 30% or even 50%...?
Well, how about by 200%, 400% or even 600%?
You see, the Israeli farmers which we work with, they increased the yield to the level of 30,000 to 50,000kg per hectare!!
So I assume that if we target for 20,000kg per hectare, 400% yield increase, it is ambitious but far from being 'impossible'.
Now let's see how it affect the Farmer and the Country's economy -
* Potential Income ($/Ha.) – 20,000kg X 0.5$ = 10,000$
* Expenses and Loss ($/Ha.) – 900$ plus 0$ (due to fruit fly infestation).
* Total Profit ($/Ha.) – 10,000 - 900 - 0 = 9,100$
The Mango industry is fully transformed at Stage 3. Farmers moved from Losing to Making Money and Profitability grew by thousands of percent.
Wow, can you believe it?
Now let's sum up the stages.
Starting point – Unsustainable Mango industry where the farmer is losing 400$ per hectare, and need the government support, plus the country has to import food.
Stage 1 – Reducing the fruit fly infestation. It immediately moves the farmer to profitability, even if small - 100$. And… no more need to import this type of food.
Stage 2 – We open the gates to exports. Now the price per kg jump and with it the profitability increases. The bottom line is a great jump in income per hectare to 1,600$.
Stage 3 – We increasing the yield. Now income jumps again to the imaginary sum of 9,100$. No need to import – rather increase the export and bring currency into the country.
And in short this is what the farmer sees -
Current; (-400$) => Stage 1; 100$ => Stage 2; 1,600$ => Stage 3; 9,100$
In 3 quick (1-3 years!!) and simple Value Creation Stages, we increased the Value per Hectare for the farmer from -400$ to 9,100$!
Tell me, how many percents is that?
At the state level it means that 1,000 hectare -
Under 'Current' management may cause annual loss of 400,000$, which eventually the government needs to cover.
But, after applying the 3 Stages of Value Creation the area create a profit of 9,100,000$.
Furthermore, by the time the exported mangoes reach the markets of Europe, USA and elsewhere, the local market of the exporting country will benefit more than twice than the farmer!
Note that while at the Current situation farmers cannot invest more (because they are losing), as they move to higher Stages they can easily increase their growing and crop protection expenses yet, remain profitable.
And what the government gets out of it?
* The government will stop spending a fortune on support of poor farmers.
* The government is growing a profitable and powerful industry that will help develop other areas, instead of looking for help and money.
* The government is starting to collect taxes instead of distributing support.
* The government is creating jobs and a healthy export-based Mango industry.
* The government is creating a model to be seen and copied by other crops and other industries.
* The government develops strategic capabilities, such as: exporting agri-fresh and healthy products, the confidence of the markets in the state's capabilities, demand for produce originating in the country.
* The government is developing ancillary industries and supporting the mango industry and exporting.
* The government is building farmers' confidence in themselves and their ability.
We can easily assume that for every Dollar the farmer makes, the country's economy is making 2 to 4 USD in the process from the farm to the export market.
Therefore, at Stage 3 the country's economy is making 18,000$ to 36,000$ per hectare, and 18 million to 36 million per 1,000 hectares instead of losing, as it was before.
No matter how you look at it, the Three Stages to Creating Value are Win-Win situation.
For a greener world
Free of sprays
Full of joy
See you soon,
Better produce... Better future... Biofeed...
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