Adetunji's Corrected Journal -4

Journal of Rural Res. & Information (Vol.6; No.1:2011) Adetunji,M.O.

STRUCTURE, CONDUCT AND PERFORMANCE OF FRUIT MARKETING IN SURULERE LOCAL GOVERNMENT AREA OF OYO STATE, OGBOMOSHO.

Adetunji, M.O. Department of Agricultural Economics And Extension,

P.M.B. 4000, Ladoke Akintola University Of Technology, Ogbomoso, Oyo State, Nigeria

e-mail: [email protected] Tel: 08033601965

ABSTRACT

The study examines the structure, conduct and performance of mango marketing in Surulere

local Government Area of Oyo state. Cluster sampling technique was used to select the

respondents from the four markets located in the study area. Primary data was collected through

the aid of structured questionnaire from the 95 respondents selected from the four villages in

Surulere Local Government Area of Oyo State.

The socio-economic characteristics of the respondents revealed that 84.2 percent are

married, 9.5 percent are widowed while 6.3 percent are single. Also 60 percent of the

respondents were female while 40 percent are male. Only a few of the respondents have no

formal education, majority of them have one form of education or the other. Quantity of mangoes

sold by respondents per day ranges from an average of 27 baskets and the major source of

mango is from the wholesalers who in turn buy from the farmgate. Transportation of mangoes is

mainly by vehicle and the marketers’ source of fund is from personal effort. Most of the

respondents made use of hired labour with an average labour cost and transportation cost of

about N600 and N2,160 daily respectively daily. The gross margin and marketing margin are

N5,309.95 and N8,100 reaspectively The result shows that fruit marketing is profitable with an

average income of N9,362 and the market is perfectly competitive with herfindahl index of 1.1.

It is therefore, recommended that in order to make mango marketing a viable business venture,

good and motorable roads should be constructed in the remote areas for easy collection of

produce from the farm gate and also provision of storage facilities to increase the shelf life of the

fruits.

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mailto:[email protected]


1.0 INTRODUCTION

Fruits are important in the diet of man chiefly for their minerals and vitamins. They serve

as natural sources of vitamins. Most fruits contain large quantities of sugar and vitamin A and C,

which is not available in adequate quantities in staple foods. They also contain iron, calcium etc

in useful quantities and acids that promote bowel movement. Since fruits are normally eaten

fresh rather than cooked, the vitamin content is not diminished in preparation process. Fruits are

palatable and are often consumed in large quantities thus, contributing greatly to the nutrient

intake. Fruits are essential part of traditional Nigerian diet because of their nutritional and

economic worth. However, enough of fruits needed are not available in the right quantity

therefore; less fruits are consumed against the daily required quantity (Joseph and Adeoti

(1996).

Many fruits are being produced in Nigeria, among these are oranges, banana, plantain,

mangoes and cashew. The fruit and vegetable sub-sector of the agricultural sector in Nigeria has

not been fully utilized and exploited. Due to the highly perishable nature of fruits, there is a

fervent need to expand their processing and marketing so as to serve as a way of reducing

wastages and also disposing market surpluses.

Fruits are also inexpensive source of protein and they act as supplements on substitutes to

animal protein like meat and fish. The fruit sub-sector is a fraction of the contribution of the

agricultural sector of the GDP Gross Domestic Product, which has been at an average of 35%

after the oil boom era. This shows the relevance of the fruits sub-sector to the economy as a

whole. They are also very important because of their various uses such as food for man, feed for

animals, as well as for medicinal purpose. It serves as indispensable raw materials for industries

that specialize in producing fruit products e.g. juices, jelly jam etc. When compared to crops

such as maize, groundnut and rice, fruits are sold for high prices. A combination of high yield

and price in heavily populated areas means that farmers will make good income from its sales.

The fruits marketing system in Nigeria is characterized by the urgency to sell because of

the high perishability of these products. The existing marketing system of fruits in Nigeria is

dominated by free entry therefore, there is a need for an efficient marketing system for fruit.

Betyl and Molly (1986) identified the major problems of grocery marketing in the south west

Nigeria in order of importance as: storage, transportation grading and packaging, advertisement

42


and labour on a contrary is the order of importance of major problems affecting the marketing of

fruits and vegetables as identified by Swindale and Bilinsky (2006). In both cases the fact still

remains that marketing is dynamic and so there is still room for improvement and latest

occurrence about fruit marketing is necessary.

In Nigeria, the fruit farmers are mostly small farm holders who are scattered over a large

expanse of land. The farm gate middlemen are the country buyers. The commissioned agents

bridge the gap between the farm gate middlemen and the wholesalers and thus play an important

role in the process of price formation. The wholesalers play a crucial role in the marketing of

fruits by buying fresh fruits as well as financing, transportation, sorting grading etc.

Mango Production in Nigeria

For the purpose of this study, Mango, Mangifera indica, which is the most economically

important fruit crop in the Anarcardiaceae family (FAO statistics 2001) will be considered.

Mango fruit is very popular with the masses due to its wide range of adaptability, high nutritive

value, richness in variety, delicious taste and excellent flavour. It is a rich source of vitamin A

and C. The fruit is consumed raw or ripe. Good mango varieties contain 20 percent of total

soluble sugars. The acid content of ripe desert fruit varies from 0.2 to 0.5 percent and protein

content is about 1percent. Raw fruits of local varieties of mango trees are used for preparing

various traditional products like raw slices in brine, amchur, pickle, murabba, chutney, panhe

(sharabat) etc. Presently, the raw fruit of local varieties of mango are used for preparing pickle

and raw slices in brine on commercial scale while fruits of Alphonso variety are used for squash

in coastal western zone.

The wood is used as timber while the dried twigs are used for religious purposes. The

mango kernel also contains about 8-10 percent good quality fat which can be used for

saponification. Its starch is used in confectionery industry. Mango also has medicinal uses. The

ripe fruit has fattening, diuretic and laxative properties which helps to increase digestive

capacity. Among internationally traded tropical fruits, mango ranks only second to pineapple in

quantity and value. Major markets for fresh and dried mangoes in 1998 were: Malaysia, Japan,

Singapore, Hong Kong and the Netherlands, while for canned mango were: Netherlands,

Australia, United Kingdom, Germany, France and USA.

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Nigeria is among world’s mango producing countries, other major mango producing

countries include India, China, Thailand, Mexico, Pakistan, Philippines, Indonesia, Brazil, and

Egypt, while it is the Africa’s largest mango producer. The mango trade calculations based on

FAO statistics indicate that trade in mangoes has increased by 26 percent in volume between

1990 and 1999 and it is the fourth most rapidly grown volume in fruit and vegetable trade (FAO

2001).

Problem Statement

The marketing system of fruit and vegetables in Nigeria has been observed to be quite

inefficient with variation and instabilities in prices. This could be attributed to the little attention

placed on horticultural production in national planning. Large scale marketing of tropical fruits

has hitherto not been encouraged locally because of the existing poor transportation and storage

facilities. Farmers cannot easily reach both local and international markets and this result in high

post harvest losses (Adepoju 2004).

Fruits are highly perishable and mostly are seasonal. The enormous wastage due to high

perishability of fruits has not been adequately looked into. An all year round availability of these

fruits is greatly diminished due to their seasonality. In the absence of storage or conditioning

system to lengthen their shelf life, early harvesting is very necessary to avoid total loss on the

fruits harvested and this should be sold within the shorter time possible. The wastage of fruits

range between 52-60% of total yield and this usually occur on farm, in transit or during holding

in storage. Also transportation problems which are further heightened by insufficient vehicle and

poor feeder roads contribute to the wastage. These problems make produce evacuation from farm

to the market very difficult (Abimbola 1996). Besides, the improper distribution channels of

fruits produce often result in scarcity in some places and surpluses in other areas.

This fluctuation of prices as well as inadequacy in availability of mangoes for urban

consumers often result in loss of revenue for rural farmers. This therefore necessitate a research

into how mangoes are been marketed putting into consideration the efforts to reduce or possibly

eliminate wastages through immediate distribution. The study is therefore set out to look into

the following objectives; to

describe the socio-economics characteristic of the respondents

identify the structure and marketing activities in the mango market

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estimate the cost and returns for mango marketing

determine the problems associated with mango marketing

The hypotheses are as follows

Ho1: There is no significant relationship between the socio-economic characteristics of the

respondents and their average income.

Ho2: There is no significant relationship between marketing activities and sales of mango.

2.0 METHODOLOGY

The study was conducted in Surulere Local Government Area (LGA) of Oyo state. It is one

of the five local governments areas located in Ogbomoso zone. Farming is the major occupation

of the people living in the area. In general, the LGA is well known for its productionand

marketing of fruits such as Mango, Cashew, Oranges, etc. The four villages under the local

government area namely, Iresaadu, Iresaapa, Oko and Iregba were used for the study. Cluster

sampling technique was used to select the ninety-five mango marketers in the area. Primary data

was collected through the use of structured questionnaire.

The analytical methods used to investigate the objectives are descriptive statistics,

budgetary analysis, linear regression and double log regression analysis. The descriptive

statistics involve the use of frequency distributions and percentages, while marketing margin

and gross margin analyses were used for the budgetary analysis. Linear regression and double

log regression analysis were used to measure the relationship among the variables. Herfindahl

Index was also used to measure market concentration.

Marketing margin Analysis (M.M)

Marketing margin = Selling price - Farmgate price MM = Sp - Fp Gross Margin analysis (G.M)

This is the difference between the total revenue and the variable costs incurred.

Gross margin = Total Revenue – Total Variable Cost

GM = TR -TVC

Where GM = Gross Margin

TR = Total Revenue (Price x Quantity sold)

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TVC = Total Variable Cost (Producer price + other marketing cost incurred)

Therefore TVC = Total Variable cost = Total marketing cost

Regression Analysis

The relationship between marketing activities and the sales of mango is represented in the

linear equation below:

Y= 0 + 1x1 +2x2 + 3x3 + 4x4

And double log equation given below:

InY = 0 + 1ln x1 +2lnx2 +3lnx3 + 4lnx4

Where Y= sales (N)

X1 = Rent (N)

X2 = Purchase cost (N)

X3 = Transport cost (N)

X4 = Labour cost (N)

While relationship between the socio-economic characteristics of the respondents and

their income is represented in the equation below:

Y = 0 + 1X1+ 2X2 + 3X3 + 4X4 + 5X5 +6X6 +7X7 + 8X8

Linear and double log as below:

lnY = 0 + 1lnX1+ 2lnX2 + 3lnX3 + 4lnX4 + 5lnX5 + 6lnX6 + 7lnX7 + 8lnX8

where Y = income

lnAg = Age

lnSx = Sex

lnMr = Marital status

lnHs = Household size

lnEd = Education

lnYe = Years of experience

lnNb = Number of baskets of mangoes sold

lnMt = Mango type

Herfindahl Index (H1)

This is used to measure concentration of the market which is one variable of the market

structure that affect the behaviour of firms participation in that market.

The market share of firm is denoted by S1 =

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Sn =

S1 =

where: q = output of fruit seller i

qn = output of all fruit sellers

Herfindahl Index Hl = S12 + S2

2 + S32+ S4

2+ S52……………..+ Sn

2

HI tells us how concentrated the market is, when there is high concentration that means there is

an uneven distribution of market shares and there is a situation of monopolistic control of the

major marketer and then vice versa.

3.0 RESULTS AND DISCUSSIONS

The socio- economic characteristics of mango marketers in the study area is presented in

Table 1. The table below showed that mango marketing is an occupation with no age limit. Only

about 5.3 percent of the marketers were 25 years and below, majority of the respondents (60

percent ) were between the age bracket of 26– 55 years. The respondents in this age bracket have

greater potentials of selling fruits effectively because they are in their active age. About 30

percent of the mango marketers were between 56 years and above. While 60 percent of the

respondents were female, 40 percent of them were male. This indicates that in the study area

women are more involved in fruit marketing than men.

The result also revealed that 84.2percent of the respondents were married while very few

were single, that is 6.3 percent and 9.5 percent were widowed. Hence, this indicates that married

people are more involved in fruits marketing in the study area. Majority of the fruit marketer’s

household size range between 6 and 10 (59%) while household size with 5 members or below

account for only 5 percent. This implies that respondents with larger family size are more

involved in fruit marketing and this aid the quick distribution of fruits before they deteriorate.

About 14.3 percent of the respondents had no formal education., only 21.1 percent had post

primary education while 64.6 percent accounted for those with primary education. Since

knowledge is a useful tool in marketing activities, this means at least a level of formal education

is useful in successful marketing.

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It was revealed in table 1 that 44.2 percent of the respondents sourced their fund through

personal efforts, 29.5 percent sourced theirs from cooperative society, while only 1.1% source

their funds through banks by obtaining loans. This indicates that marketers hardly sourced fund

through banks while self financing was a major source of fund used by the marketers. About

55.6 percent hired labour to help in off loading fruits, transporting purpose and other marketing

activities , 31.6 percent made use of family labour, while 12.6 percent employ both family and

hired labour. The result revealed that most respondents hired labour for marketing activities.

Wage payment increases the marketing cost.

Table 2 presented the market structure of fruit (mango) marketers in the study area. Based

on the reason why respondents ventured into the marketing of mango, 37.7 percent of the

respondents claimed that they sold mango because it was a profitable business, 17.9 percent

ventured into it because it was the fruit in season. While 9.5 percent sell mango because they

inherited the business from their parents, 38.9 percent sell mango because they were generally

into fruit marketing. It was also discovered that all the respondents in the study area used the

same unit of measurement i.e. baskets or sell in bags. About 53.8 percent sells between 21- 30

baskets of mangoes daily, this confirms that majority of the respondents (89.5 percent) have

many customers while only little (10.5 percent) have fewer customers. This indicates the level of

marketing of respondents.

It was revealed in table 2 that 43.2 percent of the respondents sourced their mangoes

fruits from farm gate, 45.3 percent sourced theirs from the wholesalers and 11.6 percent claimed

they bought from both sources. The result revealed that most mango sellers purchased the fruits

from both farm gate and wholesalers. Majority of the respondents (87.4%) claimed that there

were many mango marketers in the market and this revealed that fruit (mango) marketing is

perfectly competitive. Many mango marketers purchased their fruits for reselling on a daily basis

(63.2 percent), while 36.8 percent bought large stock and stored them by spreading it out for

fresh air. This mode of storage indicated that there was no special way of storing mango in the

study area and that majority of the sellers were involved in daily purchase.

There were two modes of transportation used by the respondents in the study area; the

use head carriage for the goods and use of automobiles. Only about 4 percent of the respondents

used head carriage while majority (91.6 percent) used automobiles as means of transporting their

goods to the market for sales. This revealed that transportation via automobiles which was

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believed to be more effective in fruit marketing was well adopted by majority of the sellers.

Some respondents employed the activities of middlemen in their transaction process while some

did not. Table 2 showed that 61.1 percent involved the middlemen in their transaction

Table 3 presented the cost and returns from marketing of mangoes . The average

transport cost was N2,160 and this accounted for about 52.17 percent of the total variable cost,

labour cost accounted for 14.49 percent, rent allowance accounted for only 0.72 percent of total

variable cost. The farm gate cost of mango was N1,350 which was about 32% of the total cost

price. Average total revenue was N9,450. The gross margin per daily sale of mango was

N5,309.95 while the marketing margin which was the difference between the producers price

that is the farm gate price and the final price sold to the consumer was N8,100.

The Herfindahl index was estimated to be 1.1 percent that is 0.011. This signifies low

concentration of market shares and that there is a situation of structurally perfect competition

among mango sellers in the study area.

The respondents indicated that they faced many constraints in mango selling,, about 43

percent complained of losing money to the high level of perishability of the fruit,18.9 percent

claimed that bad road affect them from moving the fruit from the source of production to where

they are needed as many transporter always avoid bad road and those ones who dare it charged

exorbitant price. However, 23.2 percent complained about lack / inadequate fund to finance the

business while 14.7 percent reported that lack of storage facilities made them buy only the

baskets they are sure they can sell daily.

Table 5 presents the linear and double log regression analysis which aimed at establishing

the relationship between marketing activities of mango sellers and sales of mangoes For linear

regression, the results showed that the coefficient of transportation was negative and statistically

significant at 5 percent with sales of mango. This implies that as the cost of transportation

increases ,there will be decrease in total sales. Cost of labour and mango purchased from the

source were also significant at 1 percent but were positively related to sales of mango, i.e. as cost

of mango from source and labour increases, sales increases as well. On the other hand, double

log analysis revealed that cost of transportation and mango from the source were significant to

sales of mango at 1 percent level, however transport cost was negatively related sales of mango.

The null hypothesis is therefore rejected because the F-cal is significant at 1%

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The result establishing the relationship between gross margin and socio-economic

characteristics is presented in table 6. A positive and significant relationship exit between the

gross margin of the respondents and marital status, years of marketing experience, as well as

specie of mango sold. This implies that irrespective of the status of the marketer, there is no

limitation and no effect on the revenue of respondents. As the years of experience increases,

there is addition to knowledge of mango sales and this enhance the revenue made from mango

sales. This also goes for selling of the right species of mango i.e. as marketers sell good varieties

of mangoes their income increases.

However, household size, education, and number of basket bought for sales were

statistically significant and negatively related to the gross margin from mango sales. The

implication of this is that the larger the household size the lesser the gross margin accruing from

mango sales which may due to household consumption. Knowledge is necessary tool for

marketing purpose but a higher level of education such as tertiary institution etc may not have

impact on the gross margin for mango sales in the study area. Also, larger purchase of baskets of

mango may not necessarily increase gross margin, this may be due to high level of perishability

of the fruits as well as the lack of storage facilities.

The coefficient of determination R square for the model is 68.2%. This means that 68.2%

of the change in income in fruit marketing is explained by all the socio-economic characteristics

variable that are statistically significant.

4.0 CONCLUSION AND RECOMMENDATION

Apart from the perisability and seasonality of the produce, it can be categorically stated

that mango marketing is a worthwhile business due to its high level of profitability, the gross

margin and the marketing margin are quite high and the market is a perfectly competitive one.

Transportation cost was found to be negatively significant to the average sales of mangoes, this

means that the amount spent on transporting mangoes from farm or collection points is affecting

the daily income To make fruit marketing a viable business venture, it is therefore, recommended

that good and motorable roads should be constructed in the remote areas for easy collection of

produce from the farm gate and also provision of storage facilities to increase the shelf life of the

fruits. Also, programmes that will enlighten the marketers on how to process mango into fruit

50


juice should be encouraged through the activities of extension officers in order to reduce the

wastage.

REFERENCES.

Abimbola, M.O (1996): Economic Analysis of Vegetable Production and Marketing in Ibadan. An unpublished B.Sc thesis, Submitted to the Department of Agric. Economics and Extension. Ladoke Akintola University of Technology, Ogbomoso.

Abbot. J.C and Madeham J.P (1999): Agricultural Economics and Marketing in the Topics Longman. Nigeria. Pp 65 – 78

Adegeye A.J. and Dittoh J. S (1985): Essentials of Agric Economics, Impact Publishers Ibadan.

Adekanye, T.O (1988): Readings in Agricultural Marketing. Longman Publishers, Nigeria.

Adepoju, A. A (2004): Horticultural Crop Production in Nigeria, Problems, Prospect and Trends. An Unpublished M.Sc Dissertation in Department of Agricultural Economics, University of Ibadan, Ibadan.

Betyl B.S and Molly C.O (1986): Economic Botany Of Planting In Our World. MC Graw Hill Publishing Company. New York.

Downey W.D and Erickson S.P (1987):Agricultural Business Management. 2nd Edition. MC-Graw Hill Inc.pp236-337.

Food and Agricultural Organization (2001): FAO Year Book on Production.

Joseph Y.K and Adeoti J..A (1996): Assessment of The Efficiency of Fruit Marketing System In Nigeria. Horticultural Society of Nigeria (HORTSON) Conference proceedings Publishers.

Swindale K and Bilinsky. L (2006): America for Nutrition, Journal of Nutrition. Nutr 136:

14495- 14525

Table 1: Socio - Economic Characteristics of the Respondents

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Frequency Percentage Cumulative %Age (years) < 2526 – 3536 – 4546 – 5556 – 6566 and above

5102723237

5.310.528.424.224.27.4

5.315.844.268.492.6100

Total 95 100

Sex

Male Female

3857

4060

40 100

Total 95 100

Marital status Single Widowed Married Total

698095

6.39.584.2100

63.3 15.8 100.0

Household size ˂ 56 – 1011 – 15

195620

20.059.021.0

20 79 100.0

Total 95 100

Educational level 01 – 6 7 – 12 Total

15602095

14.364.621.1100

14.3 78.9 100

Years of experience 1- 10 11 – 2021 – 3031 and above

22402211

23.242.123.211.5

23.365.388.5100

Total 95 100Source of Fund

(a) Selfb) relation Bank Cooperative Self and cooperative Self and relation Total

421012810495

44.2 10.51.129.510.54.2100

44.2 54.7 55.8 85.3 95.3 100.

Source of labour Family Hired Both

305312

31.655.612.8

31.687.4100.0

Total 95 100

Table 2: Market Structure of fruit marketers

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Frequency Percentage Cumulative %ReasonProfitability Fruit in season Inheritance Fruits marketing

3217937

33.717.9 9.538.9

3.751.661.1100

Total 95 100Quantity (baskets)

1 – 10 11 – 2021 – 30

103451

10.635.853.8

10.646.2100

Total 95 100Source Farm gate Wholesalers Both Total

41431195

43.245.311.6100

43.288.4100.

Population of Mango sellersMany Few Total

831295

87.412.6100

87.4100

Mode of storage

Daily purchase Fresh air treatment Total

603595

63.236.8100

63.2100.0

Means of transportationHead carriage Vehicle

881

8.491.6

8.4100.0

Total 95 100Source: Field Survey 2010

Table 3: Cost and Returns on Mango Marketing

Source: Computed from Field Survey 2010

Table 4: Problems encountered by respondents in mango marketing

Variables/ per day (N)/ day % share in the TVC

Per basket SoldTotal Income(TR)Transport CostLabour CostRentFarmgate cost of MangoTotal Variable Cost (TVC)Gross Margin (GM)Marketing Margin (Mm)

350.009,450.002,160.00 600.00 30.051,350.004,140.055,309.958,100.00

--52.1714.49 0.7232.60---

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Frequency Percentage Cumulative %

Perishability Bad Road Lack of fundStorage

41182214

43.218.923.214.7

43.262.185.3100

Total 95 100

Source: Field Survey 2010

Table 5 : Regression Analysis establishing the relationship between marketing activities of fruit sellers and their marketing margin

Model Variable Se T Sig level R-2

F-cal Decision H01

Linear

Constant

Purchase

Transport

Labour

Rent

142.268

1.1041

-7.67x10-8

9.221x10-2

-1.257

22.520

.052

.006

.031

1.273

6.317

20.002

-1.280

2.954

-.988

Non Sign

1%

5%

1%

Non Sign

83.0% 2.03

At 1%

Reject H0

Reject H0

Double

log

Constant

In Pur

In Tr

Ln la

Ln R

2.302

0.656

-2.33x10-3

4.110x10-2

6.761x10-3

.233

.035

.025

.026

.047

9.898

19.003

-.944

1.574

.143

Non sign

1%

1%

Non Sign

Non sign

80.4% 3.12

At 5%

R = 0.915R square = 0.837Adjusted R square = 0.830 T test = 115.4Source: Computed from Field Survey 2010

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Table 6: Regression Analysis establishing the relationship between gross margin and socio-economic characteristics of mango marketers

Model Variable Se t Sign level FLevel

of sign

R-2Decision

HO1

Linear

Double

log

Constant

Ag

S

Ms

Hs

Ed

Ye

Nb

Mt

Constant

Ln Ag

Ln 5

lnMs

lnHs

LnEd

lnYe

lnNb

lnMt

-11612.0

247.611

-2932.359

4597.656

-169.918

-88.267

.747

-1120.229

540.709

7.330

-.219

-.200

.267

-.169

3.265E-03

.264

-.164

.730

14666.127

266.916

3406.649

1699.281

713.575

406.446

263.945

2346.556

113.077

.952

.327

.113

.102

.140

.136

.132

.136

.061

-.792

.928

-.861

2.706

-.238

-.217

.003

-.477

4.782

7.698

-.669

-1.766

2.617

-1.208

.024

2.004

-1.199

11.895

Non sign

Non sign

Non sign

1%

5%

5%

1%

5%

1%

Non sign

Non sign

10%

5%

Non sign

Non sign

10%

Non sign

1%

4.638

21.458

1%

1%

68.2

%

76.4

%

Reject H0,

Reject H0

Source: Computed from Field Survey 2010

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Adetunji's Corrected Journal -4

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