A lot of people want to know why no commercial producers make tomato paste all year round. Let me break it down for you.
(Thread) 1/
(Thread) 1/
It comes down to economics. Let's start with consumer prices. In Nigeria, the main tomato paste brands all sell "tomato mix" now, which is a combination of tomato and soy. A carton holding 50 sachets of 70 gram paste sells for, lets say 1,800 naira. 2/
Let's assume that the market is willing to pay a premium for a pure paste product. Huge assumption, given the state of the economy and the average Nigerian's spending power, but let's go with it. Let's say our target price to distributors is 2,300 for a carton of paste. 3/
We want to earn a 25% margin. This means it can't cost us more than 1,725 to make a carton (3.5 kilograms) of paste. More assumptions: raw material, ie the tomatoes, will take up half of this cost. And it takes 7 tons of tomato to make 1 ton of paste. 4/
So I need to be able to get 24.5kg of tomato for 862.5 naira. That's 35.2 naira per kg. That's my buying price, including delivery from the farm to the factory. So the question becomes this: can I buy tomatoes at 30-32 naira per kg all year round? 5/
Now we've got to put our farming hats on. For a farmer to be happy selling at 30 naira per kg, he or she has to grow tomatoes at a cost of 22.5 naira per kg in order to get a 25% margin. 6/
Our farmers spent maybe 550,000 naira per hectare this season. If they had been able to achieve yields of 25 tons per hectare, their cost of production would have been 22 naira per hectare. But the best farmer in our group got 21 MT/Ha (cost of production: 26 naira/kg) 7/
Still, let's say he goes for it. At least he made a margin, right? 4 naira per ton on 21 tons means a profit of 84,000 naira. But remember, this is taking place on the dry season. In the rainy season, tomatoes just don't do that well. 8/
In the rainy season, a farmer might only get 10 tons per hectare or even less (in Nigeria I wouldn’t bet on anything higher than 5). 550k / 10 tons is a production cost of 55 naira per kg. remember, thefactory wants to buy at 30 naira per kg. This just isn’t going to work. 9/
This also doesn’t take into consideration the price hikes in the rainy season. Let’s do a little more math. The purchase value of my tomatoes for processing is 30 naira per kg, right? And If I sell a carton of paste at 2.3k, my sales value is 94 naira per kg (2,300 / 3.5 / 7) 10/
So if I am a farmer AND a processor, it only makes sense for me to make my tomatoes into paste when the farm gate market price is 94 naira per kg or less. Otherwise, I’d just scrap the processing and sell to the malams. 11/
We have a few tomatoes in our greenhouse because we are always testing stuff out. Last week I sold farm gate at 1,000 naira per kg. Paste, for all its value-add, is never going to be that valuable.
Side note: sorry for the long delay between posts in this thread. I’m currently out on the farm trying to get our tractor unstuck from the mud and service is spotty 🤷🏽♀️ 13/
(Exhibit A)
/14
/14
Anyway. The moral of the story is that tomatoes are extremely sensitive little guys, and if you can’t grow them at the right price, and if the market doesn’t consider paste to be more valuable than tomatoes, processing can’t and shouldn’t take place. 15/
The end!!! 16/16
