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An Economic Evaluation of Post-Harvest Technology: The Case of

Rice and Corn Drying in the Philippines

Article · December 2004

DOI: 10.11248/jsta1957.48.253

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Jpn. J. Trop. Agr. 48(4): 253-264, 2004

An Economic Evaluation of Post-Harvest Technology:

The Case of Rice and Corn Drying in the Philippines

Michael GRAGASIN1,Atsushi MARUYAMA2and Masao KIKUCHI2

1Graduate School of Science and Technology, Chiba University,Matsudo, Chiba 271-8510, Japan
2Faculty of Horticulture , Chiba University,Matsudo, Chiba 271-8510, Japan

Abstract Using the data obtained in rice and corn villages in the Philippines, actual farmers' practices in post-harvest
grain drying in rice and corn production are examined and compared to the economic performance of mechanical dryers.
Grain drying by farmers is popular in the case of corn, but rare in the case of rice. We find a positive income effect on grain
drying in that the higher the household income, the more farmers practice drying operation. Farmers' method of grain
drying is unanimously manual solar-drying, and none adopts mechanical dryer. The rate of return to solar-drying operation
is high. In contrast, the rate of return to the best machine dryer available in the country is so low that no farmer adopts it
under the present conditions. Although steady increases in the wage rate undermine the relative superiority of manual
solar-drying over mechanical drying, the latter will remain as the major drying method in the near future. The largest
obstacle to the adoption of mechanical dryer by farmers is its low fuel efficiency in the heating system for drying. If grain
drying by mechanical dryer is to be promoted, serious efforts must be made to improve this efficiency.
Key Words: Internal rate of return, Manual drying, Mechanical dryer, Solar-drying

収 穫 後技 術 の 経 済 的評 価― フ ィ リピ ンに お け る米 と トウ モ ロ コシ乾 燥 の 事例―Michael GRAGASIN1・丸 山 敦 史2・菊 池 眞

夫2 1千 葉大 学 大 学 院 自然 科 学研 究 科 〒271-8510松 戸 市 松 戸648 2千 葉大 学 園 芸 学部 〒271-8510松 戸市 松 戸648

要 約 フ ィ リ ピ ン北 部 イザ ベ ラ州 の 稲 作 と トウ モ ロ コ シ作 農 家 の 調 査 デ ー タ を 用 い,作 物 収 穫 後 農 家 が 実 施 す る乾 燥 作 業 の実 態 と
経 済 性 を明 らか に し,乾 燥 機 に よ る機 械 乾燥 の 経 済 性 と比 較 し た.作 物 収 穫 後 の 乾 燥 は 稲 作 の 場 合 例 外 的 に しか な され ず,ト ウ モ ロ
コ シ作 の 場 合 は乾 燥 を 行 うの が ふ つ うで あ る .乾 燥 作 業 に は 所 得 効 果 が作 用 して い る よ うで あ り,豊 か な 農 家 ほ ど乾 燥 作 業 を 自 ら実
施 す る傾 向 が観 察 され る.乾 燥 は 総 て 人 力 に よ る天 日乾 燥 で あ り,乾 燥 機 の 使 用 は皆 無 で あ る.天 日乾 燥 の 経 済 性 が高 い の に 対 し ,
現 存 す る乾 燥 機 の 経 済 性 は比 較 に な らな い ほ ど低 く,使 い もの に な らな い.賃 金率 が 高 ま るに 従 い,天 日乾 燥 の 機 械 乾 燥 に対 す る 有
利 性 は 低 下 して い くが,当 分 は天 日乾 燥 の 有 利 性 は ゆ る が な い.乾 燥機 の 経 済 性 を低 め て い る最 大 の 要 因 は 熱 を発 生 させ る た め の バ ー
ナ ー の 燃 料 効 率 が 低 す ぎ る こ とに あ り,も し機 械 乾燥 を普 及 させ る必 要 が あ る とす れ ば,そ の 点 を大 幅 に改 善 す る こ とが 必 要 で あ る
.キ ー ワ ー ド 乾 燥 機,機 械 乾燥,人 力 乾 燥,天 日乾 燥,内 的報 酬 率

al. 1996; PCARDD-BPRE 2001). Failure to reduce

Introduction
It is often said that the post harvest grain
loss is huge in developing countries in tropics,
ranging 10 to 20% of harvest (PRocTOR, 1994).
For example, the Philippine government estimates
that poor handling of grain in post-harvest
processes in the rice sector results in grain loss
every year of as much as one million tons, which
is equivalent to, or even more than, the country's
entire rice import, about 15% of the total rice
need of the country (DA BAS 2004). Such a high
degree of loss makes the reduction of post harvest
loss as an important issue in achieving food
security in the country (CACHUELA et al. 2002).
Grain drying right after harvest is an
important post harvest activity, since about 30%
of the total post-harvest loss is attributable to
improper and inadequate drying (MARANANet
Received Aug. 2, 2004
Accepted Sep.18, 2004
the moisture content of newly harvested wet grain
from 20-30% to 14% in an appropriate timing
causes grain losses resulting from mould infection,
sprouting, spoilage and quality deterioration.
Increasing concern among consumers about
food safety in recent years, in addition to food
security, has attracted further attention as to
adequate grain drying. In the case of corn, for
example, the storage of un-dried shelled corn for
10 days could easily lead aflatoxin contamination
to the level far above the safe level for human
consumption (BAUTISTA et al. 1986).
With these recognitions, the governments
of many developing countries in Asia have devoted
considerable efforts to curb post-harvest grain
losses. In particular, the Philippine government
has invested in the last two decades a large sum
of money to develop and promote mechanical
dryer for rice and corn. In spite of the great
effort by the government, rice and corn farmers
254 Jpn. J. Trop. Agr. 48 (4) 2004
have thus far nearly entirely ignored it, while
either continuing to sell their produce right after
harvest without drying or relying on sun drying
in case they do grain drying. A very popular scene
in rural areas all over the country during the
harvesting season of rice and corn, that is, the
half of the lanes of paved highways is occupied
miles long by farmers as grain drying grounds,
is nothing but a clear evidence that grain drying
by mechanical dryer is not the choice by farmers.
Why has the diffusion of mechanical dryer
been so slow and insignificant, in spite of
government's strong belief that the rationalization
of grain drying by introducing mechanical dryer
reduces post harvest grain losses? First of all, is
it in fact profitable for farmers to practice grain
drying by themselves? What are the barriers
that prevent mechanical dryers from being
adopted by farmers and should it be adopted
what conditions are to be satisfied? We try to
answer these questions based on the data
collected in rice and corn growing areas in
Isabela Province, the Philippines. After explaining
about our study area and data collection in the
following section, we present in the third section
actual farmers practices in rice and corn drying
and analyze economic factors behind them. In the
fourth section, we identify the factors that hinder
mechanical dryers developed by the government
from being adopted by farmers. The last section
summarizes the findings of our study and discusses
their implications.
Materials
Data collection
The data used in this study were obtained
from a series of field surveys conducted from
March to November 2003 in Isabela, Philippines.
Table 1 Number of sample farmers with and without drying operation, by season, 2002/2003
The province of Isabela, situated about 350 km
north of Metro Manila, is a major rice and corn
producing province in the country, accounting
for 7% of total national rice production and 13%
of total national corn production in the country
(DA BAS 2004). There are other major rice
growing areas in the country and so are major
corn growing areas. It is rare, however, to have
both in close proximity within a province. In order
to collect necessary information which makes a
comparative study of post-harvest activities for
these two major grains possible and feasible, we
selected this province as our study site.
We first conducted a survey for March-April
2003 in which we interviewed 150 rice farmers
and 150 corn farmers who are randomly selected
from three rice villages and three corn villages
in the province (Table 1). Since we found that
there were only a few rice farmers who
practiced drying operation in one hand and only
a few corn farmers who sold their produce
without drying on the other, we conducted
another round of survey for October-November
2003 in which we intentionally looked for rice
farmers who did practice rice drying and corn
farmers who did not do corn drying. As a result,
we interviewed 84 rice farmers and 94 corn
farmers as additional sample farmers (Table 1).
Study area
Looking into the entire sample pooling the
random and the purposive samples, rice and
corn farmers in the study area share many
similarities in their characteristics (Table 2).
They are mostly owner-operators, cultivating on
average about 2 ha of farm land. In terms of
operators' age, farming experience and family
size, there are few differences between rice and
 Gragasin et al.: Economic
Table 2 Basic information on sample farmers and their farming, Isabela, Philippines, 2002/2003a
a Based on the pooled sample including both random and purposive samples .
b 1 peso =US$0 .0189 (average for 2002-2003).
corn farmers. With respect to household income,
however, rice farmers tend to be richer than
corn farmers. Not only farm income but also
non-farm income is larger for rice farmers than
for corn farmers. The percentage of farmers
who obtain production loan is also significantly
different between rice and corn farmers: it is
higher for corn farmers than for rice farmers.
As explained later, this is because corn farmers
are poorer, and therefore more cash-thirsty,
than rice farmers.
Results and Discussion
Farmers' grain drying operation
Do farmers practice grain drying? Table 1 tells
that rice farmers do generally sell their produce
right after harvest (and threshing) without
performing drying operation whereas corn
farmers generally sell their produce after drying
it by themselves. The number of rice farmers
who performed drying operation is 6 in the wet
evaluation of post harvest technology 255
season and 18 in the dry season, or 4% and 12%,
respectively, of the rice random sample. On the
other hand, the number of corn farmers who
sold their produce without drying is 4 in the wet
season and 2 in the dry season, or 2.6% and 1.3%,
respectively, of the corn random sample. The
percentage shares of corn farmers without
drying are much less than those of rice farmer
with drying. In fact, in our second survey in which
we purposively added rice farmers with drying
and corn farmers without drying, it was far
more difficult to locate the latter than the former.
Such a contrasting pattern in farmers'
behavior toward grain drying between rice and
corn stems in part from the contrasting behavior
of buyers between rice and corn; while rice
buyers do not mind to buy paddy from farmers
before drying, corn buyers strongly prefer buying
dried corn to buying wet corn. This difference
in buyers' behavior seems to reflect differences
in market structure between rice and corn. For
256 Jpn. J. Trop. Agr. 48 (4) 2004

both, major buyers are millers; rice millers for
rice and feed millers for corn. A salient feature
of rice mills in the Philippines is that a large
number of local rice mills of small to medium
size are found in villages and towns in rice
growing areas all over the country. There are
large commercial rice mills that operate nation-
wide, but the number of such large scale mills is
limited (HAYAMI et al. 1999). In contrast, a small
number of feed mills of large scale thinly
scattered in the country characterizes the feed
industry. As a result, most of rice produced in
the study area is bought by local rice millers,
not necessitating long distance, time consuming
transportation. Most of corn produced in the
study area, on the contrary, is transported by
large trucks to feed mills located far away. Corn
buyers, therefore, need to buy dried corn to
avoid quality deterioration during the long
distance transportation.
Yet, there are rice farmers who sold their
produce after drying and corn farmers who sold
their produce in wet. As shown in Table 2, among
rice farmers, there is a tendency that richer
ones sell their paddy after drying, while the
opposite is the case for corn farmers. A contrasting
pattern is observed for the percentage of farmers
who obtained production loan; in the case of
rice, the percentage of farmers who obtained
loan is significantly higher among the farmers
without drying than among the farmers with
drying, but the opposite is the case for corn. A
clear pattern is also observed in the relationship
between farmers' labor productivity and whether
or not to perform drying operation; it is higher
for farmers who do not practice drying operation.
Since farmers who practice drying need to use
more labor input than farmers who do not, it
may seem a matter of course to see higher labor
intensity for farmers with drying than those
without, both for rice and corn. As shown later,
however, the difference in labor intensity between
farmers with and without drying is far more
than the labor input needed for grain drying.
Lastly in Table 2, the share of hired labor in the
total labor use tends to be higher for farmers
with drying in the case of rice, but the opposite
is the case for corn.
The forgoing points can be verified statistically
by applying the probit analysis in which the
dependent variable is set 1 for farmers who
practiced drying and 0 otherwise (Table 3). In
addition to the explanatory variables shown in
the table, other variables, such as farm size,
farming experience, and the early harvesting
season dummy, are tried out in the estimation,
but they are omitted from the final estimations
because they do not give significant coefficients.
Checking by the conditional index reveals that
there exists nor serious multicolinearity in the
estimation of two probit equations.
Three variables give statistically significant
coefficients with the same sign for both rice and
corn. First, higher land productivity induces

Table 3 Probit analysis for farmers' decision to dry their grain after harvest, rice and corn, Isabela, Philippines,
2002/2003a

a Probit analysis with the dependent veriable that takes 1 for farmers with drying operation and 0 for farmers without

drying operation.***, **and * stand for the significance level of 1%, 5% and 10%, respectively. Used in the analysis is the
pooled sample, treating the wet and the dry seasons separately. The number of observations is smaller in the case of rice,
since many samples in two out of three rice villages have to be dropped because of missing values for some variables.
 Gragasin et al.: Economic evaluation of post-harvest technology 257

farmers to carry out drying operation by obtained by farmers are all from informal sources,
themselves. This result is explained as indicating such as private money lenders, fertilizer dealers,
that ceteris paribus higher land productivity relatives, etc., with yearly interest rates ranging
brings about a larger return to drying operation. from 80% to 150%. As such, only farmers who
Second, higher labor productivity induces lack sufficient cash at hand for farming borrow
farmers to sell their produce right after harvest. money from these sources. For rice farmers,
Underlying this result should be the fact that who are on average more than twice as rich as
farmers with higher labor productivity have corn farmers (Table 2), it appears that the amount
higher opportunity cost of labor. Ceteris paribus, of loan works as indicating farmers' higher level
they tend to refrain from practicing drying of affluence, so that it shows the positive income
operation by themselves. Third, the higher their effect on drying operation just as the household
household income, the more farmers practice income does. For corn farmers, the same variable
drying operation. This finding of positive income works in the opposite direction, in which farmers
effect on grain drying indicates that richer who borrowed money with high interest rates
farmers can afford to wait about a week before try to maximize their income from farming by
selling their produce after drying and thereby at practicing drying operation by themselves.
a higher price. Similarly, the higher affluence level of rice farmers
In contrast, other two variables in Table 3, seems to explain the positive coefficient of the
farmers' production loan and ratio of hired ratio of hired labor that is higher for richer
labor, give significant coefficients for rice and farmers. In the case of corn farmers, the lower
corn, but with opposite signs. These variables the hired labor ratio, or alternatively the higher
seem to reflect some aspects of the level of the family labor ratio, the more they practice
farmers' affluence. It should be remarked that drying operation by themselves in pursuit of
none of farmers in the study area obtained a larger income from farming.
formal institutional loan with the interest rate Farmers' grain drying practices Basic information
ranging from 15% per year of government on farmers' actual practices of grain drying
concession loan to 30% per year of commercial operation is given in Table 4. First of all, it should
banks' loan with collateral. Instead, the loans be mentioned that grain drying, if practiced, is

Table 4 Basic information on sun drying operation, rice and corn, Isabela, Philippines, 2002/2003a

a Based on the pooled sample

.
258 Jpn. J. Trop. Agr. 48 (4) 2004
all manual sun-drying for rice as well as for
corn. No machine drying whatsoever has ever
been practiced in the study area.
The timing of harvest is more or less the
same for rice and corn; the 2nd to 4th week of
September in the wet season and the 1st to 4th
week of March in the dry season. However, the
harvesting seasons are longer for corn than for
rice (Fig. 1). Manual drying on concrete ground,
such as basketball court, plaza in front of village
chapel and paved highway, is the common
method of drying in the study villages as well as in
the country. In case multi-purpose concrete
drying grounds are in short, farmers have to use
plastic mats or gunny sacks as drying place, but
this requires more time and labor. The manual
drying operation involves: (1) carrying/bringing
product from and to a drying ground using
Fig. 1 Timing of harvesting rice and corn by season, lsabela, Philippines, 2002/2003.
carabao-driven cart/sleds or tricycle, (2) scattering
the grain to the pavement, (3) occasional mixing
of the scattered grain using wooden mixers, and
(4) collecting and bagging. Altogether, it requires
3 to 5 person-days of labor input to dry rice
output per ha and 7 to 9 person-days to dry corn
output per ha.
The initial moisture content (MC) of newly
harvested paddy ranges from 20 to 22% in the
dry season and from 24 to 26% in the wet season
(PCARDD-BPRE 2001). The moisture content at
the time of harvest is higher for corn, which
ranges from 23 to 25%and 28 to 32%in the dry and
wet seasons, respectively. To prevent grain quality
deterioration, the MC must be reduced down to
14% for both rice and corn. The higher MC for
corn requires more drying time than for rice.
The farm-gate price of dried grain is certainly
 Gragasin et al.: Economic
higher than that of wet grain (Table 4). It should
be noted that the difference is larger in the wet
season than in the dry season for both rice and
corn, and for corn than for rice in the respective
season. In the wet season, the rate of price margin
of dried grain over wet one is 33% for corn as
compared to 19%for rice. This higher price margin
for corn than for rice may explain the reason
why it is a rule for corn farmers to practice grain
drying and for rice farmers not to do it. The
patterns of the price difference between wet and
dried grain are also different between rice and
corn (Fig. 2). In the case of rice, a large margin
of more than 2 peso at the first week of the
harvesting season drops quickly down to about
1 peso. In contrast, for corn the price margin
between wet and dried grain increases towards
the mid-harvesting season, which is consistent
to the positive, significant coefficient of the mid-
harvesting season dummy for corn in Table 3.
Return to grain drying The estimation of economic
return to drying operation shall make these
points clearer. The economic return to drying
operation (R) can be expressed as follows:
R=Pd(Qw-WL-SL)-C-PwQw
=PwQw[a(1-b-c)-d-1]
,
where Pw=farm-gate price of wet grain, Pd=farm-
gate price of dried grain, Qw=weight of wet grain
after harvest, WL=weight loss due to drying,
SL=spillage loss during drying operation, C=
Fig. 2 Price difference between dried and wet grain,
rice and corn by season, Isabela, Philippines,
2002/2003.
evaluation of post-harvest technology 259
labor cost for drying the grain, a=rate of price
increase due to drying (Pd/Pw), b=rate of weight
loss due to drying (WL/Qw), c=rate of spillage
loss due to drying (SL/Qw), and d=share of
drying labor cost in the value of wet grain
(C/PwQw)
. Of these parameters, Pw, a and d are
obtained from our survey data (Table 5). The rate
of weight loss due to drying (b) is computed by
assuming average MC by grain and by season
based on an earlier research (PCARDD-BPRE
2001). The rate of spillage loss due to drying
operation (c) is assumed to be 0.1% of the wet
grain which is dried. It should be noted that this
assumption is made largely for an illustrative
purpose with no hard evidence; the actual level
could be higher.
The fifth row of Table 5 shows the rate of
increase in the total revenue due to drying is
about 4% in the wet season and 5% in the dry
season for rice. This is consistent with the fact
that the number of rice farmers who practice
drying is larger in the dry season than in the
wet season. More importantly, the rate of increase
for corn is 10 to 11%,more than twice as high as
for rice. These differences in the rate of return
to drying must be behind contrasting farmers'
behavior towards grain drying between rice and
corn.
In terms of increase in the total revenue per
ton, or equivalently, increase in value added per
ton, the economic return to drying is about 260
to 390 pesos for rice and 520 to 530 pesos for
corn. If the cost for labor used for the manual
drying is deducted, the rate of return becomes 2
to 4% for rice and about 8%for corn. Increase in
income, net of the labor cost, for rice farmers of
average yield per ha and of average size is 1300
pesos in the wet season and 3000 pesos in the
dry season, and for corn farmers 3200 pesos in
the wet season and 3500 pesos in the dry season.
Such amounts of income increase cannot be said
small particularly for corn farmers whose income
level is relatively low. Considering that the labor
input for drying generates the return to grain
drying, the rate of return of manual drying is as
high as 250% to 330%. Even for rice in the wet
season, the rate of return is 100%.
Prospects for mechanical drying
As explained in the previous section, no
machine drying has been adopted at all by corn as
260 Jpn. J. Trop. Agr. 48 (4) 2004

Table 5 Returns to drying operation per ton of wet grain, rice and corn, Isabela, Philippines, 2002/2003a

(1) and (2): From Table 4.

(3): The moisture content of grain after harvest is assumed to be 25% (wet season) and 22% (dry season) for rice and 28%
(wet season) and 24% (dry season) for corn. The moisture content of dried grain is assumed to be 14%both for rice
and corn. By definition, the weight loss due to drying is obtained as follows: b=(MCw-MCd)/(1-MCd), where MCw=
moisture content of wet grain and MCd=moisture content of dried grain.
(4): Spillage loss is asumed to be 0.1% of grain dried in the wet weight.
(5): Qw, the weight of wet grain, is set equal to unity.
(7): Labor requirement in Table 4 valued at the wage rate of P120/day for rice and P80/day for corn.

well as rice farmers in the study area, in spite of the
efforts by the government to promote its diffusion.
In this section, we examine the economic rate of
return to the existing mechanical dryers and
attempt to identify the conditions under which the
mechanical dryers become economically viable.
Existing mechanical dryers There are two models
of flat bed mechanical dryers in the Philippines;
one is the Maligaya flat-bed dryer developed by
the Philippine Rice Research Institute and the
other is the UPLB-designed flat-bed dryer. The
specifications of these dryers are summarized in
Table 6.
The Maligaya model, which is considered
the most viable dryer in the country (MARTINEZ
2003), is a large dryer with higher drying
capacity and higher acquisition price as compared
to the UPLB (University of the Philippines at
Los Banos) model, which is an old model
developed in the early 1980s. The specifications
related to physical performance of the machines,
such as drying capacity and the rate of fuel
consumption, are taken from the performance
testing conducted at the Bureau of Post-Harvest
Research and Extension (Munoz, Nueva Ecija)
by MARTINEZ(2003). The data on prices and
duration for dryer operation per season are
taken from our survey. The working days per
week and the working intensity per day are just
assumed for the purpose of computation. Changes
in these assumptions, however, do not alter our
discussions in this section. It is noted that because
of its larger grain size, corn requires much
longer time for drying than rice does. Note also
that it is assumed that the dryers are employed
throughout the harvesting seasons.
 Gragasin et al.: Economic evaluation of post-harvest technology 261

Table 6 Specifications of flat-bed dryers, Maligaya model and UPLB model

Table 7 Recurrent costs for dryer operation

a Assume the median velue of drying time for wet grain in Table 6.
b Row (6) of Table 5
, average for wet and dry seasons.

Recurrent costs to operate the dryers are
shown in Table 7, together with the net price
margin adjusted for weight and spillage losses.
First, it should be mentioned that the total
recurrent cost for the UPLB model is far larger
than the net price margin for both rice and corn.
The adoption of this dryer results in a huge loss,
even before including the investment cost for
the dryer; no question that this machine has
never diffused among farmers since its advent.
262 Jpn. J. Trop. Agr. 48 (4) 2004

Second, the recurrent cost for the Maligaya government -subsidized loan with the interest
model is smaller than the net price margin for rate of 15% per year is available, it is not worth to
both rice and corn, leaving a positive return, acquire a dryer. The cost-benefit ratio describes
though very small, to the machine use in the the same story in a different way; even with the
current account. Third, it must be remarked that government loan the cost to acquire and operate
among the cost items kerosene takes a giant a dryer is nearly twice as much as its benefit. It
share in the total recurrent cost; it accounts for should be reminded that farmers in the study
around 70% of the total recurrent cost. area obtained neither government-subsidized loan
Rate of return to dryer acquisition The economic nor commercial bank loan. If any, loans available
viability of machine dryer is assessed by estimating to farmers are of informal sources with interest
the internal rate of return and the cost-benefit rates as high as 80% to 150%per year. Under the
ratio of the machine acquisition investment for present conditions no chance exists at all for the
the Maligaya model. The internal rate of return mechanical dryer to be adopted by rice and
is defined as r that satisfies the following corn farmers.
equation: What is the largest obstacle for the dryer to
be adopted by farmers? As already pointed out,
K=‡”j=1n(R-c)/(1+r)j
the kerosene consumption for the pit burner
takes a large share of the total running cost in
=(R-c)[(1+r)n-1]/[r(1+r)n]
the dryer operation. Could it be halved from 10
where K=acquisition cost of dryer, R=increase liter/hour to 5 liter/hour by improving the fuel
in value added due to drying (net price margin), efficiency, the internal rate of return for dryer
c=total recurrent cost, and n=usable life of dryer acquisition would increase to 35% for rice and
(assumed to be 10 years). Similarly, the cost-benefit 65% for corn (Table 8), the decently high level of
ratio (C/B) is defined as follows: return that makes it possible to finance the
investment by a commercial bank loan. On the
C/B=K/[‡”j-1n(R-c)/(1+i other hand, the internal rate of return, when the
acquisition price of the Maligaya model is reduced
)j] =K/{(R-c)[(1+i)n-1]/[i(1+i)n]} from 150,000 pesos to 75,000 pesos, is estimated
to be 13% for rice and 12% for corn, only slight
where i=interest/discount rate. improvements over the original estimates.
Estimated rates of return are summarized It should be noted that the price of kerosene
in Table 8. The internal rate of return is estimated is assumed to be 15 pesos/liter, the prevailing
to be 2.7% for rice and 1.3% for corn. Even if price at the time of our survey. The large share
of kerosene consumption in the total dryer
Table 8 Rate of return to acquire a dryer (Maligaya operation cost means that changes in the price
model) of kerosene give considerable impacts on the
rate of return to the dryer. For instance, 50%
reduction in the kerosene price, though unlikely
to occur in the near future, gives exactly the
same impact on the rate of return as 50%
increase in the fuel efficiency.
The economic viability of agricultural
machinery often hinges critically on the rate of
operation, as is the case for rice milling machine.
However, it is not the case for dryer. Doubling
of the duration during which a dryer can operate
improves its rate of return, but the improvement
is marginal (Table 8).
These counter-factual estimations reveal that
the low fuel efficiency of the dryer is the real
barrier to its diffusion at the farm level. Unless
a The parameter a=1 .25 for rice and a=1.40 for corn. the fuel efficiency of the machine is improved
 Gragasin et al.: Economic evaluation of post-harvest technology 263

substantially, there is no hope for the Maligaya where C=cost for grain drying and W=wage
model, one of the best available grain dryers in rate. The Maligaya model is assumed for machine
the country, to be economically viable. drying. The intercept term for the machine drying
Another parameter that critically affects the cost equation consists of two components; the
rate of return is the price gap between wet and recurrent total costs of machine drying excluding
dried grain. As shown in Table 8, 5% increase in labor cost and the fixed cost of dryer, estimated
the parameter•ea,•fwhich is assumed for the wet by assuming 15% per year of interest rate.
season, improves the rate of return considerably. These cost equations are depicted in Fig. 3.
This price gap would be larger if weather Machine drying becomes the cheaper option
conditions, such as continuous rain for a long than manual drying at the wage rate of about
lapse of time, make it difficult to perform solar- 450 pesos/day for rice and 400 pesos/day for
drying. The gap may also increase if the steady corn. These levels of wage rate are compared to
growth in the national economy makes the quality the present levels of 120 pesos/day in rice
of grain more and more important for consumers villages and 80 pesos/day in corn villages. With
as their income increases. In any case, the gap is the present level of technology, there seems to
determined in the output markets, and therefore be still a long way to reach the intersection point
beyond the control of farmers as well as policy for both rice and corn. The impact of improving
makers and developers of agricultural machinery. the fuel efficiency of the dryer is illustrated in
Even with the counter-factual cases that give Fig. 3. The improvement makes the break-even
higher economic performance for mechanical wage rate 300 pesos for rice and 250 pesos for
dryer, however, its rates of return (Table 8) are corn. As was the case in Table 8, the 50%
far lower than the rates of return to manual reduction of the acquisition price gives much
drying (Table 5). Our results thus seem to indicate less impacts than the 50% improvement in the
that manual sun-drying continues to be an fuel efficiency.
economically viable grain drying option for rice

and corn farmers. Summary and Implications

Manual drying, mechanical drying and wage rate We have observed the actual farmers'
However, the forgoing discussion is based on practices in post harvest grain drying in rice
the present level of the wage rate. If it increases in

future, as in the recent past, the economic

viability of manual drying, which depends solely

on labor, will certainly be undermined. Since

machine drying is of labor-saving in nature as

compared to manual drying, an increase in the

wage rate improves the economic performance

of machine drying relative to manual drying. At

what wage rate the economic viability of machine

drying exceeds that of manual sun drying? The

answer is obtained as the solution of a simultaneous

equation system consisting of the cost equations

for manual drying and for machine drying.

Based on our data, the cost equations as a

function of the wage rate are given as follows:

Rice (wet season): Manual drying

C=1.05 W
Machine drying
C=313+0.333W
Corn (wet season): Manual drying
C=1.82 W
Machine drying
Fig. 3 Drying cost as a function of wage rate: sun
C=492+0.611W
drying versus machine dryer.
264 Jpn. J. Trop. Agr. 48 (4) 2004

and corn growing areas in Isabela and examined
the economic performance of existing mechanical
dryers. Our major findings and their implications
are summarized as follows.
First, grain drying is practiced by almost all
farmers in the case of corn, whereas it is
practiced by only a small number of farmers in
the case of rice. Such a contrasting pattern in
grain drying operation between rice and corn
farmers stems partly from a difference in buyers'
request; while rice buyers most of whom are
from local rice mills do not mind to buy wet
grain, corn buyers most of whom are from feed
mills located far away buy dried grain.
Second, we find a positive income effect on
grain drying, i.e., the higher the household
income, the more farmers practice drying
present level of wage rate of 80-120 pesos per
day. This implies that solar-drying will continue
to be the major method of grain drying in the
near future.
Sixth, low fuel efficiency in the heating
system for drying is identified as the largest
obstacle to the adoption of mechanical dryer by
farmers. The negative impact of this low fuel
efficiency upon the economic viability of the
dryer, through increasing dryer's operating cost,
is far more detrimental than the acquisition cost
of the dryer itself. If grain drying by mechanical
dryer is to be promoted, serious efforts must be
made to improve this efficiency.
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