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Margins and Channels For Shin Kulu (Golden Delicious)
Margins and Channels For Shin Kulu (Golden Delicious)
4, 2008
ABSTRACT
The aim of this study was to evaluate the marketing margins and costs involved under different markets phases and
channels of Shin Kulu apple in the Pishin District, Balochistan, Pakistan. The segregation facilitated to further
evaluate the marketing margins of different middlemen involved. The volume of marketing margins generally
reflects the efficiency of marketing system. The higher market margins reflect fewer shares of producers and more
benefits to marketing middlemen and vice-versa. We study two common marketing channels Producers-Preharvest
Contractors-Commission Agents-Wholesalers-Retailers and Consumers (Channel 1) and Producers-Commission
Agents-Wholesalers-Retailers and Consumers (Channel 2). The results revealed very higher marketing margins for
Shin Kulu apple. The marketing margins were 76 % when apple is marketed through preharvest contractor
(Channel 1) while direct marketed (Channel 2) the marketing margins were 58 %. These higher margins also
indicates an inefficient marketing system which may deter apple growers the profit they deserve.The result also
indicates that apple growers have incentives to directly market apple in relevant markets. However, timely and
reliable marketing information is prerequisite for effective grower based marketing systems.
Key Words: Channels, Marketing, Margins, Shin Kulu
Citation: khair, S.M., M. Ahmad and Ehsanullah. 2008. Margins and channels for shin kulu (Golden delicious)
apple produced in Pishin; A case study. Sarhad J. Agric. 24(4): 755-761.
INTRODUCTION
The total area under apple was 47.7 thousand hectares producing 315.4 thousand tones during 2002-03 in
Pakistan. Out of this, 38.0 thousand hectares were cultivated in Balochistan and the production was 201.0 thousand
tones (GOP, 2004). The above figures indicate that Balochistan is the major contributor in apple production, which
is 64 % of country’s total production. The upland of Balchistan comprising Quetta, Pishin, Loralai, Zhob, Ziarat,
Qilla Saifullah, Mastung, Qalat and Khuzdar districts are the main areas of apple production.
District Pishin is the major producer of apple. The produce is 32.27 thousand tones from an area of 5.4
thousand hectares, which contributes about 16 % of the total production of the province (GOB, 2003). The most
common commercial apple verities are: Shin Kulu (Golden Delicious), Tor Kulu and Kaja (Red Delicious) while
Amri, Mashadi and Kashmiri are mainly used as pollenizers. These varieties contribute about 95 % of apple
produced in the province. Shin Kulu is grown on large scale and its share in total apple production is about 40 %
while Kaja which is comparatively a newly introduced variety accounts for about 8 % of apple produced in
Balochistan (FAO 1990).
Among other deciduous fruits apple is the major one i.e., about 70 % of deciduous fruits, which is grown
on an area of 35 thousand hectares and its production is 480 thousand tones reflecting its importance in the
agricultural economy of Balochistan (GOB Statistics 1996-97). Shin Kulu (Golden Delicious), Tor Kulu and Kaja
(Red Delicious) are the popular commercial apple varieties grown in Pishin while Amri, Mashadi and Kashmiri are
mainly used as pollenizers. Shin Kulu is grown on large scale and its share in total apple production is about 40 % of
apple produced in Balochistan (FAO 1990).
Farmers in Pishin are facing various problems such as lack of regular dissemination of price information
from various markets to the farming community, lack of systematic grading and standardization of fruits. “Topping”
of produce is a common practice in Pishin in which good quality of produce is mixed with the poor quality of
produce in the same pack by placing the good quality produce on the top layer of crate and poor quality on the
bottom layers. Due to this practice the apple did not fetch substantial price in the market and cause financial losses
to the apple growers (Iqbal, 1990). Preharvest contractor plays important role by marketing as more than 80 % of
apple growers use this channel for marketing their produce. This is primarily due to shortage of capital, lack of
marketing expertise and shortage of man power. Iqbal (1989) also argued that the existence of preharvest contractor
is a distinctive character of marketing in Pakistan and marketing middlemen are exploiting the farmers on one hand
and the consumer on the other hand.
Bashir et al. (2001) has reported several key reasons for low return for apple growers in Pishin. Poor and
inadequate roads, lack of credit facilities, poor grading and cold storage facilities for perishable products and
shortage of warehouses are the common marketing problems leading to big marketing margins. Ranasinghe (1988)
also reported that middlemen behavior, monopolistic operations of transport system and poor storage facilities are
the problems eroding the farmer’s income on one hand and supply to consumers at a higher price on other hand.
Singh et al.(1990), reported that a decline in apple producer’s share in consumer rupee are due to, high cost of
packaging material, greater dependence of grower on middlemen, malpractice in the market and inadequate facilities
of transport.
Many studies have highlighted marketing middlemen’s exploitation to apple growers evidenced by the
existence of huge marketing margins ranging from 30 % to 80 % of consumer price (Abid, 1980; Bashir et al., 2001;
Mittendorf and Heritage, 1982; Mohy-ud-din, 1989; Singh et al., 1985; Smith, 1979). However, some studies
described the usefulness of middlemen’s role in the marketing set up. For example, Sial and Anjum (1990) argued
that the role of marketing middlemen is very useful, because they provide interest free loans, supply inputs at the
time of need, free food and other marketing facilities to farmers. They also negated the opinion that middlemen are
exploiting the farmer’s income but they perform a very useful role by providing timely needed capital to farmers
which serves as lubricant for moving the wheel of the fruit industry.
With the diverse background and views on role of middlemen, this study aim to further contribute to apple
marketing system in the District Pishin, Balochistan. The specific objectives of the study are as under:
i. To study the prevailing marketing channels of Shin Kulu apple prevailing in Pishin
ii. To find out marketing margins and costs involved in Shin Kulu apple marketing
iii. To segregate marketing margins and costs to find out the net marketing margins of different middlemen
involve in Shin Kulu apple marketing
agency. The following formula was used to compute %age-marketing margins as earned by each market
intermediary in the marketing of broiler.
Mm= (Ps/Sp)*100
Where,
Mm is the marketing margin, Ps is the price spread availed by specific agency and
Sp is the sale price of the same agency.
Marketing Costs
Marketing costs are the expenditure incurred by various market intermediaries from the time when the
produce leaves the farm until it reaches the consumers. These costs are incurred by producers and other marketing
intermediaries and have impact on prices as well as on the margins of the market intermediaries.
The major cost components included packing, loading, unloading, transportation etc. These costs were
computed on per 18 Kg basis by using the following formula:
Mc =As × qh
Where Mc stands for marketing cost of a specific unit quantity, As stands for actual amount spent and qh
represents quantity handled.
Preharvest Commission
contractor Agent
Commission Wholesaler
Agent
Retailer
Wholesaler
Consumer
Retailer
Consumer
Marketing margins are also computed as the %age share of final price received by each marketing
intermediary. Using the above criteria in the following lines the marketing margins and costs of different marketing
middlemen are computed and presented:
Table I. Marketing margins and costs for Shin Kulu Apple (Rs. /Crate of 18 kg)
Trade level Channel-1 Channel-2
Net Margins Net Margins
(Rs. per % of (Rs. per crate) % of
crate) consumer price consumer price
Farmer 81 24 110 32
Pre-harvest contractor 28 8 ------- -------
Wholesaler 15 5 15 5
Retailer 50 15 50 15
Costs Costs
Farmer ------- ------ 98 29
Pre-harvest contractor 98 29 ------- ------
Wholesaler 18 5 18 5
Retailer 48 14 48 14
Consumer price 338 100 338 100
Table II. Marketing margins and costs for Shin Kulu (Golden Delicious) Apple (Rs/crate)
Channel-I: Producer-Preharvest contractor-C.Agent-W.Saler-Retailer-Consumer
Trade level and Costs Margin/Cost (Rs.) Net Margin %
1. Farmer = contracted price/consumer
- Contracted price 81.00 price*100
= 81/338*100
= 24 %
2. Pre-harvest Contractor
i.Purchase price 81.00
ii. Orchard management costs 08.50
iii. Packing, sorting, grading, packing costs 15.00
iv. Packing material 25.00
v. Transport including loading/unloading costs 12.00
vi. Cold storage charges 12.00
vii. Commission agent fee 20.70
viii. Value of physical losses 02.00
ix. Zilla tax and octroi etc. 02.00
x. Other costs 01.00
xi. Total costs (add i through x) 179.20
xii. Gross income (selling through auction) 207.00
xiii. Net margin (xii minus xi) 27.80 = P.H.C net margin/consumer
price*100
= 27.80/338*100
=8%
3. Commission Agent
i.Auction price 207.00
ii. Net margin @ 10 % of auction price 20.70
4. Wholesaler
i.Purchase price 207.00
ii. Transport charges 01.20
iii. Rent of shop 07.73
iv. Sorting and repacking charges 03.00
v. Wastage 05.72
vi.Total costs (add I through v) 224.65
vii. Gross income (sale price) 240.00
viii. Net margin (vii minus vi) 15.35 W.saler net margin/consumer
price*100
= 15.34/338*100
=5%
5. Retailer
i.Purchase price 240.00
ii. Rent of shop 02.43
iii. Transport charges 04.75
iv. Labor charges 07.15
v. Other costs 03.46
vi. Wastage 30.16
vii. Total costs (add i through viii) 287.95
viii. Gross income (sale price) 338.00
ix. Net margin (vii minus viii ) 50.05 Retailer net margin/consumer
price*100
= 50.50/338*100
= 15 %
6. Consumer -Purchase price 338.00
Note: (Standard weight per crate = 18 kg)
Source: Survey 2002
C.Agent = Commission Agent, W.Saler = Wholesaler
Syed Mohammad Khair et al. Margins and channels for Golden Delicious apple produced in Pishin 760
Table III. Marketing margins and costs for Shin Kulu (Golden Delicious) Apple. (Rs/crate)
Channel-II: Producer-C.Agent-W.Saler-Retailer-Consumer
Trade level and Costs Margin/Cost (Rs) Net Margin %
1. Farmer
i.Sale price 200
ii. Orchard management costs 08.50
iii. Packing, sorting, grading, packing costs 15.00
iv. Packing material 25.00
v. Transport including loading/unloading costs 12.00
vi. Cold storage charges 12.00
vii. Commission agent fee 20.00
viii. Value of physical losses 02.00
ix. Zilla tax and octroi etc. 02.00
x. Other costs 01.00
xi. Total costs (add i through x) 97.50
xii. Gross income (selling through auction) 207
xiii. Net margin (xii minus xi) 109.50 = Prod.N.M/consumer
price*100
= 109.50/338*100
= 32 %
2. Commission Agent i.Auction price 207
ii. Net margin @ 10 % of auction price 20.70
3. Wholesaler
i.Purchase price 207
ii. Transport charges 01.20
iii. Rent of shop 07.73
iv. Sorting and repacking charges 03.00
v. Wastage 05.72
vi.Total costs (add i through v) 224.65
vii. Gross income (sale price) 240.00
viii. Net margin (vii minus vi) 15.35 W.saler net margin/consumer
price*100
= 15.34/338*100
=5%
4. Retailer
i.Purchase price 240
ii. Rent of shop 02.46
iii. Sorting costs 01.63
iv. Repacking costs 01.50
v. Transport charges 04.75
vi. Labor charges 07.15
vii. Other costs 03.46
ix. Wastage 30.16
x. Total costs (add i through viii) 287.95
xi. Gross income (sale price) 338
xii. Net margin (xi minus x ) 50.05 Retailer net margin/consumer
price*100
= 50.50/338*100
= 15 %
5. Consumer
-Purchase price 338.00
Note: (Standard weight per crate = 18 kg)
Source: Survey 2002
C.Agent = Commission Agent, W.Saler = Wholesaler
Sarhad J. Agric. Vol.24, No.4, 2008 761
i. Due to lack of market information the farmers losses their profit and are at the mercy of commission agents.
Therefore, so proper marketing information systems through the relevant agencies (media) need to be developed.
ii. Due to an early recovery of their investments, the farmers are forced either to sell their produce at an early stage
at low prices to preharvest contractors or get conditioned loan from the commission agents and do not have time
to wait for improved prices resulting into financial losses. Therefore, the loan facilities through Agriculture
Development Bank of Pakistan (ADBP) or other commercial banks should be introduced in the area
iii. Expensive packaging material further increases the marketing costs causing enormous marketing margins;
supply of packaging material near production area is the foremost requirement to benefit farmers.
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Syed Mohammad Khair et al. Margins and channels for Golden Delicious apple produced in Pishin 762