Th3_Comparative analysis of rice milling strategies: Evidence from rice millers in Benin

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3rd Africa Rice Congress …

3rd Africa Rice Congress
Theme 3: Rice processing and marketing
Mini symposium: improving rice processing technologies in Africa
Author: Flifli et al.

More in: Technology , Business
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  • 1. 3rd ARC on “Rice Science for Food Security through Smallholder and Agri-business Development in Africa” Comparative analysis of rice milling strategies: Evidence from rice millers in Benin plan  Background  Objectives  Data and Methods  Results  Conclusions and recommandations Vincent Flifli, Economist
  • 2. Background  Promoting domestic rice production is seen today as an effective means to reduce food insecurity in West Africa. And since 2008 rice crisis many agricultural policy measures focused on promoting of domestic rice production strategies.  But, the quality of locally produced rice obtained after milling does not match often with consumers’ preference, because it contains many chips and color mixing rice.  Besides, recent studies have emphasized in many African countries on the importance of post-harvest activities, especially milling activity, in increasing rice quality. Different milling strategies are used by millers in their business. The main strategies include fee-based milling services and paddy buying-milling-selling.
  • 3. Background continues & research questions Furthermore, a previous sturdy underlined that rice millers who purchase paddy have a direct control on the type of paddy they process and bear the risks of selling a type of rice that does not respond to market’s requirements and that the issue of rice quality is actually only relevant to them (Combiners). Unfortunately, most of the millers do not systematically combine milling with trading (i.e. purchase paddy and sell milled paddy) but milling paddy for a fee (i.e. a service provider), (Lançon et al, 2003:2). This situation involves the following questions:  why millers do not purchase paddy and process it with a required care for selling?  Which one of the both types of activities increases better millers’ welfare?  Said in another word, what are the factors that determine the economic attitude of millers and therefore the level of purchased paddy milled?
  • 4. Objectives Determine factors that could explain in one hand the economic behavior of millers faced with the alternative types of activities such as “providing only milling service for a fee” and “purchasing paddy and mill it for selling” and in the other hand the level of purchased paddy they mill. Specifically it aims at:  Identifying factors that influence the millers’ decision as to the question whether to buy paddy and sell milled rice or to provide only milling service on fee basis. Identifying factors that influence the level of quantity of purchased paddy milled.  Computing the gross profit of rice milling activity for both categories of millers and compare them.
  • 5. Data and method AfricaRice, INRAB and NASS sample included communes 16 northwest • Notheast (MCA) •Heckman two-stage model • gross profit of both types of activity Centre South
  • 6. Data and method continues The selection equation of Heckman two-stage model Yi Xi i i , i 1, 2,....n (1) * i * i 1if , y  0 (2) 0if , y O Yi Xi P revioussalary activity Modern tec hnology trade as main activity Constant The Regression equation (OLS) Qi zi i i machine capacity lenghtof service (3) i i N (0, i N (0,1) corr ( i , i ) Zi per day operationtime modern technology Constant ) Profit calculation of milling activity n Gross profit V C PQ pi qi i Depreciation cost nitial cost - Salvage cost Machine life
  • 7. Results Figure1. Map of millers’ characteristics
  • 8. Results continue Table 2 Estimate results from Heckman two-stage model First stage second stage Regression equation Selection equation Paddy purchase Exogenous variables Quantity milled Marginal Coefficients and SE effects Exogenous variable Machine capacity 0.2983588*** (0. 0175215) Length of service Previous salary activity 8.110701*** 1.572335 *** (0.6043054) Modern technology 7.667977*** Trade as main activity 8.119137*** (0.673198) Per day operation time 1.501033*** (0.5602881) 1.571992 *** 0.1060519 8.904778 (90.4356) Modern technology 737.239 (894.287) (0.5893665) constant 2.629266*** Constant (0.2861096) 793.5082 (933.5542) 0.3888559* (0.1816568) Standard errors in parentheses SE : Standard Errors *** p<0.01, ** p<0.05, * p<0.1 rho
  • 9. Results continue The profit computation Table 3 operating accounts Processors Miller-traders Millers-only Items Parboiled rice Qty (kg) 11600 41476.57 Non-parboiled rice Qty (kg) 62080 49842.29 Price of parboiled rice (USD/kg) 0.69 NC Price of non-parboiled rice (USD/kg) 0.68 NC Milling fee (USD/kg) NC 0.04 Depreciation costs (USD) 11.1 6.21 Repair and maintenance costs (USD) 362.71 728.02 Expenditure in purchasing paddy (USD) 44441.74 NC Balance (for total Qty) 5226.154 2918.52 Balance (USD/kg) 0.071 0.032 Source: own elaboration, NC: not concerned
  • 10. Conclusions The quality of locally produced rice remains far below the expected quality more exigent that urban consumers are seeking  There are two types of millers in milling sector in Benin: miller-traders and millersonly. We suggest the organization an upgrading from time to time for processors in order to allow the new comers to have the required knowledge.  Any policy that create an enabling environment for easy access to capital needed is to encourage so to allow processors to invest in improved technologies. Finally, It is also necessary to create an incentive environment especially financial one to bring millers to start purchasing paddy.
  • 11. Thanks for your attention Vincent Flifli, Economist