Aboki, peter maisaje

1.4 Hypotheses

The null hypotheses tested were:

H0₁: Groundnut processing into GNO and GNC is not efficient;

H0₂: Variable input and output prices of GNO and GNC do not affect their variable profit;

H0₃: There is no significant difference in value of groundnut before and after processing; and

H0₄: Markets for GNO and GNC are not integrated.

5. 
   Justification of the Study
   

Positive net returns in any business is an incentive to continue the business. The continuity of investment in crop processing will largely depend on its profitability. Ojowu (2006) noted that “demand- pull” and profit incentive make the changes achieved in developing agricultural processing sustainable. More so that participants in groundnut processing are the low income group who depend largely on what is generated for their sustenance. Therefore the findings of this study will be of immense importance to the participants in the attainment of their business goal.

This study will particularly benefit groundnut processors in increasing the value (quality and quantity) of products at lower cost and hence increase their income. For the marketing agencies, efficiency in the marketing system will increase their returns and lower cost to consumers and manufacturers that use the products as raw materials. Households will be able to acquire GNO and GNC at lower cost for domestic needs. On the whole, the entire value chain from raw material supply (groundnut farmers) through traders to consumers and manufacturers (Bakers, confectioneries, margarine manufacturers, etc) will be improved.

An inverse relationship between increased mechanization of crop processing and women participation was observed by Bruinsma (1999); and that some technologies targeted at alleviating poverty among women did not actually benefit them. The findings of this study will provide technology related information for purpose of intervention and development of appropriate technologies to alleviate poverty among the rural poor, particularly in the study area where religion and other cultural values restrict women from some outdoor income generating activities. It is understood that spatial market integration ensures that a regional balance is attained among food-deficit, food-surplus and non-food producing areas through effective transmission of price signals (Chirwa, 2000).

The findings of this study will set the pace for further research into the groundnut industry. It will also generally provide base-line information to the private sector, government agencies and the non- governmental organizations (NGOs) in their businesses and development activities which will also increase the supply of GNO needed for both domestic and industrial purposes.

5. 
   Limitations of the Study
   

The major limitations in this study were those inherent in social and economic research. Foremost of which was poor record keeping especially among the traditional processors, with consequent dependency on memory recall for processing and marketing activities with inherent unreliability. Probing and leading questions were however used during data collection to assist respondents affirm their responses. Secondly, the study had to contend with the mood and the on-going activities of the processors during data collection. Because processors could not just stop their processing work or selling products to respond to questions, it was difficult getting them to do that. To enhance the quality of information collected, interviews and observations were used during data collection. This however extended data collection period with its attendant cost.

This study covered only groundnut oil processors in the selected states. Only those actively involved in the groundnut oil processing and products marketing activities comprised the elements in the study, hence other groundnut products were not covered.

CHAPTER TWO

LITERATURE REVIEW

2.1 Groundnut Processing Technologies and Systems

Technology is seen as the body of know-how about materials, techniques of production, and operation of equipment based on the application of scientific knowledge (Black, 2002).Modern technology enables the achievement of objectives at a faster rate. Therefore, a sound understanding of current technology, their technical, social and economic environment, is necessary to promote processing enterprises (Bruinsma, 1999). Every technology must be assessed to determine its adaptability and attendant social, economic and environmental consequence. Arene, Nwagbo & Okoye (2004) stressed that an existing technology can be assessed to determine the extent it contributes to satisfying basic human needs; its promotion of self reliance through the use of local human and material resources; and how it affects social and cultural structures, norms and attitudes of the society.

Technology selection is often the most crucial decision in designing and undertaking an agricultural processing project (Austin, 1992). Consequent upon that, Austin (1992) noted that before choosing an agro-processing technology, the market requirement, technical processing requirement, cost and availability of labour, capital, energy, raw materials, capacity utilization, skill capabilities and nutritional consequence must be taken into account. It has been observed that most technologies for food processing are technology driven rather than product or market driven hence have had problems of adaptation (Bruinsma and Nont, 1991; Connry et al, 1995; and Zommers, 1995). In agricultural processing, Orji (2008) suggested a vibrant linkage among processors, industrial users of products and agro- equipment manufacturers. This will enable the fabrication of appropriate machines for agro- processing activities and optimization of the processing segment in the commodity chain.

Bruinsma (1999) compiled technology selection guidelines from Fellows and Hampton (1997) as follows; (i) technological effectiveness (whether the equipment will do the job required at the intended scale of production); (ii) relative cost of the equipment and its maintenance; (iii) operating cost and overall profitability; (iv) conformity with existing administrative and production conditions; (v) conformity with the existing supplies of raw material and the marketing opportunities; (vi) social effects, such as displacement of the work force; (vii) training and skill levels required for equipment operation, maintenance and repair; (Viii) health and safety features and environmental impact; (ix) flexibility to perform more than one function; and (x) compatibility with other parts of a process and stages in the food chain.

In groundnut oil extraction, the basic principle is the same worldwide. These are: (i) pre-treatment, which involves cleaning, scorching and crushing the groundnut; and (ii) extraction, which is the separation of the raw material into oil and residue (cake) (Sharma & Carilli, 1999; RMRDC, 2004). The cells of groundnut embryo contain oil in an extremely fine emulsion (Woodroof & Leahy, 1940). When nuts or kernels are broken or bruised, a sufficient number of cells are injured, hence cause tiny drops of free oil to ooze out and collect on the surface (Asiedu, 1989). In Nigeria and elsewhere, oil extraction from groundnut kernel is done by mechanical pressing or by use of solvent (RMRDC, 2004; Asiedu, 1989). Solvent extraction is capable of bringing out nearly all the oil from the groundnut material, a high yield of oil of better quality and high protein meal (Khan & Hanna, 1983). In the mechanical extraction, the efficiency of oil expression rarely exceeds 90% but it has the advantage of yielding end-products free of dissolved chemicals, and is safer and less expensive to undertake (Asiedu, 1989). The residue, the groundnut cake is further fried dry and is used for human consumption popularly known as ‘kulikuli’ in Hausa dialect of Northern Nigeria (RMRDC, 2004).

In Nigeria and West Africa, mechanical and other methods of extraction co-exist. They all follow the sequence thus: (i) shelling/decortications and drying of groundnut kernels; (ii) roasting/scorching, the process where the kernels are fried to enable quick polishing and easier oil extraction; (iii) polishing, which is the removal of the redskin or testa from the groundnut kernel; (iv) grinding/crushing or pasting, a process that turns the roasted polished and cleaned groundnut seeds into paste; (v) oil extraction, a process which removes the oil from the groundnut paste by means of some mechanical effort or solvent and; (vi) refining and quality control(Asiedu, 1989).

2.1.1 The traditional and modern methods of groundnut oil extraction in Nigeria

In the traditional method, groundnut is shelled, cleaned and roasted lightly. Next, the testa or redskins are removed by rubbing kernels against each other by hand. The de-skinned kernels are pounded with mortar and pestle or ground with stones. The hammer mills used to mill grains in the villages is also used to mill the groundnut kernel in some of the communities. The oil-rich paste is kneaded and pressed by hand or with pestle and mortar to extract the oil. Small quantity of warm water is usually added following each pressing operation until as much of the oil-water mixture as possible has been extracted. The oil-water mixture is fried or ‘fire dried’ over a low fire to remove the water. Lastly, the oil is decanted into bottles or cans, for home use or the market. Alternatively, the paste is boiled and the oil rising to the surface is skimmed off. This may continue until no sign of oil is seen. The traditional method has low oil extraction rate, but the resulting press cake is used for human consumption (Asiedu, 1989; RMRDC, 2004; NAERLS, 2006).

The modern methods used are the expeller methods and solvent extraction process. For the expeller pressing method, the pre-treated, crushed groundnut is continuously fed into the expeller, consisting of a screw which rotates within a sturdily built cylinder. The groundnut mass is fed from the top larger end of the expeller chamber and pressure exerted as the screw turns forcing the mass towards the discharge end. Friction and pressure cause the mass to heat, which facilitates oil extraction. The groundnut oil passes through the perforated screen walls and is collected beneath the expeller chamber, while the press cake is extruded from the discharge end. The resulting press cake contains 5% oil and can be made into ‘kulikuli’.

The solvent extraction of groundnut oil is similar to solvent extraction of soya bean oil. Groundnut destined for oil is not fried, but the red skin is removed. Next, the nuts are cracked into pieces and conditioned to 10-11 percent moisture content at 70^oc or more, and then flaked by passing through rolls. Sometimes the flakes are cooked before being conveyed into the extractor. In the extractor, the oil is removed by means of a solvent. The solvent laden flakes are then passed through a desolvenizer which recovers the solvent. The defatted and de-solvenized cake may undergo further treatment before it is used as feed. The crude oil is clarified by passing it through a filter press. After which it may be dehydrated and sent for refining. Solvent used in oil extractor include ethanol and hexane (Asiedu, 1989; RMRDC, 2004).

This process is basically the same for most vegetable oils. It can also be applied to oil extracted using hydraulic press or screw expeller. Refining consists of alkali refining which neutralizes the free fatty acids using sodium hydroxide (NaOH), bleaching to improve flavor stability using natural bleaching earth, and deodorizing to remove odour using steam distillation under vacuum. If GNO is to be used as salad oil, it undergoes a process of winterization prior to deodorization. The alkaline refined and bleached oil, if necessary, is hydrogenated to an iodine value of about 105 before it is winterized to remove fats that crystallize out at about 0^oC (Asiedu, 1989).

2.1.2 Capital ownership and organizational structures of agricultural processing

Capital has been viewed by Erikson, Akridge, Bernard & Downey (2002) as financial resources of a business, comprising in the broadest sense, all assets of the business and representing both owned and borrowed funds. Black (2002) sees capital as man- made means of production. It is any good that is designed for production of other goods and services, example machinery. These include financial assets which will be used to provide income. Olayide & Heady (1982) explained that capital resources came into agricultural production in form of farm machinery, as tractors, harvesters, tools and equipment for threshing, shelling, grinding, milking; biological capital, in form of fertilizers, herbicides, insecticides, and certified seeds; and also in form of livestock feeds, feed mixes and additives, drugs and improved breeds.

In agricultural processing, capital items will include the raw materials (farm produce), processing machines and equipment, packaging items, additives, and money capital among others required for running of the outfit (Brown, 1986; Austin, 1992). Capital in form of machines, tools and equipment are of critical importance to an agricultural processing activity. Many processors have encountered problems of capacity under-utilization due to improper estimation of working capital needs, such that they are not able to acquire adequate raw materials during harvest, hence leaving the plant short of raw materials for the processing activity. Consequently, enterprise development and the secondary processing sector have sometimes failed because the approach taken was technology driven, rather than market oriented (Bruinsma, 1999). Therefore, decision to purchase a machine must be based on market demand for the products to be processed (Austin, 1992).

Technologies for food processing are normally small-scale as they are accessible and affordable (Clarke, 1987). They can be sited near raw material or where other industries cannot be located, as was the case with small-scale rice processing in Java (FAO, 1982). In small-scale agricultural processing in sub-Sahara Africa (SSA), most machines and equipment operate on contract providing services to owners of the crops or farm output (Clarke, 1987; Bruinsma, 1999). This was shown in cassava processing in Benue State, Nigeria. Aboki & Saingbe (2007) also reported that all the small-scale rice hulling machines in Lafia, Nasarawa State, operated as contract mills, providing milling services to paddy owners on hire.

Bruisma (1999) compiled the various forms of organization and ownership arrangement for processing equipment as follows:

i the village cooperative or interest group can own and run the processing plant and pay a salary to the machine operator(s) and labourers;

ii. the village cooperative or interest group leases equipment from a local workshop with sufficient experience in equipment manufacture and maintenance;

iii. a private enterprise functions as a service mill and processes small batches for individual families, or larger batches on contract for the village cooperative or individual business persons; and, (iv) a private processing enterprise operating on a fully commercial basis where it buys raw materials from the village and the surrounding area for further processing.

2.2 Marketing of Finished Products

One of the challenges of agricultural processing industry is the identification of the target markets for the products. This can be based on consumer needs, market segmentation and buying pattern (Austin, 1992). For processed foods, which form bulk of the agro-industrial products, consumers’ needs are expressed in preference for products’ taste, smell, colour, texture, appearance and convenience for users, and, most importantly, nutritional requirement (Austin, 1992; Brown et al, 1994). For other agro-industrial products such as cotton, jute and wood, whose consumers are industrial users; the emphasis is on price and physical quality (Austin, 1992).

Products are purchased based on the various segments of the markets. These may include geographical location of consumers which reveals ethnic or regional taste, or other socio – cultural attributes of the consumers. Income levels of consumers are also strong determinants of purchases hence an important segment. Also, effective demand and food preferences change as income levels rise, which also reflect product pricing and product characteristics (Gould & Villarreal, 2006; Abdullai & Aubert, 2004). For instance, packaging of products is made in various sizes to cater for the low and high income consumers (Austin, 1992; Ganewatta, Waschik, Jayasuriya & Edwards, 2005).

Another market for agro – industrial products is the export market. This market requires high quality products with good packaging. There is increasing difficulty in export of agro – industrial products to other countries because of increasing protection of domestic agro-industries in the traditional export markets (Brown, 1986 and Austin, 1992). Access to such markets may require a thorough knowledge of regulations and trade structure, changes in packaging or distributional channel, or even new product development (Brown, 1986).

Domestic markets appear to offer growing opportunities for agro-industrial products for both product diversification and import substitution. With increasing income and status, demand for high value products is on the rise (Gould & Villarreal, 2006 and Brown et al, 1994). Agro-industrial product user type such as industrial consumers, institutional consumers, wholesale and retail businessmen, and end consumers need to be considered. Product type- necessities, status items, convenience goods or specialty products, health foods, food away from home (FAH) require attention (Austin, 1992; Gould & Villarreal, 2006). In India, 50% of the value of agricultural production is now high value, but in Africa it is only 5% (Morris, 1994). The buying process of agro-industrial products can also be examined based on who decides the purchase of the product, how they decide, and where to make the purchase (Austin, 1992; Fousekis & Lazaradis 2005). Market information helps in marketing decision for agro – products to be taken adequately. Potential buyers, producers and marketers can be identified; while location and prices of products can be revealed via market information research. Costs can be tremendously reduced if reliable information on a product is available to the producer, marketer or even the consumer (Austin, 1992).

The market place is normally crowded with agro- industrial firms and products, especially in developed countries, each aiming at controlling or accessing the market, hence the competitive environment. The five sources of competition of Michael Porter- rivals, potential entrants, substitutes, suppliers and buyers- need be considered in marketing process of agro-industrial products (Austin, 1992). Agro-industries present a typical representation of monopolistic competition with several firms. Market place will be explored by providing buyers with greater values, which are attainable through cost advantage or product differentiation (Bruinsma, 1999). Cost advantage allows more effective price competition and product differentiation enables more effective quality competition, so that the price-quality interplay yields the ultimate consumer value. In the USA, major meat packers reduced transportation and labor costs by relocating to rural livestock production areas. Differentiation of product can be in form of, for instance, vegetable oil, with varying oleic acid, distinct flavor and special consumer preferences (Sharma & Carralli, 2002). Packaging is also a differentiating factor. South American banana companies’ use of cartons created value for distribution and retailers through more efficient handling, quality control and branding. There is a difference between intrinsic and perceived quality of products. Brand and image creation is a strategy for perceived quality competition, but packaging, product content and services are means of intrinsic quality differentiation; value is therefore in the eyes of the buyer (Austin, 1992).

2.2.1 Marketing strategies for agro-industrial products

The basic consideration in product marketing includes design, pricing, promotion and distribution referred to as the marketing mix. Several design options are acceptable for agro – industrial products. These include taste, texture, cooking ease, colour, odour, nutritive value, convenience, size and packaging. For furniture, leather or wood products, consideration will include durability and fashion (Austin, 1992). In Nigeria the iodization of salt and fortification of vegetable oil, and sugar with vitamins is an example. Cost of product designs and final price of the product must be evaluated to avoid prohibitive cost. Demand and supply forces in the markets set prices for most agro – industrial commodities. Internationally, most developing countries are price takers, while the exporting countries set the prices (Austin, 1992). For locally processed products, pricing vary from market to market within regions and between regions, attributable to such imperfections as lack of information, poor infrastructure and so on (Damisa & Rahaman, 2004).

Sales promotion creates awareness and stimulates demand for products in a consumer. A superior product will not reach its sales potential unless consumers are aware of its advantages. In the USA food processors spend about 3% of their revenue on advertising, which amounts to about 1.5 percent of consumers’ at home food expenditure (Kolhs & Uhls, 2002). Promotion is much less for staples and undifferentiated products and more for processed products. Promotional activities are commonly seen in the print and electronic media in Nigeria, and road shows among others; they all stress real and imaginary advantages of products.

The distribution system is important because it links the processors to the market place. The structure of the marketing and distribution system describes the length of channel and the number of intermediaries between the manufacturers and the consumer. These include the wholesalers, commission agents, brokers and retailers operating at different levels of the product’s chain (Austin, 1992). Several marketing functions carried out include logistics operations (transportation, storage, repackaging), financing, and promotion. In an efficient marketing system of developed countries like USA, 28 percent of the consumers food dollar went to farmers, 72 percent went for processing and marketing functions (Kolhs & Uhls, 2000). The reverse was the case in Ghana where farmers received 71 percent of the retail price of rice, processor 12 percent, assemblers / wholesalers 12 percent and retailers 5 percent (Timmer, Walter & Scott, 1983).The nature of agricultural produce requires specialized and speedy transportation, storage arrangement for both procured raw materials and processed products, (Austin, 1992). Food wholesaling in developing countries tends to be highly fragmented and relatively small-scale though effort to improve the system is being stepped up (Brown, 1986).

2.2.2 Market demand for agro-industrial products

Demand as defined by Erikson, Akridge, Bernard & Downey (2004) is the quantity of a commodity that consumers are willing and able to buy in the market at various prices. Arising from the theory of consumers’ behaviour, in which consumers are rational and thrive towards maximizing utility given their income (Nellis & Parker, 2000).The demand situation for agro-industrial products set the pace for its marketing plans, and because it makes no economic sense producing a product that cannot be sold (Kotler & Keller, 2006). Therefore, consumer demand analysis becomes critical in the processing and marketing of a product. To grapple with this, Austin (1992) suggested consumer analysis to include consumer needs, market segmentation, the processing process and market research ; competitive environment to include market structure, the basis for competition and government influence; the marketing plan analysis to include product design, pricing, promotion and distribution, and demand forecasting which include examining data needs for forecasting technique and projecting sales.

A cross-section analysis of household demand for food and nutrients in Tanzania (Abdullai & Aubert, 2004) revealed that income and other socio- economic variables exerted significant effects on the demand for food and nutrients. The other socio- economic variables included women’s schooling, size of household and urban residence. The study also showed that households in urban areas consumed more fats and oils than their rural counterparts. In a study of Greek households, Fousekis & Lazaradis (2005) concluded that the age of the household head, the degree of urbanization, the percentage of expenditure devoted to food away-from home (FAH), and per capita consumption expenditure affected the intake of nutrients; while household head gender and educational achievements were effective only in certain locations in the study. Gould & Villarreal (2006) in a study in China reported that 26% of household income was spent on food at home (FAH); with household in the lowest income group spending 40% of household income on FAH, while the highest income bracket household spent 15%. It was revealed that percentage of food expenditure on food away from home (FAFH) was higher than on FAH. Also, noted was decrease in percentage of income devoted to food with increase in income of household.

Sabates et al (2001) noted that educational attainment of the main meal planner had impact on food choice and nutritional quality of the resulting diet. Gould & Villarreal (2006) observed that 40% of the household meal planners did not have a high school education. They, also, hypothesized that household food choice patterns were influenced by the age structure of the household members. Sub-Saharan Africa (SSA) is expected to experience growth in food demand largely driven by rapid population growth. Demand for roots and tubers has also increased over the years due to increased consumer and industrial needs emanating from population pressure, favourable markets, government support and price interactions ( Nwachukwu, Agwu, Onyewaku & Egeonu, 2009). Agro – industries enhance product diversification and improvement necessary to change the demand pattern for farm producers (Brown, 1986).