Ever wondered how food gets to the table? There are several players within this chain. Each activity within the chain presents a wonderful business opportunity for investors. Good news is, it does not matter the size of your capital. There is always an opportunity in there for everyone. So what really guarantees success in these activities? It may sound simple but it is not as simple as buying a fixed income security and walking to your investment banker to demand your money upon maturity.
There is an important activity in the chain that presents investors with a good opportunity. It is the gathering, carting and sales of farming produce from the cultivation areas to the market places. Cultivation areas are usually places outside of the major cities, which are the market centres. Cultivation areas are usually towns and villages, scattered across the country and depending on what food crop you want to engage in, it may take you to the far ends of the country. Fruits, like mango, melons, orange, coconut and pineapples are among the ones that you can begin with. We also see equal opportunity in vegetables like pepper, okra, tomatoes, onions and garden eggs as well as root and tuber crops such as yam, cassava, cocoyam and potatoes.
The operational activities involved in this business are quite clear and simple. However, it involves knowing the times and seasons. It is important to know when the farm produce is harvested, and the appropriate time to arrive and load the crops, taking into consideration the transportation period between farming area and market centre, given the perishability of the crop.
Once these information are known, the first thing is to establish business relationships with farmers in the cultivation areas and market sellers in the marketing areas. Remember that in Ghana, there are categories of businesses which need the crops. For example, at the end of the vegetable chain are restaurants and hotels, shopping malls and women in market places such as mokala, kaneshie and agbogbloshie markets.
Transportation is key in this business. You need very dependable and reliable transportation arrangements to succeed. A good transportation arrangement decreases risk of perishability, cost, risk of losing business partners (farmers and buyers). In short, a lot depends on transportation. The truck used for carting farm produce may sometimes be used as a temporary warehouse at the market centres in the absence of a good storage facility. This is not the best practice, and may come at certain costs to the business. At least two workmen in addition to the driver are needed to help with loading and unloading the truck.
Selling is the next step. It is important to price to attract and retain customers and at the same time be able to cover all fixed and variable costs associated with the business.
Capital requirement for this business largely depends on the size of business you want to engage in. It is however important to buy enough produce to be able to cover expenses such as transportation, wages and selling cost. At least GHc12,000 is enough to start this business and make some positive returns, if you invest in the right food crops and buy from farming areas within appropriate distance from your chosen market centre.
Seasonal variations in farm outputs and the consequent impact on market prices may affect revenue and it is thus important to note the seasonal effects. Peak seasons bring larger farm outputs which lead to lower prices, whereas lean seasons come with higher prices. In both situations, transportation and other expenses may not be as largely impacted as market prices, but they may vary with changes in petroleum price.
Below is a summary of projected financials of buying, carting and sale of foodstuff in some parts of Ghana.
|Vegetables||Roots and Tubers||Fruits|
|Amount Invested in||15,000||15,000||15,000|
|Expected Sales Value||21,000||22,000||23,000|
|Margin per cycle||1,500||2,100||3,700|
|Average cycles per year||8||10||6|
|Expected Annual Profit||12,000||21,000||22,200|
These are only estimates based on certain assumptions. All profits are pretax profits
RISKS AND CHALLENGES
The risk of crops being perished between the time they are picked up until when they are sold emerges as one of major problems faced in this business. Reliable transportation arrangements and intensified marketing efforts are ways to manage such risk.
Investment sector: Agrobusiness
Expected Return: 122% per annum
Payback Period: 0.2 years
Attention required: High
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