Abishek Pokharel ECONOMIC ANALYSIS OF OFFSEASON TOMATO PRODUCTION IN KATHMANDU, NEPAL
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Abishek Pokharel ECONOMIC ANALYSIS OF OFFSEASON TOMATO PRODUCTION IN KATHMANDU, NEPAL A Study of Nepalese tomato growers Thesis CENTRIA UNIVERSITY OF APPLIED SCIENCES Bachelor of Business Administration, International Business May 2021
ABSTRACT Centria University Date Author of Applied Sciences May 2021 Abishek Pokharel Degree programme Bachelor of Business Administration, International Business Name of thesis ECONOMIC ANALYSIS OF OFFSEASON TOMATO PRODUCTION IN KATHMANDU, NEPAL. A Study of Nepalese tomato growers Centria supervisor Pages Sara Åhman 37 + 3 Instructor representing commissioning institution or company Mr. Chhabilal Baral In Nepal, fresh seasonal and off-seasonal vegetables have been considered high value crops and com- mercial production of fresh vegetables is promoted. Tomato is one of the most commonly produced vegetables in Nepal. The cultivation of tomato in offseason has been gaining popularity as it fetches more price than seasonal production of tomato. But the domestic production of tomato is not enough to meet the demand during the lean period. Many efforts have been made on the growth of off-season tomato production but still it is facing problems which have disturbed the rapid expansion of tomato cultivation on sustainable way. Generally, farmers are forced to dispose their produce at low price. Hence it is very urgent to identify different marketing and production constraints to boost-up the profitability. This study, therefore, in- tended to fill the gap in knowledge by surveying the condition of off-season vegetable growers and provide insights about cost, return and market of off-season tomato cultivation. The objective of the thesis was to assess the economics of offseason tomato production in Kathmandu, Nepal. Further analyses were conducted regarding the cost of production and returns of tomato production inside green house, marketing channel of offseason tomato production and identification of the major con- straints of tomato production inside green house. The research was done using quantitative methods. The data were collected through phone interviews with thirty off season tomato cultivators. The desired outcome of the thesis was to know the econom- ics of off-season tomato cultivation and to make suggestions to the producers based on data analysis. All of the study areas (Tokha, Tarkeshwor and Budhanilkantha municipality) were found to be the po- tential production pocket area for tomato cultivation due to climate and edaphic suitability as well as market access. Gross margin analysis showed that tomato cultivation was one of the profitable enter- prises, which was supported by its high B/C ratio. The marketing channel of produce-wholesaler-re- tailer-consumer had been the mostly followed channel by farmers. During the marketing of tomato, farmers faced many problems like problem during transportation, lower price of produced vegetable, problem of middleman who takes more marketing margins that increases the price of tomato in mar- ket. Due to the lower price of the tomato, farmers left vegetable in field for decay. This problem hin- ders farmers to cultivate offseason tomato on commercial basis. Key words Economics, Marketing, Offseason
CONCEPT DEFINITIONS ADS: Agriculture Development Strategy AKC: Agriculture Knowledge Centre APP: Agriculture Perspective Plan B/C: Benefit Cost Ratio CBS: Central Bureau of Statistics DADO: District Agriculture Development Office GDP: Gross Domestic Product HT: Hectare JTA: Junior Technical Assistant MT: Metric Ton NARC: Nepal Agriculture Research Council PMAMP: Prime Minister Agriculture Modernization Project VDD: Vegetable Development Directorate
CONTENTS
1 INTRODUCTION................................................................................................................................1
2 COMMISIONER .................................................................................................................................3
3 AGRICULTURE CONTEXT IN NEPAL .........................................................................................4
3.1 Status of tomato production in Nepal...........................................................................................7
3.2 Potential areas for offseason farming in Nepal ...........................................................................9
4 MARKET, MARKETING AND ECONOMIC ANALYSIS .........................................................12
4.1 Market and Marketing ................................................................................................................12
4.2 Economic Analysis .......................................................................................................................14
5 METHODOLOGY ............................................................................................................................17
5.1 Research Design ...........................................................................................................................17
5.2 Selection of the study area and respondents ..............................................................................18
5.3 Sources of information and data collection techniques ............................................................18
6 RESULTS AND DISCUSSION ........................................................................................................21
6.1 Area under tomato cultivation ....................................................................................................21
6.2 Economics of tomato production ................................................................................................22
6.3 Marketing of offseason vegetable by farmers ............................................................................23
6.4 Price fixation of the offseason tomato ........................................................................................24
6.5 Marketing channel of the offseason tomato ...............................................................................25
6.6 Comparative advantage from different marketing channels ...................................................25
6.7 Problem during marketing of vegetables ...................................................................................26
6.8 Method for improving profitability of crop ...............................................................................27
6.9 Expectation from local government and technician .................................................................28
6.10 SWOT Analysis ..........................................................................................................................28
6.10.1 Strength ..............................................................................................................................29
6.10.2 Weakness............................................................................................................................29
6.10.3 Opportunity .......................................................................................................................29
6.10.4 Threats ...............................................................................................................................29
7 CONCLUSION ..................................................................................................................................31
REFERENCES ......................................................................................................................................33
APPENDICES
FIGURES
FIGURE 1. Monthly trade of tomato in KFVW Market in 2077 .............................................................8
FIGURE 2. Trend of national average retail price of tomato (1970/71-2015/16) ...................................9
FIGURE 3. Common flow of vegetable in Nepal (AKC 2019)..............................................................14
FIGURE 4. Distribution of land under tomato cultivation by study site (hectare) .................................21
FIGURE 5. Marketing of offseason vegetables by farmers ....................................................................24FIGURE 6. Method of price fixation of offseason vegetable .................................................................24 FIGURE 7. Marketing channel of offseason vegetable ..........................................................................25 FIGURE 8. Comparative advantage from different marketing channel .................................................26 FIGURE 9. Problem during the marketing of vegetable ........................................................................27 FIGURE 10. Method of increasing the profitability of crop...................................................................27 FIGURE 11 Expectation from local government and technician ...........................................................28 TABLE TABLE 1. Economic indicator of tomato production.............................................................................23 PICTURES PICTURE 1. Map of Nepal showing Terai region, Hills, and Himalayan region ..................................10 PICTURE 2. Map of Kathmandu showing study sites ...........................................................................11
1 1 INTRODUCTION Agriculture has been the way of living to humankind from the beginning of the civilization. Nepal is the diverse country with diversity in climate, geographical structures, species and cultivable land which facilitates agriculture enterprises in different ecological zones. Agriculture is the main boon to Nepal’s economy. Growing of vegetables under adverse climatic or economic conditions is called off- season vegetable production. Fresh seasonal and off-seasonal vegetables have been considered high value crops and commercial production of fresh vegetables is promoted. In the process of commercial- ization of the agriculture, offseason vegetable production has played key role contributing to ameliora- tion of economic status of the farmers. It has been the source of regular employment and income to the marginal farmers by bringing economic gains. The government has formulated many programs and policies for the off-season vegetable production and aims to improve food self-sufficiency and reduce poverty through commercialization. In Kathmandu district, tomato production is a big part of the farming system. Tomato production is a major source of cash income and livelihood for households and a large number of traders are available in those areas where irrigation water is available, and farmers have stronger agricultural marketing net- works. Kathmandu, on the other hand, is failing to meet the growth needs of tomato farming. Produc- tion, post-harvest handling, and marketing constraints, such as input use, efficiency, packaging, stor- age, and distribution, have hampered tomato production, trade, and consumption. Production econom- ics is necessary to understand the relationship between all players in a production and distribution chain. It aids in the identification of pressure points and the strengthening of weaker ties with low re- turns. The demand of offseason fresh vegetables especially tomato is very high as Kathmandu is the central spot for trade and tourists. Rainy season tomato cultivation enables hill farmers to catch offseason mar- ket price as the cultivation of tomato in Terai region is limited due to heavy rainfall, flood and high temperature. Therefore, there is a high potential of growing vegetables in offseason to meet the domes- tic demand in mid hills of Nepal. Traditional markets should explore new ways to attract business by knowing customers and their needs. This study aims to fill the gap in knowledge by surveying the con- dition of off-season vegetable growers and provide insights about cost, return and market of off-season tomato cultivation. The study is significant as it could serve as a source of policy guidance to Nepal
2 government and also provide necessary incentive for proper production and marketing of off-season tomato. The objective of the thesis is to assess the economics of offseason tomato production in Kathmandu, Nepal. Further analyses on the cost of production and the returns of tomato production inside plastic house, marketing channel of offseason tomato production and identification of the major constraints of tomato production inside plastic house have also been conducted. The research portion includes quantitative method of analysis. This research will be carried out by a questionnaire survey for the progressive farmers who have adopted the off-season tomato cultivation technology. The data obtained from the analysis will give the clear view of the production economics and current marketing trends of tomato in Nepal.
3 2 COMMISIONER The commissioner for this thesis is Mr. Chhabilal Baral who is a progressive farmer and has adopted off season vegetable farming technology. He helped me to obtain all the relevant information regard- ing off season tomato growers. Mr. Baral is the owner of three agricultural farms and has also been awarded with best progressive farmer award of Kathmandu district in 2018. He has attended hundreds of trainings and seminars on offseason vegetable farming. According to him, the most disturbing fac- tor of offseason tomato cultivation is the weak marketing chain of tomato which causes high fluctua- tion in price with very low farm gate price of tomato. (Baral 2021.) Chhabilal Baral is one of the model farmers in the area and his three farms provide job opportunity to twelve long term and around 30 short term workers altogether. He has been coordinating with the mu- nicipality (local government) and Agriculture Knowledge Centre (Provincial government) for organiz- ing different programs for motivating youths in agri-entrepreneurship and also providing skill develop- ment trainings especially for off season vegetable cultivation. Mr Baral has a good linkage to both lo- cal and distant markets inside the country. He keeps a good deal of market information including the information of price, demand, supply, etc. He also conducts informal trials to understand the factors hindering the off-season vegetable production and seeks for their potential solutions consulting with the related experts. (Baral 2021.)
4 3 AGRICULTURE CONTEXT IN NEPAL Most of the Nepalese people are dependent on agriculture for their livelihood. In Nepal, agriculture sector contributes 26 % share in national GDP. Among the total GDP from agriculture, horticultural commodities contribute 14% to the total AGDP. Nepal government has given priority to agriculture sector by expanding the total expenditure to NRs 2650 million in 2015/16. (MOAD 2016.) It was 18% higher than previous year and agriculture budget has increased tremendously as compared to previous years. Vegetable worth NRs 55 billion is being produced by Nepal annually. Around 70% of total household has been involved in vegetable production and plain region is the major area for vegetable cultivation with an annual production of 1437921 mt (metric ton) followed by hilly region with 1261041 mt. 39% of the total production is used for the household consumption and only 61% is used for marketing purpose. (PACT 2014.) Due to diverse agro-ecological conditions, Nepal has compara- tive advantage of producing the vegetable crop throughout the year. Tomato is one of the most im- portant vegetable having the high market demand. Open field cultivation during the Autumn-Winter and cultivation in the plastic tunnel during Summer/Rainy season is very common in Nepal. (Ministry of Agricultural Development 2018.) In Nepal, agriculture is the major sector for economic development. The total cultivated area of the country is about 3.09 million ha. Vegetable crops are cultivated in 232,295 hectares of cultivable land and the total production was found to be 2,820,527 mt. (MOAC 2016.) In 2015/16 Nepal imported vegetables worth Rs 2.1 billion and exported vegetables worth Rs 21 million (MOAD 2016). Vegeta- ble production in terai, mid hills and high hills were recorded to be 55, 40 and 5 percent respectively (MOAC 2016). In last 10 years, the area of vegetable cultivation is increased by 41% while production increased by 63%. Similarly, the productivity is increased by 16%. The area, production and produc- tivity in 2015/16 is 266937 ha, 3580084 mt and 13.41 mt/ha. Likewise, the major vegetables which were grown in large areas are cauliflower, cabbage, tomato, bean and pea. (MOAD 2016.) According to a field survey conducted by USAID Nepal in 2011, the central region of Nepal only transacts 60,979 mt of vegetables. There were more participants in the vegetable buying and sale pro- cess at different levels, such as input supply, processing, wholesaling, and retailing. Similarly, USAID Nepal identified number of constraints to vegetable production, including a lack of skilled labour, lack of year-round irrigation, lack of improved packaging, grading, cultivation, and harvesting practices, lack of technical knowledge on the proper use of chemical pesticides, lack of timely access to high-
5 quality agricultural inputs, and a reliance on imported vegetables. Shrestha, Shrestha and Pandey (2014) conducted research on production analysis of fresh vegetables in Kathmandu district, Nepal. They discovered that the cost of tomato production was NRs. 15.32 in the study field, with a BCR of 2.20. The producer's share of the tomato on consumer price was 64.44 percent and 44.61 percent, re- spectively. The study found that as more actors in the chain were involved, the marketing margin in- creased, as did the post-harvest loss in the marketing process. Tomato (Lycopersicon esculentum) is one of the most commonly produced vegetables in Nepal. It has occupied the fourth position in terms of production and fifth position in terms of acreage. Cultivation of tomato using plastic tunnels is increased in Kathmandu due to its higher productivity and income compared to traditional crops production. (AEC 2006.) The cultivation of tomato in offseason has been gaining popularity as it fetches more price than seasonal production of tomato. Tomato is being grown mostly as winter crop in plain and spring crops in mid hills. The gradual increase in year-round de- mand of tomato for fresh consumption and processing resulting from urbanization, hotels, tourism, nu- tritional awareness of the people etc is making the avenue to the offseason production. (Kafle & Kumar 2017.) In the hills, cultivation of tomato can be done in two growing seasons that is spring and rainy. The production of tomato inside the plastic house during rainy season has become popular and profitable. Marketing of tomato is complex especially because of perishability and seasonality. (Gandhi & Namboodiri 2004.) The demand of tomato production is increasing day by day. Producers could fetch good price in spring season as it is possible to cultivate tomato both in Terai and hilly regions and hence the production be- comes surplus. Whereas in case of the monsoon season, there will be no production in Terai. Thus, the domestic production of tomato is not enough to meet the demand during the lean period. Hailstone and heavy rain generate various problems to cultivate tomato in open field condition. Many efforts have been made on the growth of off-season tomato production but still it is facing problems which have disturbed the rapid expansion of tomato cultivation on sustainable way. In case of vegetable, marketing is very important in determining the profitability. They are perishable in nature. Hence to ensure mar- keting efficiency, special marketing arrangements are necessary. Generally, farmers are forced to dis- pose their produce at low price. Hence it is very urgent to identify different marketing and production constraints to boost-up the profitability. Off season tomato growers of the study area claim that due to the lack of extension services; they do not have enough price information. Traders and middleman are much benefited from weak linkage between farmers and consumers. Many program and policies for- mulated by governments for the commercialization has not been implemented effectively. Hence, most
6 of the producers have been following traditional production practices which have high cost of produc- tion, low productivity and low profitability. It is not enough just to produce a vegetable; it must be pro- duced efficiently and marketed successfully. (Kaini & Singh 2005.) Hence it is necessary to have effi- cient marketing system for higher profits from the products. Tomato is one of the most grown vegetable. It is a member of the Plantae Kingdom, Phylum Angio- sperms, Class Dycotiledonae, Order Solanales, and Family Solanaceae. Tomatoes are a good source of vitamins A and C. (Faruq & Islam 2012.) Despite their widespread popularity, tomatoes were thought to be poisonous in the United States just two hundred years ago. In the 17th century, it spread to Eu- rope, then to Southern and Eastern Asia, and then to the United States, Africa, and the Middle East (Meya & Kusolwa 2015). Its roots can reach a depth of over a meter. Some varieties have short stems that stand tall and guardian in the air without the need for assistance. The leaves are bright green in colour and typically have fluff on the back. The five sepals on the green calyx are longer than the first, and the drawn or spear-shaped petals are smaller than the first, but they are enhanced during fruit de- velopment. It has five stamens on a short rod, each with a wide anther. A cavity is produced between the two parts of the tomato fruit (berries). 20-270C is the best temperature for tomato growth. When average temperatures exceed 30°C or fall below 10°C then fruit setting will be poor. As they are sensi- tive to water logging, they prefer well drained soil with 6-7 soil P.H. As tomatoes are deep rooted veg- etable, the bed should be well prepared to reduce the soil compaction and hard pans. To enhance the earlier growth of tomato, they should be transplanted into plastic mulch on raised beds which warm up more quickly in the spring. On raised beds more water availability is necessary during drought condi- tions. In Nepal, different agro-climatic regions are available at different times of the year that enhances all year production of tomato. (Ministry of Agricultural Development 2018.) Nepal is the country with extreme climate events. The increase in temperature during summer season and fog with prolonged low temperature during winter season affects the cultivation of tomato. Thus, tunnel farming is the simple with low-cost practices system that controls the microclimate surrounding the crops and reduces the impact of the fluctuation in temperature. It consists of green- house like structure swath in plastic hat which empowers the growth of the offseason vegetable and thus serving the food supply all-round the year. Plastic house should be constructed in well drained areas with good proportion of sunshine and shade. The main benefit of cultivation of tomato under plastic tunnel is that it is an easy technique for offseason vegetable production with increase income during offseason. The BC ratio of tomato production under the plastic tunnel is high with value 2.78 in peri-urban areas of Kathmandu which indicates it as a profitable Agri Enterprise. (Gautam 2019.)
7 3.1 Status of tomato production in Nepal Tomato is broadly accepted crop and commonly used in a variety of dishes as raw, cooked or pro- cessed products. In Nepal, it is a winter crop in Terai and Inner Terai whereas in the mid hills of Nepal it can be produced successfully in two growing seasons-spring and rainy. According to MOAD (2015/16), the area under tomato is estimated to be 20046 hectares with a total production of 386824.6 ton in the year 2014/15. If we compare tomato crops with total vegetables in terms of area and produc- tion, we will find that tomato has constituted 7.4 percent in area and 9.3 percent in total production of vegetables. Tomato comes in third position in terms of production and acreage (PMAMP 2016). Kathmandu is one of the most potential areas for the production of the commercial vegetables. The major vegetables cultivated in this district in terms of area are cauliflower, cabbage, tomato, radish, carrot, cucumber, pumpkin, brinjal, bitter gourd, zucchini and other leguminous crops. Cauliflower, cucumber and tomato are cultivated in 838 ha, 231 ha, 73 ha and 168 ha respectively and production are 14047 mt, 3012.9 mt, 874 mt and 2553.6 mt respectively. The total production, total amount of ex- port and total income of vegetables in Kathmandu in 2072/2073 are 21721.2 mt, 4896.7 mt, and Rs 109775100.2 respectively. (AKC 2019.) Tomato market prices fluctuate a lot, both for farmers and for consumers. In the summer of 2017, the market price of tomato dropped by 22% at the producer stage, owing to a bumper harvest (Karki 2017). Tomato prices fall at the start of the rainy season due to increased demand, but they rise at the end of the season. This allows house farmers to explore the market because the harvest is spread out over a long period of time. Furthermore, the majority of farmers intend to grow tomatoes in plastic houses in order to produce large harvests by July when there is lower supply and higher price. (Pokharel 2010.) Figure 1 shows the monthly trade of tomato in Kalimati Fruit and Vegetable Wholesale Market in 2077 B.S. (2019/20) which indicate fairly good amount of trade in whole year.
8 FIGURE 1. Monthly trade of tomato in KFVW Market in 2077 (VDD 2019/20) Nepal has prioritized agricultural production as a key area for the country's development, and it has in- creased its efforts in mechanization to reduce poverty in rural areas. The development of Nepal's agri- culture sector has been prioritized by various plans and policies. Several preparations have been made and implemented so far. In fact, the government of Nepal considers agriculture to be the most im- portant sector for the country's economic growth. The Agriculture Project Planning (1995) was devel- oped to improve agricultural growth by growing per capita AGDP from 0.5 percent in 1995 to 4 per- cent per year. Similarly, the Agriculture Development Strategy ADS (2015) is a 20-year initiative with the goal of reducing poverty from 25% to 5% by 2035 A.D. Similarly, the Prime Minister Agriculture Modernization Project (2073-2082) seeks modernization in agriculture with the goal of increasing agri- cultural production and productivity through mechanization, availability of necessary technology and production materials, and development of essential infrastructure for agricultural processing and mar- keting to make farmers self-sustained through commercialization (PMAMP 2016).
9
70 National average retail price of tomato
National average retail price of tomato
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FIGURE 2. Trend of national average retail price of tomato (1970/71-2015/16) (ABPMDD 2015)
3.2 Potential areas for offseason farming in Nepal
There are different places in Nepal that could be taken as the potential areas for the offseason tomato
cultivation. Taking the glance at geography of Nepal, Nepal has three different types of climatic geog-
raphy which are Terai, Hills and Himalayas. Terai is the plain region with the hottest climate among
the three regions. Hills are with subtropical climate and Himalaya region are the mountainous region
with temperate climate. (ABPMDD 2015.) Nepal's diverse climatic conditions are conducive to the de-
velopment of different climatic zones. Many studies have shown that commercializing existing farm-
ing practices and incorporating offseason vegetable production into the mix will boost farmers' liveli-
hoods. Nepal has the best agro-ecological characteristics for the promotion of high-value crops. (VDD
2020.) For the development of different vegetable crops, a wide range of agro-ecological diversity pro-
vides a competitive advantage. Off-season vegetable development, which takes advantage of these
ecological niches, could be extremely beneficial in terms of nutrition, jobs, and income generation.
The Nepalese government is promoting the cultivation of offseason vegetables in Nepal's hills as a val-
uable crop that can help farmers increase their income and thus reduce poverty. (Shrestha 2008.) The
main off-season vegetables in Nepal are tomato, cauliflower, cabbage, cucumber, onion, and chili. To-
mato, cauliflower, and cabbage cultivation are the most common among them. Off-season vegetable
farming has played an important role in helping hill farmers improve their economic status, in part by
providing daily jobs and income to marginal farmers and their families during the year. Despite the10 fact that the Terai grows and sells more vegetables, vegetables grown in the hilly area are more valua- ble. (Shrestha 2008.) In case of Nepal, hills are the main region where most of the offseason farming is carried out. Among the hilly districts Kathmandu is the major district where highest number of the commercial offseason tomato cultivation has been carried out (PMAMP 2016). Kathmandu is a mid-hill district in the Bag- mati province. The district spans the longitudes of 27°27′E and 27°49′E, as well as the latitudes of 85°10′N and 85°32′N. The district is bordered on the east by Bhaktapur and Kavrepalanchok districts, on the west by Dhading and Nuwakot districts, on the north by Nuwakot and Sindhupalchok districts, and on the south by Lalitpur and Makwanpur districts. The district's total area is 41202 ha, with 21200 ha of agricultural potential land and 12109 ha of irrigated agricultural land. This district has the poten- tial to grow vegetables due to its climatic suitability. The climate encourages the growth of both winter and rainy crops, allowing people to grow vegetables in both seasons. Because of the assessable market and inputs for processing, access to the vegetable wholesale market in Kathmandu, and high demand of tomato for the rising populations of Kathmandu as well as from various tourist hotels during lean periods, it is one of Nepal's best potential areas for cultivating offseason tomato under plastic house on a commercial scale. Tokha, Tarkeshwor, Budhanilkantha, Chandragiri, and Kritipur municipalities produce offseason tomatoes in the district's plastic houses, according to AKC Kathmandu. In 2018/19, the total vegetable production in Kathmandu was 45385 mt. (AKC 2019.) Kathmandu produces 20250 mt of tomato from 210 ha of land, with a productivity of 96.43 mt/ha, making it the most productive tomato-producing district in Nepal (VDD 2020). PICTURE 1. Map of Nepal showing Terai region, Hills, and Himalayan region (AKC 2019)
11 PICTURE 2. Map of Kathmandu showing study sites (AKC 2019)
12 4 MARKET, MARKETING AND ECONOMIC ANALYSIS This study is all about studying the market of offseason tomato production, ways of marketing for the offseason products and the analysis of economics involved for the cultivation of vegetables during off- season. 4.1 Market and Marketing A market is where purchasers and merchants can meet to work with the trade or exchange of labor and products (Kenton 2021). The idea of business is derived from the concepts of trade and relationships. It's a group of real and prospective customers for a product. Marketing is the process in which individ- uals and groups obtain what they want and need through the development, selling, and sharing of value-added goods with others in a social and managerial process (Gamble, Gilmore, McCartan-Quinn & Durkan 2011). Production is the door to economic growth, but marketing is the key that unlocks the door. Marketing seeks to satisfy consumers through an exchange partnership in order to achieve organ- izational goals (Aboagye 2013). A good marketing system will help farmers get better prices and increase the supply of low-cost pro- duce for consumers (Shrestha 2008). The marketing system encompasses a diverse set of practices. Sidhu (1986) defined the modern definition of marketing system, which involves producer producers, merchants, transporters, wholesalers, retailers, and consumers as the key actors in various activities. In certain situations, new markets or changes to existing markets may aid in the resolution of a variety of marketing issues. It is critical to decide whether or not to make business changes and what kind of im- provements to make. Several authors have identified bottlenecks in Nepalese vegetable marketing in this regard. One of the many bottlenecks in the vegetable marketing industry is the systematic arrange- ment of marketing networks. Understanding the marketing mechanism is critical for identifying system constraints and providing efficient services across the production/consumption chain. That is because an effective marketing system reduces costs and helps everybody in society. (CIM 2015.) Agriculture marketing is a process that begins with a farmer's decision to produce a marketable farm product and encompasses all aspects of the marketing mechanism or scheme, functional and institu- tional, as well as technological and economic considerations for market delivery and use by the final customer (Kaini & Singh 1998). According to Rhodes (1987), agriculture marketing usually entails
13 numerous transactions involving producers, different forms of agribusiness, and household consumers. Farmers are typically the first sellers in the process, but as the group passes through the marketing channel, there are a variety of agribusiness companies that will be buyers and sellers. Agricultural mar- keting entails the execution of all business activities related to the transportation of agricultural prod- ucts from the point of origin to the point of consumption. Agricultural marketing, according to Acharya (2001), encompasses all activities associated with the delivery of input to farmers and the transportation of agricultural products from farmers to consumers. There are a number of issues that arise when it comes to the cultivation and marketing of agricultural commodities. The findings of a study on agricultural marketing constraints in Nepal at various levels, from producers to consumers, defined weak institutional, legal, and marketing infrastructure as the major constraints of agricultural marketing in Nepal. Facilities should be upgraded to improve sanitation, minimize post-harvest losses, speed up the flow of produce, and lower transaction costs in marketing systems. Markets in rural areas will have an easier time adapting to new systems like supermarkets and hypermarkets than in other ar- eas where conventional systems are under the most immediate pressure from new systems like super- markets and hypermarkets. (Kaini & Singh 1998.) According to Ali (2000), vegetables need more labour than cereal crops. In order to cultivate one hec- tare of vegetables in one season, an additional 205 labour days were needed. This equates to around one extra full-time job during the year. In individual crops, the same pattern can be seen. On a yearly basis, the conversion of one hectare of cereal land to vegetables would produce around two labour jobs in two seasons. In the same vein, he demonstrated that the cost of production for vegetables was roughly three times that of cereals. Despite the fact that costs of family-owned services such as labour and manure were excluded, the proportion remained unchanged. One thing that both vegetable and rice cultivation had in common was that labour and fertilizer were the most expensive components. (Lu, Bai, Ren & Campbell 2010.) In vegetables, however, labour shares in total cost were lower, and mar- keting, defensive structure, and pesticides were significantly higher than in cereals. According to Deoju (2003), a marketing channel is a different route for products to flow from manu- facturers to customers. According to him, marketing channels begin at the farm gate and end at the front door of the customer. Some goods are handled when on their way to the end user, while others arrive unaltered. The marketing channel is the path that goods take from their suppliers to their final consumers. Agriculture produce undergoes changes in time, location, type, and ownership during the marketing process, all of which contribute to their value. Their marketing platform is made up of the chains that transport different products from manufacturers to consumers. In channel arrangements,
14
producers, wholesalers, retailers, and other channel actors perform marketing functions (business ac-
tivities) that contribute to the product flow. Intermediaries are individuals who act as a link between
producers and end users. (Pokharel 2010.) The participants in the process are studied to gain this
knowledge (Mendoza 1995). Marketing agents accomplish both personal and social goals by perform-
ing these tasks. They receive a monetary reward for performing a societal desired activity. They often
add value to output and, as a result, meet the needs of consumers. (Kotler 1997.) In Madhya Pradesh,
India, In an article published in 2005, M.K. Singh established four different forms of marketing net-
works in which 1-3 middlemen are involved in the entire phase of vegetable marketing. They were: a)
producers to retailers to consumers, b) producers to wholesalers to retailers to consumers, d) producers
to local collectors to retailers to consumers, and d) producers to local level collectors to wholesalers to
retailers to consumers. The most common chain used by 41.63 percent of respondents in his study was
producer to wholesaler to retailer to customer, which involves two middlemen (Kushwaha, Chaudhri,
Verma & Kushwaha 2018). While marketing channels in Southeast Asia are rapidly shifting from con-
ventional shops to supermarkets and hypermarkets, wholesale markets still account for the vast major-
ity of fresh foods and vegetables sold to urban consumers (Cadilhon, Fearne, Moustier & Poole 2003).
According to a study conducted by the Marketing Development Directorate on tomato production and
marketing, the lack of basic infrastructure (market yard, storage, weighing machine, etc.) at local as-
sembly markets causes farmers and traders great hardship (wholesaler and retailers). Middle markets
are mostly in charge of gathering goods and selling them to wholesalers. The wholesaler's goods are
passed on to the manufacturer, who then passes them on to the customers. The number of steps re-
quired for a product to enter customers is determined by market place. The typical flow is depicted in
the diagram below:
Farmer/producer Collector/Local marketer National traders
Consumer Retailer/Vegetable shop Wholesale market
FIGURE 3. Common flow of vegetable in Nepal (AKC 2019).
4.2 Economic Analysis
Plastic house farming has a high production cost due to the high cost of plastic house building (Kotler
& Armstrong 2003). In comparison to open field farming, the cost of fertilizer and pesticides is lower
in plastic house farming. The cost of producing a kilogram of tomato in an open field was Rs 13.87,15 compared to Rs 20.17 in a plastic home. In a plastic home, however, total output, total sales, and net profit nearly double as compared to an open field. The cost of installing a plastic house on one ropani of land is estimated to be Rs 20000. The cost of production in plastic house farming appears to be higher at the start of the company, but the cost is offset by a higher harvest and longer-term produc- tion. Farmers can get Rs 17 per kg for open-field tomatoes when selling them to local collectors, but they can get Rs 27 per kg for tomatoes grown in plastic houses. (PACT 2014.) This is due to the fact that harvest from a plastic house lasts longer and is available even during the off-season. Plastic house farmers can earn as much as USD 350-500 from a plot of land measuring only 100 m2 in area over a short time period, in addition to protecting crops from excessive rainfall and providing a sheltered en- vironment for the production of better quality crops during the rainy season cropping period. This is significantly more than they can earn by growing any traditional crops using conventional methods. The net profit from a plastic house varies depending on its size, cultivation methods, and market condi- tions. However, according to Pokharel (2010), a plastic house measuring 20*6.5 m2 provided a net farm income of 26-50 thousand rupees per year, depending on cultivation practices, varieties, and mar- ket conditions. Off-season vegetable price variation is a critical concern. Normally, price of the offseason vegetables is cheaper during harvesting season and steadily increases as stock decreases and is cheaper at growing locations than distance away. The supply of off-season vegetables to the market is not well regulated due to the lack of sufficient cold storage. Different modes of transportation trigger price differences in vegetables, and farmers in remote areas are forced to sell them at a lower price than those in more ac- cessible areas. The market price of vegetables from the former region will be higher than those from the latter due to the porter age cost. Since these unfavourable factors exist in any location, the price and quantity differ dramatically. Farmers' productivity and income have decreased in recent years as a result of bacterial wilt, late blight, nematode, and viral diseases. (NARC 2002.) Farmers' income has decreased due to poor quality in terms of form, scale, and colour of vegetables. Farmers, on the other hand, will benefit economically if they are encouraged to grow vegetables using organic manure and without insecticides, as there is a high demand and price for the products on the international market, which has recently opened up in the Middle East countries. (Gautam 2019.) Gross margin is the difference between the gross income and variable expenses (Dillon & Hardaker 1993). The cost of production and profit of crop is important for economic analysis. The total cost of production includes both fixed and variable costs associated with crop production. There is a signifi- cant gap in our understanding of crucial aspects of farmers' profitability decision-making. Farmers'
16 management abilities increase as they become aware of certain facts through available information or records. The variable expenses are that expenses which vary according to the enterprise level, which is expressed in per unit basis. It helps to analyse the adoption of farm practices. In large scale production, the total fixed cost is large over volume of output. On small scale production, fixed cost spreads over smaller volume of output. So, difference in the scale is crucial factor to be considered in the study of enterprise. Higher net return can be received from vegetable production of high-priced vegetables. Data on production costs will aid farmers in their decision-making process when it comes to choosing a profitable sector. Farmers learn about the feasibility of growing various crops that are adapted to var- ious agro-climatic conditions by comparing the cost of production of various crops and other farming activities. (Aryal, Bhattarai & Bhandari 2014.) In terms of both benefit-cost ratio and net return per unit area, vegetable cultivation is generally more profitable than cereal. Therefore, cultivation of vegetable can help farmers to increase economic level (Kotler 1997). Since all agricultural activities are dependent on the size of the farm or scale of produc- tion, the scale of production of any enterprise is generally the most significant factor influencing the per unit gross margin. Due to the relative economics of size of production, large scale farming is sup- posed to have some advantages over small scale farming, such as efficiencies in division of labour, re- duction in average cost, economics in selling, economics in ability, stronger negotiating power, and flexible profit-making operations. (FAO 2017.) Vegetable production, according to MOAC (1991), is a more productive enterprise than other agriculture enterprises, as net income was more than 180 percent higher in vegetable production than in cereal crops. However, India exports a significant number of vegetables, implying that vegetable production in India is more cost effective than in Nepal.
17 5 METHODOLOGY This portion includes different tools and techniques of research procedure such as selection of the study area, selection of population and sample, sources of information and data collection techniques, survey design and methods, and techniques of data analysis. According to Barney, Ketchen and Wright (2011), a thorough planning of study site, research period, research methods and methodologies in- cluding sampling frame, targeted population, data source and collection instruments, data analysis, and validity and reliability tests is needed to operate a research effectively. 5.1 Research Design To perform the study and achieve the desired results, it is important to first coordinate the research procedure with a suitable plan that will lead to a research decision that will aid in answering the thesis' research objectives. For this study, the research strategy is based on quantitative research method. Quantitative data is characterized as a set of numerical value data that is used to transform large amounts of data into a more manageable and understandable format by drawing conclusions and iden- tifying trends (Gautam 2019). Quantitative data can be used for mathematical equations and statistical analysis, and it can include frequency and variable calculations. Quantitative research involves the ag- gregation of empirical data and shows interrelations between theory and research as a deductive ap- proach (Babbie 2010). Putra and Anwar (2019, 2009-2014) focus on the ability of a quantitative ap- proach to generalize a sample finding for a larger population. Population is defined as the set of units, elements, events, people, and group of things or households (Majid 2018). For the research approach, study aims to receive data from tomato growers who are involved in off season tomato farming. Thus, the information about the offseason tomato growers was obtained from the Agriculture Knowledge Centre (AKC) of Kathmandu district and the commissioner of the thesis from where recognition of the sampling population of the study was done. This research is based on quantitative method. Quantitative in formations were collected from the respondents by selecting them from the sampling population. The tomato growers in plastic house of selected sites are the sampling population. Out of the sampling populations respondents should be selected by using different selec- tion technique. This study used simple random sampling method for selecting respondents from the population.
18 5.2 Selection of the study area and respondents Study areas are geographical boundaries that determine the scope of your investigation (Babbie 2010). Tomatoes being highly demanded commodity and a major component of the Kathmandu district's farming system, the population involved in this sub-sector is very significant. It is also one of the ma- jor tomatoes growing districts in Plastic house in rainy season (AKC 2019). Based on the suggestions of commissioner and district profile of AKC, Kathmandu the major production pocket areas of tomato growing in plastic house were identified. The study area was chosen with care, taking into account the area covered by tomato production, the number of tomato-growing growers, tomato production, and road access. Tokha, Tarkeshwor and Budhanilkantha municipalities were purposively selected to study the economics of offseason tomato production in Kathmandu, Nepal. The purpose of selecting the site is that it has high number of tomato growers in comparison to other places. Respondents are people who have been asked to take part in a study and have already done so (Babbie 2010). A certain number of respondents from each connection were chosen to represent the entire pop- ulation (Majid 2018). The research strategy is based on quantitative research method. The samples were chosen using a simple random sampling technique with no substitution. The tomato growers in Plastic house of selected sites are the sampling population. Sampling frame is a list of all tomato grow- ers which are only 80 in number. List of tomato growers were obtained from commissioner and AKC, Kathmandu. The key informants and Junior Technician (JT)/ Junior Technical Assistant (JTA) of the study area were consulted. Altogether 30 tomato growers in Block area were listed for surveying. Five eminent farmers were considered as the key informants as suggested by the commissioner of the thesis. In the result and discussion section, the result of the SWOT analysis was prepared with the answers of 30 respondents and five key personals. 5.3 Sources of information and data collection techniques To gather information about tomato production and marketing, a field survey was conducted which was leaded by the commissioner. Data were gathered through informal and formal surveys, as well as from key informants. Tomato producers were the sources of primary data. Primary data is information gathered directly from primary sources and is considered the best type of data in science (Brewerton 2001). Primary data were collected from phone interviews of tomato growers. Secondary data is the sort of information that has already been gathered and made available to researchers for use in the
19
studies (Babbie 2010). Various secondary sources of data, such as journals, papers, and books pub-
lished by various institutes and organizations such as Nepal Agriculture Research Council (NARC),
Central Bureau of Statistics (CBS), Agro-Enterprise Centre (AEC), District Agriculture Development
Office (DADO), proceedings of various NGOs and INGOs, and technical documents relevant to the
subject, were used to supplement the data from primary sources.
Data collection is the method of collecting and evaluating information on variables of interest in a sys-
tematic manner that allows researchers to address research questions, test hypotheses, and assess out-
comes (Babbie 2010). Primary quantitative data were collected through phone interviews with the help
of questionnaire. A questionnaire is an effective tool for gathering data and knowledge. Furthermore,
the questionnaire method's low cost, low resource requirements, and potential for broad sample capture
make it an appealing research method for researchers (Brewerton 2001). Both open and closed ended
questions were prepared and presented to 30 respondents. The questionnaire with eighteen questions
was prepared and all the questions were asked thoroughly to each of the respondents. Pre-tested ques-
tionnaire was used for collection information like cost of production, marketing system, and gross mar-
gin. After pretesting the main survey was carried out through phone call. The average time for collec-
tion of data from one respondent was about one hour and they were contacted time and again when-
ever needed. The cross checks of the answers especially to the open-ended questions were done by
contacting key personnel. The questionnaire had three sections. The first part was about the demo-
graphic situation of the respondents, the second part was about cost of production and return. Part three
tried to obtain the information on marketing system.
After the collection of data, data were analysed by using the SPSS and MS EXCEL. Cleaning, trans-
forming, and modelling data to look for useful knowledge for decision-making is known as data analy-
sis (Brewerton 2001). Evaluation and counting of individual questionnaire were done to ensure that all
information is properly obtained from the respondents. Data collected were categorized into variables
from each question. Data analysis was done as per the objectives of the study; data obtained from the
questions were revised and coded before analysis. Descriptive statistics such as mean, standard devia-
tion, percent and frequency were used to analyse socio-economic and farm characteristics. As the
study focuses on the cost of production, gross margin analysis and benefit cost ratio of offseason to-
mato cultivation. Thus, those were calculated by using different formulas. Total cost of production was
calculated by adding all the expenditure on variable inputs as below.
Total cost = Σ of cost of all variable inputs.20
The gross margin is easy and fast method for analyzing business. It is the difference between the gross
return and the total variable cost of any enterprise (Babbie 2010).
Gross margin = Gross return - Total Variable Cost
Where, Gross return = Price of tomato × Total quantity marketed
Total variable cost =Summation of cost of all variable items
A benefit-cost ratio (BCR) gives idea about recovery of cost used for the production by return from
products (Babbie 2010). This analysis was done after the calculation of total variable cost and gross
return from tomato production. Cost of production was calculated by summing the variable cost items
incurred in the production process. For calculating gross return, income from tomato sale was ac-
counted. So, the benefit cost analysis was carried out by using formula:
B Gross return
=
C Total var iable cost
Reliability and validity are necessary elements in any research practice in order to assess the survey's
accuracy. The stability of findings is referred to as reliability, while the truthfulness of findings is re-
ferred to as validity (Brewerton 2001). The consistency with which a system tests anything is referred
to as reliability. The degree to which a term is correctly measured in a quantitative sample is known as
validity (Babbie 2010). The measurement is considered accurate if the same result can be accurately
obtained using the same methods under the same conditions. The reliability coefficient ranges from 0
to 1, with 1 indicating perfect validity and 0 indicating negative validity.21
6 RESULTS AND DISCUSSION
This chapter shows the results of the study with the discussion of the result obtained from the analysis.
The information was collected through phone and entered the data in SPSS. Pre-tested questionnaire
were used for collection information like cost of production, marketing system, and gross margin.
Firstly, pretesting phone call was done to key interviewers including the commissioner and after the
successful phone call survey to key personnel; other people were surveyed through same procedure on
the month of April 2021. To check the correctness of the data crosscheck was done by retaking the
phone survey to key personnel. Evaluation and counting of individual questionnaire were done to en-
sure that all information is properly obtained from the respondents. The SPSS and MS EXCEL pro-
gram has been used to represent the charts, table and statistical part of the research. All the results
shown below are the information obtained from the questionnaire. Each question of the questionnaire
is shown in the result.
6.1 Area under tomato cultivation
All the respondents were asked about their area under tomato cultivation and with their response, the
distribution pattern of cultivated land shows that the average land under tomato cultivation was 0.14
ha, where the maximum area was 0.4ha and the minimum was 0.03 ha with standard deviation of 0.07
ha. The result shows that the majority of the people are interested in offseason cultivation of tomato
but still providing less land for cultivation. Thus, more area should be arranged for offseason tomato
cultivation.
0,8
0,6
0,6
0,4
Land
0,2 0,14
0,04 0,07
0
Average Maximum Minimum Standard Deviation
FIGURE 4. Distribution of land under tomato cultivation by study site (hectare)22 6.2 Economics of tomato production Tomato is the major vegetable crop grown under plastic house in rainy season as cash crop in the study area. The number of tomato production under plastic house in large scale is not so common. This sec- tion history deals with the cost, return, B/C ratio and gross margin analysis of off-season cultivation of tomato. The production of tomato in greenhouse is much more expensive than producing the same crop in the open area. The most crucial cost determining sectors are depreciation of the structure and equipment, labour, energy and variable costs. In the cultivation of agriculture crops, the most important factor that influences the profitability of the commodity and also shows the farmers' input usage efficiency is the cost of production. Tomato cultivation involves a variety of costs due to the use of different inputs such as labour, manure, fertilizer, seed, irrigation, pesticides, plastic houses, and construction materi- als. For the analysis of cost of production, variable cost and fixed cost per year were taken into account. In the second section of the questionnaire people were asked about the cost of production. Variable cost was calculated by adding the cost of seed or seedlings, pesticides, fertilizers, micronutrients, FYM and other cost related to intercultural operations. Fixed cost of the respondents for offseason tomato culti- vation was calculated by adding cost of land, bamboo, silopolin plastic, labour cost, drip irrigation ma- terials, sprayer and secateurs. Added expenses of the tunnel were also calculated with the help of the question number five of questionnaire. All these cost and expenses were added together to obtain total cost of production. The results showed that total cost of production per ha was NRs. 2801730 where the total variable cost was NRs. 2651730. Similarly, with the help of the question number three of the questionnaire which is total yield in one season of respondents and question number seven total pro- duction in the year 2020/021, total amounted of marketed tomatoes was calculated. Then with the help of question number seven, Average price of tomato was calculated by adding highest and lowest price and dividing it by 2. Thus the revenue of the respondents were calculated by multiplying total produc- tion and price and then adding the result with the income obtained from question number four. The re- sult showed that per hectare average total return was NRs. 5705000.The benefit cost ratio analysis was done by dividing benefit from the cost. Result showed that the tomato cultivation was profitable with the B/C ratio greater than 1, i.e., 2.15. This result shows that the total cost of production is lower than that of total revenues obtained from the products. The B/C ratio of the tomato cultivation is 2.15 which mean that the benefit obtained from the
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