Pricing flaw stalls tomato paste production


September 26, 2017 | 3:21 am
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Tomato paste and concentrate production in Nigeria is currently at a stand-still, as farmers of the fruit prefer to sell their produce at prevailing market prices, even after entering into understanding with manufacturers to supply them at off-taker rates, BusinessDay has found.

With the off-taker agreement, paste makers provide improved seeds, chemicals and other inputs to fresh tomato farmers, to raise their yield per hectare, with an understanding that the manufacturers will then get tomatoes at specified rates from the farmers. The farmers however, eventually sell their produce in the open market whenever prices are high and to paste makers only when prices are low.

Though this may make market sense to the farmers, it is stalling the hope of having a fully integrated paste and concentrate maker in the country, with Dangote Tomato shut down.

“Currently, our yields are between 15-20 tons per hectare when others are having 70-100 tons per hectare. To address this, we started the out-growers scheme, to provide improve seed varieties to farmers. This has however been frustrated because the moment market price become more attractive than the off-taker price, the farmers will boycott selling to us and sell to the market,” Abdulkarim Kaita, managing director, Dangote Tomato Processing Plant, told BusinessDay.

“We are not getting sufficient supply of fresh tomatoes and that is why our factory is shut down. We need 40 trailer loads of fresh tomatoes daily, which is equivalent to 1,200 tons,” Kaita said.

He said Dangote Tomato is working with all stakeholders to better coordinate and bring the government to ensure compliance to the terms of the MoU and agreements entered into with farmers, stating that “If all these are put in place, we expect to reopen our factory in January 2018.”

Africa’s biggest economy produces 1.5 million tons of tomato per annum, with 0.7 million metric tons post-harvest loss. Tomato demand in Nigeria is put at 2.2 million metric tons per annum, leaving a gap of 700,000 metric tonnes, according to official data. Nigeria is the 13th largest producer of tomatoes in the world and the second after Egypt in Africa, yet the country is still unable to meet local demand because about 50 percent of tomato produce is wasted to lack adequate storage facility.

“I think there is a need to ensure that due diligence we do for agricultural products, factors in changes in prices in the future,” said Uche Nwogwugwu, associate professor of economics at the Nnamdi Azikiwe University, Awka, Anambra State.

Femi Oke, chairman, All Farmers Association of Nigeria, Lagos State Chapter, called for the re-instatement of commodity boards.

“Commodity boards will help to regulate prices, irrespective of market price fluctuations. Furthermore, government needs to provide more support to farmers, such as ensuring that they get some of their inputs for free. This will help reduce their production cost and also ensure they fulfil their agreements with companies off-taking their products,” Oke told BusinessDay.

Frans Ojielu, global financial advisor, ICMG Commodities , said farmers should take a long-term view of their businesses, rather than look for short-term gains.

“This intervention system which has been brought into the agribusiness of supplying inputs to farmers should be considered by farmers with a long term view, instead of the short term gain for quick returns. In our operations in the commodities business, we have seen a situation where farmers were given inputs but they did not respond appropriately in delivering the output. This, we do not think is good. However, we believe this can be resolved by farmers’ education,” Ojielu said.

He suggested the need to revolutionise agribusiness in Nigeria, enlighten farmers appropriately on the negative impact such breach of contract could have on their business.

Nnamdi Nnodebe, managing director/CEO of Sonia Foods Limited, a Lagos-based tomato packer, said Nigeria must take the issue of low tomato productivity seriously.

“You may give farmers the right seeds, the right fertilizers, but if they do not know the right application, they may end up not achieving anything. Government needs to look at improving yields. By the time they start getting the yield, they can sell at N20 per kg of fresh tomatoes, so that the likes of Dangote, who we will want to buy triple concentrate from, will get fresh tomatoes,” Nnodebe said.




September 26, 2017 | 3:21 am
  |     |     |   Start Conversation

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