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Value chain mapping, producer share and margins for corn snack processors

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Eco. Env. & Cons. 21 (Suppl.) : 2015; pp. (S375-S378)
Copyright@ EM International
ISSN 0971–765X

Value chain mapping, producer share and margins for

corn snack processors
Shakuntala Devi I1, K. Suhasini2 and N. Vasudev3

Department of Agril. Economics, College of Agriculture, PJTSAU, Hyderabad 500 030, India
1&2

Dean of Humanities and Social Sciences, PJTSAU, Hyderabad 500 030, India

(Received 5 December, 2014; accepted 2 March, 2015)

ABSTRACT
The analysis of maize production and marketing in Mahbubnagar district and its processing into different
value added products till it reached the end users is done by collecting the data from producers, traders
and processors of maize. The movement of the produce is tracked through major AMC Badepally from
farmers to the processors and onwards. Even though there are many value added products for maize the
major value added products found were corn sev, corn bolls and corn sticks in this region. The mapping of
the value chain from farmer to the snack processor was done and, the marketing margins were calculated
for the three value added products. The study shows the movement of maize from farmer- market – trader-
snack processor. The mapping of value chain and analysis indicated that processing for corn sticks yielded
maximum returns compared to the other two. The study revealed that processors were the gainers in the
value chain. This revealed the importance of setting the processing units at the production points of maize
leaving a scope to have direct contracts with farmers. Further if training is given to small farmer groups for
taking up small scale processing units and encouraging them to establish units in the same village by
providing matching grants also helps the farmer in receiving large portion of consumer’s rupee.

Key words : Corn bolls, Corn sev Corn sticks, Maize, Value addition and Value chain

Introduction corded the highest production (4.14 m t) and pro-

In India, maize is the third most important food
crops after rice and wheat. Maize in India, contrib-
utes nearly 9 % in the national food basket. Maize is
cultivated throughout the year in all states of the
country for various purposes including grain, fod-
der, green cobs, sweet corn, baby corn, pop corn in
peri-urban areas at present becoming popular in
non traditional areas. The predominant maize grow-
ing states that contributes more than 80% of the to-
tal maize production are Andhra Pradesh (20.9%),
Karnataka (16.5%), Rajasthan (9.9%), Maharashtra
(9.1%), Bihar (8.9%), Uttar Pradesh (6.1%), Madhya
Pradesh (5.7%), Himachal Pradesh (4.4%). Andhra
Pradesh which ranks 5th in area (0.79 m ha) has re-
*Corresponding author email : nagalakshmi.s9@gmail.com
ductivity (5.26 t ha-1) in the country. The importance
of the processing sector is further enhanced by the
fact that over 70 per cent of the population depends
on agricultural activity for livelihood. The govern-
ment has therefore been focusing on commercializa-
tion and value addition to agricultural produce,
minimizing pre/post harvest wastage, generating
employment, preventing migration from rural areas
and to promote export growth in this sector.
(Kulkarni, 2005; Seth et al., 2008).
Materials and Methods
The study was conducted in Mahbubnagar district
considering the area expansion happened under
S376
maize. According to the Ministry of Agriculture,
Government of India 80.74 lakh ha have been
brought under maize. Badepally AMC has the high-
est arrivals during the study period and the respon-
dents are selected from the identified list of maize
growers by adopting simple random sampling tech-
nique. Primary data was obtained from farmers by
interview method. The information is also gathered
from traders and snack processors of maize.
Producer’s share in consumer’s rupee, Marketing
margin market agents and price spread is calculated
according to SS Acharya and Agarwal. The broad
network of value chain and mapping of value chain
to its value added products is done.
Results and Discussion
The market channel through which the produce is
delivered to consumers includes traders and proces-
sors. The maize produce is the basic unit traded. It is
usually categorized into three types. Primary prod-
uct: The raw corn harvested from the farmers field.
Eg: maize cobs. Secondary product: These are the
sub products derived from maize cobs such as
grain. Tertiary product: Further differentiation or
processing of secondary products including snack
foods and processed animal feeds. With this prelimi-
nary view the broad value chain of maize is concep-
tualized.
The value chain is conceptualized and presented
in Figure 1 which included, maize production with
Fig. 1. Generic of value chain of maize
Eco. Env. & Cons. 21 (Suppl.) : 2015
the input supplies like seed fertilizers, pesticides,
labour and chemicals. Financial services obtained
from the traders and commission agents. After the
produce is dried for 3-4 days and shelled using
maize shellers for this farmer uses the labour for
drying, shelling and winnowing operations. The
produce is then transported to traders in the agricul-
tural market where selling the produce takes place
immediately and sometimes the produce is stored in
the market godowns with high price expectations in
the future. The produce is then sold to the proces-
sors. In snack processing unit after produce is re-
ceived it first goes for screening and cleaning of for-
eign material like sand particles, agricultural waste
if any, later add value to the snack products. These
diverse value added maize products are distributed
to all the targeted areas.
Value chain analysis of maize
The concept of value chain is quite prevalent in in-
dustry (Abdullah 2004). A value chain is the full
range of activities which are required to bring a
product or service from conception through the dif-
ferent phases of production and final delivery to
customers. Market functionaries or middle men
move the commodities from producers to consum-
ers. (Gereffi et al. 2005). Marketing costs and mar-
gins incurred by the cultivator, trader and processor
were worked out. The value chain prompts exist-
ence of three major value added products prepared
out of maize in study area namely corn sev, corn
SHAKUNTALA ET AL
bolls and corn sticks. Hence the mapping, price
spread and market margins are worked out for this
snack manufacturing channel
The value chain shows that the farmers take their
produce for sale to the nearby regulated markets i.e.,
Badepally agricultural market rather than selling
them in villages or unregulated markets. In regu-
lated markets farmers are not required to bear many
of the marketing charges. In the market they follow
close tender system, the bids are invited in the form
of a close tender rather than by open announcement.
The produce is displayed and the commission agent
is allotted lot numbers.
The prospective buyer inspects the lots, offer a
price for the lot which they want to purchase on a
slip of the paper and deposit the slip in a sealed box.
When the auction is over the slips are arranged ac-
cording to the lot number, and the highest bidder
gets the produce. Maize having several uses trader
has divergent selling opportunities as it is used in
the poultry and animal feed industry, in starch and
food industry, in breweries and for human con-
sumption. Traders in the market area of
Mahbubnagar sell the produce to snack manufactur-
ers in Hyderabad who also receive maize from other
traders in Hyderabad.
Fig. 2. Mapping the value chain for corn snack processors
Snack manufacturing channel: In the food
manufacturing industries, maize is used as ingredi-
S377
ent for preparation of corn sev, corn bolls and corn
sticks and finally supplied to consumers. For this
purpose the processor buys both whole grain and
also broken grain if any from the trader. If whole
grain is received from the trader and each maize
grain is broken to 4-5 pieces and additives like
colour is added like yellow, orange colours and the
broken grain is thoroughly mixed with colour and is
put in the machine run by electric motor and the
grain is popped into sev, corn bolls and corn sticks
as shown in Figure 2 and there are three machines
involved in making three different value added
products. These products are sold to wholesale
shops and retail shops and it further reaches the con-
sumer. Thus maize value addition takes place. Hav-
ing defined this value chain, process of value addi-
tion in the study area, an attempt has been made to
analyse the market margins, marketing costs in the
major value chain activities.
Fig. 3. Maize value added products
Market margins to various stake holders and price
spread in various channels of value chain
The results pertaining to price spread and marketing
margins are presented in Table 2. The total cost of
handling is worked out by including the raw mate-
rial and other ingredients used if any in the course
of value addition done by the processors. The mar-
gins for snack processors is ‘ 1310 for con sev, ‘ 1610
for corn bolls and ‘ 1795 for corn sticks per quintal
across the various products. Processors felt that
making the maize into sev, bolls and sticks is not
receiving ample attention (Figure 3), but if proper
marketing arrangements are done to facilitate the
contracts with farmers, the share of farmer in the
 S378 Eco. Env. & Cons. 21 (Suppl.) : 2015

Table 2. Price Spread in three different value chain activities

S. Particulars Channel-2 (‘/q)
No. Corn sev Corn boll Corn sticks
1 Net price received by producer/cultivator 1080 1080 1080
2 Expenses incurred by the producer
A Loading & unloading charges (Hamali charges) 3 3 3
B Transportation cost 12 12 12
C Bagging costs 5 5 5
Sub total 20 20 20
3 Producers sale price/Trader purchase price 1100 1100 1100
4 Marketing costs incurred by trader
A Fixed costs 4 4 4
B variable costs 30 30 30
C Cost of holding produce 13 13 13
Sub total 47 47 47
5 Traders margin 53 53 53
6 Trader sale price/ processor purchase price 1200 1200 1200
7 Marketing costs incurred – processor
A Fixed costs 25 25 35
B Variable costs includingraw material costs 1150 1150 1150
C Labour costs and miscellaneous costs 15 15 20
Sub-total 1190 1190 1205
8 Processors margin 1310 1610 1795
9 Total marketing margins 1363 1663 1848
10 Consumers purchase price 2500 2800 3000
11 Producers share in consumer’s rupee 44 39 37

value addition would go up. The sale price of snack
foods is ‘ 2500-3000 showing the potential of diver-
sity of uses and the amount of value addition done
to maize.
Suggestions
Maize processing is one of the most potentially lu-
crative areas for expansion of private sector. There is
a need to explore the scope and benefits of joint ven-
tures between the multinational food companies
and local private sector in promoting using enter-
prises in maize surplus areas. The Government has
to introduce schemes to provide financial assistance
for setting up and modernizing of food processing
units in rural areas, under the ownership of group of
women/men farmers, creation of infrastructure,
training the farmers in entrepreneurial skills, sup-
port for research and development. At present, a
few private operators have started some processing
of maize on their own initiative. Strengthening the
private sector initiatives by helping to link their
business with outside markets, capacity building
and support of viable informal processors and urban
retailers in the country is another way to expand the
private sector.
References
Acharya, S.S. and Agarwal, N.L. 1987. Agricultural Mar-
keting in India, Oxford and IBH Publishing Com-
pany, New Delhi.
Abdullah S, Al-Mudimigha Zairib M, Moneim A, and
Ahmed, M. 2004. Extending the concept of supply
chain. The effective management of value chains.
International Journal of Production Economics. 87 (3) :
309–320.
Gereffi, G., Humphrey, J. and Sturgeon, T. 2005. The gov-
ernance of global value chains. Review of International
Political Economy 12(1) : 78-104.
Kulkarni, S.D. 2005. Country Report – India: Agricultural
Mechanization – Present Scenario and Perspective.
Presented in Fourth Session of the Technical Com-
mittee of APCAEM held at New Delhi, India.
Seth, D. Seth, N. and Goel, D. 2008. Application of value
stream mapping (VSM) for minimization of wastes
in the processing side of supply chain of cottonseed
oil industry in Indian context. Journal of Manufactur-
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