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Measuring Profitability of On-Farm Storage Pest Management in Developing Countries: The case of PICS and Maize in Africa Mike Jones Corinne Alexander Jess Lowenberg-Deboer April 2012. Will PICS be Profitable?. What are the returns to storage for PICS?
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Measuring Profitability of On-Farm Storage Pest Management in Developing Countries: The case of PICS and Maize in AfricaMike JonesCorinne AlexanderJess Lowenberg-DeboerApril 2012 Department of Agricultural Economics Purdue University
Will PICS be Profitable? • What are the returns to storage for PICS? • What are the competing storage technologies? • Focus on marketing producers • Would need a different analysis for producers who store for food security Department of Agricultural Economics Purdue University
Returns to Storage • Commodity price at harvest period (P0) • Quantity to store (Q0) • Length of storage period (t) • Price seasonality across the storage period (x) • Cost of storage technology (C) • Dry Weight Loss: quantity lost to insects (w) • Price discount for damaged grains (v) • Opportunity Cost of Capital (OCC) (rt) Department of Agricultural Economics Purdue University
Economic Model • Return to storage (R) • R Department of Agricultural Economics Purdue University
Economics Model Cont. • R • Financial rate of return to storage • Opportunity cost of capital adjusted for storage time • R>0: Storage profit greater than returns from other investments • R<0: Other investments more profitable Department of Agricultural Economics Purdue University
Maize in Mal-awi Cowpeas in West Africa Profitable to Store Maize in W. Kenya Not Profitable to Store
Department of Agricultural Economics Purdue University
Average Return on Storage for Mbeya, Tanzania 2003/04 to 2007/08, selling eight months after harvest Department of Agricultural Economics Purdue University
Department of Agricultural Economics Purdue University