Value Addition can be said to be the process of improving the economic value, physical state/form, time and place of a farm product making its characteristics more preferred in the market place.
Value Addition is a portfolio in agribusiness which enables the farmers to align with consumer preferences/value for agriculture or food products with form, space, time, identity, and quality characteristics that are not present in conventionally-produced raw agricultural commodities. Value addition is characterized by farmers changing their positions on the supply chain, creating closer or direct linkages between themselves and consumers, or changing production processes to preserve certain intrinsic characteristics of their farm products.
Farmers need to strive to move from the level of mere production in the agricultural supply chain and move to levels such as; product transformation, distribution, storage and added services, and transform their roles from raw commodities producers to agribusiness owners with extended capabilities. Being involved in value added services as a farm is expected to improve profitability and reduce production risk for the farmer. Risk is generally limited in a production chain when value addition processes are put in place in a production system.
TWO KEYS FOR VALUE ADDITION IN AGRICULTURE
- Customer Value
- What informs value addition
Customer value shows the relationship between the benefits customers derive from a product and the price paid for the product. The more benefits relative to the price, the higher the value. The price of a particular commodity may seem to be high but the benefit derived by the customer is high too, the commodity will be perceived as valuable by the customer. This interaction between the benefits and the price produces customer value.
In value addition, it is the customer’s perception of value that is most important and not that of the producer. Hence, in value addition, the need of the customer in relation to form, characteristics, time and location of product should be considered first in the value addition process. It is expedient to note that different customers have different perceptions of value. These perceptions are in relation to their expectations of quality, service, convenience and selection. Knowing the customer value will help the farmer to know what segment of people and what to produce.
WHAT INFORMS VALUE ADDITION?
Value addition is usually considered when focus is placed on the benefits associated with the agribusiness products or service that emanates from;
Quality – Does the product or service meet customers’ expectations or needs?
Functionality – Does the product serve or fulfil its function?
Form – Is the product in a useful form?
Place – Is the product in the right place?
Time – Is the production in the right place at the right time?
Ease of Possession – Is the product easy for the customer to obtain?
For a production to be considered to have added value it must answer all of this questions. The more benefits derived from a product, the more the product will be considered valuable by its customer.
The agribusiness, particularly the food sector is rapidly consolidating and increasingly responding to the changing tastes and preferences of consumers. Consumers are now focusing more on convenience, quality, variety, service, health and social consciousness. And they are also faced with the increasing value of their time. All these are enough reasons to spur producers into value addition process which will in turn strengthen their relationship with the consumers and enable them earn much more money than that earned from selling raw commodities for further processing. Hence the economic, social and financial status of farmers will increase greatly.
For example, farmers can process their wheat grain by milling wheat into flour, making fresh orange juice from fresh oranges, making ready-to-eat vegetables/salad from freshly harvested vegetables, transporting perishable products such as; tomatoes, pepper etc. directly to the market for sale, cocoa pods can be gathered, sundried and sold to companies that produce fertilizers instead of allowing the pods to decay and waste away, Coconut shells can be treated and shaped into key holders, ornamental materials etc. perishables such as tomatoes and pepper can be dried and grinded into powder form, poultry dungs can be gathered and sold to factories that culture worms for aquaculture production, damaged egg shells can be gathered and sold to feed mills for bone meal supplement etc.
With value addition in view, farmers can earn more income, ensure the judicious utilization of resources, advance the cause of their business, enhance food security in the nation, improve the economic state of the nation and promote the health, social and economic condition of the customers.
References
AgriLIFE EXTENSION E-573 RM1-8-06-09
What Do We Mean bu Value-added Agriculture Ruoxi Lu and Rebekka Dudensing (2015
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