Abstract: In this study, by examining the farms dealing with the peanut production in Adana, Osmaniye and Icel provinces, which consist of nearly 80% of Turkey’s peanut production, the economic structure and problems of peanut production activities in these farms were revealed. Under the light of obtained findings, some recommendations for solutions for peanut production activities were improved. The average gross value of production in the farms is 197,171,000 TL/da and production cost is 157,280,000 TL/da. 74.77% of the production cost is variable cost and 25.23% of it is fixed cost. The production cost for 1 kg peanut is determined as 535,445 TL. The average net profit of peanut production in the farms is 36,891,129 TL/da and the relative profit is 123.46%
INTRODUCTION
Fats, important to human nutrition and food industry, are classsified as vegetable and animal fat. Animal fat accounts for 10 to 20% of the total world’s fat production because of its limited yield and high cost and vegetable fats meet 80 to 90% of this amount.
Products of the Turkish fat industry which has a valuable yield potential are exported to a lof of countries. Since the production of oily seeds, the raw material for the Turkish fat industry, is not adequate for Turkey’s needs, fat defiency is met through import and two thirds of Turkey’s need for fat is imported. Fat import is based on raw material in order to generate value added products[1].
Peanuts, a significant oil and food material, were planted on 26 million hectares in 2002. Peanut is the third most important oily seed in the world after cotton and soya bean[2].
Being a member of the legumes family, peanut has numerous nitrogen-fixing nodules as in the other members of the family and it leaves a rich soil for the next crop to be planted. Since it is a weed control requiring herb and the soil is regularly hoed during growing period this gives the soil a good air as well. Therefore, peanut makes a good rotating crop variety[3].
The fact that the agricultural production in Turkey depends on natural conditions and the fluctuations in prices makes growers’ cost and return relationship unknown. Besides, the yield obtained on a unit-field and return connected to this is far below the potential level. To get sufficient and regular income from the unit-field, growers should watch ever-changing economic conditions and make necessary adjustments in their operations. When making these adjustments, it will be useful to understand the input use and production costs used in primarily agricultural production. To obtain reliable and useful information for producer organizations, researchers and policy makers it is necessary to study scientifically and regularly production cost and returns relationships.
A study of the world peanut market with an overview of the past 30 years has been done by Revoredo and Fletcher[4]. The purpose of the study is to provide an overview of the world peanut market based on information for the last three decades.
Miller et al.[5] analysed the structure and distribution of U.S. peanut production costs for the 1997 “Farm Costs and Returns Survey” conducted by USDA/ERS. The analysis examined selected characteristics and production costs of peanut farms grouped on the basis of acreage size, region, costs.
An analysis of peanut price support issues was conducted by Carley and Fletcher[6]. In this report, analysis of data and results from previous studies are used to provide information concerning the peanut price support issue.
This study provides a look at the costs per unit field and per kilogram of peanut and it reveals the domestic groos value of production, variable costs, gross–net-relative profit in the provinces of Adana, Osmaniye and Mersin which are the main peanut grown areas in Turkey.
MATERIALS AND METHODS
During January and February, 2002, peanut growers in three major peanut growing cities were surveyed for the 2001 production year.
For this study, the provinces of Adana, Osmaniye and Mersin, accounting for 80% of the total 2001 Turkey peanut production, were chosen. Two provincial towns with higher yields in each province were Ceyhan and Karataş in Adana, Center and Kadirli in Osmaniye, Silifke and Anamur in Mersin. 12 villages were defined based on common cultural practices.
Production cost was treated as variable cost and fixed cost. Family labor cost was calculated according to hired labor payment. Variable costs are those costs that can be changed in relation to production size. These costs occur as a result of production and vary depending on production size. Fixed costs are those costs that cannot be altered during production period and concerning production size[7]. Variable costs in peanut production included seed, fertilizer, chemicals, water, machine hire, hired labor, peanut marketing and other expenses and interest on operating capital. Other expenses included sack, rope and sifter payments. Fixed expenses included rent, family labor and general farm overheads.
Cost is the total of sacrifices undergone to achieve a given objective or in economic sense it is the total of sacrifices undergone to own a good or service which is sold.
The exchange rate of Turkish Central Bank for US 1 Dollar as of August 1st, 2001 was equal to 1,332,716 TL.
In calculating costs, expenses for a single crop was considered, in other words, Single Crop Budget Analysis was used. To find out the cost of the crop, items in production input table were priced at the amount of money that the producer organizations paid. With regards to the alternative cost principal, goods and services used in production were trated as cost even if they belonged to the organisation.
Interest on operating capital denotes chance cost. In this study the 2001 credit interest rate on agricultural production of Turkish Agricultural Bank was used. Employing the inflation rate of the same year, real interest rate was obtained. The real interest rate as of 2001 was found as 22%. In this connection, since variable cost is distributed quite evenly in production period, half of this cost was considered. Besides, peanut growing covers a six-month period, the cost of interest on operating capital was calculated taking the half of the average interest rate for that year. The land charge was based on a cash rent equivalent. Hired labor charge was the price for unpaid labor. General farm overhead amounted to 3% of the total variable cost. Thus the production cost per decare planted has been specified by considering fixed and variable costs.
Gross value of production was obtained by adding by-product value to the value of peanut production obtained by annual productive operations. Net farm income was calculated by substracting gross value of production per decare from production cost per decare. Relative income in peanut production was obtained by comparing gross value of production per decare to production cost per decare. And the gross income was calculated by substracting variable costs from gross value of production.
RESULTS AND DISCUSSION
Peanut producing organizations surveyed for this study were defined based on peanut enterprise size:
| Group 1 Farm Size: | 1-10 decare |
| Group 2 Farm Size: | 11-50 decare |
| Group 3 Farm Size: | 50 decare and more |
Production costs
Variable costs: We can categorize the production cost as either fixed or variable costs for short term production programmes, but in the long term fixed costs become variable costs.
Variable cost s of producing 2001 peanuts averaged 117,600,000 TL per decare. This cost averaged between 107,140,000 TL and 128,260,000 TL per decare among different farm sizes. Machine hire ranked the highest with 41.34% average of the total variable costs. This was followed by 26.81% seasonal labor, 12.05% seed, 5.50% fertilizer, 5.19% interest on operating capital, 3.65% marketing, 2.23% chemicals, 2.14% water and 1.08% other variable expenses (sack, rope and sifter payments) (Table 1).
Fixed costs: Fixed costs of producing peanuts averaged 39,680,000 TL per decare. This amount ranked from 34,320,000 TL to 48,590,000 TL within farm size groups. Rent accounted for 63.88% of the total fixed costs. This was followed by family labor with 27.32% and overheads with 8.80% (Table 2).
Economic activity
Gross production value
Gross Production Value (GPV) is the value of penut productions as a result of annual productive operations.
| Table 1: | Items of variable costs in peanut production operations (million TL/decare) |
| Table 2: | Items of fixed costs in peanut production operations (million TL/decare) |
| Table 3: | GPV of peanut |
| Table 4: | Gross profit of peanut producing organizations (million TL/decare) |
This survey treated green branch andbale as by-products. Therefore, by-product value was added to GPV.
GPV included peanuts sold, consumed by the household, reserved for seed, given to workers and stored for marketing in 2001. In calculating by-product value, the amount sold and given as livestock food was included. As a rule of thumb, value of livestock food is not counted, but because a single budget product is in question it is necassary to consider this value.
Whereas farmers reported average yields of 21,345 kilograms, this varied between 1,678 kilograms and 61,472 kilograms according to the farm size. Selling price of peanut was 624,000 TL/kg on average, but it varied between 598,000 TL/kg and 647,000 TL/kg within the farm sizes. GPV was obtained by multiplying the total yield by the selling price and total GPV was obtained by adding the values of green branch and bale as by-product to GPV. In the farms surveyed total GPV was found as 14,649,489.000 TL. The total GPV per decare was 194,171,000 TL, it varied between 175,362,000 TL per decare and 219,190,000 TL per decare the according to farm sizes (Table 3).
Gross profit: Gross profit was obtained by substracting the total gross value of production from the total variable costs. Gross profit can be calculated for the whole of the organisation and it can be calculated for other production lines or other crops seperately as well. Gross profit indicates the success of operations in analysing a peanut producing organisation.
The distribution of Gross Profit and GPV by farm size, variable costs in peanut production line in the surveyed organizations is given in Table 4. The GPV of the surveyed organizations averaged 117,000,000 TL per decare. The Gross Profit averaged 77,000,000 TL per decare.The GPV of the organizations by farm size increased gradually and the variable costs decreased gradually as the organisation got bigger. By farm size, the lowest Gross Profit was seen in Group 1 and the biggest Gross Profit was seen in Group 3. The reason for this is that this group had the highest GPV and the lowest total variable costs.
When analysed one by one, 10 organizations (13.3%) had a minus gross profit, 30 organizations (40%) showed a gross profit below the average. Remaining 35 organizations out of 75 surveyed showed a gross profit above the avarage.
Production costs: Total economic cost of input use and total costs in order to realise a production operation in an agricultural organisation is the production cost.
| Table 5: | Peanut production costs per decare by farm size group |
| Table 6: | Peanut production cost and selling price by farm size |
| Table 7: | Peanut production cost and selling price based on regions |
| Table 8: | Net and relative profit by farm size groups |
Therefore, the production cost is the total of fixed and variable costs. In the long term, all costs are variable costs in production operations whereas costs are divided into fixed and variable costs in the short term.
The production costs including the fixed and variable costs per decare in the surveyed organizations are shown in Table 5. The total of the variable costs averaged 117,600,000 TL per decare, the total of the fixed costs averaged 39,680,000 TL per decare and the total production cost averaged 157,280,000 TL per decare. By farm sizes, Group 1 had a total production cost of 176,850,000 TL per decare on average, Group 2 had 150,350,000 TL per decare on average and Group 3 had 141,450,000 TL per decare on average. It is undestood that the larger the farm the lower the production cost.
The variable cost accounted for 74.77% of the production costs and so did the fixed costs 25.23%. Machine hire accounted for the highest 30.91% of the variable costs. This was followed by seasonal labor, seed, fertilizer, interest on the operating capital, marketing, chemicals, water and other expenses. Other expenses included sack, rope and sifter. Rent accounted for the highest 16.12% of the fixed costs and it was followed by family labor and overheads. Whereas the rate of the variable cost by farm size was 72.52% in Group 1, 76.74% in Group 2, 75.74% in Group 3, the rate of fixed cost was 27.48% in Group 1, 23.26% in Group 2 and 24.26% in Group 3, respectively.
Farmers reported average yields of 287 kg/decare. Farms in Group 1 produced the highest yield of 335 kg/decare, those in Group 3 produced the lowest yield of 249 kg/decare. To realise these yields, the production cost averaged as much as about 157,000,000 TL per decare. The cost of producing 1 kg of peanut was obtained by substracting by-product value from the production cost per decare and dividing the result by yield. The production cost of 1 kg of peanut averaged 535,445 TL and this varied from 366,610 TL to 644,492 TL among organizations by farm size (Table 6).
It has been found that when compared the cost per kilogram to selling price by farm size group peanut growers sold their products at a higher price than the production cost. However, the fact that Group 1 organizations had a higher cost of peanut per kilogram than Group 2 and 3 organizations was due to smallness in farm size.
In a study conducted in Osmaniye, the cost of 1 kg of peanut harvested on a decare was 198,657 TL in 1998-1999 production year.rent ranked the highest cost item with 25.6% and it was followed by interest on operating capital with 17.7%, harvesting-hauling with 12.8% and seed with 7.9%[8].
In another study,the cost of 2001 Turkish peanut production averaged 461,000 TL per kilogram and crop sales averaged 828,000 TL/kg[9].
According to the Adana Agriculture Agency Directorate, 2001 peanut production cost was 598,400 TL/kg and peanut produced 356 kg per decare.
Peanut growers in Mersin produced 207 kg per decare, so did growers in Adana 334 kg per decare and growers in Osmaniye 304 kg per decare. Peanut growers in Mersin had production shortfalls due to a fungus disease. Peanut growers in Adana had the lowest production cost and growers in Mersin had the highest production cost (Table 7).
The cost of producing 1 kg of peanuts averaged 535,445 TL per decare. 799,880 TL per decare in Mersin, 369,873 TL per decare in Adana and 487,867 TL per decare in Osmaniye were obtained. Therefore, Adana had the lowest production cost and so did Mersin the highest production cost (Table 7).
In terms of cost per kilogram, the cost of producing peanuts was below the selling price. By provinces Mersin had the highest selling price (774,737 TL/kg) of all the other provinces. Peanut merchants reported that the reason for this was that the variety of peanut produced in Mersin was a local variety; one peanut pod had 3 seeds in it; it was white, it tasted more deliciously and it was marketed as nuts without shell. And they added that the variety of produced in Adana and Ceyhan was NC-7 type, one peanut pod had 2 seeds, it was tawny and it was marketed as nuts in shell.
Net profit and relative profit: Net profit is obtained by substracting the production cost per decare from the gross value of production per decare. The net profit per decare shows 36,891,129 TL. By farm size whereas the average farm with peanut in Group 1 shows a net profit of –1,488,117 TL per decare, farms in Group 3 shows a net profit of 77,739,878 TL. Therefore, peanut growers in Group 1 were unable to cover costs because their production cost was higher than the gross value of production. Their net profit showed minus value, so they lost income.
Relative profit is obtained by comparing gross value of production to production cost. The average farm shows a relative profit of 123.46%. Organizations in Group 3 had the highest relative profit with 154.96%. It follows from this that these organizations had a return profit of 99%. These organizations’ relative profit was 99 TL for each 100 TL invested due to low yield and high production cost (Table 7).
Conclusions and recommendations: The world’s peanut production is 35 million ton/year. Turkey produces only 0.3% of this. The most important grower countries are China, India, Nigeria and the USA.
Peanut production in Turkey is primarily concentrated in the Mediterranean and Agean Regions. In the Cukurova Plain, which accounts for 81.09% of Turkey’s peanut production and covers Adana, Osmaniye, Mersin and Hatay, peanuts are of great importance because of being a rotation crop, leaving the next crop a processed soil high in nitrogene and being grown as the second crop after wheat. Therefore, peanut production is of great importance to Turkey and the Cukurova Plain as well.
The GPV for the average farm with peanuts showed 14,649,489 TL per decare. The GPV for decare averaged 194,171,000 TL. The total variable costs accounted for the 74.77% of the average production cost and the total fixed costs accounted for the 25.23% of it. Machine hire ranked the highest in variable cost, land hire was the highest in fixed costs.
One kg of peanut production cost averaged 535,445 TL. The average peanut selling price was 624,267 TL per kilogram. It was determined that peanut growers sold them at a higher price than the production cost. Analysing the peanut production cost per kilogram by cities, Mersin had the highest and Adana had the lowest production cost. The fact that the production cost was high in mersin was due to an occurrence of a fungus disease influenced the peanut production, lowering the yield. Peanut growers had a profit of 77,000,000 TL per decare, an absolute profit of 36,891,129 TL and 123.46% relative profit.
By cities, Mersin turned out to be the city with the highest rate of peanut selling price. The reason for this is that the peanuts grown in Mersin are the local variety known as “Com type”, one peanut pod has 3 nuts, it tastes better and it is marketed as nuts in shell. The peanuts grown in Adana and Osmaniye are the NC-7 (The American type), one peanut pod has 2 nuts, it is towny and it is marketed as nuts without shell.
In the light of all these considerations some suggestions have been put forward to tackle the problems concerning the peanut production.
It is important to develop good quality and high yield peanut varieties. To achieve this goal, a Peanut Research Institute should be established.
The facts that peanut is a good raw material for making oil, it has a superior place in human nutrition and it is good animal food show that how much peanut could contribute to human health and the Turkish economy. For this reason,all means of measures should be taken in order to increase peanut production fields. Therefore, peanut hrvesting should be mechanized, it should be planted in rotation, seeding sector should be improved, new varieties improved abroad should be imported, tax on input in peanut production should be lowered and production cost should be lowered so as to compete in foreign markets.
Growers’ unions guiding peanut growers technically and economically so as to help improve agricultural production and services, providing input and publications to growers, helping growers with crop evaluation and marketing, contributing to the production of highly-competitive crops in terms of quality and cost both in Turkish market and foreign markets, conducting crop improvement and research that relates to their interest, cooperating, if necassary, with international organizations and undertaking a lot of activities long carried out by the state should be put in service.
Customer demand for peanut does not increase proportionally with population growth since peanut is not a staple food. Therefore, price is the most important factor that limits the peanut production. As the prices increase, so do peanut planted fields and production; as the prices decrease,so do planting and production. Peanut prices should be organized in such a way to please growers in Turkey and growers abroad as well.
One of the findings of this study is that agricultural publications is of great importance. A great majority of growers do not get any information about peanut production from anywhere, they produce peanuts through their own knowledge ang experience. To obtain desired improvement, grower awareness and knowledge depend on the effectiveness of the studies of agricultural publications. These studies are necessary for peanut production as in other lines of production.