Ife Journal of Agriculture, 2016, Volume 28, Number 2

PROFITABILITY ANALYSIS OF MARKETING TOMATO IN ODEDA LOCAL

GOVERNMENT AREA OF OGUN STATE, NIGERIA
*Sanusi, M.M. and Dada, O.D.

Department of Agricultural Economics and Farm Management,

Federal University of Agriculture, Abeokuta, Nigeria
*Corresponding Author: [email protected], [email protected]
Telephone Number: +234 703-3046-336

ABSTRACT
This study assessed profitability of tomato marketing in Odeda Local Government Area,
Ogun State. Primary data collected from 80 marketers from Olodo and Kila markets through
a two-stage sampling technique were analyzed using descriptive statistics, budgetary
techniques, student-t statistic and OLS regression model. Results showed that marketers in
both markets were all females with an average age of 35 and 33 years in Olodo and Kila,
respectively; About 45% and 38.% of the marketers in Olodo and Kila markets were married
with an average household size of 5 (42.5%) and 4 (30%) persons, respectively. However,
35% each had 11 – 15 years marketing experience in both markets. Budgetary analysis
showed that Olodo and Kila marketers had an average net profit of N16,300 and
N11,550/basket/month with rate of return on investment of 0.35 and 0.21, respectively. The
major constraints associated with tomato marketing were high cost of purchasing tomato
(32.5% in Olodo and 25.0% in Kila), inadequate preservation (17.5% in Olodo and 15.0% in
Kila), and high transportation cost (15.0% in Olodo and 20.0% in Kila). Regression analysis
showed that transportation cost (p < 0.05), household size (p < 0.01) and income (p < 0.1)
were the determinants of tomato marketing margin in both markets. T-test showed that there
was a significant difference (p < 0.05) between the net profit of marketers in both markets.
Tomato marketing was a profitable enterprise in the study area. It was recommended that
identified constraints be addressed to enhance greater tomato marketing profit in the study
area.

Keywords: Tomato, marketers, marketing efficiency, profitability, constraints

INTRODUCTION aspects of marketing structure or system

Agricultural marketing is one of the both financial and institutional with
important branches of marketing that deals economic considerations including
with the exchange of agricultural goods. products assembly, preparation for the
Conventional definition of agricultural market, distribution and use by the final
marketing states that agricultural consumer (Kaini and Werner, 1998). It
marketing starts when the crop is comprises of all the activities from
harvested. But the concept has been production to consumption such as
changed, as it is a process, which starts harvesting, grading, packaging, storing,
with the farmer's decision to produce price fixation, selling and buying.
saleable farm commodities involving all Agricultural marketing deals with all the

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activities, agencies and policies involved Foodstuff(s) traded in these markets

in the procurement of farm inputs by the include gari, groundnut oil, palm oil,
farmers and movement of agricultural pepper, tomatoes, rice, beans, plantain,
products from the farm to the consumers banana, yam, yam flour, cassava, cassava
(Kiruthiga et al., 2015). flour, cocoyam, potatoes, maize,
Inter-community marketing activities are vegetables and fruits. All these markets
common pre-occupation among marketers operate in a periodic manner (OGADEP,
in Nigeria even on the entire African 2010).
continent. The marketers, who trade in Tomato (Lycopersicon esculuntum Mill) is
agricultural and non-agricultural one of the most important vegetables
commodities, operate both within and which supplies vitamins, minerals and
across wide geographical areas. Marketers fibres to its consumers and is of high
in cross-community and/or inter-state nutritional values. It is widely accepted
trade, most times transport their and commonly used in a variety of dishes
commodities to nearby and distant as raw, cooked or processed products more
locations for sale on market days. Also, than any other vegetable (Adugna, 2009).
they frequently purchase other Tomato fruit provides 3 - 4% total sugar,
commodities – mostly agricultural 15 - 30mg/100g ascorbic acid; 7.5 - 10
produce, which are usually sold on return mg/100ml titratable acidity and 20 -
to the home-community or home-state. 50mg/100g fruit weight of lycopene - anti-
Men, women and children of diverse tribes oxidants for cancer prevention especially
and ethnic lineages commonly operate in those of the prostate gland, lungs and
these markets. stomach. However, unlike cereals, the
In Nigeria, local markets are either marketing of horticultural crops, in
periodic or non-periodic in nature. general; and vegetables and fruits in
Periodic markets can also be called Food particular, is more complex and risky
Hubs; these are markets that hold at because of the special characteristics such
regular intervals, for instance every four as highly perishable nature, seasonality
days (5-day markets) or eight days (9-day and bulkiness; thus, needs special care. As
markets). In these markets, middlemen and a result, the supply of vegetables is
small farm producers, among other subjected to various problems including
stakeholders, have ample opportunity of wide fluctuation in prices. Tomato is
coming together to execute market-related cultivated almost throughout Nigeria
and social transactions (Yusuf, 2012). (Adenegan and Adeoye, 2011); cultivation
Three notable local boundary markets in on a large area can generate employment
Ogun State are: the Mamu market, which both at the urban and rural levels. In actual
is patronized by people (i.e. natives and fact, in 2013, Nigeria is ranked as the
non-natives) from Ibadan and Ijebu axis; second largest tomato producer in Africa
the Kila (Ilugun) and Olodo markets, and thirteenth in the world with an
which are patronized by marketers from estimated total annual production of 1.7
Ibadan and Abeokuta axis; and Mowe and million tonnes cultivated on 1 million
Ibafo markets, which are patronized by the hectares of land and an average yield of 20
people from Lagos and Abeokuta axis. - 30 tons/hectare (YISA, 2013). Yet,

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Nigeria is the largest importer of tomato paste from China and Italy (YISA, 2013).
Despite the fact that tomato production is a tomato marketing in periodic markets in
viable option to increase farm income and the study area is and what factors influence
hence alleviate widespread poverty, marketing margin of tomato in the study
considerable attention has not been given area?
to its marketing aspects; because of the Therefore, this study determined the
imbalance in distribution system and lack profitability and factors affecting tomato
of organized marketing system, there is marketing in Odeda Local Government
always a market glut of tomato in main area, Ogun State, Nigeria. This will bridge
production season and scarcity of the the gap in knowledge on marketing of
commodity in other seasons (Adenegan tomato; provide useful information that
and Adeoye, 2011). could be used to formulate marketing
However, there is wastage of tomato development programs; and improve
annually as tomatoes harvested in the organization of periodic markets. The
country are lost due to poor food supply objectives were to describe the socio-
chain management; price instability economic characteristics of tomato
resulting from seasonal fluctuation in marketers in the study area; identify the
production and the supply preference of constraints to tomato marketing in periodic
farmers and middlemen for urban markets markets in the study area; evaluate the cost
than direct users due to low farm gate and return in tomato marketing in periodic
prices. Moreover, there is a gap deficit markets in the study area; and determine
between demand and supply in the country the factors affecting the marketing margin
(Ugonna et al., 2015). These factors and of tomato in periodic markets in the study
others can reduce profit accruable to area.
marketers in the study area. Hence, the Hypothesis
study will answer the following research (1) Ho: There is no significant difference in
questions: what are the socio-economic the socio-economic characteristics of
characteristics of tomato marketers in the Olodo and Kila tomato marketers
study area; identify the constraints to (2) Ho: There is no significant difference
tomato marketing in periodic markets in between the net profit of Olodo and Kila
the study area; what the cost and return to tomato marketers.
7o13" North and longitude of 3o31" East
MATERIALS AND METHODS with a land mass of 1,560km2 (or land area
Description of the Study Area
This study was carried out in Odeda Local of 126,341ha) and a population of 109,449
Government Area (LGA) of Ogun State in people (NBS, 2009). It shares boundary
the western part of Nigeria. Odeda is one with Ido LGA of Oyo State and Abeokuta-
of the twenty LGAs in Ogun State. Its South LGA in Ogun State and has an
headquarter is at Odeda town located average temperature of 300C but humidity
along Abeokuta-Ibadan high way; about could be as high as 95% and the raining
20 kilometres from the State capital season is from April to October while the
(Abeokuta). The LGA lies within latitude dry season is between November and
March (OGADEP, 2010).

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The dominant tribal group in the area is (OGADEP, 2010). Some of the
the Yoruba with some Hausas and Igbo foodstuff(s) traded in these markets
traders. In the LGA, there are 25 semi- include gari, yam, cocoyam, sweet potato,
urban settlements, 860 villages and maize, cassava, vegetables, pepper,
hamlets with a notable local boundary 93 tomatoes and cowpea and the major
market - Kila (Ilugun) and Olodo market livestock include goats, pigs, poultry,
which is being patronized by marketers sheep and cattle (OGADEP, 2010).
from Ibadan and Abeokuta axis

Table 1: Distribution of tomato marketers by socio-economic characteristics

OLODO KILA
Characteristics Frequency Percentage Mean Frequency Percentage Mean
Age (years)
21 – 30 9 22.5 15 37.5
31 – 40 17 42.5 16 40.0
41 – 50 7 17.5 3 7.5
51 – 60 4 10 3 7.5
≥ 61 3 7.5 3 7.5
Total 40 100.0 35 40 100.0 33
Gender
Male 0 0 0 0
Female 40 100.0 40 100.0
Total 40 100.0 40 100.0
Marital Status
Single 12 30.0 14 35.0
Married 18 45.0 15 37.5
Divorced 5 12.5 7 17.5
Widowed 5 12.5 4 10.0
Total 40 100.0 40 100.0
Household Size (No)
1 - 3 persons 9 22.5 17 42.5
4 - 6 persons 17 42.5 12 30.0
7 - 9 persons 8 20.0 6 15.0
≥ 10 6 15.0 5 12.5
Total 40 100.0 5 40 100.0 4
Level of Education
No Formal 20 50.0 23 57.5
Primary 11 27.5 8 20.0
Secondary 9 22.5 9 22.5
Total 40 100.0 40 100.0
Tomato Marketing Experience (Years)
1–5 8 20.0 13 32.5
6 – 10 13 32.5 10 25.0
11 – 15 14 35.0 14 35.0
16 5 12.5 3 7.5
Total 40 100.0 13 40 100.0 10
Income N
<5,000 9 22.5 11 27.5
5,001 - 7,000 11 27.5 7 17.5
7,001 - 9,000 10 25.0 9 22.5
9,001 - 11,000 4 10.0 8 20.0
11,001 6 15.0 5 12.5
Total 40 100.0 6,000 40 100.0 5,500
Source: Field Survey, 2014

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Table 2: Distribution of tomato marketers by constraints associated with tomato

marketing in Olodo and Kila markets
OLODO KILA
Constraints Frequency Percentage Frequency Percentage
High transportation cost 6 15.0 8 20.0
Inadequate preservation 7 17.5 6 15.0
High marketing cost 6 15.0 5 12.5
High storage cost 4 10.0 5 12.5
High market levy 4 10.0 4 10.0
Shortage of Labour 0 0.0 2 5.0
High tomato purchasing cost 13 32.5 10 25.0
Total 40 100.0 40 100.0
Source: Field Survey, 2014

Table 3: Costs and Returns per basket per month on Tomato Marketing in Olodo and Kila
Markets
OLODO KILA
Items Amount (₦) Percentage Amount (₦) Percentage
Revenue 62,650 66,200
Inputs (Marketing operations)
Cost of storage 3,500 8.4 3,650 7.2
Market levy 1,000 2.4 1,250 2.5
Local government levy 1,500 3.6 1,500 3.0
Cost of transportation 4,350 10.4 5,000 9.9
Cost of loading and offloading 3,000 7.2 7,650 15.1
Cost of purchasing tomato 15,000 35.8 16,500 32.6
Cost of baskets 5,000 11.9 6,000 11.9
Others 8,500 20.3 9,000 17.8
Total Variable Cost 41,850 100.0 50,550 100.0
Total Fixed Cost 4,500 - 4,100 -
Total Cost 46,350 - 54,650 -
Gross Margin 20,800 - 15,650 -
Net Margin 16,300 - 11,550 -
Rate of Return on Investment 0.352 - 0.211 -
Source: Field Survey, 2014

Sources and Methods of Data Collection Sampling Technique

Primary data were obtained through a pre- A two-stage sampling technique was used to
tested questionnaire and oral interview select eighty (80) tomato marketers in the
eliciting information on some socio- study area. The first stage involved
economic characteristics of the tomato purposive selection of a boundary market
marketers, factors affecting marketing (Olodo and Kila markets) from all periodic
margin of tomato marketers; and the markets in Ogun State and the second stage
problems confronting marketability of involved a simple random sampling
tomato in the study area. technique of 40 tomato marketers which
were selected from the list obtained from
tomato marketers’ associations in the

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selected markets. The survey was conducted TR = as previously defined

TC = Total Cost (N)
using a pre-tested well-structured
TC = TFC + TVC .……………………. (v)
questionnaire.
Analytical Techniques TFC = Total Fixed Cost (N)
The following analytical tools were RRI = .…………………...…………. (vi)
employed in the analysis.
(i) Descriptive Statistics: the use of where:
RRI = Rate of Return on Investment
frequency distributions and percentages π = as defined previously
were adopted to describe the socio- TC = as previously defined
economic characteristics of the marketers
and to identify the constraints to tomato
marketing in selected in the study area. Hypothesis Testing
(ii) Budgetary analysis: Analysis of costs A student-t test was conducted using the
and returns was used to evaluate the
profitability and rate of return on investment formula below:
in tomato marketing in periodic markets in
the study area. The return to marketing was .………………………….... (vii)
determined using Gross Margin (GM) while √
profitability level was determined with Net
Profit (NP). where:
GM = TR – TVC …….…………………. (i) Xi = Mean net profit for Olodo tomato marketers,
Xj = Mean net profit for Kila tomato marketers,
where: Si = Sample variance for Olodo tomato marketers
GM = Gross Margin (N) Sj = Sample variance for Kila tomato marketers
TR = Total Revenue (N) ni = Number of Olodo tomato marketers
TVC = Total Variable Cost (N) nj = Number of Kila tomato marketers
TVC = X1 + X2 + X3 + X4 + X5 + X6 + X7 +
X8 ……………………………………… (ii)
X1 = Cost of storage (N)
(iii) Marketing Margin: Marketing margin is
X2 = Market levy (N) the difference between purchase and resale
X3 = Local government levy (N) price of a commodity.
X4 = Cost of transportation (N)
MM = SP – CP x 100.…………………… (viii)
X5 = Cost of loading and offloading (N)
SP
X6 = Cost of purchasing tomato (N) where:
X7 = Cost of baskets (N) MM = marketing margin (N)
X₈ = other variable costs (N) SP = selling price (N)
π = TR – TC.…………………………....(iii) CP = cost price (N)
(iv) Regression Analysis: this was used to
OR determine the factors influencing Marketing
Margin and this was accomplished with the use
π = GM – TFC .……………………….. (iv)
of Ordinary Least Square (OLS) regression
where: technique.
π = Net Margin = Profit (N) The implicit form of the regression model is:
GM = as defined previously
Y = (X₁, X₂, X₃, X₄, X₅, µ) .…………… (ix)
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tomato marketers were relatively young.

where:
Y = Marketing margin (N)
Besides, in both markets, all the respondents
X₁ = Transportation cost (N) were female; this could be attributed to
X₂ = Household size (number of people) gender role in the society. Women are
X₃ = Education levels of marketers (years)
X₄ = Marketing experience of tomato marketers (years) mostly involved in marketing of agricultural
X₅ = Household income of tomato marketers (N) produce in Southwest Nigeria while men are
X6 = Constraint of tomato marketing (1 if there is the major producers. About 45.0% and
constraint, zero otherwise)
µ = Error term (which is assumed to have zero mean and 37.5% of the marketers in Olodo and Kila
constant variable) markets were married with an average
household size of 5 (42.5%) and 4 (30%)
persons in Olodo and Kila markets
Three functional forms were estimated to obtain
respectively. This implies that more family
the lead equation and the explicit forms of the
labour will be employed in tomato
regression model are as specified below:
marketing enterprise.
Linear function
Furthermore, 50.0% and 57.5% of the
Y = a + b₁x₁ + b₂x₂ + b₃x₃ + b₄x₄ + b₅x₅ + µ
marketers in Olodo and Kila respectively
………………………………………………(x)
were not formally educated. Lack of
Semi-log function
formal/low level of education could have
Y = a + b₁logx₁ + b₂logx₂ + b₃logx₃ + b₄logx₄
necessitated the involvement of the
+ b₅logx₅ + µ .…………………………….. (xi)
respondents in tomato marketing due to the
Double log function
perceptional attitude of low capital
log Y = a + b₁logx₁ + b₂logx₂ + b₃logx₃ +
investment in agricultural produce
b₄logx₄ + b₅logx₅ + µ ……………………. (xii)
marketing by many people. However, 35%
where: each had 11 – 15 years marketing
a = Constant experience in both markets and this could be
b1, b2, b3, b4, b5 = Regression Coefficients
an indication that the marketers possess
X1,.....X5 = as previously defined
 = Error term substantial wealth of experience which
could influence profitability in the study
area. Some (27.5%) of the marketers earned
RESULTS AND DISCUSSION between N5000.00 - N7000.00 income per
week in Olodo market while 27.5% earned
Socio-economic Characteristics of Tomato
below N5000.00 income per week in Kila
Marketers
market.
Table 1 shows the distribution of tomato
marketers by socio-economic characteristics
Description of Tomato Marketers
in the study area. About 42.5% and 40.0%
according to Constraints Associated with
were within the age group of 31 - 40 years
Tomato Marketing in Olodo and Kila
with mean age of 35 and 33 years in Olodo
Markets
and Kila markets respectively which falls
Table 2 shows that 32.5% of the marketers
within the economically active working age
were faced with the problem of high
group. This implies that most of the sampled
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purchasing price of tomato from the in Olodo and Kila markets. The breakdown
wholesalers in Olodo market; this problem of the costs and returns are as shown in
could have a ripple effect on the consumers Table 3. For Kila marketers, the cost of
since the retailers will want to make profit purchase of tomato from wholesalers
on investment, thereby increasing the price amounted to 32.6% of the total variable cost
of tomato at the consumer level. Also in which was lower compared to that of the
Kila market, 25% of the marketers were tomato marketers in Olodo market (35.8%
faced with problem of high cost of of the total variable cost). The Total Fixed
purchasing produce from wholesalers during Cost was depreciated using the straight line
lean production season; this could be as a method. Olodo tomato marketers incurred a
result of the seasonal nature of the crop. total variable cost of N41,850; a total fixed
Furthermore, inadequate preservation cost of N4,500 and earned a total revenue of
accounted for 17.5% of the problems faced N62,650 per basket per month. A total
by tomato marketers in Olodo market while variable cost of N50,550 was incurred by
15.0% were having the same problem in Kila tomato marketers with a total fixed cost
Kila market. High market levy from both of N4,100 and a earned total revenue
local government authority and market amounting to N66,200. Olodo tomato
leaders accounted for 10.0% each of the marketers had an average net profit of
constraints faced by marketers in Olodo and N16,300/basket/month while it was
Kila markets. N11,550/basket/month for Kila. The rate of
return on investment was 0.35 for the Olodo
tomato marketers and 0.21 for the Kila
The Costs and Returns Structure of tomato marketers; which means that one
Tomato Marketing in Olodo and Kila naira invested marketing tomato in Olodo
Markets and Kila yielded a 35 kobo and 21 kobo
The gross margin analysis was used to returns, respectively.
determine the net profit of tomato marketers

Table 4: Difference between Mean Net Profit/Basket/Month of Olodo and Kila Tomato
Marketers
Categories Mean Standard Error N t-Statistic P-Value
Olodo 1.511795 0.131788 40 17.836** 0.05
Kila 1.027115 0.011321 40
**Significant at 5%
Source: Field Survey, 2014

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Table 5: Result of estimation of functional forms

Model Significant Variables R2 Adjusted R2 F- Statistic
OLODO
Linear 3 0.547 0.7659 48.37
Semi-Log 2 0.246 0.3629 26.98
Double log 1 0.136 0.2729 25.07
KILA
Linear 4 0.3480 0.5459 63.87
Semi-Log 1 0.1960 0.3509 24.10
Double log 1 0.1145 0.1739 21.64
***Significant at 1%, **significant at 5%, *significant at 10% Source: Field Survey, 2014

Net Profit/Basket/Month of Tomato effect on tomato marketing margin (p <

Marketers in Olodo and Kila Markets 0.01) which implies that as the household
Table 4 showed the result of the t-test of size increases by 1 person, the marketing
difference between mean net profit of margin reduced by N0.002. However,
tomato marketers in Olodo and Kila markets household income was a positive
(N16,300.00 and N11,550.00), respectively. determinant (p < 0.10) of marketing margin
The t-test showed that there is a significant in the market which implies that as income
difference (p < 0.05) between the net profit increases by N1, marketing margin
of tomato marketers in Olodo and Kila increased by N0.0004.
markets. In Kila market, transportation cost had a
Factors Influencing Marketing Margin of negative effect (p < 0.05) on tomato
Tomato marketing margin (Table 6) which implies
This was determined using the ordinary least that as the transportation cost increases by
square regression analysis. Three functional N1, marketing margin decreased by N0.46.
forms (linear, semi-log, double-log Similarly, Table 6 showed that household
functions) were used to estimate the factors size had a negative influence on the
affecting marketing margin of tomato marketing margin (p < 0.01) which implies
marketers in the study area. The linear that as the household size increases by 1
regression was chosen as the lead equation person, the marketing margin decreased by
using statistical, mathematical, economics N0.003. Furthermore, marketing experience
and econometrics criteria (Table 5). had a positive effect (p < 0.10) on tomato
Factors Affecting Tomato Marketing marketing margin (Table 6) which implies
Margin in Olodo and Kila Markets that a year increase in marketing experience,
In Olodo market, transportation cost had a marketing margin increased by N0.01.
negative influence (p < 0.05) on tomato Equally, household income had a positive
marketing margin (Table 6) and this implies influence (p < 0.10) on tomato marketing
that as the transportation cost increases by margin (Table 6) implying that as income
N1, the marketing margin reduced by N0.83 increases by N1, marketing margin
unit. Also, household size had a negative increased by N0.0004.

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Table 6: Determinants of tomato marketing margin in Olodo and Kila markets

OLODO KILA
Variables
Coefficients t-value Coefficients t-value
Constant -1.0701 -1.2526 2.0502 1.2676
Transportation cost -0.0950** -2.3300 -0.0480** -2.3600
Household size -0.2130*** -4.5297 -0.4523*** -3.4247
Education level 0.1796 0.7242 0.1675 0.6241

Marketing experience -0.0032 -0.1634 0.5643** 2.7865

Income 0.000032* 1.9036 0.000036* 1.8936
R2 0.5659 - 0.5480 -

Adjusted R2 0.5470 - 0.5459 -

F-statistic 48.37 - 63.87 -

*** Significant at 1%, ** Significant at 5%, * Significant at 10%

Source: Field Survey, 2014

CONCLUSION AND Southern Zone of Tigray: the case of

RECOMMENDATION onion, tomato and papaya.
Tomato marketing in both markets was www.eap.gov.et/sites/default/files/analysi
found profitable with Olodo marketers s%20of%20fruit%20and%20vegetable%
having more profit than Kila marketers. 20market%20chains%20in%20alamata.p
More so, the rate of return on investment df.
(0.35) for Olodo tomato marketers was Kaini, B.R. and Werner, R.A. (1998) A
higher than that (0.21) of Kila tomato market oriented approach to horticulture
marketers. The study recommends that production. In Proceedings of the
tomato marketers should strengthen national workshop on market oriented
themselves by forming cooperative groups production approach. Nepal horticulture
whereby tomato could be purchased in bulk society, Kathmandu. 77pp.
on behalf of members at a reduced purchase Kiruthiga, K., Karthi, R. and Daisy, B.A.
cost. In addition, stakeholders should (2015). Agricultural marketing– an
improve the transportation system in order overview. Int. J. Sc. & Res. Pub., 5(4): 1-
to reduce transportation cost and 2. www.ijsrp.org/research-paper-
deterioration during transportation. 0415/ijsrp-p40135.pdf. ISSN 2250-3153.
National Bureau of Statistics (NBS) (2009).
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Ugonna, C.U., Jolaoso, M.A. and Onwualu, Yusuf, R.O. (2012). The dynamics of
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