Economic analysis of agricultural projects. by Gittinger, J. Price (James Price), Borrow this book to access EPUB and PDF files. Economic analysis of agricultural projects. Gittinger, J.P.. Course Note Series, International Bank for Reconstruction and Development (CN, Rev. Ed.): from the Economic Development Institute of the World Bank who train all over the world in investment appraisal, particularly for agricultural projects in develop-.
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Economic analysis of agricultural projects (English) Author Gittinger, J. Price;; Document Date /01/01; Report Number UNN76; Volume No 1; Total. ECONOMIC ANALYSIS OF AGRICULTURAL PROJECTS employed by the World Bank for all but a few of its project analyses (Gittinger, Garg, and Thieme. For practically all these courses at EDI and elsewhere the Economic Analysis of Agricultural Projects by J. Price Gittinger, first published in , has become a.
One alternative to address this question is the development of restoration models that generate income to farmers in addition to the benefits from conservation itself. This study aims to analyze the financial viability of the enrichment restoration initiative in forest remnants based on a 30 year projection. We considered input, equipment and labor costs for implementation, maintenance, and harvesting. These positive results for the aforementioned indicators reveal that the use of the enrichment restoration initiatives utilized in this project may contribute to the economic viability of the endeavor, contributing to a greater sustainability in rural areas. The Brazilian Atlantic Forest is one of the most biologically diverse and threatened regions on the planet. Currently, only around In such a scenario, one needs to restore both the removed vegetation and also those secondary forests too degraded for self-regeneration.
Asueyi community processes about 8, t of cassava per year, producing about 1, t of gari. Akrofrom community has two processing sites. However, data for this work was obtained from only one site, which processes an excess of 7, t of cassava per year.
Between five and ten different cassava varieties are processed in both communities. Cassava is generally available all year round due to a planned cultivation and harvesting schedule.
Occasional shortages may occur due to transportation or logistical challenges but not from shortage of the produce. Firewood is the only fuel for roasting and is purchased from suppliers. The study site in Asueyi had forty roasting points and Akrofrom community site had thirty-five.
Each roasting point consists of a stove and roasting pan and is manned by one person. Description of Cassava Processing Activity Figure 2 summarises the stages in cassava processing for gari production.
The first stage is peeling and washing of the cassava root. The peeled cassava is then grated using a motorized cassava grater. The next stage is fermentation where the grated cassava is left to ferment for 24 hours at room temperature. The fermented paste is bagged and pressed to remove moisture using hydraulic screw presses.
The coarse flour material is pulverized and then sieved to make it finer for roasting. The roasting is done manually in large, shallow stainless steel pans over a fire, with constant stirring. The stirring takes place for 20—30 minutes and is done with a piece of broken calabash or wooden paddle carefully designed for the purpose. The roasted gari is sieved to obtain granules of uniform size and bagged for marketing.
Figure 2: Flowchart for processing cassava into gari. Assessment of Feedstock The first stage in the analysis of energy potential from cassava waste is the assessment of quantities of waste generated.
An experiment was performed to assess the availability of peels from each of the processing plants. The experiment was performed between April and June The assessment was performed for four varieties of cassava which were processed during the period of the study.
For each variety of cassava, thirty randomly selected samples from three different truck deliveries thus ten samples from each truck delivery to the plant were weighed and peeled.
The weight of the peels was then recorded. Peelers used in the experiment were randomly selected from among the existing peelers at the processing plants. As part of the assessment, observations were made of the existing uses of cassava peels during the study period to estimate amount of peels collected for feeding livestock and amount discarded. Peels from each of the cassava varieties were collected for moisture content determination.
The moisture content wet basis was determined using the oven method [ 16 ]. A survey was conducted in the two communities to determine the availability of manure to serve as inoculum for biogas production. The survey was structured to solicit information on cattle housing systems and existing uses of manure. The questions ranged from numbers of cattle raised, housing conditions, existing uses of manure, and cost of manure.
Measurement of Firewood Use In order to assess the amount of firewood used for gari processing, a fuel use experiment was conducted. Ten roasting points were purposively selected from each processing facility based on consent to participate and agreement to observe the rules of the experimentation.
Fuel use experiment was performed from June 16 to 23 and June 25 to July 2, , for Asueyi and Akrofrom, respectively. Experiment at each roasting point took seven full days, requiring daily visits for eight days.
For each roasting point, an amount of firewood in excess of the daily requirement was weighed daily and the leftover at the end of the working day weighed again to determine how much was used. For each roasting point, the amount of gari roasted for the day was also weighed.
The amount of firewood used and the corresponding gari roasted are used to determine the amount of firewood per a unit of gari roasted. Data was analysed and the mean of the firewood recorded. Assessment of Biogas Production Both thermochemical and biochemical technologies can be used to convert cassava waste into useful energy forms. The technologies available include anaerobic digestion, gasification, and pyrolysis. The products from each of these technological processes differ due to the production thermodynamic parameters.
This changes the compositions of the various gases in each technology. Gasification process leads to the production of producer gas, which is composed primarily of carbon monoxide CO , hydrogen H2 , and traces of methane CH4.
Pyrolysis leads to the production of char, bio-oil, and syngas, which is again a mixture of mainly CO and H2. Anaerobic digestion leads to the production of biogas, a gas composed principally of CH4 and carbon dioxide CO2.
Anaerobic digestion was considered for the production of biogas in this study because it is more matured and less complicated and there is local expertise for the construction and maintenance of anaerobic digesters.
Theoretical calculations on the composition of biogas produced were determined using the Buswell equation based on the chemical composition of the cassava peels. Data on the chemical composition of cassava peel was obtained from a recent laboratory compositional analysis of Ghanaian cassava peels for methane potential [ 17 ].
High methane production efficiency can only be achieved with inoculum. Ensuring the right combination of cassava peels and animal manure is key to ensuring maximum yield of gas.
Different combinations of cassava peel with manure from cattle, pigs, and poultry have been studied. Adelekan and Bamgboye [ 8 ] found that mixing cassava peels with pig manure had better biogas yield than using either of these wastes as a standalone feedstock.
Using 1 : 1 pig-manure-to-cassava-peel ratio had a gas yield three times higher than a ratio of 3 : 1. Ofoefule and Uzodinma [ 7 ] also investigated the effect of cattle, poultry, and pig manure on biogas yield of cassava peels. They found that mean gas yield increased from lowest 2. Adelekan and Bamgboye [ 8 ] experimented with different combinations of cassava peels and manure, using peels-to-manure ratios of 1 : 1, 2 : 1, 3 : 1, and 4 : 1.
For all the manure types, the ratio 1 : 1 gave the highest yield of biogas, though the 2 : 1 ratio followed closely for all manure types. For cattle manure, for example, the 1 : 1 ratio yielded Using the same weight of cassava peel alone produced paltry 0.
Other studies, including Adelekan [ 18 ] and Oparaku et al. Due to the critical nature of manure requirement for effective gas production, a livestock production and housing survey was conducted in the two communities to determine manure availability. The survey considered livestock that were partially or fully housed where manure could be recovered for energy purposes.
In the final analysis, a 2 : 1 cassava-peel-to-livestock-manure ratio was used for computation, in order to increase the efficiency of biogas production. While a 1 : 1 ratio appears to be the best combination based on experimental results presented above, the low level of manure production in the study communities informed the 2 : 1 ratio of peel to manure. The methane potential was estimated using 1 which is modified from Kemausuor et al.
Factors and represent the manure and total number of manure types based on the livestock type producing it , respectively, for which methane potentials are computed. The efficiency of biogas production is dependent on the inoculum, which in this case is livestock manure. All of the manure produced during the day is not considered as being available since the cattle are then not housed.
NPV is the sum of the present values of individual cash flows over the project lifetime. The IRR is the discount rate at which the incremental net benefit stream or incremental cash flow is equal to zero [ 20 ]. Social Benefit Analysis One of the very important reasons for promoting the use of agroindustrial waste for energy production is to contribute to job creation and income generation for rural communities.
These are some of the key indicators of success in bioenergy development [ 21 ]. The social benefit analysis assesses the number of jobs that could be created and the corresponding income from using agroindustrial waste to generate biogas. Results and Discussion This section presents the results from the study and discusses its implications for bioenergy development in Ghana. Cassava Peel and Biogas Potential The ratio of peels to cassava roots, based on the experiment conducted at the two processing plants, is shown in Table 1.
The average peel-to-whole-cassava ratio obtained for four cassava varieties is 0. This means that, for every tonne of cassava processed, approximately kg of peels is obtained, ranging from kg for Esam variety to kg for Dakwari variety.
The data obtained corroborates findings by the FAO [ 22 ] which states that about to kg of cassava peels is produced per tonne of fresh cassava root processed.
However, the figure obtained is slightly higher than 0. Table 1: Field determined ratio of peels to cassava.
Based on the peels-to-cassava-roots ratio shown in Table 1 , peels generated in the two communities are shown in Table 2. Following the monitoring and interaction with the managers of the processing sites, it was estimated that about two-thirds of peels in Akrofrom are collected for livestock feeding and only one-third are collected in Asueyi. The lower collection rate in Asueyi can be attributed to the remoteness of Asueyi community with poor road connection.
This makes it difficult and expensive for livestock farmers to regularly commute to the processing site for collection of peels, resulting in the creation of a huge pile of cassava peel within the community. The processing site has attempted to manage the waste by resorting to open combustion see Figure 3 which has health implications for residents.
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Carbon sequestration and the profitability of forest plantations: examples from boreal and moist tropical conditions. Silva Fennica 30 2—3 — Fortunately, in agriculture this is not often a serious problem, although in other sectors it can be.
Because future circumstances will change, we must judge the risk and uncertainty surrounding a project, and here techniques of project analysis offer only limited help. It is impossible to quantify completely the risks of a project. We can, however, note that different kinds of projects or different formulations of essentially the same project may involve different degrees of risk.
These differences will affect the choice of project design. We can also test a project for sensitivity to changes in some specific element, see how the benefit produced by the project will be affected, and then judge how likely it is that such changes will occur and whether the changes in benefits will alter our willingness to proceed. We could do such "sensitivity analysis," for example, by assuming that future yields will be less than our best estimate or that future prices will be lower than the level of our most likely projection, and then decide how probable such shortfalls will be and whether we still wish to continue with the project.
Sensitivity analyses that simply assume "all costs increased by 10 percent" or "all benefits lowered by 10 percent," which are easy to perform if machine computation is used, are generally of little 10 THE PROJECT CONCEPT usefulness; tests for specific changes that can lead to decisions on project design are far superior.
Techniques have been developed for more formal analysis of risk, but they have not been widely applied to agricultural projects. They rest on assigning probabilities to a range of alternative assumptions. These techniques are complex and generally require machine computation. Project analysis is a species of what economists call "partial analysis. In many instances, however, a proposed project is relatively large in relation to a national or regional economy.
In this event we must adjust our assumptions about future price levels to take account of the impact of the project itself. At best, such adjustments are approximate and may severely limit the usefulness of the measures of project worth that will be discussed in chapter 9. Much more elaborate analytical procedures than those discussed here must then be called into play-generally some form of a programming model.
Such techniques were used by the World Bank to analyze development of the Indus Basin in India and Pakistan, for instance Lieftinck, Sadove, and Creyke , and have been applied to regional agricultural development programs in Mexico Norton and Solis and Brazil Kutcher and Scandizzo , among other countries.
Even in those instances, however, the partiality of the assumptions means that the results must be interpreted with care. The greater the differences among alternative projects, the more difficult it is to use formal analytical techniques to compare them. Financial and economic analyses of the sort discussed in this book are quite good for comparing such close alternatives as two versions of an irrigation project, or even an irrigation project and a land settlement project.
They are relatively good for comparing alternative projects having costs and benefits that can be valued reasonably well-for instance, a project for a food processing plant and another for irrigation. But when we wish to compare projects whose benefits can be valued rather well such as projects to increase agricultural output, or light manufacturing projects with projects whose benefits cannot be valued such as education or rural domestic water supply projects , then the formal techniques can hardly be used to determine the best alternative.
In such instances, the allocation between different projects must be done more subjectively and as part of an overall development plan. The usefulness of the project format in these instances is not so much in facilitating comparison between two projects as in ensuring that both projects are planned so that they can be carried out efficiently. By and large, project analysis is more useful when it is applied to unique investment activities.
Ongoing services such as police and fire protection, extension services, export promotion, and even normal education services are probably better treated as part of a program than as individual projects. The project form works best where there is a rather clear investment-return cycle and a rather clear definition of geographical area or clientele. The relative value of items in a price system depends on the relative weights that individuals participating in the system attach to the satisfaction they can obtain with their incomes.
They choose among alternatives, and thus the prices ,-of goods and services balance with the values attached to these goods and services by all who participate in the market. Such a system, however, reflects the distribution of income among its participants; in the end, values trace back to existing income distribution. Project analysis takes as a premise that inequities of income distribution can be corrected by suitable policies implemented over a period of time.
If such a premise is not accepted, then the whole basis of the valuation system in project analysis and of the underlying price system upon which it rests is called into question. Although project analysis must consciously be placed in a broader political and social environment, in general the effects of a project on this environment can be assessed only subjectively.
Often economists refer to "externalities" or side effects, such as skill creation and the development of managerial abilities, that are by-products of a project. Projects may also be undertaken to further many objectives-such as regional integration, job creation, or improving rural living conditions-beyond economic growth alone. The less subject to valuing these objectives are, the less formal are the project analysis techniques that can be used to compare them, although the project format can still be effectively used to encourage careful planning and efficiency.
Furthermore, projects are not the only development initiatives that governments may undertake. The development process calls for such measures as good price policies, carefully designed tariff policies, and participation in discussions to obtain wider market access, and none of these lends itself easily to being cast in project form.
Projects are planned and implemented in a political environment. This is as it must be, since it is the political process that enables societies to balance many, often conflicting, objectives. But questions inevitably arise about the political overtones of project analysis. Is the "national" interest the same as the "social" interest?
In project planning and analysis how do we adequately incorporate such considerations as national integrity, nation building, or national defense? One objective may be to benefit disadvantaged groups or regions, but projects in which these objectives are important may not always be the most remunerative. Political leaders must respond to all sorts of pressures, and the way they weigh various tradeoffs may not lead to the same conclusions a project analyst would reach.
All this is to say that, even though the analytical methods we will discuss can be of great help in identifying which projects will increase national income most rapidly, they will not make the actual decision of project investment. That decision is one on which many, many factors other than quantitative or even purely economic considerations must be brought to bear.
Or, the analysis may reveal that the plantation project is more profitable and may give an idea of just how much so. Is the social benefit of the lowerpaying project worth forgoing the probable future income from the higher-paying project?
In the final analysis, any national investment decision must be a political act that embodies the best judgment of those responsible. The function of project analysis is not to replace this judgment. Rather, it is to provide one more tool a very effective one, we hope by which judgment can be sharpened and the likelihood of error reduced.
Aspects of Project Preparation and Analysis To design and analyze effective projects, those responsible must consider many aspects that together determine how remunerative a proposed investment will be. All these aspects are related.
Each touches on the others, and a judgment about one aspect affects judgments about all the others. All must be considered and reconsidered at every stage in the project planning and implementation cycle. A major responsibility of the project analyst is to keep questioning all the technical specialists who are contributing to a project plan to ensure that all relevant aspects have been explicitly considered and allowed for.
Here we will divide project preparation and analysis into six aspects: technical, institutionalorganizational-managerial, social, commercial, financial, and economic. These categories derive from those suggested by Ripman , but alternative groupings would be equally valid for purposes of discussion. Technical aspects The technical analysis concerns the project's inputs supplies and outputs production of real goods and services.