Updated: Jun 14, 2021
What is Value Addition?
Value addition refers to the process of transforming a commodity from its original form to a different form that is more valuable. In agriculture, value addition is done to improve a commodity, to increase its longevity, to make it easy to transport or to make it easy for the commodity to be consumed.
Examples of value addition include turning wheat grains into flour, processing raw milk into yogurt, and processing raw meat into canned meat or sausages.
Why should you consider value addition?
Value addition is the most profitable stage in the entire agricultural production value chain. Farmers begin by setting up farms and selling their commodities to buyers who may consume the products directly or add value and sell to consumers. As they scale up their operations, they reach a proper capacity to venture into value addition.
Value addition helps farmers to avoid middlemen and sell directly to consumers. A broiler and Irish potato farmer with the right production capacity and the cycle can easily set up a fast-food restaurant with fried chicken and fries as the main items on her menu. This way, she does not worry about the low prices offered by middlemen. She will also not worry about the volatile prices of Irish potatoes because the prices of fries remain fairly constant despite the volatility in the price of potatoes.
Value addition also offers farmers a window to accessing the export market. Value addition improves the quality of commodities. Through quality and health assessment by governments, farmers get to certify their products for international circulation. Some countries are more open to receiving the final product than the raw material.
How we determine our top value addition farms
We determine a farm idea to be suitable for value addition based on the following factors;
Whether the product is consumed raw or processed
Consumer demand of the value-added product
Ease of processing the raw commodity into a value-added product
Frequency of use or consumption of the commodity
Top 6 farms for value addition
1. Dairy Farm
Dairy farming has one of the highest numbers of value addition opportunities. One of the simplest ways that dairy farmers can add value to raw milk is pasteurization. Milk pasteurization is the process of treating milk using heat to kill bacteria and other microorganisms in milk. Pasteurized milk stays fresh for longer than raw milk. It also sells for almost double the price of raw milk. In Kenya for instance, milk processing companies buy raw milk at a maximum price of $0.45 per litre and sell packaged pasteurized milk at $1 per litre.
Other products that you can obtain from raw milk include yogurt, fermented milk, ghee, and butter. All these are premium products that can fetch up to 3 or 4 times the price of raw milk. Learn more about dairy farming opportunities in Africa.
2. Pig Farm
Pig farming has a number of value-added opportunities that pig farmers can explore. While most pig farmers sell live pigs to processors, they can get better prices through value addition.
The first value addition opportunity is slaughtering and selling pigs for pork. Processing companies purchase pigs at an average price of $2 per kilogram. They then sell pork to consumers at $5 to $6 per kilogram. Farmers who sell pork directly to consumers can easily make $6 per kilogram if they sell quality pork.
Pig farmers can even go a step further and set up pork restaurants. In many urban areas, fried pork is sold at a minimum price of $7 per kilogram. High-end restaurants sell smaller portions for up to $50 per plate. Because pork is consumed with other accompaniments, farmers with pork restaurants stand to gain even more profits. They can also add sausages to the menu in addition to supplying other restaurants.
Learn more about pig farming opportunities in Africa.
3. Peanut Farm
Most peanut farmers sell their peanuts in raw form to buyers. Peanuts have at least two ways in which value addition can be practiced. Roasted and packaged peanuts fetch better prices than raw peanuts. On average, roasted peanuts cost about 50% more than raw peanuts. Even when the costs of power, packaging, staff salaries, and taxes are factored in, selling roasted peanuts is far more profitable than selling raw peanuts.
Value addition can also be done through the making of peanut butter. 1 kg of raw peanuts can produce approximately 1 kg of peanut butter. The average farm-gate price of peanuts is $1 per kilogram. The average price of 1 kg of peanut butter is $6. It is possible to keep the production cost under $2 to remain with a profit of $4 per kilogram of peanut butter.
Learn more about peanut farming opportunities in Africa.
4. Mango Farm
Mango farmers can do value addition on their produce to fetch better prices. Through value addition, they can avoid post-harvest losses that are associated with mango farming. Mangoes can become ripe rapidly before a ready market is available.
Farmers can explore making mango juice. With the help of modern technology and permitted preservatives, mango farmers can increase the shelf life of their juice and get higher prices selling mango juice. They can also make dried mangos pieces for sale which are gaining popularity, especially in urban areas.
Learn more about mango farming opportunities in Africa.
Irish Potatoes have high price volatility. Their products, however, do not change in price regardless of the potato supply in the markets in Africa. The price of fries and potato crisps remains constant.
Irish potato farmers can explore adding value to their harvest by setting up restaurants that have fries on the menu. They can increase their profit margins by almost 80% by selling fries. They can also process the potatoes into potato crisps which have a long shelf life due to the almost zero moisture content in potato crisps. With potato crisps, they can increase their profit margins by up to 200% depending on how they package, brand, and market their potato crisps.
Learn more about Irish potato farming opportunities in Africa.
Eucalyptus trees take about 10 years to reach maturity. At this age, they can be harvested for timber. Buyers of mature eucalyptus trees are timber sellers, timber processing companies, and power transmission companies.
Timber is a vital commodity in construction. Large-scale timber farmers can process their timber and set up timber shops instead of selling trees to timber dealers. In their timber shops, eucalyptus tree farmers can split the timber into different sizes and sell it to buyers in the construction industry. Through this method, they get to increase their profit margins by up to 60%.
Learn more about timber farming opportunities in Africa.
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