Monday, June 20, 2011

The Great Tomato Soup Heist

The small people like us who go shopping for vegetables ( I am still in crutches) will know how low the price of Tomato has fallen to. While it is not that cheap at Food City, it is down to Rs20 if I buy a kilo or more at the Pola.

So now I can have tomato soup and tomato with everything without worrying about the price as most other vegetables cost more. Look at the plight of the Tomato grower. It was before my accident that tomato at retail climbed to over Rs120 a kilo, but it takes about that time for people who think growing tomato may change their lives so many people increased the land extent that they used for growing tomato.

So if one drives on the Walapana, Rikilligaskade, Hanguranketha stretch also referred to as the Tomato belt, one will see the wooden tomato boxes piled high waiting for pick up. It is quite possible that farmers who saw the price of tomato rise so high, put more land under tomato and now are facing a glut as they did a super job growing, and the weather was kind to them as well as the tomato wilt was adequately contained. There is tomato coming out of their ears!!!

What do they do when the price offered for a kilo is Rs 5 and the box deposit is Rs 60 when the box can hold at most 20kg of tomato? That is a further Rs3 just for the box. Think about it? when tomato was retailing at Rs120, the farmer was able to sell it at Rs60 per kg, so the box fetched say Rs1,800. Now they are lucky to receive Rs100. Just look at the income discrepancy. Granted at the time tomato was Rs120 their yields were about 20% of current yields. Still if their yields are 5 times now, they are receiving Rs500 for the five boxes and then they received Rs1,800 for the one box, a quarter of the income.

One can now appreciate how devastating it is to the grower who is now reluctant to pluck. No amount of increased fertilizer subsidy for minor crops will improve his bottom line.

The wholesaler of course still makes a profit as his margin is on the difference between what he buys, his transport and storage costs, and selling price. I pity the tomato growers bringing them to the Dambulla market throwing their tomatoes into the garbage for elephants to scavenge on after paying for the transport cost.

Now it should be a field day for the Ketchup makers. MD, KVC, KIST and the like. They can make a fortune with their costs so low. The problem is that they are also brainless. They were caught with their pants down, and were not able to shift production immediately to Tomato Sauce to the extent that they should. They did not have enough labels bottles and the like. Added to that their prices never drop even if the raw material drops so there is less incentive to maximize profits, and a scandal arises there where the purchasing managers buy the tomato at Rs 10 from the bulk deliverer(quality of tomato for pulping is less important as it is cooked before bottling) but book it into the company records at Rs25 to 40 and pockets the difference.

The company records don't look bad as they are buying at much lower prices, so they will show profits. the purchasing person and his sidekicks pocket a sizeable amount on this short term payday for them and in the end the consumer suffers. This is how the agri-processing business is run.

When you look at all the machinations that go on in our economy, behind the scenes is it any wonder that the average Joe in the country is thoroughly confused.

I just hope the owner of MD (Hunters) reads this, goes to their cannery in Attanagalla and checks up on the costs and production of Tomato Sauce to see if he can make another Rs10M profit more than he is currently making. I don't think so as there is little competition in this field with few players in the market, resulting in an oligopoly at whose brunt end is the Consumer

1 comment:

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