The investment cost for this level of mechanization is estimated to be USD 146,300. This level of mechanization is recommended for larger co-operatives and smaller nucleus farms. It is also recommended for private service providers, with a large number of customers. The service provider may work on 100 hectares, with up to 25ha of potatoes. This level is recommended for a service provider with a larger number of customers, who may have also his own farm. The service provider may work on 100ha, with up to 25ha potato and most of his customers have plot sizes of above 0.25ha.
The service provider uses the big tractor mainly for stubble cleaning, tillage, and seedbed preparation. The second tractor will work with the potato equipment and can also carry out all cultivation work for other crops. The second tractor can be used for tillage, but it will require exchangeable rims for wider tires and an additional investment for a two to three furrow plough. The highest level of mechanization will cost about USD 185,900.A higher capacity tractor with horsepower of 130hp carries out tillage and seedbed preparation and the smaller one (75hp to 100hp) is utilized for planting and cultivation work.
All other work is mechanized as suggested in the next table. This level of mechanization is recommended for a large nucleus farm or service provider with customers who farm together more than 200ha, and with about 50ha potatoes. Nucleus farms and service providers may additionally offer also smaller equipment for their customers with smaller plots, depending on the environment they are working in. It must be noted that there is no clear cut boundary between the mechanization levels presented above.
As seen in the table, a potato producer has a range of mechanization options to choose from. The profitability of the farm varies with each level of mechanization. The table shows the production costs and revenues under the different mechanization levels or scenarios. The first scenario is the traditional method, in which there is little use of mechanization except for ploughing.
The yield of such farms in Kenya is averagely 7 tons per hectare. The total cost of production for the farmer (using current prices, February 2015) is about USD 1,586.72. Using price scenarios of USD 247.20/ton, USD 168.80/ton, and USD 329.60/ton of ware potatoes, this producer makes a gross profit of USD 143.69, negative USD 433.12, and USD 720.49, respectively. Thus, this low mechanization producer runs with losses if the potato price is at USD 168.80/ton (or KES 16,000/ton). The highest profits are realized at a price of USD 329.60 (KES 32,000/ton), for which the benefit- cost ratio of this low mechanization farm is 0.63.
The farm with a medium level of mechanization will incur costs of USD 1,945.67 and produce an average yield of 15tons/ha. The profits are USD 1,762.33, USD 526.33, and USD 2,998.33 under price scenarios of USD 247.20/ton, USD 168.80/ton, and USD 329.60/ton, respectively. The medium level of mechanization is therefore more profitable than the traditional method. This is predominantly due to the increase in yields resulting from more mechanized operations. The benefit cost ratio is highest (1.54) at a price of USD 329.60/ton, followed by the price scenario of USD 168.80 (0.9058) and USD 247.20 (0.2705).
The benefit-cost ratios are even higher with full mechanization of the farm. Gross margins are about KES 299,500, KES 420,500, and KES 730,500 with benefit cost ratios of 1.40, 0.60, and 3.18 under the respective price scenarios. This analysis is based on the rental charges farmers pay for hiring equipment for mechanized farm operations. Hence, the smallholder who cannot purchase this equipment can rent/hire them from service providers at the stated cost, and still run a profitable farm enterprise.
The general implication of this outcome is that the productivity and profitability of the potato farming increases with greater use of mechanized operations (more information can be found in the part on business models). Such investments will require access to credit from banks or other financial institutions. The possibility of farms making such investments in machinery in the African potato landscape, however, is limited by the lack of access to finance or credit and cannot be expected to be financed by a farmer alone. Furthermore, private suppliers also don’t invest as the risk is too high for them. Therefore, private machinery sup- pliers might need to work out financing solutions in Africa together with banks or think about longer credit periods in order to make the business more attractive.