50kg Economics

Today I was listening to the late, great Chris LeDoux, a country-western bard who largely wrote his material out of his first-hand experience on the rodeo circuit in the 1970's. If any of you are big George Strait fans, try Chris out ... he's rough around the edges at first, but slowly grows on you.

LeDoux appeals to those of us who are of the anchorite persuasion, whether by intent or by accident; he sings quite about the loneliness of the road, hard living, the battering nature of his beloved profession (from what I gather, bullriding has a lifespan much shorter than an NFL player, though not quite as bad as a gymnast ... my guess is they quit around the same age as ice-skaters. It amazes me to see them last that long; regularly having a justly-agitated beast in the neighborhood of a ton throwing you headlong into the ground, then rumbling over to gore or stamp you into progressively smaller portions gets tough on the knees, I suppose.

It was playing today on my earbuds as I worked on a budgeting spreadsheet from around noon through most of the rest of the day to attempt to back-calculate the price of raw sunflower seeds [allenes]. We have a good idea of what to charge for wholesale prices through informal market surveys we carry out every month, but the variables include the price of plastic bottles (which has trended upward steadily with the cost of fuel), the cost of transporting those bottles from the manufacturer in Lusaka (400 miles away), labels, processing costs, our profit margins, and of course, depreciation of the equipment, in particular the massive oil expeller that was cast in China. After coming up with a spreadsheet in a way that was legible, I proceeded to fiddle with the all the variables to see what kind of price combinations would result. For example, if we sell 500mL bottles, our revenues per liter go up (yay!), but so do our costs (boo!) due to the higher volume of containers and the extra processing we have to do, forcing us to either slash our profit margin, raise the unit price, or lower the price we pay our producers (i.e., subsistence farmers who form our cooperative).

Incidit in scyllam cupiens vitare charybdim [He ran upon Scylla to avoid Charybis]. We'll likely work on the former two, because the whirlpool of disenchanted farmers is far more dangerous than a slightly higher price or a slightly lower profit margin. However, the whirlpool is still a gaping maw of a problem ... if we set the price of raw sunflower too low, farmers will abandon the crop next season, and we'll bury an excellent market opportunity. If we set it too high, we have to either cut our profit margin to the bone (ulp) or charge more for our product; furthermore, if our price is artificially high, the farmers probably won't accept a lower price in subsequent years.

It's worthwhile to mention that we are setting the price independent of the market price for sunflowers, which we still haven't ascertained. We are essentially eyeballing the price not off of what the market determines, but what we think (hope) is an low enough price that is acceptable to the farmers and will spur on further cultivation in the next rainy season. Late in the afternoon when Aka, Li-Li, and Mr. Mooto rolled back in from the field, we lobbed this back and forth for quite awhile before narrowing down the range to 45,000-55,000ZMK/50kg bag (1,500-1850ZMK/kg).

You have to understand that in this context, weight and the scales are nearly meaningless. If I tell a farmer "Hey, we'll pay you 1,500 kwacha per kilogram of sunflower", he or she will politely nod, or even smile in anticipation ... you are selling a 50kg bag, and 50 x 1,500 is 75,000 kwacha! Wow ... way more than the price for the same volume of maize bought by the government. However, they take on slightly mystified looks when you tell them that the 50kg bag weighs 30kgs when filled with sunflower. Huh? A 50kg bag is a 50kg bag. It's this big, see?

I guess the confusion comes back to mistrust; most scales in Zambia are rather tricky things that are flimsy affairs that are rarely accurate. For example, back in my original service as a health volunteer in Kasempa, one baby I weighed twice in consecutive weeks gained five pounds in a week despite a minor famine. It's hard to mess with a volume. Thinking about it, I realized most increments in rural or boma Zambia are in volumes ... the ubiquitous paintcan [meta] (equal to one gallon), used by nearly all marketeers and hammer mill operators comes to mind. Furthermore, using weights might be convenient in our simple economic models or for agricultural research, but volumes work far better for farmers as a measurement or prediction tool ... bags are comparatively cheap and more intuitive for their purposes. Being able to visualize the price of a bag allows a farmer to make a decision on how much and where to plant crops, a remarkably risky thing in a subsistence (hand-to-mouth) livelihood.

Huh ... gets me thinking again just typing through that. At least we have one thing going for us; every single family in Zambia uses at least 200 mL of cooking oil a day; if we make a low-cost, high-quality product, our market will literally be at our door.