CHAPTER IV

MARKETING PATTERN AND EFFICIENCY OF VARIOUS

CHANNELS IN GROUNDNUT MARKETING

4.1 INTRODUCTION
Marketing channels are playing an important role in marketing of
agricultural commodities. In general, agricultural goods are marketed directly by
the farmers and with the help of intermediaries like village traders, commission
agents and oil millers. According to Badi 1 , marketing channels are different
organisation taking care of a product or services made available to the customer.
Decision of channel choice is very important as that decides other marketing
decisions. The role of channels is not mere distribution. They have to constantly
interact with producers and customers to co-ordinate quality, quality and
expectations aspects.

In India, oilseeds marketing in general and groundnut marketing in

particular are mainly in the hands intermediaries. Hence, the groundnut growers
anre only a price receiver. Therefore, many a times they have to resort to distress
sale due to uncertain situation in the marketing of oilseeds. In the process of
marketing, the producer has to incur various marketing cost2.

Bulk of the groundnut is sold by the farmers as pods and small percentage
as kernels. Shelling of the pods is done at intermediate stages as the produce
reaches the millers and exporters outside the states in the form of kernels. Shelling
reduces volume and transport charges but it is disadvantageous to market the
kernels as they easily and quickly undergo deterioration and spoilage. Grading of

1
Badi, R.V. and Badi, N.V., (2004), Rural Marketting, Himalaya Rbulishing house, New Delhi, p,373.
2
Balaji, P.Padmanadan, N.R. Sivakumar, S.D and Chinnaiyan, P., op., cit, pp.36-41.

86
groundnut is a pre requisite before mechanical shelling to keep the percentage of
kernel breakage to a minimum. Better prices are also obtained in the market for
graded pods. When groundnut is to be sown, women labourers are employed for
breaking the pods and taking out the kernels. In doing so, the test of the kernel also
get separated to a considerable extent making it useless for sowing, because such
damaged kernels will not germinate. Groundnut decorticators, therefore, have been
designed. About 70 to 80 % of the marketable surplus of groundnut pods is taken
by the farmers personally to the markets in the study area.

The disposal of the produce, either at the market or in the village is

however, often closely connected with indebtedness. When the produce is sold to
the creditors in the village or in the local market, the process paid to the farmer are
much lower than the regulated market rates. The seller has to pay tolls, taxes
commission, labourers, wages, weightment charges and deduction for charity.
Deductions are also made for quality, impurities and moisture even through all
these have been taken into account at eh time of price settlement. In the regulated
Markets, certain amenities are provide to sellers and exorbitant market charges and
deductions in settled price are not made.

The methods of sale generally adopted are the cover system, the open
system, and the auction system. There is great diversity in the use of weights and
measures in the groundnut trade. The pods are sometimes sold by measure. In
other areas, the main source of the farmers finance is the village merchant who
advances small amounts for agricultural operations and they advance money to the
village merchants and in a few cases to the farmers in the nearby villages. The
banks confine their activities to big towns and advances are made to merchants
against produce in the god owns pledged to the banks. But these are the situations
pertaining to others major producing states. Credit has to be made available in the

87
village by the Banks directly to the farmers to get them out of the clutches of the
greedy local merchants so that they could secure good price for their produce.3

In erode district, groundnut growers are marketing their major portion of

their produce through various channels (vide Figure 4.1). against this background,
this chapter is a modest attempt to indemnity the existing marketing efficiency and
price spread of the identified three channels.

4.2 EXISTING MARKETING CHANNELS FOR GROUNDNUT

MARKETING
On the basis of pilot study, it is identified that there are channels in Erode
district to market the groundnut from the groundnut growers to the oil millers. The
oil millers are finding their own outlet to market the oils. The identified marketing
channels for groundnut are presented in figure 4.1

4.3 SELECTION OF CHANNEL TO DISTRIBUTE THE GROUNDNUT

The study of channel preference provides an insight into how the farmers
arrive at the disposal decision and the variables which influence their decision.
Once the influencing variables have been identified, the traders can manipulate
them so as to induce the farmer in a positive sales decision. The village traders and
farmers have faith in each other in order to maintain the goodwill. The long term
trade links help the farmers to borrow money from the village traders. It is known
fact that groundnut growers are prefer any of the identified three channels for their
own convenient. The details about selection of channel by the sample groundnut
growers are presented in table 4.1.

3
www.nabard.org/file upload/databank/evaluation study / groundnut 20 % study.pdf.op.cit.

88
 TABLE 4.1
MARKETING CHANNEL PREFERENCE OF THE GROUNDNUT
GROWERS

Channels Marketing
No. of farmers Percentage
Numbers channel
Growers oil
I 228 45.6
millers
Growers village
II 123 24.6
traders oil millers
Growers
III commission 149 29.8
agents oil millers
Total 500 100

Table 4.1 reveals that as many as many as 228 (45.6) sample farmers. In
this channel, the village trader procures the groundnut from the farmers by
assembling in a particular place of villages and the same is despatched to the oil
millers. Channel iii is selected by 149 (29.8%) sample farmers. In this channel, the
sample farmers sell their produce to the commission to the commission agents
who in turn sell in to the oil miller.

4.4 MARKETING EFFICIENCY

A developed market is an incentive to the produces to produce more
without having any linkage of fear regarding exploitation of market margins by the
market managers. Efficient marketing is essential for the well being of the country.
Efficiency and productivity of marketing are directly linked with the growth and
developed of the economy as a whole. Marketing, when effectively performed,

89
contributes to the higher living standards, greater national prosperity and broader
industrial expansion.

A marketing system is said to be efficient if the goods are moved from the
primary producers to the ultimate consumers at the lowest cost consistent with the
provision of the services that consumers desire. Form the producers point of view,
sale of produce at the hightes possible price is considered as an efficient
marketing, from the consumer’s point of view, availability of the best quality
product in the most convenient form at the lowest possible price is synonymous to
the efficient marketing.

Marketing efficiency is generally studied in terms of marketing cost and

margin known as price spread. Price spread of a commodity is the magnitude of
difference between the price received by the primary produces and that paid by the
ultimate consumer. Obviously, this magnitude constitutes tow elements viz., cost
and margin.

The role of an efficient agricultural marketing system as a key component

for accelerating agricultural marketing and hereby promoting economic growth in
developing nations is now widely recognised4.

An efficient market system is beneficial to farm community. The higher

share in the value of final product is expected to provide sufficient inventive to
increase groundnut production, either allocating more area under groundnut or
enhancing the yield increasing the input by using preferably the modern inputs

4
Jagadish Prasad, (2002), Encyclopaedia of agricultural Marketing, V.6, Delhi, Mittal Publication, p.1.

90
having higher productivity and eventually leading to higher output as well as
higher form income5.

Kohl’s and Uhl measured the marketing efficiency as a ratio of output

(satisfaction) to input (cost of resources). Efficiency in marketing is therefore, in
maximization of this input output ratio6. According to badi7. Marketing efficiency
is the sum outcome of profit/ losses and market share of the product taking due
care of investment and cost and efforts put by sales force, advertising, sales
promotion and distribution departments of an organisation.

Marketing efficiency is assessed with the help of marketing efficient index,

shepherd’s method and Acharya and Agarwal method. In this regard, it is decided
to analyse the price, cost and margin.

4.4.1 PRICE
The groundnut price is fluctuating on season basis. Further, the price
available to groundnut farmers is purely based on demand and supply. During
peak season, supply farmers get a good price because supply is less. During peak
season, supply is more but price is less. To analyse the marketing efficiency of
various identified existing realised channels, the sample farmers have been asked
to reveal the price realised by them for quintal of dry pods from the intermediaries
or oil millers. Such collected data are averaged and the same is used for analyse
purpose.

5
Uma Shanker Patnaik, K.(1989), efficiency of Groundnut Marketing in India, New Delhi. Discovery
Publishing House, p.123.
6
Richard. L.Kohls and Joseph N.Uhl, (2002), Marketing of Agricultural Products, New Delhi. Prentice
Hall of India Private Limited, p.35.
7
Badi, R.V. and Badi, N.V.op.cit., p.462.

91
 On this basis, price relished by the groundnut growers in the first channels
worked out as Rs.43.12 per kilogram. In the second channel, it is Rs.42.14 per
kilogram. In the third channel, it is Rs.39.20 per kilogram.

4.4.2 MARKETING COST

Generally, high marketing cost and margins are considered to be indicators
o inefficiency in the marketing process. But this is not always true. It is known
fact that a major part of the consumer’s rupee is spent on marketing cost. A
number of factors may operate to cause a high proportion of marketing cost.
Without any reflection on the efficiency of the marketing system8.

The study of marketing of any commodity is in commodity is incomplete if

it does not cover the cost involved in the marketing of commodity. The marketing
cost assumes a focal point of interest in the marketing of most commodities since
marketing cost directly affect the net returns to producer’s as well as well as
consumer’s satisfaction. Cost of marketing therefore, is frequently considered as
an index to measure the marketing efficiency.

MARKETING INCURRED BY THE GROUNDNUT GROWERS

The marketing cost incurred by the farmers differs significantly in the
identified different channels. To minimise the marketing cost, the farmer has to
select the channel of distributing which is characterized by least cost. Marketing
transport, storage and commission. The cost of marketing of groundnut in different
unidentified channels is worked out and the same is pressured in the table 4.2.

8
Acharya, S.S. and Agarwal, N.L., (2004), Agricultural marketing in India, New Delhi, Oxford & IBH
Bublishing company Private Limited, p. 392.

92
 TABLE 4.2
MARKETING COST

Channels
Particulars
I II III
Labour 980.00(69.40) 920.00 (59.20) 800.00 (53.33)
Drying 360.00 (25.50) 400.00 (59.20) 350.00 (23.33)
Packing 30.00(2.15) 35.00 (2.25) 30.00 (23.33)
Transportation 22.00 (1.60) 19.00 (2.22) 25.00 (1.67)
Commission - 150.00 (9.65) 250.00 (16.67)
Loading and unloading 15.00 (1.05) 25.00 (1.60) 25.00(1.67)
Miscellaneous 5.00 (0.35) 5.00 (0.33) 20.00(1.33)
Total 1,412 (100) 1,554 (100) 1,500 (100)

Note: Figures in parentheses are percentage

As shown in table 4.2, marketing cost incurred in channel II is found to be

higher as compared to those incurred in channel I. further, it is found that total
marketing cost incurred in the first channel is least due to non-involvement of
intermediaries.

MARKETING COST INCURRED BY MARKET FUNCTIONARIES

Knowledge of the distribution of marketing cost among various market
functionaries is very important for improving the efficiency of marketing system.
Necessary cost data have been collected through field study from village traders.
Commission agents oil millers. The result of the analysis of the distribution of
marketing cost among different functionaries is presented in table 4.3.

93
 TABLE 4.3
MARKETING COST INCURRED BY MARKET FUNCTIONARIES
(Rs.per Quintal)
Commission
Particulars Village traders Oil millers
agents
Labour 10.00 (11.83) 18.50 (33.22) 19.00 (17.97)
Rent and electricity - - 15.30 (14.47)
Packing 17.00 (20.09) - -
Storage - - 16.10 (15.23)
Transportation 15.50 (18.32) 16.00 (28.72) 14.20 (13.35)
Loading and unloading 15.10 (17.85) - 14.10 (13.35)
Service charge 15.00 (17.73) 3.10 (5.56) 8.00 (7.57)
Telephone 2.00(2.35) 3.10 (5.56) 4.00 (3.78)
Weighting and other cost 10.00 (11.83) 18.10 (32.50) 15.00 (15.00 (14.19)
Total 84.60 (100) 55.70(100) 105.70(100)

It is observed from the table 4.3 that the average marketing cost of
groundnut per quintal incurred by the oil millers (Rs.105.70) is more than that of
village traders (Rs.84.60) and commission agents (Rs.55.70).

4.4.3 MARKETING MARGIN

The study of marketing of agricultural products is very important to
ascertain the producer’s share in the consumer’s rupee and also to know the
margin of various functionaries involved in the marketing process. The gross
marketing margin refers to the difference between the prices paid by the ultimate
consumers and the efficiency of the producers. The marketing margin is an
indicator of the efficiency of the marketing system. The larger the value of
marketing margin, the greater is the inefficiency in the marketing system. On the

94
other hand, if goods move form the producers to the ultimate consumers at the
minimum cost, the marketing system can be said to be efficient9. A calculated
marketing margin of the different intermediaries in the identified channels is
presented in table 4.4.

TABLE 4.4
MARGIN OF FUNCTIONARIES IN DIFFERENT CHANNELS
(Rs.per quintal)
Channels
Particulars
I II III
Margin of village traders
- 150 (27.27) -
@ Rs.1.50 per Quintal
Margin of commission
agents @ Rs.2.5 per - - 250 (38.46)
Quintal
Margin of oil millers @
400 (100) 400 (72.73) 400 (61.54)
Rs.4 per Quintal
Total marketing margin 400 (100) 550 (100) 650 (100)
Note: figures in parentheses are percentage
It is clear from the table 4.4 that market functionaries margin is found to be
the highest in channel III. This is mainly because of the fact that involvement of
more intermediaries.

4.4.4 MARKETING EFFICIENCY OF THE IDENTIFIED CHANNELS

A study of marketing cost and margins as well as producer’s share in
consumer’s price is required to assess comparative efficiency of different
marketing channels and identify the scope for improvement in the various
marketing functions so that the producers and consumers get remunerative and fair

9
Singh, B.B. (1998), Production and marketing of wheat in india, new delhi, mittal Publication, p.80.

95
price10. The present study is an attempt to analyse the efficiency of the identified
three channels by marketing efficient index, shepherd’s Method, Acharya and
Agarwal method and price spread.

Marketing efficient index method

As per this method efficiency is calculated with formula of11.
ME = 1 + (marketing margin + marketing cost)
As per this formula, higher value denotes higher level of efficiency and vice versa.
Findings are shown in table 4.5.

TABLE 4.5
MARKETING EFFICIENT INDEX

Marketing Marketing
Channels Marketing cost
margin efficiency
I 1,517.70 400 3.63
II 1,638.60 550 4.35
III 1,555,70 650 5.17

It is clear from table 4.5 that first channel is found to be an efficient one as
per the marketing efficient index method, channel III is the most efficient of all the
three channel.

SHEPHERD’S METHOD
Shepherd has suggested that the ratio of total value of goods sold in the
market and the total marketing cost is to be used as a measure for marketing

10
www.nabard.org/file upload/ databank/ evaluation study / groundnut 20 % study. Pdf, op. cit.
11
Chidambram, K. (2002), ‘Marketing Efficiency of channels used for Grey Cotton Fabrics Indian Journal
of Marketing, Vol.XXXII, No.9, September, p.12.

96
efficiency. According to him, the greater the ratio, the higher the efficiency and
vice versa. Shepherd’s formula for marketing efficiency is :
ME = V -1
I
Where,
ME is marketing Efficiency:
V is Value of goods sold (consumer’s price) and
I is total marketing cost (or) input of marketing.
As per this formula, higher value denotes higher level of efficiency and vice
versa. Details of the findings are shown in table. 4.6.

TABLE 4.6
MARKETING EFFICIENCY: SHEPHERD’S METHOD
(Rs.per quintal)
Channels
Particulars
I II III
Consumer’s Price
4,817.70 4,954.30 4,731.40
(V)
Total marketing
1,917.70 2,294.30 2,311.40
cost (I)
Marketing
1.51 1.16 1.05
efficiency (ME)

An examination of table 4.6 indicates that the marketing efficiency is found to be

highest in the channel 1.
Acharya and Agarwal method

97
According to them, the formula for computing efficiency is :
O
E= x100 (or)
I
Net price received by the farmers
Marketing cost + Marketing m argin

Where,
E is marketing efficiency;
O is output of the marketing system and
I is cost of marketing including margin of intermediaries.
As per this formula, higher values denotes higher level of efficiency and vice
versa12. Findings are shown in table 4.7

TABLE 4.7
ESTABLISHES THAT CHANNEL IS THE MOST EFFICIENCY
CHANNEL.

Channels
Particulars
I II III
Value added (o) 2,900.00 2,660.00 2,420.00
Cost of marketing 1,917.70 2,294.30 2,311.40
Marketing efficiency
151 116 105
index (Ex 100)

4.4.5 COMPUTATION OF PRICE SPEARED

Price spread is one of the important measures of marketing efficiency it
indicates the difference between the price paid by the ultimate consumers and the
price received by the producer for an equal quantity of farm produce. The price

12
Acharya, S.S and Agarwal, N.L. op. cit., pp.311-312.

98
spread includes marketing cost incurred by the intermediaries as well as their
profit margin.

The main reason for comparatively lower price obtained by the farmers on
one hand and higher price paid by the consumers on the other hand is due to the
existence of more market intermediaries. The price spread in the marketing of
groundnut in the identified three channels are given in table 4.8.

TABLE 4.8
PRICE SPREAD OF GROUNDNUT

Marketing channels
Particulars
I II III
A.Producer
2,660
1.Net price received 2,900 (60.20) 2,420 (51.15)
(53.70)
1,554
2.Marketing cost 1,412 (29.30) 1,500 (31.70)
(31.35)
1,554
3.Gross price received 4,312 (89.50) 3,920 (82.85)
(31.35)
B.Village Traders
84,60
1.Net price received - -
(1.71)
15.,00
2.Marketing margin - -
(3.05)
4,448.60
3.Gross price received - -
(89.80)
c.commission agents

99
1. Marketing cost - - 55,70 (1.17)
2.Marketing margin - - 250.00 (5.29)
3.Gross price received - - 4,225,70 (89.31)
d. Oil millers
105,70
1. Marketing cost 105,70 (2.20) 105,70 (2.23)
(2.13)
400.00
2.Marketing margin 400.00(8.30) 400.00 (8.46)
(8.07)
4,954.30
3.Gross price received 4,817.70 (100) 4,731.40 (100)
(100)
4,954.30
Consumer’s purchase price 4,817.70 (100) 4,731.40 (100)
(100)
producer’s share in consumer’s
60.19% 53.69% 51.15%
rupee
G.Price spread 1,917.70 2,294.30 2,311,40
Note : figures in parentheses are percentage

As per table 4.8 it clear that the price paid by the consumer for purchase of
groundnut in the channels I, II and III is Rs.48, 17, Rs.49.54 and Rs.47.31 per
kilogram respectively. While, gross price received by the groundnut growers per
kilogram Rs.43.12, Rs.42, 14 and Rs.39.20 in the channels I, II respectively.

The price spread is relatively more in channel III (Rs.2,311. 40 per quintal)
when compared to that in channel II (Rs.2,294.30 per quintal) and in channel I
(Rs.1,917.70 per quintal). Even through price spread in channel III is high as
compared with other tow channels, majority of the sample farmers have sold their
groundnut only through channel 1.

100
 The producer’s share in consumer’s rupee is the highest (60.19%) in
channel I and it is lowest (51.51%) in channel III. Perhaps this is the reason why
majority of the sample farmers disposed their groundnut through this channel
whereas, through a study directorate of marketing and inspection found that
producer’s share in consumer’s rupee as 71.56%13.

4.5 SUMMARY
In this chapter, existing marketing channels for groundnut, marketing cost,
marketing margin of intermediaries and marketing efficiency are examined.

Existing marketing channels for groundnut marketing channels consist of

various agencies, which perform different marketing functions. As a result, the
produce moves form the producers to the ultimate consumers. The farmers are not
concerned with the distribution of his produce to the consumers. His activity ends
with disposing of the produce to the intermediaries.

In the groundnut marketing system, the intermediaries play a dominant role.

Groundnut growers are not concerned with the distribution of groundnut to the
consumers. His activities end with disposing of the produce to the intermediaries.

The marketing of groundnut in Erode is done through three marketing

channels viz., (i)Growers –Oil millers (ii)Growers-village traders-Oil millers and
(iii)Growers-commission agents-Oil millers.

The present study revealed that as many as 228 (45.6%) sample farmers
preferred channel I for marketing this channel, the produce to the oil miller.
Channel II is chosen by 123 (24.6%) sample farmers. In this channel, the village
trader procures the groundnut from the farmers by assembling in a particular place
13
www.nabard.org/file upload/ databank/ evalution study/ groundnut 20 % study.pdf.op.cit.

101
of villages and the same is despatched to the oil millers. Channel III is selected
by 149 (29.8%) sample farmers. In this channel, the growers sell their produce to
the commission agent who in turn sells it to the oil miller.

MARKETING EFFICIENCY
Marketing efficiency can be assessed with price, marketing cost, marketing
margin and price-spread. In the present study, marketing efficiency is assessed
with price-spread and some formulae are given by various authors in their studies
in this regard, it is necessary to analyse the price, cost and margin.

Regarding to analyse the marketing efficiency of various identified existing

channel the sample farmers have been asked to reveal the price available averaged
to the groundnut is despatched during the year 2009. Such collected data are
averaged and the same is used for analyse purpose. On this basis, price realized by
the groundnut farmers in the first channel is worked out Rs. 43.12 per kilogram.

The marketing cost assumes a focal point of interest in the marketing of

most commodities since marketing cost directly affect the net returns to producers’
as well as consumers’ satisfaction. Cost of marketing, therefore, is frequently
considered as an index to marketing efficiency

It is found that farmers incurred less cost (Rs.1,412 per quintal of 100kg)in
channel I is as compared to channel II (Rs.1,500). Hence, it is concluded that
channel I is more efficient that of other two channels.

Knowledge of the distribution of marketing cost among various market

functionaries is very important for improving the efficiency of marketing system.
The average marketing for improving the efficiency of marketing system. The

102
average marketing cost of groundnut per quintal of village traders (Rs.84.60) and
commission agents (Rs.55.70).

Marketing margin is the amount of revenue (both cost and profit) received
for the marketing function and services. The study of marketing function and
services. The study of marketing margin of agricultural product is very important
to ascertain the producer’s share in the consumer’s rupee and also to know the
margin of various functionaries involved in the marketing process.

For the present study, calculation is made on the basis of data collected
from village traders, commission agents and oil millers during the period of study.
Marketing margin per quintal of 100 kg accounted for Rs.400, Rs. 500 and Rs.650
in channels I, II and III respectively. This proves that channel I is more efficient
than that of other two.

Marketing efficiency is analysed with three methods viz., marketing

efficient index shepherd’s method and Acharya & Agarwal method. As per
marketing efficient index method, it is found that channels III as the most efficient
channel because its index (5.17) is higher that channels. As per shepherd’s method
and Acharya and Agarwal method reveal clearly that channel I is most efficient.

Price -spread is one of the important measures of marketing efficiency. It

indicates the difference between the price by the ultimate consumers and the price
received by the producer for an equivalent quantity of farm produce. The price-
spread includes marketing cost intermediaries as well as their profit margin.

In price-spread analysis, it is found that channel III as more efficient than

that of other two, because its price-spread of Rs.2, 311 .40 per quintal of 100kg is
lowest, followed by channel II and channel I as Rs.1,917.70 respectively.

103
Producer’s share in consumer’s rupee is found to be very high (60.19%) I,
followed by channel II (53.69%) and channel III (51.15%) this too shows that
channel I is more efficient than that of other two channels.

The focus was on groundnut oil processing and marketing systems; input
use efficiency in production and factors that made for efficiency; profitability of
the processing activity and factors that determined profitability; examination of
value added by processing; integration of markets for the processed products and
problems of the industry. A total of 175 traditional processors were selected and
17 small-Scale modern processors covered from Nasarawa, Benue and Niger
States. Pre-tested, structured questionnaires and observations were used as
instruments of data collection. Types of data collected were those on socio-
economic characteristics of processors, groundnut procurement, processing, and
ground nut oil (GNO) and groundnut cake (GNC) marketing. Weekly price series
for GNO and GNC were also collected at various markets within the region. Data
analyses were attained by use of descriptive and inferential statistics, stochastic
frontier analysis (SFA), profit function analysis, t-test statistic and Johansen test
for co-integration. Hypotheses were also tested appropriately. The average age of
traditional processors in North Central Nigeria was 38 years and 41years for
modern processors. Ninety-four percent of the traditional processors were women
while 88% of modern processors were men. Majority of the processors did not
participate in co-operative activities. Sixty percent of groundnut processed by
traditional processors came from farmers while 94% of groundnut processed by
modern processors was obtained from traders. The maximum likelihood result for
traditional processors indicated the presence of inefficiency. Raw groundnut
variable was significant at 1% level of significance (LOS) in Nasarawa and Niger
States. Fuel-wood and salt were both significant at 1% LOS in Nasarawa and
Benue States. In the inefficiency aspects, age and years of experience were
significant at 1% LOS in all the states. For the zone, labour and salt were

104
significant at 1% LOS; fuel-wood 5% and raw groundnut 10% LOS. In the
inefficiency aspect for the zone, household size was significant at 5% LOS, while
level of education was significant at 10% level of probability. Raw groundnut and
labour were significant in modern processing, while education and experience at
10% in the inefficiency aspect. Most of the traditional processors had their
efficiency scores above 0.80 and modern processors were from 0.47. In the profit
function results for traditional; processors, fuel-wood and packaging variables
were significant at 1% LOS. Raw groundnut, procurement and maintenance were
significant at 1% in modern processing. Value added was 41% for traditional
processors and 44% for modern processors. There was significant difference in the
value of groundnut before and value after processing. The Johansen trace test
result indicated five co-integration vectors at 5% level of probability for GNO and
two co-integration equations for GNC. The markets for GNO and GNC were not
fully integrated. Administrative regulations affected market integration for GNO
which was significant at 5% LOS. Constraints identified included inadequate
finance, inadequate electricity, machine breakdown and transportation.
Recommendations made included improved packaging, finance, electricity supply
and co-operative education.

105