Transport costs

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Transport costs are incurred by farmers when they take their produce to the market and by traders as they move the produce down the marketing chain to the consumer. Sometimes transport costs are very obvious because they involve the direct payment by a farmer or trader to a truck owner or, in some cases, boat owner on a per piece basis. In other cases such costs are less direct, for example when the trader, or even the farmer, owns and operates his own vehicle.

In other situations there is no financial outlay but there is still an opportunity cost. For example, when a farmer uses animal transport, a bicycle or even carries the produce himself to get to an assembly market he could be doing other things with his time. This is a relevant marketing cost if the farmer has the possibility of selling his produce at the farm gate but feels his income will be higher if he takes it to the market. However, if the farmer has no alternative to going to the market then the time spent can be more properly regarded as part of his costs of production. If he doesn't go to the market he will not be able to sell his produce.

Payment to truck drivers to carry produce to market on a "per piece" basis makes for easy marketing cost calculations but is usually a more expensive way of transporting produce. Truckers have no idea whether they will fill their trucks or not and so calculate their charges "per piece" by assuming an average load over the season or year which is less than the capacity of the vehicle. Thus traders or farmers working in groups can, if they are sure they can fill a vehicle, save on transport costs by joining together to hire one. Generally, the larger the truck they can hire and fill, the cheaper the per unit transport costs. Extension officers involved with marketing can play an important role by helping farmers or traders to organise to do this.

When produce is carried on a "per piece" basis it is a simple matter to divide the cost per container by the number of kilograms in the container. When a truck is hired or the trader uses his own, the calculation is more difficult because the vehicle may be used for several different commodities, each packed in a different sized container. For most trucks the factor limiting quantities carried is space available, not weight. Thus products which have a low weight-for-volume ratio (for example green peppers) should be costed at a higher per kilogram cost than produce which is heavier in relation to its volume. This requires making a rough estimate of the volume of the containers used for each commodity. The space available in the truck(minus an allowance for space that cannot be filled because of the shape of the containers, etc) can then be divided by the volume of the container, so allowing the cost per kilogram to be worked out. An example of this calculation is shown in Figure 2.

The calculation becomes more complicated when a trader owns his or her own vehicle and we have to assess his or her transport costs. There are so many factors to consider in working out the costs per kilogram for one journey that this is best avoided unless there is no alternative information available to allow the cost to be estimated. 11, for example, some traders use their own transport while others hire trucks on a "per journey" or "per piece" basis then you can use the costs of the latter as a "best guess" of the costs to a truck-owning trader.)

Because traders and truck owners are often accused of overcharging it is important to be aware of the transport costs they face. These include:

• wages paid to the driver and, where relevant, his assistant;
• cost of fuel, maintenance, repairs and the like;
• cost of licences, road tax, insurance and other necessary payments;
• costs incurred en route such as tolls or bribes paid at official or unofficial road blocks and charges for entering a market;
• the capital cost of the vehicle. When working out the yearly cost of operation of a truck you need to include not only the cost of bank interest paid on a loan but also the annual depreciation (or loss of value) of the truck. When roads are bad trucks may last only a few years and thus depreciation will be a major cost.

Having identified annual transport costs it is then necessary to consider the amount of work the truck will do in one year in order to work out a cost per tonne per km. This will depend on:

• the periods in which produce is available to be marketed;
• the other uses (if any) to which the truck can be put-on return journeys or when not being used for agricultural marketing;
• the days the truck is unavailable due to breakdowns, repairs, services and the like;
• when both produce and the truck are available, the number of journeys and kilometres the truck will be able to do.

Figure 2
Calculating transport costs

Assume that there are 40 m³ of space available in the truck to be used and that it costs $500 to hire the truck. A container of 0.2 m³ holds 8 kg of tomatoes and a container of 0.4 m³ holds 10 kg of green peppers.

Then the transport cost for tomatoes per container and per kilogram is ...

$500 ÷ (40 m³ ÷ 0.2 m³) = $2.50 per container

and

$2.50 ÷ 8 kg = $0.3125 per kilogram

While the transport cost for green peppers per container and per kilogram is ...

$500 ÷ (40 m³ ÷ 0.4 m³) = $5.00 per container

and

$5.00 ÷ 10 kg = $0.50 per kilogram

As can be seen, there are numerous individual costs which can combine to make produce transport extremely expensive. In many cases transport will be the most important marketing cost. It is therefore vital that the cost is calculated correctly. Expensive mistakes can be made if, for example, a village, cooperative decides to buy a truck to compete with traders. If it underestimates the costs of operating the truck or overestimates the amount of produce it will handle it could end up with a large loss.

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