Economics of Neem in Crop Protection PDF Print E-mail
ECONOMICS OF NEEM IN CROP PROTECTION:

The high cost of neem products in comparison to synthetic products is often cited as one of the main reasons why neem is not more widely used by farmers, particularly Indian farmers. A deeper understanding of the long-term benefits of neem to the crop, soil, environment and ecology should be taken into consideration, while comparing to avoid misinterpretation regarding the profitability of the different farming systems.

A more detailed analysis of the economics of neem raw material, processing and application of neem products, together can perhaps provide a correct perspective.

Cost of Neem Raw Material

The price of commercial neem formulations depends largely on the basic price of the seeds. This price can vary greatly from one country to the other due to different harvest methods, differences in wages, in drying, transportation, storage and further processing costs. Another important factor is the structure and efficiency of the marketing chain. The varying availability of seeds also contributes to price fluctuations. In addition, the price for neem raw material depends very much on the place, where the fruits or seeds are collected (farm gate, rural areas, district town, capital) and on the quality of the raw material.

In countries where neem trees are grown, gatherers receive between 0.1 & 1.00 US$ / kg of dried seeds. Prices are lowest in India, to a great extent because neem fruit collection & processing have become an integral part of the Indian rural economy. Neem seeds in India were traditionally processed into oil for soap manufacturing, where the quality of the seeds however is not as decisive as for pesticide production. In Bangladesh and Pakistan, where neem soaps have also appeared in the markets, neem fruit collection appears to be more on an ad hoc basis.

In many other countries where the neem tree is commonly found, as in the southern Sahel region of West Africa, neem products are still a novelty and fall outside the rhythm of the rural economy. Hence, neem fruit collection there is rare - and usually in response to requests from overseas buyers.

If neem seeds are sold through middle-men and traders the price for raw material increases by around 20-100% compared with the price at the gatherers level.

The primary traders purchase neem seed directly from farmers/rural poor, who usually come to the trader's shop from within a radius of 10 km. The secondary wholesalers procure lots from the primary traders and their suppliers come from distances of up to 50 km. The secondary traders supply the raw material to neem oil processors and neem cake producers who, in many cases, are located at considerable distances - some even beyond 500 km.

Some neem seed is also purchased by fertilizer blenders. Ayurvedic medicine producers also source their neem fruit/seeds from these secondary traders to be used for pharmaceutical products and generally pay much higher prices to ensure quality.

Cost Factors of Neem Products

Dry neem seed kernel, de-oiled neem cake or neem oil are generally cheaper than the ready-to-use pesticides - but have the disadvantage that their preparation is labour intensive and they are often not standardized. However, they do find a market especially if training and information is available on the proper method of usage.

If for e.g. neem oil and emulsifier are supplied at the same time, there is only little economical difference and difference in handling to products such as ready-to-use formulated neem oil or standardized neem cake powder.

Special problems arise, if half-finished products have to be transported over long distances. Strzok (1992) estimates that the general transport costs in India average about US$ 0.10 /ton/km; in contrast, they are much higher in West Africa (about US$ 0.20/ton/km in Senegal, US$ 0.22 in Mali, and US$ 0.25 in Burkina Faso) for a full truck load; charges for smaller quantities are even higher, and transport is usually available only on days when local markets are held - which may work out to a frequency of about once a week.

The lower cost in India is due to better infrastructural facilities in the country: roads are generally better and more closely spaced. Thus, one can easily find transport everywhere, with options of bullock cart, cycle, trucks, minibus, train etc. Given this extensive road network in India, & the propensity of farmers to have multiple-generating activities, moving small quantities of a product, such as a 50 kg sack of neem seed to a local village, is accomplished easily and cheaply.

In contrast, West Africa's sparse population, the much greater distance between farm & market,    and the limited road network require appreciable advance planning and a larger mass of product to interest transporters. Additionally, many secondary roads in West Africa become impassable during the later stages of the rainy season. Also, truckers give priority to recurring customers, and occasional suppliers may have a real problem in transporting perishable goods on a firm schedule basis. Thus, the opportunity costs are high and possibility of spoilage substantial. Consequently, large-scale transport of neem raw material & half-finished products does not usually take place in Africa.

The prices of commercial neem pesticides as purified EC formulations are generally significantly higher than those of half-finished products. Commercial concentrates of neem cost around US$ 3-10/per/g of azadirachtin in Europe & North America, whereas 1 g of azadirachtin in seeds or cake can be bought at around 0.5-2 US$ (Hellpap, 1994, 1999).

The difference is mainly caused by the cost of extraction. Thus, each increase in the concentration of active ingredients through additional extraction steps is reflected in the price of the product. At the high price level neem concentrates are generally significantly more expensive than synthetic products and even significantly more expensive than other biological pesticides such as the microbiological product 'Dipel'.

Economics of Use of Neem Based Products for Crop Production

Comparing the economic aspects of a biological neem pesticide with synthetic pesticides is something that needs to be considered separately for each country concerned, since the prices of synthetic pesticides and of neem raw material and products differ from one country to another. Although there is a general tendency to abolish subsidies in many developing countries, yet cheap synthetic pesticides are one decisive factor inhibiting the spread of neem pesticides. Synthetic pesticides are still often subsidized by governments or even made available by them, to encourage the growers to use such pesticides, in the first place.

Home Made and Half Finished Products

In many cases, the benefits of using neem-based pest control materials cannot be quantified due to a lack of data. Users' perception of the benefits is usually all that is available. However, Kandaswamy & Ravindran (1988) conducted an economic analysis of seven field trials in paddy implemented during 1986 - 1987 seasons. They concluded that, while neem products (oil, cake,  neem coated urea, kernel extract, etc.) generally helped to increase crop yield over control by 150-1,000 kg/ha and gave a benefit-cost ratio (BCR) of about 5, the synthetic pesticide monocrotophos generally increased paddy yield by 1,000-2,000 kg/ha and gave a higher BCR of 10-31.

In one experiment, however, a neem treatment (5% neem seed kernel extract; NSKE) applied by a low volume sprayer gave a more attractive BCR of 44 against 31 obtained with monocrotophos; and in another experiment, both products (5% neem oil low volume application and monocrotophos) gave the same BCR of 25. In spite of the lower BCR, however, these findings do validate the pest control effectiveness of selected neem materials under specific conditions. For the limited-resource farmers lacking money to purchase pesticides, the use of home-made products can be attractive. The main cost involved in their preparation is labor, which probably the farmer can obtain 'free', when family members are not otherwise gainfully occupied.

Marz (1989) provides the following summary regarding the economics of using neem for pest control in India and Togo: (i) while the percentage of tobacco seedlings badly damaged by Spodoptera litura in India is higher when treated with neem seed powder (NSP) than with the antifeedant 'Fentin', the difference in costs between the two alternatives is small; thus a lower production cost of NSP could render its use economical; (ii) NSP can economically replace the pesticide deltamethrin for protecting cabbage against Plutella xylostella in Togo; & (iii) if cowpeas are stored for up to six month, a 0.5% neem oil application (by volume) proves more economical in Togo than the use of the next cheaper alternative: ash. Beyond that period, ash use becomes more economical.

Serra (1992), Ostermann (1993) and Brechelt (1994) found that home-made neem kernel water extracts are more economical in vegetables than many synthetic pesticides.

Calculations by researchers and governmental extension services in Sri Lanka, Thailand & Madagascar confirmed this finding (Zehrer, 2000). They revealed that based on the preparation & application home-made neem kernel water extracts are economically more favorable than conventional pesticides for plant protection in high value crops despite the labor intensity required. Environmental effects & health hazards were not considered in these calculations.

Leupolz (1999) concluded that if only the product price is taken into account, and no toxicological benefits and middle and long time effects such as stabilization of the production system are considered, the prices for neem products in the Dominican Republic are on the average 25 - 40% higher than those for cheap synthetic pesticides. There are, however, still a number of selective synthetic pesticides, i.e. products with similar properties & advantages as neem, which are much more expensive than the application of neem is.

Quentin (1999) found that the application of the locally produced EC neem formulation in Kenya is cheaper than 14 other competing pesticides while neem cake powder is cheaper than 28 other competing pesticides. For the latter is has to be taken into consideration that often the application is much more laborious than for EC formulations.

In all these cases, it has to be emphasized that the economics of using home made neem pesticides depend highly on the quality of the raw material. The following rough calculation may illustrate this: To effectively control most pests, one hectare of crops must be treated once with between 20-60 g of the main active ingredient azadirachtin. Thus, given the fact that there are approx. 2 g of azadirachtin in average per kg of seeds, somewhere between 10-30 kg of neem seeds are needed in all. This means that the seed costs alone for the single treatment of one hectare of crops vary between 1-60 US$, although in most countries they are somewhere in a narrower range of between 5-20 US$. This rough calculation indicates again the importance of the quality (taking the azadirachtin content as an indicator).

Industrially Manufactured Neem Pesticides

The prices per application and per ha for neem based EC formulations and other industrially manufactured neem products are often significantly higher than those for common synthetic pesticides. However, such comparisons are only of limited value, unless the whole cropping system, the different 'side effects', and the long term benefits are considered. One of the remarkable characteristics of most neem products are that their use does not easily cause resistant pests due to the different active substances (in addition to azadirachtin) and complex mode of action. Thus, neem insecticides can still be used when other common synthetic pesticide lose their efficacy against key pests. 

Another  important advantage of neem pesticides  is that they cause only relatively low side effects on most beneficial arthropods. This may result in reduced pesticide application, when looking at the whole system, as it could be demonstrated by Forster et al. (2000). They reported about an example from Kenya where the application of neem effectively controlled leafminers in Carthamus flowers, which were resistant to synthetic pesticides. The application of neem allowed the parasitoid Diglyphus isaea to recover and to contribute to control of the leafminers effectively in the following cropping periods. This in turn led to a reduction of neem applications. The system neem/parasitoid proved to be much more economical & sustainable than the application of synthetic pesticides alone.

The profitability of using commercial neem insecticides also depends on the demand for agricultural products free or almost free of pesticide residues. If the demand is increasing, the competitiveness of neem products could prove significant. Numerous farmers all over the world have already stopped to apply cheap pesticides as they consider their side effects to be too harmful, as also due to market requirements. Consequently, they can choose between more 'modern' synthetic pesticides, being ecologically sounder and less toxic but which are also significantly more expensive than the former generation of pesticides. They may also apply biological products such as neem insecticides, whose prices don't differ much from the high price synthetic products.

Economics of Using Neem Cake As A Manure (Fertilizer)

Neem cake has a higher nutrient content (7.7% total) compared to what is commonly found in farmyard manures (1.2% total). However, its nutrient content is much lower than what is found in most chemical fertilizers. Thus, at the current costs of fertilizers and neem cake in India and elsewhere, it will not make any economic sense to use neem cake primarily as a fertilizer nutrient. However, when it is used for controlling nematodes and other soil borne organisms (as is done by growers of cardamom, vegetables, etc., as discussed above), the product's 'fertilizing' value - and the fact that it contains more than one nutrient - as additional advantage.

Several studies have also shown that the nitrification inhibition properties of neem cake help to increase the efficiency of urea when this fertilizer is coated with neem cake. Yield increases of between 5-20% have been reported (Prasad et. al., 1993).



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