|Small-Scale Maize Milling (ILO - WEP, 1984, 160 p.)|
|CHAPTER VI. METHODOLOGICAL FRAMEWORK FOR THE ESTIMATION OF PRODUCTION COSTS|
|III. METHODOLOGICAL FRAMEWORK FOR THE ESTIMATION OF MILLING COSTS|
The cost structure of roller mills is much more complex than that of small-scale mills. Since this memorandum is mostly concerned with these latter mills, no attempt will be made to describe in detail the cost structure of roller mills.
The principal cost items for a roller mill are those of raw maize, packing, labour, storage of raw materials and products, management and administration, transport, insurance and taxes. Other important cost determinants are location, working capital tied up in raw maize storage, capacity utilisation and length of operating season. According to Uhlig and Bhat (1980), raw maize accounts for more than 80 per cent of total net present costs discounted at 10 per cent on the basis of Kenyan factor prices. This figure provides a very convenient, if rough guide to the estimation of unit costs. One only needs to know the local price of raw maize in order to estimate unit production costs. If a more accurate guide is needed (e.g. in cases where estimated unit costs are close to retail prices), more detailed information is needed on the quantity and price of the factors of production.
The cost of packing materials ranks second in magnitude to raw maize costs. It represents 6 to 9 per cent of the total unit cost depending on whether the packing of meal is done manually or mechanically. Packing costs can be lowered by a small percentage if larger bags or sacks are used (e.g. use of 50 kg sacks instead of 25 kg sacks).
Labour and management costs rank third at under 5 per cent of unit costs, reaching 2 per cent in machine-intensive plants. The management proportion of this cost element is high, approximately 48 per cent of total labour and management costs for the smallest scale roller mills (2 tonnes/hour). This proportion decreases as the scale of production increases, but does not generally go below 32 per cent.
Other cost items for roller mills are far less significant than the three cost items indicated above. Insurance, administration and maintenance costs represent approximately 4 per cent of total unit costs.