II. SALTING AND DRYING

For each process, two levels of input have been assumed and these in turn have been analysed over 200 and 250 working days. Sun drying is carried out on drying racks made of timber and wire-mesh, with slightly over 5 kg of fish spread on each 1 m² of rack, and a drying cycle lasting 5 days. Mechanical drying involving forced air circulation, has a cycle lasting 12 hours. In all cases, a yield of 33% of finished product is assumed.

The following tables (V.2, V.3 and V.4) show the fixed and variable costs associated with these processes.

Table V.2.
Production of salted dried fish: Investment costs (US$)

Input fresh fish per day	Natural drying		Mechanical drying
	320 kg	650 kg	650 kg	1000 kg
Land	450 (900 m2)	900 (1800 m2)	250 (500 m2)	250 (500 m2)
Buildings (store, processing and/or office building)	300 (20 m2)	450 (30 m2)	9000 (120 m2)	11250 (150 m2)
Equipment + racks1	720	1440	12600	18200
Contingencies (10%)	150	280	2190	2970
TOTAL	1620	3070	24040	32670

Note 1:

- For natural drying: at 320 kg throughput, 300 m² of drying racks at $2 per m² plus miscellaneous equipment

- At 650 kg throughput, 600 m² of drying racks at $2 per m² plus miscellaneous equipment.

- For mechanical drying: A tunnel dryer and accessories installed.

Table V.3.
Production of salted dried fish: Annual fixed costs (US$)

	Natural drying		Mechanical drying
Daily input fresh fish	320 kg	650 kg	650 kg	1000 kg
Depreciation1	324	642	1,620	2,270
Interest on fixed capital (8%)	130	246	1,923	2,614
Maintenance and repair costs (5% of investment costs)	81	154	1,202	1,634
Insurance (1.5% of investment costs)	24	46	361	490
Interest on working capital (8%)2	74	148	171	262
Permanent labour3	1,500	1,500	3,500	3,500
Other overheads	250	300	500	500
TOTAL	2,383	3,036	9.277	11.270

Notes:

1. Estimated at: 4% of building costs + 10% equipment costs + 50% of drying racks costs.

2. Working capital is equal to 5% of variable costs (see table V.4) for 200 working days per year and to 4% of variable costs for 250 working days per year.

3. - For natural drying: 1 manager
- For mechanical drying: 1 manager, 1 mechanic/supervisory

Table V.4.
Production of salted dried fish: Annual variable costs (US$)

Fresh fish daily input	Natural				Mechanical
	320 kg		650 kg		650 kg		1000 kg
Days per year	200	250	200	250	200	250	200	250
Fish (at $200 per tonne)	12,800	16,000	26,000	32,500	26,000	32,500	40,000	50,000
Electricity1	-	-	-	-	650	810	900	1,130
Fuel oil2	-	-	-	-	8,000	10,000	12,000	15,000
Labour3	3,360	4,200	6,240	7,800	3,360	4,200	5,280	6,600
Packaging4	760	960	1,560	1,960	1,560	1,960	2,400	3,000
Salt5	1,560	1,920	3,120	3,900	3,120	3,900	4,800	6,000
Total variable costs	18,480	23,080	36,920	46,160	42,690	53,370	65,380	81,730

Notes:

¹ 36 kWh per day for 650 kg; 50 kWh per day for 1000 kg. At $0.09 per kWh.

² 100 litres per day for 650 kg; 150 litres per day for 1000 kg. At $0.4 per litre.

³ Mechanical: 7 workers per day for 650 kg; 11 workers per day for 1000 kg.
Natural: 7 workers per day for 320 kg; 13 workers per day for 650 kg. At $2.4 per man-day.

⁴ Polythene bags - in some cases may be omitted.

⁵ Applied in the ratio of 1 tonne salt per 5 tonnes fresh fish. At $120/tonne of salt.

The cost per tonne of finished product as well as the output per man-day of direct labour are shown in table V.5.

Table V.5.
Cost per tonne and output per man-day

	Natural drying				Mechanical drying
Fresh fish daily input (kg)	320		650		650		1,000
Days per year	200	250	200	250	200	250	200	250
Finished product (tonnes fish per year)	21	26	43	54	43	54	66	83
Fixed costs per tonne ($)	113	92	71	56	216	172	171	136
Variable costs per tonne ($)	880	888	859	855	993	988	991	985
Total costs per tonne ($)	993	980	930	911	1209	1160	1162	1121
Man-days direct labour	1400	750	600	3250	1400	1750	2200	2750
Output (kg/man-day)	15	15	17	17	31	31	30	30

A number of conclusions may be drawn from the above analysis. For these volumes of throughput, economies of scale exist in both the natural and mechanical processes. However, for a similar volume of input (e.g. 650 kg/day), natural drying methods are cheaper both in terms of fixed and variable costs per tonne of output. At this level of throughput, total costs per tonne are nearly 30% higher for mechanical drying that for natural drying.

In the case of fixed costs, despite the fact that the racks for natural drying are replaced every 2 years, these still work out cheaper on an annual basis than the fixed costs associated with mechanical drying. This is not only because of higher initial capital costs for building and mechanical drying equipment, but also because of the higher interest payments required to service this investment as well as higher maintenance charges. It may be noted that in most developing countries, interest rates are usually much higher than the 8% rate used in the above example. Thus, in reality, natural drying should be much more cheaper than mechanical drying if higher interest rates were used in the cost estimations.

When variable costs are considered, the cost of fuel oil is the most important after that of fish in the case of mechanical processing. Despite the fact that the output per man-day of direct labour is approximately double that obtained by natural drying, this is insufficient to offset the higher energy costs.

So far this discussion has been based solely on cost. Other factors, however, need to be borne in mind when evaluating these processes. Natural drying requires optimal climatic conditions. In many tropical countries, natural drying is severely limited for several months of the year and, even if production continues, heavy losses often occur. Mechanical, drying on the other hand, allows better control to be maintained, a steady throughput and, generally, a more uniform product. If such a product can command a higher market price, the extra costs of mechanical drying could be justified. On the basis of the above analysis it would appear that prices would have to be in the region of 30% more than for the naturally dried product (at the adopted interest rate of 8%). As pointed out in Chapter II, however, the better quality products do not always command higher prices since the consumer is not necessarily aware of their advantages. Furthermore, he may not afford the higher retail price.

In terms of foreign exchange utilisation, natural drying methods offer considerable savings over mechanical methods. The former process only requires very limited foreign exchange expenditure on both fixed and variable cost items. However, mechanical drying equipment, which is the largest item of fixed costs, may well require foreign exchange, as probably will fuel oil - the most important item of variable costs apart from fish.