228

Bulgarian Journal of Agricultural Science, 15 (No 3) 2009, 228-237

Agricultural Academy

BENEFIT/COST ANALYSIS OF MUSHROOM PRODUCTION FOR

DIVERSIFICATION OF INCOME IN DEVELOPING COUNTRIES

Y. CELIK* and K. PEKER*

Selcuk University, Agriculture Faculty, 42079 Selcuklu, Konya, Turkey

Abstract
CELIK, Y. and K. PEKER, 2009. Benefit/cost analysis of mushroom production for diversification of income
in developing countries. Bulg. J. Agric. Sci., 15: 228-237

This study presents benefit/cost and SWOT analyses of mushroom production in developing countries as
diversification of rural income; a case study in Konya, Turkey. Data were obtained through a survey method by
application of 33 questioners. Benefit / Cost Analysis and SWOT analysis were used as methods. In research
area, the average production area was determined as 1135.1 m2. A majority (76.9 %) of the business in the
province have four production periods annually. The average yearly output of the business was 45.4 kg/m2, that
periodic output was 11.6 kg/ m2 and that compost output was 256.6kg/ton. The cost of 1kg mushroom as an
average of business was USD 1.36 that its average sales price was USD 1.54. Strengthening mushroom produc-
tion sector could be essential in order to enable the rural economy to keep its vibrancy and development, increas-
ing and diversifying business and employment opportunities in the rural areas, and providing income opportunities
for disadvantageous groups, small family farms.

Key words: Mushroom, Benefit/Cost Analysis, Rural Development, SWOT, Turkey

Introduction nability of living and job conditions of rural commu-

nity in their territory in compatible with urban areas,
Most of the world’s poor are in, or employed on the basis of utilizing local resources and potential,
mainly on, family farms. The objectives of rural de- and protecting the environmental and cultural assets,
velopment in developing countries are mainly diversi- mushroom production could be very good opportu-
fication of rural income and attaining a competitive nities in developing countries.
structure for agriculture in order to increase job op- Mushroom production can be meaningful to the
portunities and development. Small family farms are extent that non-agricultural job and income opportu-
disadvantaged groups since they do not have enough nities. Intensive type of mushroom production could
land to produce crops and raise animal. Also rural provide good alternative income opportunities for
environment can be protected by improvement of small family enterprises since they do not have ad-
Environmental-Friendly Agricultural Practices. Espe- equate land to produce crops and raise animal. Also,
cially, farmers in forest villages both do not have agri- mushroom production gives additional/alternative in-
cultural land and have to protect forest ecosystems. come to farmers looking for a value-added product
In this case, for developing and ensuring the sustai- and a way to supplement farm income while making
e-mail: [email protected]
Benefit/Cost Analysis of Mushroom Production for Diversification of Income in Developing Countries 229

use of by products or co-products from other crops. high mushroom price pushing farmers to produce
Since mushrooms can be grown on nearly any type of mushroom, the sector is not growing in Turkey. Vari-
agricultural and forestall residue, they are an ideal crop ous studies have been done in Turkey and other de-
for rural areas with large amounts of cultivated hect- veloping countries, regarding production, marketing,
are and residue from field crops. By taking into con- and business structure of mushroom (Simsek., 1988;
sideration of drought problem in some countries, mush- Griensven, 1988; Aksu et al., 1996; Isik et al., 1997;
room production could help soil and water conserva- Hamm 1998; Demir and Uzun, 1998; Ozkan et al.,
tion too. At the same time mushroom demand increas- 2000; Gungor et al., 2000; Akkaya et al., 2001;
ing due to health consideration. Many drugs and di- Ozcatalbas et al., 2004; Erkel, 2004). Former stud-
etary supplements contain at least some component ies were usually concern on the situation of mushroom
produced from fungi because of their immune system enterprises especially cultivation.
enhancing qualities (Fungus among Us, 2005). Con- This study presents benefit/cost and SWOT analy-
jugated linoleic acid is found in mushrooms, and the ses of mushroom production in developing countries
study indicated it can stop cancer cell growth through as diversification of rural income; a case study in
blocking cancer cell reproduction (Chen et al., 2006). Konya, Turkey. Also, some measurements in accel-
In the world mushroom production started in the erating mushroom production in developing countries
1800’s. The demand of mushroom has been increas- were determined.
ing due to population grow, market expansions, chang-
ing of consumer behavior, and developments in the Material and Method
manufacturing industries, storage, transportation, and
retailing. Gradually, the world mushroom production The main material of the study consists of the origi-
has reached 33.4 million tons in 2007 while it was 26 nal data obtained by a survey method from the mush-
million tons in 2000. China, United State of America room enterprises in Konya. The number of enterprises
and Netherlands rank as the first threes in mushroom in the province was few (23 units); all of them were
production in the world. Nearly 42% of the world interviewed for data collection. The mushroom pro-
mushroom production takes place in China, 12 % in duction techniques were similar except amount of cul-
the USA, and 8% in the Netherlands (Anonymous, tivation areas, the materials used in the production
2007). In Turkey, the history of mushroom produc- rooms, and the physical appropriateness. Therefore
tion is very brief. In subsequent years, with the public it was considered useful to analyze the data by divid-
sector as well as the private sector investing in mush- ing the enterprises into two groups ( ≤ 1000 m2 and >
room production, and conducting promotional activi- 1000 m2) according to the size of production area.
ties, the production has increased with every passing Konya province where the data were collected is a
day. In fact, mushroom production which had been rural area in Middle Anatolia, Turkey. Konya popula-
approximately 80 tons in 1973 rose to 1400 tons in tion increased up to two million in 2008 and mush-
1983, to 3052 tons in 1991, to 7728 tons in 1995, room consumption has been increasing. In the area,
and to 10000 tons in the recent years (Erkel, 2004). most mushrooms are grown in a compost produced
In developing countries as Turkey, mushroom pro- using chicken manure, straw, and minerals. Almost all
duction is not wide separated. For example, mush- of the mushroom farmers purchase compost from
room production is mainly common in the regions of other farmers. Mushroom spawn is mixed into the
Marmara, and Aegean. Usually, mushroom enterprises compost, and then the compost is placed in tiered
are small size. Throughout Turkey, 82.4% of mush- beds inside light, temperature, and humidity controlled
room enterprises have less than 1000m2 (Erkal and buildings.
Aksu, 2000). Although mushroom consumption is in- Mushroom farming could be one of the most im-
creasing, and lack of farm land, drought problem, and portant agricultural activities in Konya since the con-
230 Y. Celik and K. Peker

sumption is increasing and drought is main problem in %. From this point, we can say that mushroom pro-
the area. Mushroom production can be considered duction could give employee and business invest-
the leading cash crop in Konya since almost half of ment opportunities for youth and mid-age people
Konya’s mushroom sales came from other cities. in rural area in developing countries.
Some potential growers are becoming concerned that Even though mushroom production seems to be
the decreasing of mushroom profitability and the fu- professional job, it was observed that the managers
ture of the mushroom industry in Konya. The cost who were graduates of elementary and high schools
analysis of mushroom was examined by fixed costs (30.8% elementary school, 30.8 % high schools)
and variable costs (Kiral et al., 1999). In the calcula- formed the majority (61.6%) of the business, so
tion of the variable costs, the costs realized were taken mushroom production can be managed by people
into consideration, and on the other hand, as the op- who have lower level education in rural area. They
portunity cost of these expenses the interest on the may need short time training on mushroom pro-
working capital has been calculated. The rate of spot duction. When the question of “How many years are
agricultural loan interest of Ziraat Bank (18.5 % for you involved in this business?” was raised to the busi-
90 days) was accepted for the interest rate on work- ness managers, a large majority of about 46.1 %, ex-
ing capital. it was calculated over its half based on pressed that they had an experience of 1 to 5 years. It
the assumption that the variable costs are spread ho- was determined that 30 % of business managers had
mogeneously within the period. In the scope of fixed an experience of 6 to 10 years, 23.1%, of 11 + years.
costs, the rental paid for leased buildings, has been The structure of mushroom enterprises
taken as expense where the interest on depreciation In research area, the average mushroom produc-
and building capital do not need to be calculated. For tion is about 602.9m2; average room number was 4.3,
the owner of real estate buildings, amortization was while average production area of the rooms was
calculated according to the straight-line method. Due 263.5m2. The average number of the rooms was 2.3
to the fact that amortization was calculated according and average production area in the rooms 263.7m2 in
to the straight-line method, the interest on fixed capi- the group with the size of 1-1000m2. The average
tal was calculated over half of their values (Kiral et production area was 1756 m2; number of the room
al., 1999). Since the data values were related to the was 6.7 and production area in the rooms 263.4 m2
end of year, the interest on fixed capital were calcu- in the group > 1000 m2. In business size groups, it
lated according to the reel interest rate (5 %). The was seen that room sizes were almost the same, but
financial results of the study was calculated on the there were some differences in terms of room num-
basis of the national money unit, and then, the results bers. The mushroom production period was stated to
were reported by converting to US Dollar at the av- be 65 to 70 days as 4 periods in the province. In
erage exchange rate over the research period (aver- general, 76.9 % of all business enterprises carried out
age 1 USD =1.43Turkish Lira) of The Turkish Re- the mushroom production in 4 periods. That was 85.7
public Central Bank. % of the businesses in 1-1000 m2 group, and 66.7 %
of the business in > 1000m2 group. It is possible to
Results and Discussion produce 5 times a year depending on available
workforce, raw material and demand. It was stated
The characteristic of mushroom that, the mushroom production periods were mainly
enterprises managers affected by demand. The producers planning the pro-
The most of mushroom business managers, about duction periods in conformity of the market demand.
69.2 %, were in the 31 to 40 age group. It was fol- The capital structure of the business was 135972.30
lowed by the producers in the age 41 and over group USD in average as assets. That consisted by 73.1 %
with 23.1 %, and by the 20 to 30 age group with 7.7 of building capital, 18.4% tool-machinery capital, 2.9
Benefit/Cost Analysis of Mushroom Production for Diversification of Income in Developing Countries 231

% plant capital, 2.8 % cash and receivable capital. The mushroom production obtained by the enter-
More than half of active capital consists of building prises in one production year consists of the total of
capital. The reason of higher percentage in building the mushrooms produced during different production
capital arises from the fact that the mushroom pro- periods were given Table 1.
duction is made in closed conditions in rooms to en- From the quantity of mushroom production ob-
sure the necessary climatic conditions. It was deter- tained annually by the businesses included in the scope
mined that 4 business enterprises in the province of study, gross production values was calculated as a
owned their buildings while the others produced in result of multiplying the quantity of product sold by its
workplaces they rented in industrial areas, in rooms sale price. Even though the sale of composts used in
which are necessarily insulated. the businesses in the scope of study was possible, it
The values of the rented buildings were indicated was stated that, in the businesses, compost was no
in the assets; on the other hand, its equivalent in li- longer sold, but was either given to the farmers or
abilities was shown in debt side. There were some discarded. Hence, the gross production values of the
differences in capital structure of the business size businesses completely consist of mushroom sale val-
groups. Especially, for the business size group with a ues. In the business size groups, gross production value
production area of 1001 m2 and over, as a result of was calculated as USD 43701.6 and USD 129547.8
using the materials in higher quality and appropriate and USD 83322.9 was the average value of all busi-
standard in the buildings, was higher of the values. nesses.
Liabilities and Capital indicates the sources of the as- Benefit/cost analyses of mushroom production
sets. In the business size groups, the structure of li- In order to determine whether the businesses pro-
abilities and capital presents difference. In business ducing mushroom were profitable or not, cost analy-
size group of 1000m2, while 64.6 % of liabilities and sis of mushroom production was carried out and pro-
capital consists of long term liabilities, 35.4 % was duction cost and profitability cases were given in Table
owner’s equity. The matter affecting this situation was 2 in respect to business size groups. Production cost
the fact that most of the businesses in this business varied between USD 32230.0 and USD 114535.8,
size group rent their building where they perform pro- while this value was USD 70189.5 as average of all
duction. In this business size group, business manag- businesses. In business size groups, while 88.5 to 87.1
ers have stated that they have no current debts. In of production cost consist of variable costs, 11.5 %
business size group of 1000 m2 and over, 74.1 % of to 12.9 of it was fixed costs. Whereas the average
Liabilities and Capital consists of owner equity, 17.42 production costs of the business enterprises was
% long term liabilities, 1.1 % current liabilities. As formed by 87.4 % of variable costs and by 12.6 % of
average of all business enterprises, 74.1 % of liabili- fixed costs. These results display that mushroom was
ties and capital consists of owner equity, 25.1 % long produced at lower costs in the business group of the
term liabilities, and 0.8 % current liabilities. size 1-1000 m2. Normally, while it would be expected
Table 1
Gross product value of mushroom production and productivity of the businesses
Productivity
Sizes of the Not sold or Gross product Compost
Production, Annual Period
businesses, lost amount, value, productivity,
kg/year productivity, productivity,
m² kg/year USD kg/ton
kg/ m² kg/ m²
1-1000 29333.3 50.0 43701.6 46.9 10.8 255.8
1001-+ 82433.3 466.7 129547.8 41.7 12.6 256.9
Average 51584.6 238.5 83322.9 45.4 11.6 256.6
232 Y. Celik and K. Peker

Table 2
Mushroom production costs in the business investigated
Business size groups, m² Average of all
Costs elements 1-1000 1001-+ businesses
US $ % US $ % US $ %
Variable Costs
Compost+Misel 17182.8 53.3 54778.5 47.8 34534.7 49.2
Covering Soil 2807.2 8.7 10362.4 9.0 6294.3 9.0
Chemicals 324.7 1.0 1078.1 0.9 672.4 1.0
Water 294.7 0.9 786.7 0.7 521.8 0.7
Energy 2642.4 8.2 9089.7 7.9 5618.0 8.0
Packaging 67.9 0.2 343.8 0.3 195.2 0.3
Machine Equipment, Repair - Maintenance 1375.3 4.3 344.7 0.3 820.3 1.2
Temporary labor 1408.6 4.4 14009.3 12.2 7224.3 10.3
Others (residue cleaning, etc ) - - 559.4 0.5 258.2 0.4
Opportunity Cost (%18.5) 2414.5 8.5 7390.7 6.5 5192.9 7.4
Total Variable Costs (1) 28518.1 88.5 99802.9 87.1 61332.2 87.4
Fixed Costs
Overhead (1*%3) 855.5 2.7 2,994.1 2.6 1840.0 2.6
Family Labor Fee Equivalent 535.6 1.7 475.4 0.4 507.5 0.7
Machine –equipment amortization 627.3 1.9 3067.0 2.7 1753.4 2.5
Machine –Equipment. Capital Interest 156.9 0.5 766.8 0.7 438.3 0.6
Building Amortization 21.5 0.1 1981.3 1.7 936.0 1.3
Building Rent 1034.0 3.2 2022.2 1.8 1490.1 2.1
Building Capital Interest 366.5 1.1 3228.0 2.8 1738.8 2.5
Building Repair Maintenance 114.9 0.4 198.1 0.2 153.3 0.2
Total Fixed Cost (2) 3712.2 11.5 14732.9 12.9 8857.3 12.6
Total Production Coast 1+2 32230.3 100.0 129547.8 100.0 70189.5 100.0
Gross Product Value 43701.6 - - 83322.9 -
Gross profit 15183.5 - 29744.9 - 21990.7 -
Net Profit 11471.3 - 15012.0 - 13133.4 -
1 kg Mushroom Cost US $ 1.10 - 1.39 - 1.36 -
Average Sale Price 1.50 - 1.59 - 1.54 -
that cost in larger business enterprises would be lower, tity of the interest of building capital, amortization and
the reason of higher cost was the fact that some busi- fixed capital per unit product increases the costs.
nesses in this group had production for 3 periods in a When the sale price of mushroom produced in the
year according to the market demand. Additionally, businesses was studied, it was calculated as average
due to higher building and machinery expenses as those USD 1.50 in 1000 m2 business size group, USD 1.59
owning their production rooms have built these rooms in 1001 m2 and over business size group, and 1.54
in accordance with the standards, as a result of higher USD in average of all businesses. The reason of dif-
building and machine expenses, the rise in the quan- ferent sales price in business size groups was the fact
Benefit/Cost Analysis of Mushroom Production for Diversification of Income in Developing Countries 233

that the mushrooms cultivated by producers in small payment sale, delays etc) and deficiencies in market-
size business group were generally marketed by the ing organization.
enterprises of the large size business group. The most important problem of the producers who
As given in the section of cost analysis of mush- cultivate by renting a workplace was the lack of places
room production, the average sale price of mushroom such as organized industrial areas, where the produc-
in the businesses included in the study was 1.54 USD/ ers are together and where necessary buildings are
kg. However, in the district bazaars of the province built for producing mushroom. As there is no such
Konya, the sale price observed in the survey period structuring, production rooms are formed by renting
(The price paid for by the consumer) was 2.45 USD/ empty workplaces and making necessary alterations.
kg. When the price of the producer is compared to In that case, due to bad smell released from waste
the price paid by the consumer, it appears that the compost the industrialists operating in other areas are
marketing margin of the mushroom for the province disturbed and furthermore environmental problems also
Konya was USD 0.91. Accordingly, 37% of the price appear.
that the consumer pays does not reach the producer. SWOT Analyses of Mushroom Production
When the prices at the grocers, supermarkets, A SWOT analysis of mushroom production has
hypermarkets and large consumer centers are taken been done as fallows in order to determine opportu-
into consideration (2.80-3.50 USD) the marketing nity of mushroom production growing in rural areas.
margins increase further. The average values of the
annual mushroom productivity, the periodic produc- Conclusions
tivity and the compost productivity for all the busi-
nesses were determined as 45.4 kg/m2, 11.6 kg/m2 The demand of mushroom increased with the re-
and 256.6 kg/ton, respectively. spect of fast population grows and business manag-
The compost productivity was found to be 226 ers, especially in the recent years, have started to pro-
kg/ton for the businesses of 501-1000m2 size group duce for the large amount of supermarkets in Konya.
in Turkey (Erkal and Aksu, 2000). This means that Although mushroom producers don’t have an asso-
the compost productivity of Konya was greater than ciation or cooperative, they had a strong cooperation
the average of Turkey. The average cost and selling with themselves and the university in Konya. The
price of 1kg mushroom was respectively determined mushroom production in Konya was mostly performed
as $1.36 and $1.54 as an average of all the mush- by managers of the middle-age group from every edu-
room producing businesses. Thus, a profit of 0.18 cation levels; however the ratio of the primary and
USD is obtained against a production cost of $1 which high-school graduates was higher than the others. The
means an 18 % profit rate. average production area of the mushroom producing
Market structure of mushroom production businesses in Konya was determined as 1135.1m2.
Concerning marketing, all producers complain The research (Erdal and Aksu, 2000) performed in
about the decrease and instability in the sales prices 1999 stated that the 82.6 % of the mushroom busi-
despite the regular cost increases. On the other hand, nesses in Turkey had a production area of less than
it was stated that the mushrooms brought from the 1000m2, thus, the production area per company in
other district of Turkey and its vicinities and intro- Konya was above the average for Turkey. The mush-
duced to the market at lower prices have diminished room production was performed in the facilities rented
the competition power of the producers and also in the industrial district of the city which caused envi-
brought along the issue of their no longer being ef- ronmental problems due to wastes and bad odor
fective in price determination. The other problems emitted during production. Consequently, allocating a
related to marketing were the negativities met in col- special area within the province to the mushroom pro-
lecting payment in exchange for the product (deferred ducers is important for preventing the environmental
234 Y. Celik and K. Peker

Strengths Weaknesses

• Abundance potential for product diversity in rural • High dependency of rural income sources on
area, agricultural activities (crops and animal production)
• Low education level and low schooling ratio
• Diversity of raw materials for mushroom production,
of rural population,
• Inadequacy of alternative agricultural training and
• Rural labor force potential,
extension services, and cooperation,
• Low environmental pollution and existence of • Difficulties in conformance with standards and
potential for organic agriculture, quality of mushroom,
• Richness of mushroom production and consumption • Problems regarding mushroom industry integration
culture, and in efficiency of marketing activities,
• High potential in respect of mushroom consumption • Necessity of improving efficiency of education,
by youths health and social security services,
• Insufficiency of rural infrastructure and
• The experience obtained in European Union’s rural
modernization requirements of the
development projects,
existing infrastructure,
• Increasing supports of Ministry of Agriculture • Inadequate coordination between public institutions
engaged in rural development, providing services to rural population.
• Lack of technological development on
• Small scale and fragmented agricultural holdings
mushroom production
• Insufficiency of capital and financial resources,
• Low soil quality, widespread erosion, and
inappropriate utilization of land resources
due to ignoring of soil capability,
• Problems regarding balance of conservation-
utilization of natural resources (land, water,
forest, pasture and grassland,
fishery resources etc.),
• Structural problems of agriculture
• Prevalence of poverty in rural settlements, especially
in forest villages

Opportunities Threats
• Development trends of mushroom industry,
• Increasing consumer consciousness and demand for
• Changing trend in agricultural support policies,
healthy, quality and organic products,
• Development of mushroom production on the basis
of domestic and foreign demand,
Benefit/Cost Analysis of Mushroom Production for Diversification of Income in Developing Countries 235

• Migration of young from rural areas, loss of

• Increasing tendency for demand of mushroom,
productive factors and ageing population,
• Increasing interest in protection and improvement of
environment,
• Accessibility to European Union, and domestic • Increasing pressure of rapid urbanization, and
funds, industrialization,
• Enhanced opportunities to access foreign markets,

• Progress in production, and processing technologies, • Rising input prices in the world,

• Creating strong functional relations between urban

and rural areas,
• Increasing concern for the empowerment of local
• Growing intra and inter-regional development
support and improvement of public administration for
disparities,
mushroom production.

pollution and for the synergy of the producers. viding income opportunities for disadvantageous
In accelerating mushroom production in develop- groups, small family farms.
ing countries depending on local resources and the Those mainly depending on local opportunities and
following issues have gained more importance to cre- circumstances, supporting microenterprises, strength-
ate the investment support to mushroom enterprises; ening structures for processing mushroom in parallel
- Improving local knowledge and skill with developments in consumer preferences. On the
- Strengthening cooperation and partnership based other hand, the local knowledge and experience in
on local mushroom production mushroom production have the potential to provide
- Enhancing entrepreneurship culture and empow- significant opportunities to develop micro enterprises
erment of the productivity of rural community and entrepreneurship. Vocational training opportuni-
- Establishing the value added chain of mushroom ties shall be provided in order to develop human re-
from farm to the final consumer, sources in addition to the investment supports for
- Developing production technology and increas- mushroom production.
ing productivity, Taking necessary precautions can be advantageous
- Ensuring low cost raw material needs of mush- in order to further improve the mushroom produc-
room production, tion. These measures can be listed as in the follows;
- Utilizing the potential of mushroom industry by - The lack of knowledge in cultivation as well as in
meeting the expectations of consumers at unique mar- fighting diseases and pests should be eliminated,
kets - The mushroom producers are not organized in
- Increasing the efficiency of storage, transporta- any manner whatsoever. In the event that an associa-
tion, packaging, labeling, promotion and marketing tion of mushroom producers is formed in Konya,
activities of mushroom, effectiveness will be obtained in both marketing and
Strengthening mushroom production sector price determination,
could be essential in order to enable the rural - The most important input in the mushroom pro-
economy to keep its vibrancy and development, duction is the “compost”. Producers face various
increasing and diversifying business and employ- problems in obtaining the supply of quality and healthy
ment opportunities in the rural areas, and pro- compost. Although some researches related to the
236 Y. Celik and K. Peker

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