Business model profitability

The European market for sweet potatoes is relatively small but growing considerably. Imports and consumption are rapidly expanding and increased by over 100% in the five years ending in November 2016. European supermarkets continually cater to a growing demand for more diverse food. Important destinations in Europe are the UK and the Netherlands, the latter being the main hub for the rest of Europe.

Key takeaways

  • The USA holds a 70% market share in the supply of sweet potatoes. Opportunities exist for suppliers from developing countries with differentiated or competitive products (CBI, 2016).
  • European demand for American sweet potatoes is growing rapidly as imports doubled between 2009 and 2014.
  • The Caribbean has the opportunity to establish a niche market in Europe.
  • Organic sweet potatoes are sold for more than double the price and might be considered an option for the future.
  • As the European sweet potato market grows, CARIFORUM countries also have the opportunity to expand their existing market share in this region.

Opportunities

When exporting fresh produce from tropical countries to temperate countries, there is a window of opportunity that favours the Caribbean region when the market price is high. This window has to be carefully researched and exploited by CARIFORUM countries in terms of production planning to meet this potential.

Organic sweet potatoes are sold for more than double the price. The region does not plan to cultivate organic sweet potatoes at present, but it remains an option for the future.

Investment risks

The existing financial landscape shows that, in general, the business risks in the sweet potato sector are a major inhibitor to investment.
Financial institutions focus on inherent integrated business risks which inhibit successful production and trade. These risks in the agricultural sector may be categorised according to the business system, i.e. corporate governance, investment finance, marketing, operations (technical and support) and people development.

In Jamaica and Saint Vincent and the Grenadines, where the technical production aspects have been carefully addressed, as the industry expands, more attention needs to be paid to the management of value chains, corporate governance, finance, marketing, and people development.

Sweet potato: a climate stress resilient crop

Sweet potatoes are a drought tolerant crop and, as such, are themselves used in strategies to mitigate climate stress. Most of the other climate-associated risks with sweet potatoes are mitigated through the use of proper agronomic practices for this crop. Being a three-month crop, it is relatively easy to mitigate the risks of 'climate stress' to sweet potatoes through good agronomic practices.

Favourable existing financial ecosystem

Both Jamaica and Trinidad and Tobago actually rank higher than the Organisation for Economic Cooperation and Development (OECD) High-Income average and the Latin American average.

The Bahamas, Barbados, Dominica, Grenada, Jamaica and Trinidad and Tobago, also have stronger legal rights when accessing credit than the OECD High-Income average and the Latin American average.

Lastly, on the index indicating how much credit information is shared and how widely, the Dominican Republic and Jamaica outrank the OECD High-Income average and the Latin American average, and Trinidad and Tobago is competitive. This information should be promising to any investor seeking business opportunities in the Caribbean region.

Sweet potato trading cycle in Saint Vincent and the Grenadines

Cash flow projection (US$)

 

Month 1

Month 2

Month 3

Month 4

Month 5

Opening Bank/Cash Balance $0 $0 $0 $0 $0
Cash in-flow
Advance from FI 594,074 $0 877,037 3,382,526 $0
Payment from buyer $0 $0 $0 $0 5,656,000
Total cash in-flow 594,074 $0 877,037 3,382,526 5,656,000
Cash out-flow
Materials 594,074 $0 $0 $0 $0
Farmer (labour) $0 $0 877,037 $0 $0
Farm to packhouse $0 $0 59,259 $0 $0
Packaging material $0 $0 $0 592,593 $0
Packhouse operations $0 $0 $0 296,296 $0
Packhouse to wharf $0 $0 $0 197,531 $0
Freight $0 $0 $0 2,296,106 $0
Repayment of advance to FI $0 $0 $0 $0 4,853,637
Total cash out-flow 594,074 $0 877,037 3,382,526 4,853,637
Net cash flow $0 $0 $0 $0 802,363
Cumulative cash flow $0 $0 $0 $0 802,363

CTA FAST GUIDE cover

Download your Investment Guide here

The Finance Alliance for Sustainable Trade (FAST) has partnered with the Technical Centre for Agricultural and Rural Cooperation (CTA) to develop an investment guide for the sweet-potato sector in the Caribbean Forum (CARIFORUM) region for financial institutions (FIs), with financial support from the Intra-ACP Agricultural Policy Programme (APP).

 

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