The production cost of seed produced in special seed programmes "formal seed" is high if compared to the seed from the non-formal seed systems:
INTERACTION SEED SYSTEMS
- Farmer's own seed, small sized tubers from markets, neighbours, traders, etc
- Formal and non-formal systems interact
Seed programmes can only survive if they are financially viable. After providing an initial subsidy, it cannot be expected that governments can continue to subsidize seed units for many years. A seed unit has to become financially feasible as soon as possible and be operated as a commercial business.
Profits on seed production are needed to guarantee that reinvestment in equipment, stores, transport, etc can be made when the need arises. A contingency fund is also needed to finance the operation in years which are less favourable. To keep production costs low, the logistic of the operation needs to be carefully analyzed: expected yields, distance to markets and contract growers, size and accessibility of contract grower farms, etc
It is crucial to know the potential of this special seed market and to adjust the total amount of seed produced to the existing (high price) seed market. A surplus of seed will cause low selling prices, which cannot cover the production costs.
SEED PRICE AND SEED MARKETS