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What’s it: A value-added product is any product we can sell at a price higher than it cost to produce it. It can have a broad meaning, like what a manufacturer does. They process raw materials into finished goods for final consumption by methods ranging from simple to complex.
But, specifically, the term usually refers to agricultural products. Value addition can be done by further processing raw agricultural products or changing the way we obtain them. It involves a simple process, usually without changing their chemical properties. And, in this article, this is my focus.
We process raw agricultural products by modifying their form into other products with higher market prices. For example, processing fruits into pies or jams. Or it does so by extending their shelf life to be transported to distant locations. These usually involve a simple process rather than the sophisticated one like by the manufacturer.
Why are value-added products important?
Several reasons explain why value-added products are important for farmers, the economy, and the environment.
- Less susceptible to price volatility. Agricultural products are usually not only cheap if sold raw. But, their prices are also volatile.
- Increase market value and income. By processing raw agricultural products, farmers make more money because they can sell at a higher price.
- Open a new business. Creating added value opens up new businesses to emerge and develop, creating jobs and income for the community.
- Open new markets. Farmers can sell products to other markets outside of the current one.
- Increase product shelf life. Thus, we can send agricultural products to more distant geographic locations such as overseas.
- Support environmental sustainability. Producing such organic vegetables contributes to preserving the environment because it does not use harmful ingredients such as pesticides and artificial fertilizers, which harm the environment.
How to produce value-added products?
There are several ways to produce value-added products. Here, the United States Department of Agriculture (USDA) provides a specific definition of how we do it:
- Change the appearance or physical form of the product. An example is grinding wheat into flour. Another example is processing meat into beef jerky.
- Produce by increasing their value. An example is producing agricultural products organically without relying on harmful chemicals. Hydroponic or aeroponic systems are other examples.
- Physically separate products from products in a way that increases their value. An example is selling commodities through an identity-preserved marketing system.
What to read next
- Goods: Definition, Importance, Types
- Services: Definition, Examples, Characteristics, How to Measure
- Semi-finished Goods: Meaning, Examples, Calculation in GDP
- Value-Added Product: Definition and Brief Explanation
- Durable Goods: Meaning, Characteristics, Examples, And Importance
- Consumer Service: Meaning, Examples, Differences with Consumer Goods