New market opportunities for enterprising farmers
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CTA. 1996. New market opportunities for enterprising farmers. Spore 61. CTA, Wageningen, The Netherlands.
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A productive agriculture offers many benefits: food for local consumption; raw materials for agro-industries; employment that generates income, which in turn encourages other industrial, commercial and service activities; export markets that can be...
A productive agriculture offers many benefits: food for local consumption; raw materials for agro-industries; employment that generates income, which in turn encourages other industrial, commercial and service activities; export markets that can be identified and met to generate hard currency. The national economy also benefits from import substitution and opportunities for increased taxation. But for agriculture to be productive it is not enough to produce, products must be marketed. Farmers have to learn the hard lesson that it is no longer enough to expect production to drive the market; success will come from producing what the market demands. Policy-makers and planners need to accept that farmers and others in the agricultural production chain can only work within the framework of the policies that they put in place. For years farmers have complained, with justification, that they have received low prices for staple crops (mainly cereals and pulses) because governments have instituted policies that ensured low-cost food for urban consumers. Their returns from export crops have also been low because of levies deducted by marketing boards to support their often-inefficient bureaucracies and because prices for export crops have fallen due to increased production and poor quality. Coffee and palm oil from West Africa are now regularly outsold by newer producers in Asia, who apply quality standards more rigorously and thereby perform best in an increasingly competitive market. Farmers have a]so complained that assurances that crops would be transported to central depots have not been met and that payment for crops purchased by marketing boards has also been erratic. It is not surprising that agriculture has declined into a sick, even crippled, industry in so many countries. It teas been starved of investment, often parasitized and frequently disabled by inappropriate policies, inadequate infrastructure and inefficient management. Yet, most ACP countries have natural resources and human talent sufficient for a healthy, productive agriculture, which in turn could be the driving force for both rural and national development. What is needed is a change from past attributes of dependency on others to take all the responsibility for selling and processing produce. ACP farmers need to come to see themselves, and to be seen by others, not as mere labour but as managers and entrepreneurs. However, this change can occur only if there is a fundamental change in attitudes not only among farmers but among many others involved in the chain of production, processing and marketing of agricultural products, and among policy makers, planners and donors. There are linkages and interactions within the rural economy and between the rural economy and the industrial and national economies within ACP countries. This view was expressed emphatically at a recent conference sponsored by CTA in Dublin, Republic of Ireland, by Professor Helen O'Neil, Director of the Centre for Development Studies at University College, Dublin. The conference was held to discuss 'Farmer strategies for market orientation in ACP agriculture'. Since the state of the national economy reflects the health and vigour (or lack of them) of agriculture, Professor O'Neil believes that for every dollar invested in industry governments must invest a dollar in the rural sector. The job for Agriculture is to produce food for local consumption, to produce high quality products for processing and to generate goods for exports. That agriculture is failing to do this is illustrated by the fact that of the 59 ACP countries for which data are available, 43 recorded lower food production in 1992 than in 1979-81. Change, risk and opportunity Now that so much commercial activity is being privatized, farmers must be ready and confident to take on the responsibilities for more than just growing crops and raising livestock. Since the market will increasingly dictate what is to be sold at adequate prices farmers will have to be informed, or to inform themselves of what the markets demand. This may require farmers to examine and review not only the crop and livestock enterprises on their farms but the varieties and breeds selected for production. Farmers will also have to establish the criteria for quantity and quality of supplies and plan production accordingly. If possible, specialist or niche markets can be found and supplied: an unusual variety of a crop for a particular culinary or industrial need, or crops and animal products for minority tastes or specific ethnic groups or religious requirements. (See box: Trinidad case study). This will demand that farmers plan their selection of farm enterprises, planting dates for crops and breeding dates for livestock, the supply inputs including seeds, fertilizers, pesticides, containers for crops at harvest and both home-grown and purchased feeds for livestock. Underpinning many of these decisions will be the necessity for finance to be available to purchase inputs in advance and to avoid the need for sale of produce at less than advantageous times. Is this too much to expect from the mostly small-scale farmers in ACP countries, most of whom are currently struggling to meet the bare minimum requirements for themselves and their families? The answer is to be found in almost every community where some individuals are more successful than the majority. Despite similar constraints, some people make more progress and accumulate more resources than their neighbours. In the same village, two adjoining plots can produce contrasting crops and two farmers with the same produce may negotiate substantially different prices and terms of sale. If more farmers are to achieve higher incomes from producing better quality produce and selling it more advantageously, governments, farmers' organizations and support services, and farmers themselves, will have to implement new strategies for market orientation - in other words optimising market opportunities. Market orientation indicates the approach that farmers will need to follow in order to meet the demands of supporting their families. This is particularly important for women farmers, many of whom are heads of households, and all those who carry the responsibility for children, household and farming activities. Strengthening the marketing imperative The classical view of agriculture is that it centres on the farmer and that farming is a relatively simple and predictable process. This does not take sufficient account of the reality that farming itself is a very complicated activity, dependent on the need to manage biological systems within an unpredictable climate. Also that farming is but one activity of many that form the links of a chain starting with research and input supply to marketing produce, processing and ultimate sale to consumers. Policy makers, planners and donors have not given sufficient consideration to the need to do more than support farmers. If farmers are to develop then the people on whom they depend, such as research scientists, input manufacturers and suppliers, traders and agro-processors must also be helped to develop in concert with farmers. The complicated nature of the commodity production chain has resulted in the failure of many government initiatives. Interventions by the state have not had the impact that was expected because the interactions of the marketing process are far too complex to be adjusted by state manipulation. This is especially true for highly perishable products such as fruit and vegetables. Dr Ester Mgale of Tanzania has studied how value can be added to a widely grown crop such as cassava, which is bulky and requires processing to make it palatable and more saleable. Farmers can add value by planning their production so that they can find buyers at optimal times; by choosing varieties that provide products at times of maximum demand; and by ensuring consistent high quality by grading, processing and packaging. However, such initiatives depend on farmers being receptive to the view that they must be prepared to change from traditional practices to meet new market demands. Farmers can form groups to benefit from the economics of scaling up production and processing and they can increase their margin by selling products directly to retailers or consumers, thus avoiding intermediaries who would otherwise take part of the final sale price. In Swaziland, for example, farmers are forming groups for the production and marketing of vegetables such as tomato, cabbage and carrot and have responded to the demands of the cosmopolitan markets in the major towns by upgrading quality. Adding value invariably requires additional finance for the labour and equipment to carry out the processing, for packaging, storage and transport, and to cover the extended cash-flow for selling later rather than sooner. The cheapest form of finance is personal or family savings, if they are available. Alternatively, non-go_ernmental organizations (NGOs) may be able to offer funds as loans at competitive rates of interest. Where farmers form common interest groups they may be able to pool personal savings to fund value-added activities and such groups are more attractive to NGOs offering funds for credit. Groups can also share experiences and strengthen their bargaining power when buying and selling. Common, but more expensive, sources of credit are traders or middlemen. Role and value for middlemen Middlemen or traders are often seen as exploiters of producers. Where farmers are uninformed of markets or where they live in locations remote from markets they may be exploited. However, many marketing specialists recognize that traders do play useful roles in the marketing process. Where middlemen have been involved in cassava production and processing in Tanzania, the area of cassava planted and total production has increased. This has occurred because farmers have been relieved of the responsibility of final marketing and have been able to concentrate on production, processing and negotiating sales with alternative traders. The traders known as bana-bana in Senegal play an important role by advising growers which vegetables are in demand and supplying the seeds of favoured varieties. At harvest the cost of inputs supplied by the bana-bana is deducted and the sale price negotiated between grower and trader. Although the bana-bana appear to have high margins they also accept high risks and have to finance their own time spent in prospecting purchases, interest on inputs supplied, transport, and products that fail to sell. If the bana-bana were removed, there would be many negative impacts on the production and marketing chain. George Jackson, who prepared the background paper for the Dublin Conference, 'Study of the market orientation and the family farm', points out that it has to be accepted that margins increase up the marketing chain towards the final consumer. If farmers are to optimize their share of consumer spending it will be necesary for them to seek ways of building creative alliances with other sectors of the chain and move away from the traditional attitude of confrontation over prices. There is an urgent need for training producers to understand the relative value of investments, risks and returns in the whole chain of producing, processing and marketing produce. Taking the flame from Dublin The opportunities for increasing agricultural production and trade within countries are very great, especially with the growth of urban populations. Populations of many cities, such as Dakar and Nairobi, are doubling every 25 years. This is leading to problems of distribution but the market is there for local and regional trade, particularly in food products. 'Regional trade is inhibited by bureaucratic customs procedures and by refusal of countries to accept their neighbour's payments except in hard currencies,' observed Professor O'Neil. Developing farmer strategies for market orientation in ACP countries will undoubtedly be a challenge for farmers, policymakers and planners alike. There will be many in the food chain who will need to review and measure their current attitudes and beliefs against the reality of the market place and take stock before taking the next steps. The rewards of success will be more than a revitalized rural sector emerging from the pain of structural adjustment. It will be no less than a vital step towards the development of more balanced, more sustainable national economies, better able to provide the framework in which individuals and families can seek to fulfill their aspirations. As one participant remarked at the close of the conference, it is vital that 'the flame of Dublin' be taken forward from these discussions to develop positive policies, plans and actions. The conference on 'Farmer strategies for market orientation in ACP agriculture' was sponsored by CTA and organized in association with Teagasc and the Department of Agriculture, Food and Forestry, Republic of Ireland in Dublin 23-27 October 1995. Publication of the Conference Proceedings will be announced in Spore.
SubjectsMARKETING AND TRADE;
- CTA Spore (English)