Hidden costs between marketing and consumption

One of the most misunderstood aspects of agricultural value chains in most developing countries is the time lag between marketing and consumption of agricultural commodities.

By CHARLES DHEWA

While for farmers, supplying commodities and getting paid immediately is the most important thing, a lot happens between marketing and consumption. The way middlemen are blamed, as if they stand in the way of farmers accessing predictable profit pools shows how little is understood about the movement of commodities from farm to fork. People who do not want to invest in understanding agricultural markets at a granular level are often quick to convey the myth that middlemen control the movement of agricultural commodities to the disadvantage of farmers and consumers. This article will reveal some of the issues that farmers, consumers, development agencies and policy makers should strive to know and contribute in solving.

Time lag between marketing and consumption

While the absence of mechanisms for linking farmers directly with consumers is seen as the main challenge in smallholder farming systems, the time lag between marketing and consumption is the Real McCoy. Some commodities need a week of marketing. Others need to reach consumers still fresh and some go to specific niches. Grading of different commodities in line with the needs of different buyers and niches is done by the market, mostly traders or middlemen, who have taken time to understand consumers and the entire ecosystem. Traders know what is needed by different classes of consumers and try to correct mistakes made by farmers and other actors on a continuous basis. Many consumers are not even sure about their needs until they see what is available in the market.

By blaming middlemen, farmers shield issues that should be addressed by policy-makers and development agencies. If processing and manufacturing was a better solution, the majority of smallholder farmers would have stopped going to informal markets, where they blame traders, who are trying to provide a solution using their limited means. Nothing stops farmers from taking their commodities to food chain stores, restaurants and hotels except that those are not sustainable and viable markets. Traders and middlemen do not prevent farmers from by-passing informal markets and selling their commodities door-to-door in residential areas. The main reason farmers do not take that route is because it’s more costly and time-consuming. Consumers do not eat as fast and predictable as farmers would want them to.

Challenges surrounding aggregation

It has been proven that most smallholder farmers do not have capacity to aggregate. Although it is known that travelling 150km with a bucket of groundnuts or a crate of tomatoes is not profitable for a single farmer, such knowledge has not been translated into corrective action. Farmers continue to frequent agricultural markets in a haphazard fashion. Disorganised supply from farmers invites many traders and middlemen into the game, as they try to pool resources together, so that they are able to sweep commodities from scattered farmers. When traders pool their meagre resources to go and buy commodities from farming areas, each trader ,who will have contributed his/her money has ownership of the same consignment. If 15 traders aggregate their money to go and purchase a 30-tonne truck of potatoes, it means the consignment is owned by 15 people, who have to monitor marketing until the consignment is sold. That is why we end up with many traders in the market. This can be reduced if development agencies and policy makers put in place a system for purchasing commodities in bulk from farmers and handing over the commodities to traders, who should mostly be salespersons. When this happens, traders will not go out looking for commodities in farming areas.

Consistent supply of diverse commodities in a nutrition-sensitive fashion will stem the proliferation of traders. Each commodity has a minimum number of traders that can be involved, before farmers and everyone starts incurring losses.

Traders as aggregators of money from consumers

When agricultural commodities get into the market, traders are responsible for redistributing to end-users such as individuals and households scattered in many areas. As they sell, traders aggregate money from consumers and end-users so that farmers get paid. The time lag, beginning with pooling money from consumers and then going to buy from farmers can take a least a week. How many farmers have the patience and time to wait that long? Some traders also operate like contractors, who extend inputs to farmers for production of specific commodities. Rather than condemn such a relationship, financial institutions and policy-makers can learn from it and generate better models.


What has happened to the retailing of agricultural commodities?

In many African countries, the retail part of agricultural commodity trading has gone closer to the consumer’s door step, mainly in high density areas. Runners, who used to take commodities from urban informal markets to high density markets, are no longer active. The absence of runners is the main reason why vendors with baskets, mostly women, are now going to markets like Mbare in Harare every morning to buy commodities. There should be runners delivering complete food baskets to vendors in high density market stalls. Having built relationships over time, it is possible for traders in Mbare to know the requirements of vendors in high density areas. Vendors can stop coming to Mbare and wait for their supplies, which can be confirmed via mobile technology. The same way bread is delivered to high density tuckshops should be the way fresh commodities are delivered to high density market stalls. It becomes possible to accurately and constantly inform producers about consumption patterns.

charles@knowledgetransafrica.com. eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

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