Under previous arrangements, fertilizers, pesticides and seeds were supplied to farmers, usually free of charge, by state agencies or "official" cooperatives. The farmers paid for the inputs after harvest, through deductions made from the price paid for the crop. Parallel with the liberalization of cash-crop marketing, the marketing of all types of agricultural inputs was also liberalized and the private sector became - or, at least, was meant to become - an active participant in input procurement and sale.
Coffee yields are down. In Tanzania, "few traders are offering inputs on credit because of difficulties in obtaining repayment", the study says. The reduced supply and use of inputs since liberalization is believed to have caused a slump in coffee yields, from around 250 kg/ha to around 200 kg/ha. Similar problems are reported in the cotton sector, where the input credit system has "generally collapsed".
Ghana's private sector has also been slow to take over responsibility for input supply from the Ghana Cocoa Board. The study found that many cocoa farmers lacked the funds to make cash purchases of inputs and had no alternative credit sources. An agricultural development bank attempted to meet their needs by providing credit through a network of farmer groups, but soon discovered that, with the liberalization of the cocoa marketing, many farmers preferred to sell their cocoa for cash to private traders rather than repay the loans. The reduction in input supply has meant, for example, that "applications of agrochemicals are very limited and even farmers who continue with agrochemical use find the impact minimized by the failure of their neighbours to do the same". In Cameroon, the availability of pesticides fell and prices rose by 200% after liberalization, mainly due to currency devaluation. In Nigeria, distribution and use of inputs for production of cocoa is "totally decentralized - and disorganized".
In some countries, liberalization does appear to be living up to its promises. "In Uganda, it is generally agreed that the supply and availability of inputs for cotton, including agrochemicals, farm tools and implements is now much better than before liberalization," the study says. "The entry into the business of major companies has created competition and stabilized prices". Liberalization was certainly helped by the government's decision to remove all taxes on imported agricultural inputs - supplies of basic tools and equipment have not only increased but prices have also remained relatively stable and within the reach of most farmers. However, a Ugandan programme to provide cotton inputs on credit has not been particularly successful due to what farmers perceive as high interest rates, and delays in implementing a capacity-building programme for rural financial intermediaries.
The FAO study concludes that a market-driven economy needs an effective regulatory framework in order to create full and fair competition and to guarantee the quality of products. "However," it says, "reciprocal interests are likely to be more successful as a foundation for input supply on credit than legislation would be."
Published June 2000