1   Marketing Extension Guide

A guide to MAIZE MARKETING for extension officers Contents

Prepared by
Andrew W. Shepherd

Marketing and Rural Finance Service
Agricultural Support Systems Division

For further copies of this publication and for information on FAO's activities related to agricultural marketing please write to:

Marketing and Rural Finance Service Agricultural Support Systems Division Food and Agriculture Organization of the United Nations Viale delle Terme di Caracalla 00100 Rome, Italy

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E-mail: [email protected]

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Foreword

Agricultural production can only be really efficient if the accompanying marketing and post-harvest systems are also efficient. Well-functioning marketing systems are thus essential to develop production, so increasing farmers' incomes and promoting food security. Extension workers can play an important role in ensuring that the marketing systems work to the benefit of farmers and consumers.

Past FAO work in the field of agricultural marketing extension has concentrated on horticultural marketing. This is because until recently the marketing and storage of the major grain crops in most African countries tended to be in the hands of government agencies. Farmers simply delivered their maize to the marketing board or cooperative and, sooner or later, they were paid. They encountered relatively few problems in marketing their crops and, as a consequence, there was little need for those extension workers who served farmers in grain-producing areas to know much about marketing.

The situation is now changing. Countries in Eastern and Southern Africa are gradually moving to a system where private traders buy crops from farmers, transport those crops to the cities and sell them to processors, millers and consumers. These changes mean that extension workers will have to develop new skills. They will have to be in a position to advise farmers on what crops to grow, on how and where to sell their crops and on how to store their crops. They will need to be able to answer farmers' questions about prices, about whether to store their crops or sell immediately and about where to buy and how to pay for inputs such as fertilizer and seed.

Although this Guide was developed with the liberalized or liberalizing marketing systems of Eastern and Southern Africa in mind, many of the points it makes are likely to be just as valuable to extension workers in other parts of Africa or, indeed, outside Africa. It provides extension workers with basic information on private-sector grain marketing systems and on crop drying and storage. Emphasis is on maize, but other crops are briefly considered.

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Contents

Foreword

Acknowledgements

Introduction

1 How does a liberalized market function?

2 The price paid for farmers' produce

3 Helping farmers with their marketing

4 Maize marketing costs

5 Drying and storage

6 Diversifying — production, marketing and processing of other crops

7 Inputs, and paying for them

Endnotes

Annex — crop budgets

Figures

1 Example of a marketing channel

2 Possible monthly maize meal consumption by a family at different prices

3 Transport costs per ton according to capacity utilization

4 Calculating marketing costs — Small trader

5 Calculating marketing costs — Large trader

6 Usual post-harvest stages for maize

7 Calculating costs of storage construction

8 Seasonal price changes in Zambia

9 Calculating storage profitability per ton

10 Calculating storage viability

11 Calculating processing costs

12 Changes in the value-cost ratio

Boxes

1 The role of the extension worker in a liberalized marketing system

2 Checklist of questions for traders

3 Reasons for drying

4 On-farm drying

5 Using a rectangular crib for drying

6 Managing storage in a solid-wall bin

Acknowledgements

The idea for this Guide was developed as a follow-up to a successful FAO project in Zambia on extension support to small-scale farmer maize marketing and storage (TCP/ZAM/4555). The training modules prepared for the project by Pol De Greve and Aliou Diop served as the basic outline for this Guide and considerable use has been made of their content, including some of the illustrations. Thanks are due to Edward Seidler for his contribution to Chapter 6 and for reviewing the entire document and to Elizabeth Coffey for covering the points related to credit and rural finance in Chapter 7. Frans van de Ven, Eberhard Reusse, Gerardus Schulten and Michael Westlake provided valuable comments on various parts of the draft. The Food Reserve Agency of Zambia was kind enough to organize a field trip to enable the author to take some of the photographs used in this Guide. Finally, many thanks to ‘Yuss’ for the cartoons, which both well emphasize some of the points made in the text and provide humorous respite from the author's prose and to Tom Laughlin for his work in the planning of this Guide.

AWS

Introduction

Throughout countries of Eastern and Southern Africa and elsewhere in Africa, changes are being made to marketing arrangements for food crops, most notably maize. Marketing boards and, in some cases, cooperatives are being abolished, or their crop procurement and handling functions are being radically reduced. Private traders are now expected to buy crops from farmers, transport those crops to the cities and sell them to processors, millers and consumers. In most countries, government-owned mills and agro-processing industries are also being sold to the private sector.

Changes to the marketing system mean that field-level extension workers will have to develop new skills. In the old days, they did not really have to concern themselves with crop marketing. The marketing board or cooperative received the farmers' maize at warehouses or other buying points and, sooner or later, the farmers were paid. In some cases, the provision of credit was tied in with crop marketing, so that the marketing board deducted credit repayments from the money owing the farmer for his or her* maize, and returned them to the bank. Extension workers may have been called upon to advise on the creditworthiness of farmers but rarely had to worry about helping farmers market their crops, as there was only one marketing channel available.

As a result of recent changes, farmers can no longer rely on finding a willing buyer at a marketing board or cooperative depot. Instead, they now have to look for buyers and hence need an understanding of the way the market functions and of prevailing market conditions. When crops are in surplus, farmers cannot even be sure of finding buyers. Under the old system, marketing boards usually bought the maize soon after harvest. Under the new system, traders will only buy to meet their immediate sales requirements. This means that farmers will have to store the maize they plan to sell for much longer than before. Under the old system, there was usually just one buying price which applied to all the country throughout the year. Under the new system, prices vary according to the location and season. Even at the same location, the prices offered by different traders may vary noticeably.

In most countries there were so many problems with marketing by boards and cooperatives that the recent changes to the marketing systems were probably fully justified. But change can be painful and these changes are most painful for farmers. It is, therefore, necessary for extension workers to assist farmers by advising them on what crops to grow, on how and where to sell their crops and on how to store their crops. They will need to answer farmers' questions about prices, about whether to store their crop or sell immediately and about where to buy, and how to pay for, inputs such as fertilizer and seed.

This Guide provides extension workers with basic information on the workings of this new, or as it is sometimes called, liberalized marketing system and on crop drying and storage. It can, however, only provide general background information, as conditions vary in each country. For example, extension workers will be able to use the Guide to help them understand how prices for maize vary under a free market system, but for specific information on prices they will need to contact national information sources. The Guide should help extension workers to work out whether farmers should invest in new types of stores, but specific information on the most appropriate storage techniques for a particular area will have to be obtained from national Ministries of Agriculture.

* Throughout the remainder of this document, farmers, traders and others are referred to as “he”. This is for the sake of convenience and for simplification of the text. The author fully recognizes that a significant number of farmers and traders are women and use of “he” is not intended to imply otherwise.

Note: This guide concentrates primarily on maize, since in most countries of the region that is the most important crop and the one that is undergoing the greatest changes in marketing arrangements. Other crops will also be considered. Chapter 6 briefly looks at diversifying out of maize into other crops and considers marketing and processing arrangements for those crops.

Questions along the production and marketing chain that must be answered in a timely fashion