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5. Helping farmers to understand the market


Main points in Chapter 5

TECHNIQUES FOR COMMUNICATING WITH FARMERS ABOUT MARKETS

Some of these are...

Crop calendars to show seasonality;

Calculating costs of production;

Maps showing location of production;

Diagrams to describe the marketing channels;

Providing information about traders;

Price trends over the year;

Helping farmers to understand their marketing problems;

Information about demand for different products.

GETTING THE MESSAGE ACROSS TO FARMERS

Talking directly to farmers, traders and others makes it possible to gather information needed to improve agricultural marketing. Knowledge of the range of products produced, seasonality of crops and approximate costs of production can help farmers to understand their marketing possibilities and thus increase farm income. This first requires a careful analysis of the collected information and then an effective method of presentation of that information to farmers.

Discussions with groups of farmers can be conducted using information presented on boards or flip charts.Some of the information that can be presented is listed under "Main points in Chapter 5". These are briefly described below.

Crop calendars

A crop calendar can be used to compare those periods when an area is able to supply produce with the periods when market prices are likely to be high. It can also be used to compare the seasonality of an area's production with that of a competing producing area. For example, farmers on the island of Mindanao in the southern Philippines have compared their crop calendar with that of competing vegetable farmers in Northern Luzon province, in order to identify periods when they have a production advantage.

The crop calendar in Figure 7 is fairly typical of many hot countries. It shows diagrammatically when the crop seasons start, the peak harvest period and the end of the supply for each crop. Some crops, like cabbages, carrots and potatoes, which are temperate vegetables, are produced during the winter months. Melons and bananas, on the other hand, are mainly supplied during the hotter months.

Figure 7
A crop calendar

Cost of production calculations

Table 2 shows the costs of production of a dried vegetable product (Bouri) made from a bean paste (Black gram) with spices and other vegetables added. This data was collected from producers at a farmers' meeting in Bangladesh. When the producers saw the information presented in this way it led to discussions about how they could lower the cost of Black Gram and how they could increase sales. They also used it to compare their sales and margins with those of other producers.

Cost of production data and sales price figures can be used to draw up crop budgets (see Table 6 in Chapter 7 for an example). These can then be used to advise farmers on the potential profitability of different crops. Banks and credit institutions may also find the data useful in working out production loan requirements.

The yields that farmers claim to achieve can be very variable. Sometimes they don't know what their yields are. Yields on research stations are usually much higher than farmers' yields and must not be used for calculating crop budgets. Yields can be estimated by weighing the harvest from a known area of the field and then calculating the yield for a hectare. However, this is only useful when the research is being carried out at harvest time. Farmers can be asked to record yields in order to make future crop budget calculations possible.

Production location maps

Maps of production locations help extension workers and farmers to understand whether there are 'clusters' where particular products are produced (see Figure 8).

Table 2
Costs of a dried vegetable product (Bouri), Bangladesh


Producers

Average

1

2

3

4

Ingredients






Black gram

25

30

20

26.7

25.4

Ash gourd

2

3.5

3.8

4

3.3

Spice

2

2.3

2

2.3

2.1

Total costs

29

35.8

25.8

33

30.8

Sales (price per Kg)

50

62

45

50

51.8

Gross margin per Kg

21

26.2

19.2

17

21

Sales (Kg per day)

8

10

12.5

12.5

10.8

Margin per day

168

262

240

212.5

220.6

Family workers

2

3

2

2

2.3

Margin/day/person

84

87

120

106

99.3

These maps are also useful for discussions with traders and can be used to identify locations where farmers could group together in order to sell to traders.

Maps of alternative markets, distance from producers, size and whether their prices are good are also useful. They help producers to think about the options they have for selling their products.

Marketing system descriptions

Simplified diagrams showing the flow of products to markets are also a useful tool to help farmers understand the alternative ways that they can sell their products. Using different thicknesses of lines helps show which channels are the most important (see Figure 9).

Figure 10 shows the different marketing channels that vegetables can move through. As in Figure 9 the relative importance of the different channels has been estimated and is approximately indicated by the thickness of the lines.

Figure 8
Map of a production area

Figure 9
Market channels

Figure 10
Marketing channels for vegetables, South Africa

In South Africa wholesalers are independent businesses who buy in bulk and sell on to the major retailers.

Agents sell product on farmers' behalf in the wholesale (national produce) markets and receive a commission. Pick-up operators are small-scale mobile traders, driving small trucks, who buy both in the field and at wholesale markets and sell to hawkers, who sell fresh produce from stalls in small markets and on the streets.

In 2002, sales through both supermarkets and via the informal sector (i.e. pick-up traders and hawkers) were increasing, while sales through the wholesale markets were falling, although they remained the single most important outlet in terms of volume. Sales to the traditional processing sector (i.e. canning and drying) were flat but there was growth in more progressive types of processing such as snacks, ready-to-eat meals, sauces and convenience foods, as well as in exports.

Note: As countries develop, marketing channels become more complex and new ones emerge. Agroprocessing develops (e.g. canning, freezing, juicing, drying, pre-packing, sauces, ready-to-eat meals) and restaurants or fast-food chains may develop their own specialist wholesalers.

Information on traders

One way of increasing the volume and value of transactions in the marketing chain is by improving the communication between the people in it.

Farmers' requirements are often quite simple. They mainly want to know who would like to buy their products. Such information is not complex and lists of addresses and telephone numbers can be compiled with some short notes on each trader (see Box 2).

Listing all the local traders, transporters and wholesalers of agricultural products can be very useful if farmers want to find alternative buyers for their products. The information for the Fact Sheets can be summarised in a simple one-page table.

Box 2
Trader Fact Sheet

Company name

A. Good Business

Telephone

41 63 58 44

Contact

A. Fellar - owner and chief salesman

Fax

41 63 58 44/35 21 65...

Address

101 Dalmatian Way
Market Place, The Town

E mail

afellar@goodbusiness.com

Other

mobile phone 0790 500 7402

Company history. Started as a trader in onions, it has expanded its business to act as agent (commission sales) and wholesaler of a wide range of fresh vegetables. It supplies some supermarkets but mainly small retail stores. It has a Government contract to supply vegetables to the local army barracks and is starting to store and process onions. Its turnover is around $1 million. The company employs 20 staff at three locations.

Company activities. Buys 500 tonnes of onions per year of which 200 tonnes are for processing. This demand is expected to increase. Potatoes (600 tonnes) and garlic (20 tonnes per year) are now sold as well as onions. In order to supply the Army with its total requirements of vegetables, the company started buying tomatoes, cabbages and leafy salads. This business has expanded.

Products demanded. The company is looking to have farmers grow 200 tonnes of onions with high dry-matter content for drying. Garlic is mainly imported. It is interested in local supplies if they are cheaper than imports. The company is seeking further supplies of cabbage in the summer and tomatoes in the winter. It wants to have guaranteed year-round supply of fresh leafy salads from local sources.

Procedure for doing business. Will contract at minimum fixed prices with onion growers prepared to grow specialist onions for drying. Potatoes, onions, tomatoes and cabbage are sold on a consignment basis (commission at 10% of sale price). It is interested in a profit-sharing venture with growers who want to develop a business producing fresh leafy salads all-year-round.

Price forecasts

Farmers want to know what prices they could receive. Future prices are, of course, unknowable. For farmers, the best guide is the range of prices received in the past.

Figure 11
Plotting price trends; wholesale prices of cauliflower, Pakistan

Analysis of historical price data using averages and charts helps to indicate typical price patterns. Price data can be used to help farmers create simple crop budgets and to identify new market opportunities (e.g. for 'off season' production).

Table 3
Findings from studies of small-scale farms, South Africa


Eastern Free State

Northern Province

Allocation of land

37% by Chief, 27% municipal property, 10% rented, 9% owned

Not Available

Size of holdings

33% less than 1 ha, 28% 1-10 ha

52% less than 1 ha, 27% 1-10 ha

Types of enterprises

42% vegetables,35% beef, 30% dairy, 25% chickens

87% vegetables, 25% maize, 28% beef, 11% poultry,11% fruit


Vegetable farms

Major crops

Cabbage 50%, beetroot 50%, spinach 40%, carrots 37%, potatoes 30%,

Tomatoes 77%, cabbage 70%, onions 40%, spinach 27%,

Marketing channels

Private individuals 64%, open market 17%, small shops 8%, hawkers 6%, institutions 6%,

Hawkers 35%, private individuals 28%, open markets 26%, small shops 11%

Transport

Not used 47%, foot 19%, own pick-up 16%, taxi 9%, hired truck 9%

Hired transport 40%, not used 28%, own transport 32%,

Sales-promotion techniques

Word of mouth 62%, take produce to buyer 28%, display 7%, chance 3%

Display 46%, word of mouth 39%, take produce to buyer 12%, chance 3%

Price setting

Same as market 24%, extension officer advice 20%, shop price 18%, own price 18%, same as other growers 7%, same as hawkers 7%

Own price 38%, same as market 22%, same as other growers 20%, take price offered 14%, extension officer advice 6%

Value added

Wash vegetables 63%, package 23%, peel 6%, cut 6%

Wash and trim 56%, package 44%

Distance to markets

Less than 1km 21%, 1-5km 33%, 6-30km 25%

Less than 1km 22%, 1-5km 8%, 6-30km 33%, over 30km 37%

Farmers' proposals for improving vegetable markets

· build new market places (50%)
· sell direct to supermarkets
· cash sales only
· storage & transport
· sell in other towns, in open markets, to hawkers

· build new market places (90%)
· sell at major markets
· improved prices
· contract sales to supermarkets
· advertise
· African agents at major markets

Farmers' proposals for Government assistance

· encourage cooperation between African and commercial farmers to supply sophisticated consumers
· build farm stalls in towns
· assist in transport to major markets
· improve roads

· transport subsidies
· market information
· building market stalls
· financial assistance
· identifying marketing outlets
· tenders to supply schools, hospitals

Diagnoses of marketing problems

Discussions with farmers can reveal their needs and problems, but first it is useful to study the local production and marketing practices, as reviewed in Chapter 4. This makes it easier to understand what assistance farmers most need. Table 3 compares surveys of small-scale farms undertaken in two provinces in South Africa:

Table 4
Farmers' marketing constraints, Mozambique (percentage of farmers interviewed)

Constraints

District

Nampula

Mecuburi

Mogovolas

Ribaue

Malema

Transport

86

100

67

58

50

Lack of competition/ few traders

33

66

78

66

19

Poor prices

24

50

45

33

25

Unreliable traders

29

33

45

33

19

Roads

76

33

-

-

25

Lack of, or poor market places

8

16

-

33

-

Farmer credit

-

33

-

-

25

Input costs

-

-

-

25

13

Note: Farmers often identified more than one constraint, hence columns total more than 100 percent.

Table 4 summarises the perceived constraints of farmers in the northern part of Mozambique. This table was prepared following an interview programme with sixty farmers in five districts. Although the importance of the constraints identified varied from area to area, transport of produce was clearly considered to be the major one.

The second most important constraint was said to be the limited number of traders and the absence of competition between them. However, this raised the question of why there were so few traders. Was it because they did not have the necessary resources (i.e. cash, transport), knowledge and interest, or was it because there was little demand for the products the farmers grew.

Farmers always complain about poor prices and this is a predictable finding of any field research. Inadequate prices may reflect high marketing costs or a lack of demand. It may be possible to improve prices by lowering the unit costs of marketing and promoting more competition between buyers, by improving negotiating by farmers and by organizing access to new market opportunities.

During the survey in Mozambique farmers often described traders as unreliable. By this they meant that the traders who visited were inconsistent and unpredictable and there was no certainty as to whether they would visit and what prices they would offer. This may indicate a wish on the part of farmers to develop more regular and reliable trade.

Product fact sheets

In addition to Trader Fact Sheets (see earlier in this Chapter), Product Fact Sheets can be prepared to give specifications of the products demanded by the market, along with indications of the seasonal price and supply patterns. The purpose of the fact sheet is to provide producers and suppliers with the critical information they need in order to make correct decisions on the products they produce and sell.

The information presented in Product Fact Sheets can be developed during trader interviews. It should include information on:


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