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6. Helping farmers to decide what to do


Main points in Chapter 6

FARMERS SHOULD BE HELPED TO MAKE THEIR OWN MARKETING DECISIONS. TO MAKE DECISIONS FARMERS MUST BE WELL INFORMED

Categorising farmers helps to decide how to assist them;
Holding farmers' meetings involves all farmers in decision making;
For meetings to be successful they must be well planned.

TO ADVISE FARMERS YOU NEED TO KNOW WHAT COULD OR COULD NOT WORK

There can often be several alternative marketing strategies;
Solutions involving direct and subsidized assistance from governments or NGOs are rarely sustainable.

WORKING WITH THE PRIVATE SECTOR

HELPING FARMERS TO MAKE DECISIONS

Extension workers sometimes try to "push" farmers into accepting recommendations. However, when decisions about what to grow or how to sell are imposed this rarely leads to success. Farmers do not feel that the decisions are theirs, they are not committed to them and they feel a lower sense of responsibility. If things do go wrong it is easy for farmers to blame the person who persuaded them to do the "wrong" thing.

Helping farmers to make their own decisions is a more difficult and slower process but, in the long run, it will be more successful than trying to tell farmers what to do. When groups of farmers take on "ownership" of their plans they are more enthusiastic, show more determination to overcome problems and take greater pride if their plan proves successful. They are much more able to overcome problems in the future and to actively seek solutions for themselves.

To make decisions, farmers must be well informed. They need to know what choices they have. They will have to discuss what they can do to improve their marketing and agree on what to do and on who is responsible for the individual tasks. Your role is to guide this process.

The ways in which you can help farmers to decide on what needs to be done to improve their incomes depends on what stage they have reached in their marketing development. Box 3 sets out a method of categorising farmers. This approach helps to identify their likely needs, and what that might mean in terms of possible next steps.

Box 3
Categories of farmers in relation to their marketing approach

Type

Description

Needs

Possible activities

Stepping in

Producers wanting to start selling their products

Basic knowledge of how market works and products demanded

Training. Market visits. Indication of possible products. Introductions to potential buyers

Hanging in

Producers showing little enthusiasm for improving the marketing of their products

Few

None

Stepping up

Producers already marketing their production, but now looking to improve their sales and profitability

To reduce costs, increase sales and/or raise prices

Investigate how to lower costs, increase output and improve sales

Stepping out

Producers looking to diversify into new products and markets

Identify possible products, identify markets and possible contractual arrangements

Market research. Assess profitability. Plan and carry out development programme

Note: when farmers are only just starting to sell their products they are categorised here as "stepping in". Such suppliers are unlikely to know who to sell to and what the market wants. There will be some farmers who are satisfied with their produce marketing arrangements. They are said to be "hanging in". As they are not requesting help there is no need to provide it. Most farmers, however, are likely to come into the category of "stepping up". This means that they are currently selling a part of their production and are looking for ways to improve their incomes. Generally, this is achieved by selling more products, obtaining higher prices or reducing costs. The "stepping out" group are farmers who want to diversify by selling new products or by going into new markets. They require similar support to the "stepping in" group, but they already have the advantage of being commercially experienced.

Holding a farmers' meeting

Decisions on what to do are generally made at farmers' meetings, which you can organize. These should last between two and three hours. Invitations need to be sent in advance. In the time available only two or three major topics can be discussed. Decide the topics to be discussed and draw up an agenda.

AGENDA

Traditional opening
(in accordance with local culture, e.g. prayers)

Purpose of meeting
(e.g. ways to increase sales)

Introductions

Topic 1
What products the market wants to buy (presentation by traders)

Topic 2
Discussion - Ways to increase sales

The most successful meetings maximize the number of farmers actively joining in the discussion. The meeting arrangement is important. Clustering the active participants together helps encourage discussion. If women play an active role in farming you need to ensure that they have a full opportunity to express their views.

Farmers should be front and centre at the meetingwhile observers, such as children, should be on the outside of the group.

After the normal formalities, such as prayers, you should explain the purpose of the meeting and the agenda. Asking people to introduce themselves has the dual function of helping outsiders to learn or remember people's names and getting people used to speaking to a group. Meetings should normally involve a combination of presentations and led discussions. Your approaches to organizing a farmer meeting could include:

Meeting content. You can make short presentations on the results of your market research. Factual presentations need to be kept simple and information provided should make a particular point or illustrate an issue.

Short presentations by farmers or traders can be very useful. An effective method of helping people who are unused to talking in public is for you to interview them. Encourage farmers to participate by asking them to provide information and to indicate what they see as their problems and their opportunities. Questions from other participants should be encouraged. The meeting should be a place where ideas can be discussed and where support and agreement is gained.

Discussion topics could include:

Write on a board or draw a diagram of the findings of the discussion. As some farmers may not be literate, it is important to occasionally read out what has been written and to use diagrams and other visual information.

Offering options. During discussions a number of issues and problems will emerge. Farmers may suggest possible solutions, but will often not be aware of the range of ways that problems can be handled or opportunities exploited. Box 4 gives an example of where an extension officer has prepared a list of the major problems that farmers themselves had identified during an earlier meeting, together with the possible solutions.

You can make suggestions regarding alternative solutions to farmers' marketing problems. Often, farmers identify different markets or marketing strategies that they would like to develop. Some of the most common are set out in Table 5, with their advantages and disadvantages. Being aware of these options is useful in order to explain to farmers some of the implications of using different marketing channels.

Box 4
Examples of farmers' marketing problems and potential solutions

Problems

Solutions

Producers lack market knowledge

Develop the market knowledge of the producers.

Establish a strong relationship with trustworthy buyers and gain marketing knowledge and insight from them.

Bring market traders to 'Marketing Training Courses' so that producers can observe market research interviews being undertaken, and ask questions themselves.

Encourage producers to visit and investigate the market themselves.

Small volume of produce to sell

Use group marketing to consolidate production, to sell to wholesalers or traders or to sell direct to consumers.

Jointly plan production and marketing so as to have sufficient volume of produce available at one time to provide marketing strength (i.e. concentrate on specific products, at particular times, with common harvesting days).

Focus production by a group on a limited range of products to create a larger volume of a smaller range of products.

Table 5
Some alternative marketing strategies


Advantages

Disadvantages

Sell to neighbours

Often the first step into commercial farming is to sell to neighbours. Growers should be able to supply products that others find difficult to grow, e.g. out-of-season produce or the more difficult crops.

The market is easily over-supplied.

Sell to local market

This is the next stage in commercialization. It involves taking produce to a local market, normally a small town where there are wage earners needing to buy agricultural produce.

The market is easily over-supplied.

Sell to visiting traders

Traders buying at the farm make it unnecessary to leave the farm. There are no transport issues. Good buyers provide insight into what products the markets wants, enabling farmers to concentrate on production.

Difficult to negotiate prices from a strong position. Reliance on the buyer for market information.

Sell via wholesale markets

The market can absorb large quantities of produce. Market prices are relatively transparent. If there is sufficient volume and farmers are organized then products can be collected from many different farms.

Higher level of commercial and marketing skills is required. Market agents may need to be chosen, prices checked, transport organized, and produce graded, packed and presented well.

Sell to processors

The processor needs to obtain raw materials and so the market is more reliable. Some processors can provide inputs and technical support to ensure the yield and quality required. Contract production is a possibility. Generally, the demand for processed food products is expanding.

Prices can be lower. Farmers may be tempted to ignore the contract and sell into higher-priced local markets. Processors may not provide the required technical or input support. The processor may find that demand for its processed products goes down and then stop buying from farmers.

Peri-urban production

Producers on the outskirts (or very near) to town can access the large urban market, especially for perishable produce. Produce is either taken to market or, if there is strong demand, traders will collect from the farm, sometimes even harvesting the crop.

Theft and security can be serious problems.


Box 5
Working with farmers to improve marketing

Step 1
Lead discussions with the farmer group on main products, local resources and skills to identify a short list of potential product areas. Form a marketing task force (4-6 members).

Step 2
Work with task force to calculate production costs and profitability of alternative crops. Consider alternative markets and the location for market research identified, along with a limited number of potential products. Give guidance on carrying out market research/trade interviews.

Step 3
Let task force observe initial trader interviews. Thereafter they should carry out their own market research covering products (prices, quality, volumes, demand, prospects) and outlets (shops, traders, markets, terms of trade).

Step 4
Task force discusses findings and agrees recommendations for the full farmer group.

Step 5
Task force presents to farmer group its findings and recommendations. Together, farmers develop an action plan setting out what they will do, who is responsible and the dates of the main activities.

Towards the end of the meeting the "next steps" need to be agreed upon. It is useful at this point to summarise the main points discussed, the points agreed and the options that have been considered as the next steps.

Improving marketing is often a long process. It is unlikely that marketing problems will be solved in one farmers' meeting. The best outcome is often to agree on the next actions to take to help solve the problems. This must take into account what must be done and who will do it. A timetable needs to be prepared, so that everybody understands their roles and responsibilities. An example of this is shown in Box 5.

KNOWING WHAT WORKS

When organizing farmer meetings you must have a good idea of what can be done to solve marketing problems. Solutions that farmers propose must be realistic and achievable. Normally, achievable solutions are those the farmers work on themselves. "Solutions" that are less likely to be achievable or sustainable in the long run are those that require an outside body, such as the government or an NGO, taking responsibility for marketing the produce. Examples of realistic and unrealistic solutions are given in Table 6. In Table 7 more detail is given about mistakes to avoid when trying to improve marketing.

Table 6
Realistic and unrealistic solutions to marketing problems


Achievable solutions

Unrealistic solutions

Traders don't come to buy

Work to increase quantities available in order to attract traders.

Ask local NGO or extension worker to develop contacts with traders.

Get government to set up a marketing board.

Ask NGO to buy from farmers.

Traders don't visit because roads are bad

Work together to repair and then maintain the local road.

Try to get national government to repair the roads.

Low prices

Seek out different, higher-priced markets.

Persuade the government to set a minimum price or to buy all surplus production.

Oversupply

Look for alternative markets and in the long term encourage diversification and market-orientated production.

Expect government to build processing plants to utilize oversupply.

Lack of market places

Develop a small-scale market on specific days.

Ask the government to build an expensive new market without evidence of sufficient supply and demand.

Peri-urban production

Organize farmers and local transporters to set up a regular transport service that is profitable to the transporter.

Expect government or private sector to set up a transport operation that loses money.

It is often tempting for those working with farmers to become involved directly in marketing, for example to use government vehicles or those of an NGO or a development project to transport farmers' produce. In the long run this has many disadvantages. It is unrealistic to expect government or other vehicles to carry out this activity. Once started it is difficult to stop and stopping will disappoint farmers who become dependent on the service. From the outset it is important to establish business relationships that can continue without external support. It is much better for farmers to work with a local transport company or with established traders than to rely on subsidized support from development agencies.

Governments have often tried to help farmers by guaranteeing to buy produce at fixed prices. Although this may help individual farmers in the short term, in the long term it is a very expensive policy. Farmers will increase their production if they know that there is a guaranteed price and market. This production far exceeds market demand and therefore has to be thrown away.

Sometimes, processing or storage are seen as the solution for marketing problems caused by surplus production. They are not. Raw material supply for processing should mostly involve contract production, to ensure the right volumes are available throughout the processing season. A factory cannot be justified on the basis of occasional surpluses. Such investments must only be made when there is a firm market for the processed product and a reliable raw material supply. Long-term storage of horticultural produce has only limited usefulness, especially in situations where there is oversupply. Overcoming surpluses is difficult, but it is more likely to be achieved through better market information and through farmers carrying out the market-planning activities discussed in this guide.

Running a successful business requires different skills from those of being a civil servant. Government-run trading operations are rarely successful businesses. As they are not profitable, they are not sustainable and, in the long term, create more problems for farmers than they solve. Staff often come under pressure from well-connected farmers to buy sub-standard produce, which cannot then be sold.

Farmers, particularly those who are a long way from the market, often ask for their transport costs to be subsidized. This is an expensive policy and not sustainable, and when the subsidies are withdrawn it leaves the growers worse off than they were before because they planned their farming activities on the basis of subsidies, not on the basis of market demand and their ability to supply that demand profitably.

Grading reduces the volumes marketed and increases costs, but puts up prices. Introducing grading standards needs to be considered with care. Standards are best based on the grading already being carried out by traders. Farmers need to be aware of these and be able to follow them, but governments should not try to impose standards not required by the trade. Any standards introduced need to be supported by the trade and consumers must be prepared to pay for the additional cost.

Marketing systems have often developed over generations. Any changes need to be carefully considered so that they work with the system, not against it. In most cases, your role is to help farmers work within the existing systems, or try to make small changes to those systems.

Fixed government buying prices or price subsidies encourage overproduction, which often cannot be sold.

Table 7 - Common mistakes in marketing


Situation

Result

Fixed-price buying by governments

Fruit and vegetable production can be highly risky with market prices sometimes being too low to cover costs. As a result there is often a demand from growers for the government to buy horticultural produce at fixed prices.

Whenever schemes like this have been introduced growers have responded by expanding production. They do this because government prices guarantee profitable, risk-free production that bears no relation to demand. Large volumes of produce are wasted. These schemes are a great drain on government resources that could be spent better elsewhere (e.g. by stimulating local demand, developing new markets or improving rural infrastructure).

Food processing to utilize surpluses

When prices fall because of overproduction it is often recommended that a food-processing plant be established to utilize the surplus.

Profitable food-processing industries cannot be based on the occasional supply of raw material when the fresh market is glutted. Processing requires investment in expensive machinery. Successful plants have to have a guaranteed supply of raw material and generally must enter into contracts with growers to ensure that supply is evenly extended over the longest possible supply season. They must produce processed products for which there is a demand and which can be sold profitably.

Subsidized transport

Farmers often request that the government or an NGO subsidizes their transport to market.

The farmers rapidly build up a dependency on the subsidized transport. The costs to government are generally unsustainable and the NGO often runs out of funding after a few years. When the subsidized transport is withdrawn this will destroy farmers' livelihoods and cut off their income.

Ultra-modern, post-harvest techniques

The introduction of sophisticated post-harvest technologies, such as expensive packaging and a cool chain, is expected to reduce crop wastage.

Modern technologies are no substitute for good management. It is only after basic good practices have been introduced successfully that investments should be considered in expensive technology.

Direct involvement of the extension officer in business decisions

An extension officer makes decisions for the farmer or becomes directly involved in trading.

It is vital that an extension officer always allows the farmer and the buyer to come to an agreement together. If there is a dispute or if either party is unhappy, it is very easy for them to blame the officer. It is only by being impartial that the extension officer can avoid blame if anything goes wrong and is able to resolve disputes.

Change for the sake of change

A government department with responsibilities for marketing may feel obliged to change the existing system.

What is not often fully appreciated is that most marketing systems have evolved in the way they have for very good reasons and will continue to respond to changing market requirements. Like all systems a marketing system will be less than perfect. However, if the system functions reasonably well, if there is competition and if produce is well distributed around the country, then governments should be extremely cautious about trying to impose unnecessary changes. These could destroy the system that is meant to be improved.

Storage of produce to exploit price rises

It is commonly thought that, in times of oversupply, produce can be held in storage and marketed when price rises occur.

Most horticultural crops are only suitable for short-term storage. Storage is expensive and detracts from freshness and quality. In most situations, when produce is brought out of store it has to compete with fresher produce. The result is reduced prices and the farmer having to pay for the storage costs as well. Relatively few crops are suitable for long-term storage. If prices are low at harvest growers place a high proportion into storage. When these crops are marketed out of storage there is fierce price competition. Traders rarely make the mistake of storing produce for which there is no demand, but governments sometimes seek to intervene in marketing systems by promoting storage development.

Government-run trading operations

Traders are often accused of making excessive profits. Government-run horticultural trading operations are thought to result in improved grower returns and lower consumer prices.

Government-run enterprises marketing horticultural produce nearly always fail. They can only cover costs if they have some special monopoly (e.g. importing food products). Amongst the most common reasons for their failure are: unnecessary investments being made in equipment and buildings; management only working regular office hours and not having a profit incentive; overstaffing and restrictive working practices; not having sufficient flexibility to rapidly adjust prices; lack of quality control; having to purchase all produce offered by farmers, with political pressure being exerted to make them do so; high wastage levels of produce. Horticultural marketing is a highly competitive business requiring strong entrepreneurial and trading skills. Civil servants do not generally operate in this way.

Imposing national grading standards for the domestic market

It is often recommended that horticultural marketing will be improved by the introduction of national grading standards.

When compulsory minimum grading standards are introduced it can put up prices to the consumer as the standards limit the amount of produce that is marketable and add to costs. The introduction of standards is best done by formalizing the grades that are already used. Existing informal and flexible grading standards, which respond to market requirements and the state of supply and demand, should be used. The consumer needs to be willing to pay a higher price for the sorted product. Any attempts to force any other grading onto the horticultural industry will be almost impossible to police, will waste government resources, may well remove perfectly safe and nourishing produce from the market, may promote corruption and will certainly fail.

WORKING WITH THE PRIVATE SECTOR

Often, the key to lifting farmers' incomes is to attract businesses to work with producers.

Economic development generally leads to the emergence of new businesses in the agricultural marketing chain. Food processing companies are established and they need to secure their raw material supplies. This, in turn, creates new market opportunities for farmers and business opportunities for traders. Private companies will often be keener to work in an area where there is an extension officer or NGO to help, as this could improve their chances of success.

The development of new enterprises and new business opportunities provides the potential for real increases in farm income. It is also very risky. Some key questions must be asked of any new product or farming enterprise. If the answers to these are positive there will be a greater chance of success. The questions are:

Is there a private-sector partner involved?

There is a greater chance of success from business proposals put up by existing successful agricultural trading or processing businesses.

Is the enterprise already part of the area's farming system?

Most successful enterprises are based on existing and proven agricultural enterprises. When farmers understand the crop, confidence is higher. Totally new products are much more risky.

Is the enterprise likely to be well adapted to the local conditions?

Small-scale farmers are, naturally and correctly, reluctant to take risks. They may not want to take on new products and enterprises unless they think there is a good chance these will work. Where new crops are being considered, then decisions have to be made as to how the risks involved with their production can be reduced.

Will the enterprise generate satisfactory profits to growers?

Farmers only start a new enterprise if they feel that the potential profits are likely to justify the investment in labour and time. New products will need to be more profitable than existing enterprises in order to encourage the farmers to take the risk.

Are there added value or employment opportunities?

Preference can be given to enterprises that offer benefits over and above improved farm income. This might include value-addition enterprises and employment possibilities. Communities often have a preference for the creation of stable employment opportunities rather than the risks associated with farming.

Does the enterprise have an advantage over enterprises in other areas?

The product will generally need to be produced at a cost advantage over other production areas.

Do market opportunities exist?

Products chosen for development must depend very much on having a clear market opportunity and a market size large enough to improve rural incomes.

Is the venture being developed without subsidies?

Developments that require subsidized support from NGOs, donors or governments may not be sustainable after that support has been withdrawn. The availability of subsidies often encourages people to ignore the fact that there is an inadequate market for the products involved, or that the business cannot be operated profitably.


[1] For example, FAO has available two videos on horticultural marketing. E-mail: AGS-Registry@FAO.ORG for more information.

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