Chapter 2 - Approaches to seed marketing

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The purpose of seed marketing
Towards developing plant varieties
Government seed policy
Approaches to seed marketing
Types of seed production and distribution organizations government departments

The purpose of seed marketing

Although governments in developing countries have, in general, succeeded in establishing seed legislation as well as seed production and trading activities, government supply objectives are frequently not met and seed stocks remain unsold.

This may be because the public sector usually operates passive distribution systems, simply stocking outlets from which the farmer can collect seed but often leaving many outlets unstocked or with the wrong varieties. Such systems are not responsive to the needs of the farmer.

However, by introducing a commercial perspective and applying sound management and marketing techniques these passive systems can be transformed into active marketing systems which may prove far more beneficial to the farmer and the supplier The principle that marketing is about identifying anticipating and satisfying the needs of the farmer, as well as realizing the objectives of the supplier, is fundamental. Even if public sector objectives are not necessarily profit oriented there is no reason why a public organization should not adopt sound management and marketing techniques.

Towards developing plant varieties

Seeds arc particularly important in farming systems where resources are scarce since a significant contribution to productivity can often be gained solely from the seed used, independent of other purchased inputs. Thus, the genetic potential of seed largely dictates crop yields and the productivity of other agricultural inputs and cultural practices.

The situation in countries where the seed market is immature is that improved plant varieties are released to farmers mainly through public sector research. In markets which support a mature seed industry, private sector companies are usually the main source of new varieties, with the public sector concentrating on basic breeding and releasing new genetic material rather than finished varieties ready for commercial use.

The degree of public sector involvement in the release of finished varieties reflects both government policy and the extent to which the private sector has developed. While governments may support national breeding programmes, in order to ensure a flow of improved varieties of the major crops, investment by the private sector is also to be encouraged.

The private sector is only likely to become involved if a well-regulated market exists and the products of private research are granted protection through Plant Breeders' Rights. This is particularly necessary for inbred crops. Hybrids, and many vegetable crops, have a degree of in built protection as the breeder controls the parent lines. Initially, therefore, private companies will probably begin supplying the seed of the more easily controlled and more profitable hybrid and vegetable crops, leaving the public sector to concentrate on the more strategic, higher volume, non-hybrid crops.

Government seed policy

The role of government

The role of government should be to create a legislative framework which supports national seed institutions, creates the appropriate economic environment and minimizes government interference in the market. In such circumstances the private sector may be encouraged to play a greater role while guaranteeing the availability of seed of reliable quality to the farmer.

Over the past ten years many developing countries have initiated structural adjustment programmes in order to correct severe domestic economic problems. An important part of these programmes consists of reducing the role of the state in economic activity. One specific area where changes are occurring is in the marketing of agricultural inputs and produce.

The pressure for market liberalization is based on the belief that economic performance will be enhanced by involving the private sector and creating competition. However, private business may not always be able to fill the gap left by departing state enterprises. As a result, it may be necessary to combine professionally managed public operations and private enterprise. In privatizing state seed organizations, for example, there is an added risk that private monopolies are created in the place of state monopolies.

A steadily increasing number of countries is embracing privatization and seed market liberalization as a solution to the under performance of public sector seed supply. But no practical improvement in seed supply will result simply by declaring such a policy. Any such change has to be accompanied by a significant shift in attitude and a willingness to implement change.

Components of a government seed policy

National seed policy should aim to guarantee the security of seed supplies and to make available to farmers a range of seeds of improved varieties and of assured quality with a choice of supplier. A formal document on seed policy should cover the areas described below and on the next page.

Policy relating to establishment of a national seed industry should:

clarify the role and objectives of state seed enterprises;
recognize that there must be coordination between research, production and marketing;
establish a private-sector National Seed Association as a means of maintaining contact with government, as a forum for discussion between the members, and as a mechanism for self-regulation (see Figure 2);
create the conditions necessary to ensure that commercial finance and credit are available for the development of seed production and distribution enterprises.

Seed Acts and statutory controls should consist of:

primary legislation which takes the form of a Seed Act enabling the Ministry of Agriculture to regulate production, processing and marketing activities, thus providing 'consumer protection' to the farmers;
seed quality control procedures to cover the field inspection of crops and the analytical and technical services for certification;
testing of public and private seed varieties and their release which is ensured by creating a National List (of suitable varieties);
assuring the freedom to import and export seeds subject to the proper controls.

Seed policy should also create a positive economic environment by:

removing the barriers to seed trading;
liberalizing investment and ownership regulations;
adopting a public sector pricing policy which supports the concept of fair and equal competition;
supporting agricultural services and promoting the use of inputs, including seeds, through the extension service;
providing adequate funding to government seed institutions involved in the administration of seed legislation;
making full use of public sector seed facilities.

Approaches to seed marketing

Varieties of seeds distributed through the public sector are usually under the control of state-run organizations although, where private seed companies are established, they usually have access to these public varieties. Seed distribution may be undertaken by public sector agencies, cooperatives or the private sector or, as is often the case, by more than one of these channels at the same time.

Figure 2 An example of a seed association

Objectives

The Seedmen's Society of Bangladesh has, as its objective, the promotion and encouragement of high ethical standards in the conduct of the Seed Industry.

Within this, other major objectives are to:

1. Protect and represent the interests and activities of members of the seed industry by initiating and influencing decisions which affect them.
2. Encourage the production and use of high quality seeds and to discourage the use of interior seeds.
3. Promote export trade in seeds produced in Bangladesh, and promote Bangladesh as a reliable producer and exporter of high quality seeds.
4. Negotiate and cooperate with appropriate international, national, regional, district and local authorities and organizations in the interest of its members.

Activities

Specific activities of the Seedmen's Society of Bangladesh include:

i. Lobbying for relevant legislative change in matters relating to the Seed Industry.

2. Liaison with committees, boards and other organizations including Government and Donors, whose activities effect the Seed Industry, to represent and promote members' interest.
3. Developing, adopting and promoting rules, practices and customs for the Seed Industry and offering arbitration to settle disputes between members.
4. Promoting and encouraging plant breeding and scientific research, extension and the application of scientific knowledge in the Seed Industry.
5. Facilitate the commercialization of publically bred cultivars by acting as a representative for public breeders for the production and marketing of seed using licensing of authorities or other such mechanisms.
6. Through its journal, the Bangladesh Seed Industry Magazine, providing specific business, management and topical information to those involved in Seed Industry, together with a means of advertising products and services within the seed trade.
7. Through its regional divisions and groups arranging regular meetings of members.
8. Arranging triennial national conventions.

Direct government involvement on a commercial scale tends to restrict the opportunities for private enterprise. The public sector usually works in such a way as to limit a developing private sector from competing on equal terms through a number of practices, some of which are listed below:

capital investments are provided by government and donor agencies without the requirement for repayment of loans;
organizational overheads and working capital charges are not included in seed pricing considerations and any trading losses are written off;
costs directly attributable to the seed activity are spread through other divisions and thus may not be reflected in the price of seed;
high volume cereal seed is priced at low levels in an attempt to encourage seed use.

It is desirable that there should be a parallel development of both the public and private sectors in the formation of a national seed industry. If well planned and managed the best interests of farmers will be served and government objectives realized. India is a good example of this parallel development although private business has voiced some concern over the use of subsidies which distort the market.

Types of seed production and distribution organizations government departments

Ministries are normally given the responsibility for seed production and distribution programmes in those countries in which the state is directly involved in the supply of agricultural inputs and where there are no other reliable and effective channels.

The mandate of government departments is usually to serve all categories of seed user. Therefore, they are obliged to supply a diverse range, including seeds of low value grains, to areas of both high and low productivity. Being, in general, non-commercial in nature, government departments tend to be heavily bureaucratic with time consuming communications processes which are not responsive to the needs of the market.

State-owned corporations

Public sector corporations have an independent management and financial structure, albeit underwritten by government. As such they may have some financial autonomy but their operational strategies and approach to pricing are usually determined by official policy rather than by market forces. Management is frequently expected to operate amid conflicting social and commercial objectives, while not losing money. Although profit may not be an actual aim, pricing to achieve full cost recovery should be.

State-owned seed corporations may be integrated plant breeding, production and marketing organizations or simply act as the seed supplier with breeding being part of government-financed research. Distribution may take place through government supply points, direct from seed plants or through private dealers. If a seed corporation is well managed, embracing commercial principles, then the option exists to attract a private sector partner in a joint venture.

Private enterprise

In the seed sector private enterprise involvement can range from international seed companies and national seed businesses to local suppliers working in perhaps just one region of a country. Private businesses should operate within the framework of government seed legislation thus giving the farmer consumer protection.

The distribution of seeds takes place through retail outlets which can receive their supplies directly from the seed producer, through intermediate distributors, or through wholly integrated companies which control all the major functions of breeding, production and distribution and have a complete sales network. Such companies will concentrate their activities in those market segments where there is commercial demand and on those crops which can be marketed profitably, for example, hybrids, vegetables and seeds which are not retained by farmers for replanting.

Figure 3: Seed industry model

Cooperatives

The main function of a cooperative is to act on behalf of its member farmers in providing them with inputs and in the marketing of their crops. Individual cooperatives can be members of a single centralized state organization or independent, if owned directly by the farmers themselves. Cooperative groups are well placed to become involved in seed production on an independent or contract basis and can act very effectively as marketing agents.

A good example of an independent cooperative is the Seed Coop of Zimbabwe, the success of which depends on the mutual cooperation between government and the mainly privately owned seed cooperative. The Co-op sells seed at prices which are agreed with government and surplus funds are distributed to members.

Seed producers' associations

Yet another kind of organization is one in which individual seed producers come together to form an association. In the beginning, an association produces improved seed from those crops which are planted by farmers in its immediate vicinity. As the association gains experience and seeks the services of technically competent personnel it may extend the scope of its activities by adding new crops and seeking new markets.


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