Chapter 4 - Decision making and agreeing on an action plan

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Introduction

Credibility can be a serious problem for extension officers. Farmers will often be skeptical of advice from someone they consider to be inexperienced in practical matters. Growers may be suspicious of the motives for providing free advice. They are understandably reluctant to accept untried advice, particularly when they will suffer financially if it proves to be wrong. Furthermore, it is often those who most need good advice who are the most difficult to contact. These are the small, poor farmers without transport who are usually the most conservative. Wealthy farmers will probably have the transport to visit extension officers and are often more appreciative of extension advice. They are, however, those that least need assistance.

The challenge to the extension officer with special responsibility for marketing is firstly to decide how the marketing problems of the area can be solved. Secondly, he or she needs to think through the best way to get advice or plans across to the maximum number of target farmers. Finally, the agreement and the commitment of those that will be involved in any coordinated production programme in the area must be obtained.

Identification of problems and opportunities

The ways in which problems can be solved and opportunities exploited will change from area to area. To help the extension officer take a clear overview of the area, he or she will need to identify what stage in horticultural development the region has reached. Normally the aim will be to try to introduce the next steps in horticultural progress. The cases in Chapter 2 are set out in order of typical horticultural development.

TABLE 10. Analysis of constraints and opportunities

To help clarify the extension officer's thinking in analysing constraints and opportunities it can help to use two pieces of paper, as set out in Table 10.

The best solutions to marketing problems are normally relatively simple and ought not to require any major changes in production or new technologies. Complex plans or highly innovative plans are much more likely to fail.

Three examples are given:

1. If the area produces but has not before sold horticultural crops then the extension officer should be looking for ways to establish a local market. This might involve, for instance, coordinating growers to assemble their produce on one particular day of the week at a convenient location. Middlemen would be invited to attend the market. The buyers would compete with one another to buy produce so that fair prices should be achieved. As produce is assembled in volume, cheaper bulk transport to the major markets is made possible.
2. If produce is only being sold into a local market there may be opportunities to start supplying more distant, major markets. The extension officer's research should have indicated what the produce requirements, prices and costs are likely to be and identified potential trading partners. He may then want to persuade growers to attempt a test marketing programme to new markets, initially of existing produce and then for new types of produce. If this proves successful then commercially sized shipments could be made. Another option would be for a local representative to take on the role of transporting and selling produce.
3. In an area which is already a major force in horticultural production and marketing the extension officer may concentrate on improving the existing system.. When individual growers already have good links with the market it will be difficult to form producer groups or cooperatives-unless there is some major problem or need. Extension advice is likely to cover generalized advice to groups of growers and specific advice for individual farmers. Potential improvements are likely to be identified at critical points along the production/marketing chain. These may involve anything from new crops and improved production practices to post-harvest techniques, better designed packaging, improved transport methods, better access to credit and production inputs and the establishment of improved market information services.

Finally, it is important to remember that there is always the danger of trying to make changes when they are not necessary. All systems are imperfect inevitably farmers will always complain that they receive too little money while consumers complain of too high prices. Proposals for change do need to be carefully thought through and any additional costs or disadvantages balanced against the advantages.

Extension techniques

The two chief functions of an extension officer are:

• to reduce the learning time for an individual farmer to accept a new idea or technique;
• to increase the number of farmers who understand the new ideas.

In some countries certain extension officers are given the responsibility of becoming subject matter specialists in marketing. It is then their task to train other extension officers and provide specialist marketing advice. By working through other extension officers their effectiveness is increased. Generally the marketing extension officer is based in the production area. He or she must make regular visits to the markets in order to maintain contacts and keep in touch with changes in price and demand. Sometimes, however, he is based away from the production areas. In this case he will have to return regularly to the production areas to maintain contact with growers' problems and to provide relevant marketing advice.

Experience has shown that one of the most effective ways of working is to work with groups of farmers.

An extension technique, very much under-exploited, is helping farmers indirectly by providing guidance and advice to private-sector companies. For example, companies who either supply inputs or, more importantly, assist in the marketing and distribution of produce can often use timely and reasoned advice to put into motion a process which brings benefits to large numbers of growers. For example:

• if shortages of the required input supplies (e.g. seeds or sprays) are restricting market-oriented production, shops selling agricultural equipment may be persuaded to buy in the necessary materials and even advise growers on their correct use;
• if middlemen or traders can be persuaded that there is a business potential in marketing produce, they can be very effective in establishing workable marketing systems. They can supply seeds and packaging material, give guidance on produce presentation and provide credit for farmers;
• advice and encouragement could be provided to a packaging manufacturer to improve design or use better materials;
• a local transport firm could be assisted to establish a produce collection service.

Leading local farmers strongly influence the decisions of other farmers, e.g. to coordinate their production and marketing (see Case 2, Chapter 2). They will generally need to be persuaded of the potential advantages to themselves of improved marketing practices. The extension officer should beware that unless the wealthy farmer is genuinely concerned for the community's welfare he may try to suppress the planned changes. He may do this because he does not want other farmers to become better off. Alternatively, he may see an advantage in carrying out the scheme on his own.

The extension officer may also find it valuable to work with public-sector organizations such as:

• agricultural banks, to improve their credit service to growers;
• farmer cooperatives wishing to undertake input supply and marketing activities;
• research institutes, to ensure they tackle farmers' market-oriented production and post-harvesting problems.

The scope of the work clearly extends far beyond advising farmers. This is because marketing is only as successful as the weakest link in the production/ marketing chain.

Agreeing on an action plan

In this chapter we have considered four potential activities of the extension officer.

The first involves giving advice to an individual farmer. This should be a low priority as it is an inefficient use of time and larger-scale farmers obtain the most benefits.

The second involves providing marketing advice to farmer groups, particularly through the methods of mass extension. This has the advantage of reaching a large number of growers and allows coordination of farmers' activities and cooperation in marketing.

The third technique involves providing advice or information to critical individuals, organizations or private-sector companies in the marketing chain whose actions can have a beneficial effect on marketing.

Finally, and perhaps most ambitiously, an extension officer may decide it is necessary to attempt a project approach to developing horticultural marketing. Marketing is normally achieved by a series of interlinking stages and coordination between the stages is essential. A project approach is one which involves coordinating the activities of a number of different intermediaries in a marketing chain. It may involve a group of farmers assembling their produce at one point so that it can be transported in bulk to the market.

More complex schemes could involve ensuring a supply of inputs, providing growers with production advice and negotiating contract terms with a buyer, be he a food processor or exporter.

As discussed at the start of this chapter, extension officers can have a credibility problem. One way of overcoming this is to achieve a good reputation by successfully resolving some smaller problems. In Chapter 2, Case 5, the horticultural marketing advisor achieved credibility by negotiating significantly cheaper air freight rates. A second way involves securing influential support for the scheme, particularly from farmer leaders or marketing companies. Sometimes them is a reluctance for people to implement someone else's ideas enthusiastically. A clever advisor sometimes overcomes this problem by not revealing his project plans to the individual he considers to be the most important in the scheme. Instead he provides him with the information on the problem and then in discussion leads the individual to come up with the same (or a similar) solution. The individual then thinks it is his own idea and has the enthusiasm and commitment to ensure the plan's implementation.

MARKETING EXTENSION TECHNIQUES

Farmer teaches farmers

A successful farmer explains to a group of farmers his production and marketing practices. The meeting is most effective on the farmer's own farm.

Demonstrations

Practical demonstrations of techniques such as harvesting, cleaning, grading and packing, preferably taking place on a farm. Prepared samples which demonstrate the differences overtime of different handling practices can be effective, as are samples of competing produce and photographs.

Talks and seminars

Possible topics include: market possibilities successful case studies, postharvest techniques, prigs assessment, market-oriented production techniques. Buyers and middlemen should be involved to talk.

Problem-solving techniques

The farmer group is encouraged to identity its own major problems. The problem solving can be tackled systematicaly, by calling In specialists individually to advise the group or by forming a panel to answer farmers' questions. Alternatively, the group might be encouraged to decide their own solutions which they then implement themselves collectively.

Study tours

Farmers are taken on a study tour to make their own contacts and to see the market for themselves, visit processing centres and observe how their produce withstands transportation. Farmers visit farmers in another area to exchange experiences and see new techniques. This experience alone can transform a grower's views on production and marketing.

Written information

Fact sheets are prepared and distributed. These can identity potential trading partners or provide technical information on production and post-harvest techniques.

Market news services

Establishing a market news service which provides regular, reliable, relevant and timely information. This may be in the form of a news sheet or a radio bulletin.

The project approach

The extension officer's role is then to support the individual, to coordinate the activities of the different parties involved and to chase up the progress of the project.

A planned project approach to horticultural marketing development will increase the chances of genuine improvements being made. It is important for the extension officer to have a clear mental image of the desired outcome and successfully communicate that objective. The project must be understood by all parties, if they are going to be able to work effectively together.

Business management experience has shown that targets, such as tonnages to be shipped or selling prices, are important too, as they provide challenges to the parties involved and can be used to monitor the progress of the project. This technique is called management by objectives.

However, no matter how good the preliminary work has been, when a plan is put into action the unexpected will happen. Allowances for the unexpected should be made. It is advisable to start the project with a pilot stage so that mistakes can be made on a small scale and reamed from. Furthermore the project must be flexible so that changes can be made in the light of these lessons. Inevitably the project's critics will try to emphasize any problems; most successful projects will have had to face problems, particularly in the early phases, and their success is often a measure of their ability to learn from and overcome difficulties.

Chapter 5 - Implementation of action plans

Introduction

The two previous chapters were mainly concerned with preparatory work. This chapter concentrates on how results can be achieved. At each stage in the production/marketing chain there are possibilities for improvement. The extension officer will have to identify the main problems and concentrate his efforts on those areas. This chapter considers some of the actions that can be taken to improve rural incomes and particularly the profitability of small horticultural farms. The suggestions are not comprehensive, each individual situation is different and the extension officer must work out for him or herself what is required.

Pre-production advice

Input supply. Both quantity and quality of crops produced are affected by difficulties in obtaining inputs.

The correct planting material is particularly important. Often consumers have strong preferences for particular varieties of vegetable. In much of the Middle and Near East, for example, there is a preference for plum-shaped tomatoes. Red-coloured fruits, such as red sweet apples, are sometimes much preferred to green and golden varieties. Growers'marketing margins can be improved by ensuring the supply of the correct planting material. The extension officer's role is to advise the nurserymen and seed suppliers on which varieties they should supply, and the farmers on which varieties to plant.

Pest and disease damage will seriously reduce a crop's price and its potential shelf life. Sometimes these problems can be solved by the correct crop protection practices. An example of this is the introduction of spray programmes to control scab disease on apples in Kashmir, India. A crucial step in the successful introduction of this programme was ensuring that agricultural chemical shops had the recommended materials available and could advise growers on their use.

The extension officer should be alert for opportunities where farmers themselves can become input suppliers. Farmers can also provide contract services, e.g. for soil cultivation or crop spraying.

Finance and credit. A critical production constraint is often shortage of funds. Broadly speaking the potential sources of funds can be divided into two-formal and informal.

Formal sources are mainly banks. In general, the interest terms are reasonable, but requirements for security and slow bureaucracy often limit loan effectiveness. The extension officer can help with the supply of production credit by providing the bank with cost-of-production data and likely returns. This will enable the bank to see how much money needs to be advanced. In Table 11 an example of a cost-of-production calculation is provided.

ZIMBABWE

Perspective

A women's cooperative was growing vegetables for sale In Harare. At the market they noticed that small quantities of vegetable seedlings were also being sold.

Action

In discussions with the extension officer the group agreed that as vegetable production was expanding rapidly prices would be likely to fall, but that the demand for vegetable seedlings would increase. They decided to start to grow and sell seedlings.

Result

The women took turns In taking the seedlings to market. Sales increased. Wholesalers started asking the women to grow seedlings, giving advances, telling them which varieties to grow and offering firm prices.

TABLE 11. Production costs, gross margin per acre and breakeven cost for cucumbers from Pakistan

Loan agencies have different rules as to what proportion of the production costs can be advanced. Some will only cover the cost of inputs, while others will include some or all of the labour costs. It is an advantage if the marketing cost of transport and packaging can also be covered. It is interesting to note that in this example harvesting and marketing costs amount to 67 percent of all costs and that packaging is the single largest item.

Formal sources of credit are also extremely valuable to cover long-term investments, such as planting and establishing fruit orchards and investment in production equipment.

Some banks offer marketing loans where money is provided to cover the harvesting, transport, packaging and even storage of crops. The amount advanced can be calculated on the basis of the harvesting and marketing costs, as set out above. Sometimes they cover a portion of the estimated wholesale value of production. The value of these loans is that they can free the grower from the marketing restrictions imposed when borrowing from a middleman. These normally commit the grower to selling all his produce via the one middleman.

Where growers are under contract to supply produce to an agribusiness, e.g. food processor or exporter, production loans based on the hypothetical value of the crop can be introduced. For example, if a farmer is growing one acre of tomatoes for a food processor and he would normally harvest five tonnes per acre with a contract price of $0. 25 per kg, his income is expected to be $1 250. Under a loan hypothecation scheme the bank or processor advances a proportion of the expected income as production credit, say 25 percent or in this case $312.5, without seeking any additional security. Loan recovery can be made from the agribusiness from the money it is returning to the grower.

Although informal credit sources include family members, friends and input suppliers, the most important source of credit is often the middleman or commission agent.

The role of a wholesaler as a banker is much misunderstood. Common criticisms are that very high interest rates are charged and that growers who have borrowed money are forced into selling their produce at low prices. In some cases this is true but it is not as common as is assumed.

Generally the produce is auctioned in an open market so the grower should receive a fair price. The loans are often made on the basis of close kinship links and are free of time-consuming bureaucracy. Loans are recovered simply by deducting the money advanced from the sales.

The main disadvantage of this system is that the grower has no marketing flexibility. In the case of poor prices he cannot switch to another commission agent or market.

In the absence of an effective and suitable formal credit agency, marketing middlemen can be a useful credit source, particularly if finance is a major constraint to starting production.

Production planning

Extension officers should be able to advise farmers on planning their crops. Although important criteria such as labour availability and crop rotations will have to be taken into account the key approach will need to be market oriented production. This means growing crops for which there is likely to be a demand and which will probably be profitable.

Individual crops selection. The extension officer should calculate potential or net returns of the major alternative horticultural crops in the region (see Table 11). This will establish which crops are likely to be the most profitable.

The market research that he or she will have undertaken should have shown whether any of the local crops have a comparative advantage. The produce may have advantages in terms of price, quality or seasonality over competing crops from other areas. Research should also have shown what varieties are favoured and the best time to supply the market. The extension officer will need to translate the market requirements into practical recommendations for farmers, covering areas such as:

• best varieties;
• sowing dates, e.g. whether to extend the period of supply or aim for a particularly high priced period; whether to avoid times of oversupply;
• other techniques to extend production into high priced periods, such as late or early varieties, transplanting techniques, polythene tunnels, irrigation;
• techniques to improve quality, such as optimum fertilization, crop protection, pruning, irrigation, weather protection.

TABLE 12. Selecting crops

New crops or the introduction of new technologies or production techniques should always be undertaken, initially on a small-scale trial basis.

Selection of range of crops. In practice crops to be planted are chosen for a combination of reasons. The most important is that there is likely to be a good market demand and the crop can be grown profitably, as outlined in Table 12.

Generally it is advisable to grow a range of crops as this lessens the impact of an eventual crop or market price failure. If possible some crops could be grown under contract. Very often individual growers will have preferences for crops which they feel comfortable growing and/or which grow well on their land.

As agriculture develops farms typically become more specialized, concentrating on fewer crops. Growers become more skilled, although experience has shown that growers can rarely be experts in more than three or four crops.

As explained earlier, the most potentially profitable crops are often the most risky. It is useful to have a cropping system in which risky crops are balanced against more reliable income-earning crops.

Small farms generally have more labour available per acre. They can take advantage of this by concentrating on growing labour-intensive crops.

These are crops which cannot be harvested mechanically and may also require transplanting, pruning, hoeing and multiple-hand harvesting.

Investment advice

Business and investment advice can also be part of an extension officer's work. Often farmers are tempted to make investments which are expensive and do not improve the viability of their farm significantly. The priorities for investment decisions should be:

• investments that can assure a farmer of an income;
• investments that can increase incomes by improving prices;
• investments that can improve incomes by increasing yields;
• investments which reduce production costs;
• investments which can create additional income sources.

Investments which can improve yield stability arc:

• those which protect against pests and diseases, such as sprays and a sprayer,
• those in irrigation and technology which reduce the adverse effects of the weather, e.g. through protection of nursery plants.

Investments like these are particularly important in horticulture because in seasons when yields are low as a result of poor weather or pests, prices rise significantly. It is the growers whose yields arc least affected who make the most profit.

Investments which improve prices can be:

• those in technology which facilitate off-season production, such as polythene tunnels and improved transplant technology;
• those made directly in improving marketing such as grading facilities, on-farm storage, pick-up trucks to transport produce and even telephones to improve market communication.

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