AGRICULTURAL MARKETING-MAKE OR BREAK?

by Andrew Coulson

There are two iron laws of agriculture:
1.If there is no market for a crop, don’t grow more than you can store and eat.
The second makes the same point from a national perspective:
2.If you are trying to promote expansion of an agricultural product, then you will fail if the marketing arrangements do not work.

Farms – large or small – are businesses. Farmers make choices, about what crops to plant, how much of each, when to plant them, where, when to weed and how often, whether to use inputs such as fertilizers and insecticides, and so on.

Small farmers need money – for school uniforms and school fees, agri­cultural tools, food items that they cannot produce themselves, medical costs, clothes and shoes, cooking utensils – and if at all possible, cement and wood for houses, bicycles, mobile phones, lamps, bus fares, and all that we can imagine that makes a better life. They are therefore integrated into national, and indeed international, economies. It is misleading to call them peasants, or to imply that they can be entirely self-sufficient. They cannot exist if they are paid very little, paid late, or not paid at all.
Large farms are also businesses, and face many of the same risks as small farmers: failures of the rains, attacks by insects, birds or animals, plant diseases, and unexpectedly low prices.

Until the 1970s many farmers were organised in cooperatives, which purchased their crops and took responsibility for repaying credit. Much of what was produced was sold by marketing boards. But by the time of liberalisation in the 1990s most of these arrangements had broken down and agricultural marketing was left almost entirely to the private sector. The result has been a series of disasters so bad that farmers only continue growing crops when they have no other plausible alternative.

For cotton, businessmen purchased ginneries and employed buyers to purchase the crop from the farmers. Farmers had a choice of where to sell. If one buyer rejected their cotton because of poor quality they could sell to another. If they took credit from one buyer, they could sell their cotton to another and avoid paying back the credit. Buyers travelled over large areas to buy cotton – and one consequence was that the varieties which had been specially bred for the North and the South of the cotton area got mixed up. The position now is that many farm­ers are adulterating their cotton with sand, water, or even hygroscopic chemicals – and Tanzanian cotton sells at a discount on world markets when once it sold at a premium. To get back to a position where qual­ity could be achieved, the government promoted “contract farming”, where farmers contract with a single buyer who also supplies credit for inputs; in the central cotton areas this was opposed and ultimately sabotaged by small ginners who did not have access to the capital to provide credit to farmers.

The position with coffee is much the same. A sharp decline in quality, a failure to manage credit, and low prices.

Cashew nut farmers produced a bumper crop in 2011/12. The local pro­cessing factories were swamped. The buyers had insufficient money to buy it all in the short window when Tanzanian cashew nuts can be sold to India, before the Indian crop is harvested. So they paid for the cashew nuts with IOUs. Many of those farmers are still waiting to be paid.

Rice production has been one of the success stories. But just when farmers were doing well, the Bank of Tanzania approved imports of cheap rice which depressed the prices, and many farmers who have taken credit to buy fertilizers or sprays could not pay back their loans.

Maize is another success story, with record harvests in the Southern Highlands, Songea and Sumbawanga. According to the Citizen on 1 December, the surplus is more than 2 million tonnes, although the National Food Reserve Agency will only purchase 200,000 tonnes. There are good harvests in Malawi, Zambia and parts of Congo, so no easy export markets. Many farmers may not get paid. Some will try and store their maize, but without modern stores much of it will succumb to post-harvest insects, especially the large grain borer or Skanya bora, unofficially named after the lorries which transported food aid in the early 1980s.

One of the main planks of “Big Results Now”, the most recent govern­ment planning strategy, is the “Warehouse Receipt Schemes” where a farmer takes the crop to a store and, provided the crop is of good quality, he or she can be paid in cash or in credit. If the latter, and crop prices rise later in the season, what they have sold will be given the higher value – and payment to the farmers may be made either in cash or in the form of seeds or fertilizers for next years’ crops. This is fine in principle, not so easy in practice, where corruption can creep in. The system fails altogether if the warehouses are full or the manager does not have sufficient cash.

There are also problems with the marketing of sugar, where unexpected and perhaps corrupt imports have discouraged new local projects to increase production.

Tanzania should be celebrating its small farmers (who have shown that they can produce surpluses of cashew nuts, maize and rice), not making them angry by not buying what they have produced.

Crop marketing is a specialist skill. It is much more than an admin­istrative task. One consequence of liberalisation has been the loss of the expertise and contacts learnt in the days of the marketing boards. Since most crops are sold without the crops themselves being visible, it requires good contacts and above all trust, which can only be built up between individuals, and over time. Moreover, to achieve good quality, the marketing must be regulated: buyers who accept low quality must be driven out of the market, along with buyers who buy from farmers who have contracted to sell to someone else. The banks must know the reliable buyers, and lend them sufficient money to purchase the crops. Farmers unable to sell their crops on time and for fair prices cannot be blamed if they choose not to grow those crops in the future.

RSS feed for comments on this post · TrackBack URL

Leave a Comment

You must be logged in to post a comment.