Commercialization of agriculture should begin with consolidation of producers and aggregation of products. This implies the presence of physical market infrastructures. Since not all infrastructure fits all sizes, every community should have a market master plan and rational criteria for developing agricultural markets. As products are attracted to large urban markets like Mbare in Harare and Malaleni in Bulawayo, significant quantities of products are expected to be kept in local wholesale markets in production areas.Unfortunately, organizations like farmers’ unions and NGOs focus too much on production at the expense of marketing. It seems that the services of farmers’ unions end at the production stage, but they should be in the market, consolidating demand and supply for their members, as well as production plans and marketing plans.
Currently, when these organizations attempt to intervene in the markets, their interventions are rather ad hoc and predatory, mainly focusing on negotiating higher prices regardless of quality, volume and other critical market factors. .
Consolidation of producers and grouping of products should be a major role of farmers’ unions. Due to the lack of major efforts to aggregate agricultural products at the local level, most products continue to flow to Mbare in Harare and other major markets. The following charts illustrate what poured into Mbare’s wholesale market from various provinces across the country in January 2016.
Characteristics of an agricultural wholesale market
While the wholesale market concept is popular in the formal finished product industry, mainly imported from South Africa and other countries, it has not been fully adopted in field crops and animal husbandry.
However, important lessons can be learned from agricultural wholesale markets like Mbare in Harare and BUTA in Bulawayo. In these markets, the wholesale market has become a powerful institution based on the coexistence and sharing of knowledge of traders over a long period of time.
Through the concept of wholesale trade, traders have established trends and patterns in agricultural products. Their behavior is almost the same in terms of speculative tendencies, trading and trading. A thorough understanding of commodities over a long period has resulted in a viable institution. You can find 1,000 to 1,500 traders who have worked together in the wholesale market in the past four years. Most of them have mastered their trade and know their niche markets intimately. They also have an idea of their orders per week.
How farmers are different
Unlike traders in the wholesale market, farmers who bring produce to urban markets also bring diverse skills and models of market participation, resulting in low bargaining power.
Some have expertise on product volume by type. Most do not participate in the market at the same time. They also have different relationships with buyers and a different understanding of market operations. As if that were not enough, different categories of farmers also compete against each other.
A category wants to fix prices in order to create a stable trading platform. The other category includes desperate farmers who quickly bring produce to market to solve urgent problems. These are causing chaos in the market by undermining their patient peers.
Looking closely at the phenomenon said Makoronyera, one can see that it was created by the desperation and lack of coordination of the farmers. When farmers bring in products indiscriminately, the opportunism of some unscrupulous traders increases. Farmers who engage in desperate sales will be doing more parallel marketing than participating properly in the market.
These wandering habits cause the majority of farmers to remain at subsistence levels when they should be on a growth path to become proficient commercial producers.
Goods with different quality attributes in the same market
Other negative habits of farmers include trying to grow products with different quality attributes in the same market.
Poor quality raw materials end up being sold at bargain prices and if these raw materials are more than high quality, they jeopardize the chances of buying good quality raw materials as buyers are incentivized to argue over ‘huge volumes of poor quality products whose prices are also very moo.
Diversity of production costs
and the distance to the market
The differences in production cost present huge challenges for farmers in the market. While some farmers use their own resources to grow crops, others are funded by banks. Another group is supported by NGOs. These three groups of farmers have different production cost structures, which leads to different expectations.
One farmer may have incurred low production costs and can afford to wait for the market to improve while the other wants to sell quickly in order to pay off a short-term loan. One day a farmer comes to the market and if he suffers a loss he does not want to come back. In another situation, a large farmer pushes small farmers out of the market by bringing in huge volumes at a time. If such a farmer dominates the market for three months with potatoes, many small farmers are negatively affected.
The remoteness of the market also forces farmers to sell produce at any price. If the produce is not purchased within three days, the farmers incur a loss of 100 percent. Recent evidence collected by eMKambo revealed that less than 5 percent of farmers participate in the market for three quarters of the year. About 20 percent participate for up to six months.
The majority attend for about three months a year, mainly out of season. It is therefore very difficult to determine the exact size of the farmers’ market.
At least 80 percent of farmers who practice winter horticulture use horticulture as an interim measure during the winter and as a source of income to purchase corn inputs. This means that for at least 80 percent of the time, the farmers’ market is not dominated by farmers. One time the farmers are in the market and the other time you can’t find them because they don’t have products to bring to the market.
A good option for farmers is to establish local markets or holding centers in production areas. From these local markets, it becomes easy to collect production and marketing plans well in advance of the harvest season in order to inform other actors in the value chain.
This information can be consolidated at the wholesale market level where the absorption capacity of each market is known. ICT can be used to link local markets to other markets, making it easier to determine supply. At one point, Masvingo’s market is in deficit while Mbare is in glut.
Appropriate organization of detention centers and the deployment of ICTs will solve these challenges. By using e-commerce and ICT, traders in Masvingo should be able to outrun other players and buy directly from farmers in Mutoko. This shortens the chain and reduces transaction costs.
To avoid unnecessary costs, distribution should be order-based. Most traders know what they want to buy tomorrow. Collecting this information from each merchant can reveal the order size and associated demand.
It is now becoming very difficult for processors to make investment decisions because they are not assured of a constant supply. All supplies can be taken from the informal market for consumption as raw materials. Planning for orders in advance will help overcome some of these challenges. In addition, orders must be accompanied by standards and specifications.
Market infrastructure issues
The infrastructure of most urban agricultural markets is currently not designed to store and maintain the quality of surplus produce. For example, there are no cooling and warehouse facilities. Farmers are forced to bring in products that they are sure will be sold every day. As a result, what appears to be surplus is sold at a discount. The establishment of rural detention centers will allow farmers to send produce to larger markets and take advantage of economies of scale. Gokwe farmers can simply send a 7 ton truck of produce to Bulawayo market rather than individually bringing buckets and crates of produce to the remote market.
Charles Dhewa is a proactive Knowledge Management Specialist and Managing Director of Knowledge Transfer Africa (Pvt) (www.knowledgetransafrica.com) whose flagship product eMKambo (www.emkambo.co.zw) is present in more than 20 agricultural markets in Zimbabwe. He can be reached on: [email protected] ; Mobile: +263 774 430 309/772 137 717/712 737 430.