P4P purchases in the first two years
As the Purchase for Progress (P4P) pilot takes stock after two years of operations, figures show that purchases under P4P in 2010 accounted for 14 percent of all the food bought in the 20 pilot countries by the World Food Programme. That is up five percent on 2009, the first year of implementation of the initiative.
Each year, as farmers’ organizations and small and medium-scale traders increase their capacity to meet market demand with adequate quantity and quality, the percentage of P4P purchases in WFP’s portfolio is expected to increase.
There has also been a substantial hike in the amount of commodities contracted: from 36,000 metric tons in 2009, to 112,000 tons in 2010, nearly three times as much. This is partly because most countries were just starting P4P implementation in 2009, with many still designing their P4P strategy; and also because countries where WFP traditionally buys large amounts of food started P4P only in 2010, such as Ethiopia. With the P4P food purchases, more than US$ 30 million has so far been channelled more directly into the pockets of smallholder farmers and small and medium traders.
Since the launch of P4P in September 2008 through the end of 2010, 150,000 tons of food has been contracted. Seventy one percent of these contracts were issued in Eastern and Southern Africa, followed by the Central America region (18%), West Africa (9%) and Asia (3%).
Of the 150,000 tons contracted, around 88,000 tons had been delivered to WFP by the end of 2010. Contracts are signed usually a couple of months prior to the expected delivery date to allow vendors to bulk and grade the commodities according to WFP standards. All purchases under P4P must meet WFP’s regular quality standards to ensure its appropriateness for the beneficiaries of WFP’s food assistance.
Of the P4P contracts, more than half (53 percent) were issued through competitive processes, mainly through adapting WFP’s regular tendering practices to the potential of smallholders and through commodity exchanges, where smallholders had put up their surplus food for sale.
Direct contracts accounted for 42 percent of P4P purchases, mainly from farmers’ organisations, but in some instances from agents and agro-dealers (Kenya) and from NGOs (DRC, Zambia). In Uganda and Tanzania, direct contracts have been negotiated with warehouse receipt systems, where farmers can store their crops and sell to interested buyers.<
Four percent was contracted through forward contracts in Burkina Faso, Mali and more recently Mozambique. The aim of the forward contracts, a new way of buying food for WFP, is to give smallholder farmers’ organizations assurance at planting time of a guaranteed market, therefore encouraging increased production and facilitating their access to credit.
Two percent were purchases of processed foods, supporting pro-smallholder processing options, including high-energy protein supplements (Zambia), high-energy biscuits (Afghanistan), fortified blended foods (Mozambique and Guatemala), maize meal and corn soya blend.
Maize accounts for 71 percent of the food contracted under P4P, purchased in Eastern & Southern Africa, Central America and some in West Africa, while maize meal accounts for eight percent of total contracts, contracted in Malawi and Zambia.
Different types of pulses (black beans, red beans, white beans, pigeon peas, cowpeas) account for seven percent of total P4P contracts, most of which originate from East & Southern Africa. P4P will try to purchase more pulses in 2011 to empower women, as in many countries, pulses are grown and marketed mainly by women. Sorghum, wheat, millet, rice and fortified commodities account for the remaining 14% of P4P contracts.
Money spent – and saved
The 150,000 tons of commodities contracted under P4P have a total value of US$ 50.2 million. Given that 88,000 tons of this food has already been delivered to WFP, WFP has paid out an estimated US$ 30 million that was channelled more directly into the pockets of smallholder farmers and small and medium traders as a result of P4P purchases.
Further, by procuring locally through P4P, WFP has realized cost savings of US$ 22.6 million with respect to importing the same commodities from abroad: A clear indicator of the potential of buying food from smallholder farmers not only for WFP, but also for other market players.