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P4P Procurement Update

Maize flour produced by smallholder farmers moved from the warehouse to WFP distribution points in Lilongwe, Malawi.

Copyright: WFP/Charlie Barnwell

WFP procurement

Despite challenges, WFP has successfully increased its contracted quantity using P4P modalities throughout the pilot treatment period. From the beginning of the pilot in September 2008, until its end in December 2013, WFP has issued contracts for 431,542 metric tons (mt) of commodities at a value exceeding US$ 167 million. Of this, 287,041 mt has so far been delivered, putting US$ 117 million more directly into the pockets of smallholder farmers. Some 113,729 mt was contracted in 2013. Deliveries are currently ongoing, with 39% of the quantities contracted in 2013 delivered to date. Purchases through P4P modalities account for 12% of WFP’s local and regional purchases across the 20 pilot countries. This exceeds the 10% minimum target set at the beginning of the pilot.

Markets beyond WFP

A key P4P objective is to develop smallholders’ capacities, to support their engagement with formal markets beyond WFP on a sustainable basis. By providing them with an assured market for their surplus, WFP’s role is to catalyse and incentivize improvements in smallholder agricultural and business practices. To date, P4P-supported smallholders have sold some 200,000 mt of commodities to markets beyond WFP, at a value of at least US$ 50 million. Data collection on sales to other markets is ongoing.

WHERE have we contracted: *

  • 73% in Eastern and Southern Africa
  • 15% in Central America
  • 10% in West Africa
  • 2% in Asia

WHO have we contracted with: *

  • 65% farmers’ organizations (all pilot countries)
  • 22% commodity exchanges (Ethiopia, Malawi, Zambia)
  • 6% small and medium traders and agents such as agro-dealers (Ethiopia, Kenya, Malawi, Mali, Mozambique, Sierra Leone and Zambia)
  • 3% the National Food Reserve Agency (Tanzania)
  • 2% warehouse receipt systems (Uganda and Tanzania)
  • 2% processors (Afghanistan, Kenya, Sierra Leone, Mozambique, Zambia)

HOW have these purchases been contracted:*

  • 48% competitive processes
  • 26% direct contracts
  • 21% forward delivery contracts
  • 5% processed commodities

*Percentage is calculated based on the total amount of commodities that has been contracted by WFP through P4P modalities.

Defaults

Of the 431,542 mt contracted throughout the pilot period, 66% has currently been delivered, with 76,586 mt confirmed as defaulted and the remainder under delivery. Four major categories of defaults have emerged: factors related to the local environment, such as climatic conditions and volatility of market price; factors related to suppliers’ capacity, such as side selling, miscalculation of marketing costs and insufficient access to credit; factors related to crop quality, such as high moisture levels or damaged grains; and factors related to WFP’s procurement and logistics process, such as delays in arranging transport, signing contracts or supplying bags. Thanks in part to efforts in capacity development by P4P and partners, defaults related to quality have reduced considerably since the beginning of the pilot. They were highest in 2010, accounting for 24% of total defaults, and decreased to 6% in 2012. The reasons for defaults on WFP contracts with P4P-supported farmers are as follows (% of total confirmed defaults):

  • 63% related to suppliers’ capacity (some 40% of which was due to side selling)
  • 17% related to the local environment
  • 16% related to crop quality
  • 4% related to WFP’s procurement and logistics process

Commodities procured

Though maize still accounts for 72% of all WFP contracts procured through P4P modalities, commodities have become increasingly diversified since the start of the pilot. Now purchases increasingly include pulses, such as beans, cowpeas and pigeon peas; other cereals, such as wheat, sorghum and millet; as well as processed commodities such as fortified maize meal, high energy biscuits and cassava flour. P4P has promoted WFP’s efforts to procure pulses, which account for 12% of total contracts with P4P-supported farmers. This is a component of P4P’s objective to promote the inclusion of women farmers, as pulses are often grown by women in traditional settings. 

P4P has supported the development of local processing capacity to produce fortified and blended foods in countries where processors have the potential to become market competitive. For example, P4P has done this by developing local capacity to process high energy biscuits, supplementary feeding products and fortified milled flour, linking the processors to smallholder farmers who supply the staple commodities.

Final P4P pilot figures are currently being reconciled. A final report including full delivery information will be available in the third quarter of 2014.