Smallholder farmers tend to sell limited quantities of low quality crops directly from the farm gate, often to small-scale traders whose prices are low, partly due to transportation costs. Farmers in less remote locations may also sell their crops in small-scale local marketplaces. P4P has worked to expand smallholders’ marketing options by providing them with an attractive alternative – selling collectively to large-scale buyers that are interested in bulked volumes of quality commodities, like WFP. To take advantage of this marketing opportunity, and earn better prices, farmers generally work together through farmers’ organizations, aggregating, cleaning and marketing their crops collectively to meet the buyers’ quantity and quality requirements.
Individual farmers’ marketing strategies
[publication|648428] A study carried out under P4P, entitled Smallholder Farmers’ Marketing Choices examines the complex ways in which individual members of such farmers’ organizations develop their marketing strategies. Based on research carried out in Burkina Faso and Rwanda, the study identifies the factors that influence farmers’ decisions on which marketing channel to use, and in particular, whether or not to market crops through their organization.
Although farmers hope to sell for the highest price possible, by the time the harvest arrives they often have an urgent need for cash to cover expenses such as school fees and loan repayment. Because smallholders tend to have few savings and limited access to credit and market price information, they may prefer buyers who can offer immediate cash upon delivery, such as traders buying at the farm gate. However, there are often more lucrative marketing options available for farmers capable of waiting a few weeks for their payment. Plus, smallholders are often located in rural locations with poor infrastructure, and they must factor in transportation costs. This generates additional challenges for remote farmers to market their crops beyond the farm gate.
Farmers’ organization capacity
These limitations can pose a challenge for collective sales through farmers’ organizations to reach formal markets. The process of aggregating crops and waiting for collection and payment tends to be a time-consuming process. Unless farmers’ organizations have access to credit to offer members partial or full payment upon delivery, this can lead lower income and more remote farmers to be unable to participate in group sales. The services farmers’ organizations are able to offer members – such as access to inputs and credit – also play a major role in encouraging smallholders’ sales. In some cases, farmers were able to access credit or inputs through their farmers’ organizations, on the condition that they repay them by participating in collective sales. Finally, price premiums offered for quality crops must be high enough to cover the costs of aggregation and value addition. While WFP pays premium price for products meeting the organization’s strict quality standards, large private buyers often already own equipment to add value to crops and are therefore unwilling to do so.
Transparency and trust
The level of transparency of farmers’ organization leadership played a major role in farmers’ decision whether or not to market through the organization. Without a sense of trust or loyalty, farmers were less likely to market their crops through the organization. For example, in Rwanda, one organization’s lack of transparency led to defaults due to members’ distrust. In contrast, in Burkina Faso, women members located near the headquarters of the Union Provinciale des Professionnels Agricoles du Houet (UPPA Houet) have embraced the production of quality crops and preferred marketing through the farmers’ organization. This loyalty to the organization was likely thanks to the broader benefits earned through their participation in P4P.
Enhancing women’s participation
[photo|648507] In Burkina Faso, farmers’ organizations enacted additional measures to address the substantial challenges women face, and encourage their participation in collective sales. The trust and loyalty generated amongst women in the UPPA Houet farmers’ organization seemed to be in large part due to the presence of a female field monitor hired jointly by UPPA Houet, WFP and Oxfam. UPPA Houet also provided a cash advance for values of up to 300 kg, exclusively for women members. To increase women’s ability to contribute to sales, Union des Groupements pour la Commercialisations des Produits Agricoles (UGCPA) waived the minimum transaction volume for women’s cowpea sales through the organization.
Examining marketing strategies in Burkina Faso and Rwanda
In Burkina Faso, most farmers adopted a smart marketing strategy to maximize their profit whilst allowing them to meet their short-term needs. These farmers sold their crops in three separate transactions to different buyers at different times. First, a portion was sold immediately after harvest to traders at the farm gate to address urgent cash needs. The bulk of production was then sold through the farmers’ organization at a later date in order to earn larger margins and repay credit acquired through the organization. Finally, the portion of crops remaining were sold later in the season to finance inputs for the coming season.
In Rwanda, members of Coopération des Agriculteurs des Céréales de Musaza (COACMU) and COTEBARU – which are located more centrally and along paved roads – primarily marketed their crops through the organizations, while selling small quantities of food to traders to cover their immediate cash needs. Members of farmers’ organizations in more remote locations generally marketed basic-grade commodities from their household plots directly to traders at the farm gate, while selling higher quality crops from communal plots through their farmers’ organization. Overall, farmers’ decisions were made primarily based upon the distance to the storage location and their ability to wait for payment.
Continued efforts to make organizations inclusive
To ensure that farmers’ organizations are truly inclusive of all farmers – including those with less available cash and in more rural locations – additional efforts are needed to strengthen the organizations’ capacity. Organizational strengthening and increased access to credit are particularly critical. On the part of buyers, additional efforts are needed to reduce the amount of time from delivery to payment, reducing the pressure placed upon farmers and their organizations to ensure the availability of cash in this period.