ICRISAT Archival Report 2006 - The seedlings of success in the ...

With increased availability of profitable and pest and disease resistant Kabuli types, this trend is now already
apparent in all the major growing countries (e.g. Ethiopia and Tanzania).
For groundnuts, there are growing domestic and regional markets but export opportunities are limited by food
safety and quality concerns associated with aflatoxin contamination (a carcinogenic substance caused by the
fungus, Aspergillus flavus). This has promoted new research efforts to reduce aflatoxin contamination and
establishment of low-cost testing, traceability and certification systems. This has allowed Malawi to re-enter the
export market for groundnuts after many years of non-competitiveness in these markets. The studies have also
identified the different quality requirements for groundnuts used in the growing confectionary industry and
edible groundnuts and for oil extraction. The availability of cheaper substitutes (soya and palm oils) has also
contributed to declining demand for groundnut oils.
Overall the market assessments have shown that improving competitiveness requires access to high quality
seeds of market preferred varieties and other production inputs that increase yields, save on resource costs and
improve product quality to meet the increasingly stringent and dynamic market requirements (especially for
export markets). Facilitating the development and adoption of good agricultural practices, quality control and
grading systems is an important factor in enhancing competitiveness. Along with the need to expand the volume
of trade, competitiveness requires cutting production and marketing costs and enhancing the reliability of
supply.
On market access for smallholder farmers, the studies have shown that marketing channels in many rural areas
are characterized by long and complex marketing chains and high transaction costs which considerably lower
the farmers’ share of the consumer price. In Eastern Kenya, about 45% of the grain sold and 36% of the
transactions are undertaken at the farm-gate. About 90% of the grain sold by farmers is transacted at the farmgate
or adjacent village markets. The study also shows that rural wholesalers and brokers jointly control over
80% of the grain sold by farmers. About 75% of the grain was sold immediately after harvest when local supply
is high and prices are low. Asymmetric information is pervasive in grain pricing and most rural traders do not
pay a premium for better grain quality.
A pilot study on the potential of producer marketing groups to increase market participation and competitiveness
showed that indeed such groups can play a significant role in facilitating vertical and horizontal coordination in
input and output marketing for small producers. The prices paid to farmers by the groups after covering
marketing costs were about 20-25% higher than prices paid by brokers and middlemen in rural villages. This
was possible through quality control, bulking, temporal arbitrage and direct access to buyers at the upper end of
the value chain (urban wholesalers and processors).
The policy challenge is to facilitate the emergence of efficient and effective farmer organizations that accelerate
the uptake of improved technologies and open market opportunities for small producers often trading in small
volumes in areas with limited market access. Such groups and rural institutions are however unlikely to emerge
and attain economic viability on their own without the support of governments and other external agents. Market
orientation, competitiveness and business motives should be the guiding principles for such groups. Mechanisms
that facilitate the transition of such groups into effective business cooperatives are highly needed in many
countries in the region.
1C.6. Value chain analysis completed for groundnut and pigeonpea in Malawi and Mozambique by 2006
Linking Farmers to Markets: Diagnosis of Constraints and Opportunities for Expanding Groundnut
Marketing in Malawi
While farmers in southern Africa have been relatively responsive in adopting new and early maturing varieties,
firm linkage to markets have been weak. This has tended to compromise the rates of continuous adoption of
several technologies and in some cases even leading to some dis-adoption.
The history of agricultural technology development and transfer in Africa depicts a map of heavy concentration
on facilitating farmers to adopt technologies but with almost no business in enabling such farmers to link to
markets so that the vent for surplus can be realized. It has been assumed that the invisible hand would take its
course but apparently the market imperfections are too huge to be assumed away. At best socio-economic
researchers would come in and conduct some agricultural marketing studies for those targeted commodities but
those have largely remained academic because of the failure to adopt a participatory private sector approach.
Practical solutions to address the missing link between farmers and product markets are therefore a significant
objective of this study.
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