Egypt: Smallholder contract farming for high-value and ... - IFAD

Smallholders with their own land and institutional credit (OLICs). Smallholders owning their
land are able to finance crop production through their own resources or institutional credit
(microfinance institutions or banks) and therefore retain ownership of the crop. This category of
farmers usually sells the harvested crop to traders at the farmgate or transports it to village markets
for sale to wholesalers. During harvest, the OLICs utilize available household labour before hiring
additional transient farm workers. The produce is harvested straight into lattice-crates (constructed
of palm wood); for tomatoes and other vegetables, gunny sacks or plastic bags are used.
Farmers with trader credit (FTCs). Smallholders who have received crop financing from traders
usually must sell all or part of their crops to these traders. The traders have the upper hand
in determining the crop price, and the interest rates on production loans are often in excess of
30 per cent, three times the bank rate. At the time of harvest, the traders take over the crops, and
they become responsible for harvesting, often using his own farm labourers.
Sharecropping. Smallholders who sharecrop with landowners are responsible for their crop until
harvest. Thereafter, the crops become the property of the landowners (who often also act as
traders), who then harvest the crops for sale to traders or directly to wholesalers. The smallholders
are paid agreed shares of the prices obtained for the crops by the landlords. The shares often do not
amount to much more than the daily labour wage rate for a transient farm worker, which is
EGP 7 per day; however, the system is not transparent, and there is wide variation.
Village marketing
Figure 3 provides an overview of the marketing structure at the village level. Most horticultural
produce consumed in villages passes through the village market and is then sold to retailers and
governorate traders.
Traders and OLICs. Traders and the OLICs transport the produce to the village market and sell it
to wholesalers, usually on the same day the harvesting takes place. Open flatbed trucks are used for
transportation. The trucks typically lack covers to protection the produce from dust and sunlight.
The wholesalers usually leave little room for bargaining in their prices.
Wholesalers. The wholesalers sell the produce by the kilogram to small home stalls, street stalls
and small rudimentary grocery stores. The produce is sorted into two grades. The top grade is sold
to retailers, and the second grade – produce near the end of its shelf life – is sold to small
restaurants at reduced prices. The wholesalers do not have cold-storage facilities, and all their
produce is stored in sheds.
Figure 3 Village marketing structure
Small
producers
OLICs
Village market
Wholesalers
Restaurants
– Home stalls
– Street stalls
Consumers
Traders
Governorate
traders
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