Linking farmers to markets critical to rural development and efforts to combat Africa’s food woes

From dairy cooperatives, text messaging and grain storage to improved credit, transport and trade initiatives, new book presents “high-payoff, low-cost” solutions to Africa’s underdeveloped agricultural markets and chronic food insecurity

NAIROBI, KENYA (1 MARCH 2012)—As a food crisis unfolds in West Africa’s Sahel region, some of the world’s leading experts in agriculture markets say the time is ripe to confront the “substantial inefficiencies” in trade policy, transportation, information services, credit, crop storage and other market challenges that leave Africans particularly vulnerable to food-related problems.

“We can’t control the weather or international commodities speculators, but there are many things we can do to improve market conditions in Africa that will increase food availability and help stabilize food prices across the continent,” said Anne Mbaabu, director of the Market Access Program at the Alliance for a Green Revolution in Africa (AGRA), which has invested US$30 million over the last four years to improve market opportunities for Africa’s smallholder farmers.

AGRA and the Nairobi-based International Livestock Research Institute (ILRI) have just released a book that features a range of studies that collectively make a compelling argument for embracing agriculture-oriented market improvements as crucial to not only avoiding future food crises but also for establishing a firm foundation for rural development and economic growth. The research was originally prepared for a conference in Nairobi in which 150 experts from around the world discussed how to “leverage the untapped capacity of agricultural markets in Africa to increase food security and incomes.”

Food price fluctuation

Its publication comes as international aid groups are rushing assistance to Niger and other nations of the African Sahel—a narrow but long belt of arid land south of the Sahara that stretches across the continent—where a combination of high food prices and poor weather has left some 14 million people without enough to eat. The food problems in the Sahel are emerging just as African governments and aid groups say they have stabilized a food crisis in the Horn of Africa that at its peak in Somalia had left 58 percent of children under the age of five acutely malnourished.

But while volatility in international commodities markets is being widely cited as a major cause of the food shortages in the Sahel, there is growing evidence that at least some of the food price fluctuation in Africa is caused by domestic factors.

Recent research—led by Joseph Karugia, Coordinator of the Regional Strategic Analysis and Knowledge Support System for Eastern and Central Africa (ReSAKSS-ECA) at ILRI, and colleagues at the Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA)—examining food price volatility in Eastern Africa suggests domestic factors are playing a role as well. The researchers found that over the last few years, even when global prices have receded, domestic prices in the region have remained high. For example, while global maize prices declined by 12 percent in the last quarter of 2008, in Kenya, Tanzania, Ethiopia, Zambia and Rwanda, they increased.

Reduce vulnerability

The study finds food price volatility in these countries is at least partly due to barriers and policies impeding the flow of food among markets in the region and between the region and global markets.

“We need to consider what can be done within Africa to reduce our vulnerability to food-related problems,” said ILRI’s Interim Deputy Director General for Research Steve Staal, an agricultural economist with expertise in smallholder farming systems. “Improving regional and sub-regional agriculture markets is one way we can increase food security and the impact of even minor improvements could be impressive. Just as it doesn’t take a big rise in food prices to tip millions of Africans into poverty, it does not require a sharp move in the other direction to generate huge benefits.”

The book from the markets conference outlines a number of “high-payoff, low cost” initiatives that combine “innovative thinking” and “new technology” along with policy reforms to give farmers an incentive to boost production—and the means to make their surplus harvests more widely available and at an affordable cost.

Selling agricultural produce at Chimbiya Market, near Dedza in central Malawi (photo credit: ILRI/Mann).

Policy change

For example, the Smallholder Dairy Project, a collaborative project between ILRI and research and development partners in Kenya, catalyzed some 40,000 small-scale milk vendors to generate an extra US$16 million across the Kenya dairy industry by seeking policy changes and providing practical training that made it easier for them to comply with national milk safety and quality standards. Prior to the initiative, smallholder dairy farmers were not realizing either their production or income potential because complex and costly food safety standards reduced participation in formal milk markets.

“Smallholder farmers and herders in Africa need a combination of investment in infrastructure and services, along with regulatory changes to take full advantage of growing agriculture market opportunities,” said Staal. “And since smallholders produce most of the milk, meat, vegetables and grains consumed in Africa, improving their participation in agriculture markets—particularly as populations gravitate away from rural areas to urban centers—is key to the continent’s food security.”

For example, a warehouse receipt program operated by the Eastern Africa Grain Council and Kenya’s Maize Development program is offering farmers two things they previously lacked: a place to safely store surplus harvests and easier access to credit. Research has shown that on average, 25 to 50 percent of crops produced on African farms spoil in the fields and in East Africa alone up to US$90 million worth of milk is lost per year due to spoilage.

Credit

Lack of credit is also limiting the ability of African farmers to produce and sell more food. One important aspect of the warehouse receipt program is that it allows farmers to get credit using the deposited grain as collateral. They can use the credit to purchase such things as farm inputs for the next planting or meet immediate cash requirements.

“We understand that credit is crucial for expanding production on African farms—as it is everywhere in the world—which is why AGRA is working with commercial banks to unlock millions of dollars in loans for smallholder farmers across Africa,” said Mbaabu.

AGRA’s partnerships with Standard Bank, NMB Bank (Tanzania), and Equity Bank (Kenya) were modeled on an initiative by the Rockefeller Foundation in Uganda that had only a 2 percent default rate. “This shows that investing in African farmers makes good business sense,” said Mbaabu.

Agro-processing

The book also discusses initiatives that are using post-harvest processing facilities and information technology to improve market opportunities. An analysis of processing facilities in Tanzania that make chips and flour from cassava—a crop many smallholder farmers can produce in abundance—found that they were profitable even when dealing at 50 percent of capacity. Research in Northern Ghana found farmers were getting 68 percent more for their harvests after using a service that provides a steady stream of pricing, market, transportation and weather information via text message.

On the policy front, the market experts see an urgent need to confront the “hodge-podge of tariffs” and the numerous export restrictions and customs requirements that make it hard for areas of Africa where there are food surpluses to serve those in food deficit. Critically, they recognize that private investors are in many cases playing the lead role in new investments for market development and services. “Policy-makers need to shift emphasis from a traditional regulatory approach to one of co-investment to leverage private sector activity, supporting appropriate infrastructure and information systems,” says Staal.

Livestock produce for sale in a large supermarket in Maputo, Mozambique (photo credit: ILRI/Mann).

A recent report from the World Bank on trade barriers in Africa recounted how in Zambia, the grocery store Shoprite spends US$20,000 per week securing import permits for meat, milk and vegetables. And its trucks carry up to 1,600 documents to meet border requirements. Overall, the Bank report estimates African countries are forfeiting billions of dollars per year in potential earnings by failing to address barriers to the flow of goods and services.

“When many people think of a food crisis in Africa, they picture crops withering in the field or dead or dying livestock, but rarely do they think about the market issues that are part of the problem as well,” said Namanga Ngongi, president of AGRA. “African farmers face many challenges in the field and pasture but they will continue to lack the means and the incentive to boost crop and livestock yields if we continue to neglect our underdeveloped agriculture markets.”

Click here to download the full book or individual sections:

• Synthesis of outcomes
• Section 1: Developing pro-poor markets for African smallholder farmers
• Section 2: Seed and fertilizer markets
• Section 3: Strengthening finance, insurance and market information
• Section 4: High-value commodities and agroprocessing
• Section 5: Building market institutions
• Section 6: Encouraging regional trade

Proceedings of AGRA-ILRI agricultural markets conference now available

The Alliance for a Green Revolution in Africa (AGRA) and the International Livestock Research Institute (ILRI) have released the proceedings of an international conference held in Nairobi, Kenya in May 2009 to examine how agricultural markets can play a role in spurring economic growth in sub-Saharan Africa and improving livelihoods.

The book documents a wide range of practitioner research and evidence presented at the conference which brought together some 150 experts from around the world. It addresses a wide range of topics regarding what is working and not working to leverage the untapped capacity of agricultural markets in Africa to increase food security and incomes.

The issues discussed at the conference are especially timely in light of recent surges in food prices and the significant burden this is inflicting on millions of poor people, underscoring the urgent need for action.

The book will be an important reference for policy analysts, scholars, researchers and other agricultural practitioners interested in sub-Saharan Africa’s agricultural development.

Click here to download the entire book or individual sections

• Cover pages
• Front matter
• Synthesis of outcomes
• Section 1: Developing pro-poor markets for African smallholder farmers
• Section 2: Seed and fertilizer markets
• Section 3: Strengthening finance, insurance and market information
• Section 4: High-value commodities and agroprocessing
• Section 5: Building market institutions
• Section 6: Encouraging regional trade

For more information, contact Anne Mbaabu of AGRA (AMbaabu @ agra-alliance.org) of Steve Staal of ILRI (s.staal @ cgiar.org)

AGRA-ILRI international conference clarifies priority actions needed to develop markets for African smallholders

A major international conference, held 13–15 May 2009 in Nairobi, brought together 150 of the world’s and Africa’s leading scholars and development experts to clarify priority actions that must be taken to unleash the potential of the continent’s smallholder agricultural sector.

The conference was sponsored by the Alliance for a Green Revolution in Africa (AGRA) and the International Livestock Research Institute (ILRI).

The tone for the conference was set by Kenya’s Minister of Agriculture, the Honourable William Ruto, who opened the meeting by challenging the group to identify and prioritize concrete actions that will, over time, lead to more efficient and effective markets that bring benefits both to producers and consumers across Africa.

The ensuing and often lively debate and discussions led to a number of key conference outcomes that will be made widely available in the near future.

Conference participants comprised a wide range of representatives from all along (and beyond) the African agricultural value chain.

Intergovernmental and sub-regional bodies in Africa, including the New Partnership for Africa’s Development (NEPAD), the Comprehensive Africa Agricultural Development Program (CAADP), the Common Market for Eastern and Southern Africa (COMESA) and the Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA), served as featured speakers and participated in panel discussions and numerous parallel working sessions.

International funding agencies, including the African Development Bank, the International Fund for Agricultural Development (IFAD) and the World Bank contributed early and often to conference discussions.

The UN World Food Programme, along with a wide range of private/public sector organizations – including bankers, agro-dealers, seed companies, grain councils, national commodity exchanges and farmers associations – were vital contributors to shaping the debate.

Representatives from leading universities dealing with market development issues, such as Cornell University, the University of Colombia, Michigan State University, the University of Leuven, the University of Zambia and Montpellier University, shared results from recent market research done by them and others in academia.

And a number of centres of the Consultative Group on International Agricultural Research (CGIAR) and affiliated organizations, including ILRI, CIAT-TSBF, CIMMYT, IFPRI, ICRISAT, IITA, ICRAF and IFDC contributed their experience and perspectives on the issues being discussed.

In closing the conference, AGRA President Dr Namanga Ngongi, stressed the importance of bringing together such a diverse group of development specialists to clarify what needs to be done next, when and by whom in order to develop Africa’s local, national and regional markets.

“Concrete actions that will promote the ability of these markets to absorb the fruits of smallholder productivity increases are essential,” Dr Ngongi noted.

The right actions by key players involved in building markets across the continent will reinforce the growing momentum for a uniquely African Green Revolution and, in so doing, help increase food security and reduce poverty for millions.

Knowledge is power for farmers

By Joyce Mulama

NAIROBI, May 16, 2009 (IPS) – Following training by the Alliance for a Green Revolution in Africa, a hundred farmers in central Kenya, armed with an improved understanding of their local markets are commanding higher prices for their bananas.

“These farmers used to sell bananas by just looking at the bunch. A trader would come and dictate the price. Before, they were selling at three shillings per kilo (0.04 U.S. cents), now they are selling for up to ten times more,” Anne Mbaabu, director of the Market Access Programme of the Alliance for a Green Revolution in Africa (AGRA) told IPS.

AGRA, an organisation which unites farmers, research scientists, business and governments to boost productivity and incomes, has been working with the Kamahuha Farmers Group, connecting the farmers with buyers who they communicate with directly using mobile phones.

“The buyer may say, ‘I want bananas that are not injured, I want them of this maturity and in this quantity.’ The farmer will then negotiate the price as opposed to previously, when he would just estimate the price,” Mbaabu said.

Improving access to market information and building the capacity of African farmers to understand market trends and needs, was the highlight of a meeting of agricultural experts held May 13-15 in Nairobi.

With the theme of the event being the role of markets in accelerating Africa’s economic growth while improving incomes of poor farmers, it was stressed that for farmers to gain, they must not only produce, they must have effective access to markets in order to sell their harvests at fair prices.

Think local

Markets in Africa, it emerged, are poorly-organised and volatile. Farmers lack market information on current wholesale or retail prices that they need to negotiate good prices for their produce.

“You have to know where the market is first. If you do not have access to information, the farmers cannot even access markets or participate in them. So the big issue is providing adequate information for farmers to be aware of markets, but also to be aware of the needs of markets because market needs are changing a lot,” noted Akinwumi Adesina, AGRA’s Vice President for Policy and Partnerships.

Experts like Ade Freeman of the International Livestock Research Institute (ILRI) argue that domestic and regional markets provide the greatest opportunity for African farmers, rather than markets further a field.

The population of the East African Community – Kenya, Uganda, Tanzania, Rwanda and Burundi – is roughly 100 million; over 389 million people live in the countries that form the Common Markets for Eastern and Southern Africa.

“We are talking about huge markets, in terms of the numbers of people that are involved. And people will always need to buy food. Some of these countries have been experiencing economic growth of about five to six percent per annum. So, all factors that favour increasing demand for agriculture in these markets are moving in the right direction, providing an opportunity for regional and domestic markets to be exploited,” Freeman said.

There are several hurdles that have stifled regional trade, including high tariffs. “Tariff structures in Africa are actually much higher between countries than they are between Europe and Africa. So this makes it difficult for us to trade between ourselves,” Adesina pointed out.

There have also been calls for customs regulation standards (requirements which someone exporting or importing goods or services is expected to adhere to, and they vary from country to country) to be harmonised to make it easier for people to transport goods across borders.

Access alone is not enough

But for poor farmers to increase productivity and enter these markets, they need to be supported with improved seeds, fertilisers, irrigation, and pest management technologies. And government intervention to provide this support constitutes subsidies, a thorny issue at international trade talks.

Mbaabu’s take is a different one. “These subsidies, as they are called, are targeted. It’s not just mass subsidies; it is targeted at those who cannot be able to afford, and then once they are able to get these inputs, they become self-sufficient in their food production and then you end up reducing poverty. So let us not criminalise subsidies; it is support, targeted support to our farmers.”

In Kenya, the government has over the last year reduced fertiliser prices from about 79 dollars to the current 33 dollars. This is still too costly for many farmers, according to Peter Njoroge, chair of the League of Small-Scale Coffee Farmers. He told IPS that a good number of farmers were abandoning farming due to the high input costs, and he wants authorities to reduce further the fertiliser prices or even distribute them free of charge to small producers.

The Malawi government was commended for going against the grain to provide subsidised hybrid maize seeds and fertilisers to its farmers beginning three years ago. It has since moved from a serious food deficit to becoming a net maize exporter.

And the results of farmers using high-yielding inputs are tangible. “The standing point is an increase in productivity in areas where farmers use improved inputs,” Joseph Mwangangi, the regional director of Agribusiness Strengthening Programs at CNFC Inc, an organisation dedicated to increasing and sustaining rural incomes through empowering farmers in developing countries, told IPS.

Mwangangi, whose organisation works with the Agriculture Commodity Exchange in Malawi pointed to a recent study by the Bunda College of Agriculture at the University of Malawi, which found that up to 86 percent of farmers were using improved inputs. This, the study says, has led to increased or improved household food security.

Even with these gains, not everyone is in favour of subsidies to poor farmers. Hans Binswanger, a private consultant on agriculture and rural development from South Africa, cautioned about potential risks associated with subsidy programmes.

“If not designed and implemented properly, they can cause disruptions in markets, resulting in high prices which are completely unnecessary, and which are costly to the government, costly to its people. This undermines the intended benefits of the fertiliser and seed subsidy programme,” he stated.

Story originally posted on the Inter Press Service website.

http://www.ipsnews.net/news.asp?idnews=46877. Accessed 18 May 2009.

New markets to reduce waste of produce

By Jackson Okoth

The Government will build new agricultural wholesale markets in all major urban centres.

The initiative is expected to reduce post-harvest losses suffered by small-scale farmers, estimated at more than 40 per cent.

“Discussions are already underway between the Agriculture, Nairobi Metropolitan and Local government ministries to establish these wholesale markets, complete with cold storage and other support facilities,” said Agriculture Minister William Ruto.

He made these remarks on Wednesday while opening a three-day International conference in Nairobi, drawing Africa’s leading experts on agriculture and market development.

Expert intervention

The conference is sponsored by the Alliance for a Green Revolution in Africa and the International Livestock Research Institute with support from more than 17 organisations.

Experts are gathering in Nairobi to map out strategies to enable Africa’s smallholder farmers access the continent’s $150 billion staple food market.

With the global economy undergoing severe recession, Africa’s farmers are finding it increasingly difficult to access international markets, including its main export destinations in Europe.

The subsidies offered by developed nations to their farmers and high tariff and non-tariff barriers keep most African farmers out of lucrative international markets.

This conference is also taking place at a time when debate is ongoing at policy level, on whether to increase the producer prices to encourage farmers or lower retail prices to protect consumers.

Action needed

“There is need for priority action to address the interests of both producers and consumers,” said Ruto.

The high level discussions on how to improve market access for small-scale farmers also come in the wake of challenges facing smallholder farming.

“We should be candid enough to recommend the need for land consolidation of small holdings to make them commercially viable,” said Ruto.

Available figures indicate that small-scale farmers are also net buyers of food, a clear indication of the need to re-think the concept of small-scale farming.

New research and innovations presented at this meeting will highlight strategies that could help Africa produce and sell its own food at lower cost and take advantage of new market opportunities.

To become a food bread basket with surplus for export, policies will ne needed to expand investments in rural roads, communications, farm storage, commodity exchanges and improvement in standards, experts say.

Story originally published on The Standard website.

http://www.eastandard.net/InsidePage.php?id=1144014102&catid=14&a=1. Accessed 18 May 2009.

Conference to map strategies to enable Africa’s smallholder farmers to benefit from USD$150 billion regional market for farm produce

Scholars and development experts meet to unveil effective strategies for unlocking potential of African agriculture to improve livelihoods and spur economic growth

NAIROBI, KENYA (13 MAY 2009)—Seven out of ten Africans earn their living by farming. According to researchers, the market for milk, meat, and staple food crops like maize, banana, sorghum, rice and millet within Africa is estimated at USD$150 billion a year—far exceeding Africa’s market for internationally traded cash crops like coffee, tea, and flowers. A year of record high food prices presents a unique challenge and opportunity for Africa. To benefit, African farmers must produce more food, but more importantly, they must have access to markets to sell their harvests at prices that benefit farmers and consumers.

A conference sponsored by the Alliance for a Green Revolution in Africa (AGRA) and the International Livestock Research Institute (ILRI), drawing on support from over 17 organizations involved in the CGIAR Regional Plan for Collective Action, will assemble the continent’s leading authorities on agriculture and market development to examine the role of markets in increasing Africa’s economic growth and improving rural livelihoods. They will meet in Nairobi this week to discuss successes, challenges and opportunities that exist in Africa’s farm sector. Participants will outline new strategies for opening up domestic and regional markets to African farmers, while at the same time improving their livelihoods, and lowering food prices for urban consumers.

“New approaches are needed to create vibrant food markets in Africa,” said Ade Freeman, Director for ILRI’s Targeting and Innovation Program. “African farmers can produce enough food to feed Africa, and help feed the world. But first, governments must enact policies that support farmers’ ability to grow more food and provide access to markets that give farmers a good price for their hard work, and consumers with food they can afford.”

For participants, improving farmers’ access to regional markets for staple food crops within Africa is key to this transformation. Only a tiny fraction of the food produced in the region is sold in regional markets; the rest is either consumed on the farm or lost to pests or disease after harvest. Meanwhile, Africa imports about 20 percent of the food it consumes, spending scarce foreign currency reserves. Regional markets therefore represent a large and growing market that could offer growth opportunities for African agriculture and farm income, and help reduce widespread hunger.

New research and innovations presented at the meeting will highlight strategies that could help Africa produce and sell its own food at lower cost and take advantage of new market opportunities offered by the global food crisis. To become a food breadbasket with surplus for export, policies will be needed to expand investments in rural roads, communications, farm storage, commodity exchanges and improvement in grades and standards. Farmers will also need accelerated access to farm inputs, especially improved seeds, fertilizers; livestock feed and small scale irrigation and integrated pest management technologies.

A new paper by AGRA and its grantee CNFA will report on the impact that AGRA’s Agrodealer Development Program (ADP) has had with helping small retailers in rural villages in Malawi, Kenya, Tanzania, and Mali reach out to smallholder farmers. These agrodealers provide crucial inputs to farmers at affordable prices.

According to the report, the program has helped 4,264 agrodealers receive loans, business management and technical training in Malawi, Kenya and Tanzania, which has benefited an estimated 1.8 million farmers. An estimated USD$42 million worth of improved seed, fertilizer, and other farm supplies have been sold through agrodealers in the last 12 months, representing an increase of 15 percent over the previous year.

Role of governments

Successes are emerging from Africa on how home-grown policies can dramatically help secure national food security. The landlocked nation of Malawi is one example. It went from being a net importer of maize, depending on food aid, to a net producer with a large maize surplus in just three years. In 2007, Malawi even exported some maize to neighboring countries.

According to a paper that will be presented by the Overseas Development Institute (ODI), the program was costly, but, if handled well, the benefits of such initiatives outweigh the negatives of chronic food shortages. The paper highlights the important role of government in agricultural development. It points out the importance of targeting subsidy and voucher programs to each country’s specific conditions in order to maximize social gains while building the private sector. It also analyzes potential risks associated with fertilizer subsidy programs if they are not designed and implemented properly. These risks include the potential for market disruption; for unsustainable burgeoning costs and fiscal outlays; and for the side-stepping of intended beneficiaries.

Producing more food is only part of the solution

Another is ensuring that African farmers have a place to sell their harvests. Poor roads and infrastructure are chronic problems in Africa. At the same time, the revolution in information and communications technologies is changing the face of market opportunities for farmers.

Researchers at the conference will reveal how the Kenya Agricultural Commodity Exchange and the Malawi Commodity Exchange are linking small farmers with vital market information through local kiosks, radio broadcasts, email, and mobile phone messaging services. Three-quarters of farmers tapping into this information report getting better prices for what they produce.

Increased agricultural production stimulated by market development generates not only food but also income for farmers. Livestock products are particularly relevant in this regard, and an important example is seen in the enormous success of the smallholder dairy sector in Kenya. Beginning in 2004, policy reforms in Kenya’s dairy sector helped nearly 40,000 small-scale milk vendors to enter formal milk markets. The reforms were sparked by almost a decade of research that persuaded regulators to engage and support Kenya’s predominantly informal milk market, which trades in ‘raw,’ or unpasteurized, milk. New training and certification schemes as well as innovative mechanisms to bulk, process and distribute a highly perishable product like milk have been critical to the success. Economists assess the direct impacts of the evidence-based policy changes on the Kenyan economy to be at least USD$33.5 million per year. Participants will discuss how similar smallholder-focused initiatives could be implemented and scaled-up across the continent.

The conference will also explore options for nurturing more regional trade. Right now, Africans trade only a miniscule share of the crops they grow—just USD$2 billion worth per year. Research by Joseph Karugia shows that this hampers self-sufficiency and can send food prices skyrocketing.

Improving regional trade and access to market information key to transformation

Food policy experts say ratcheting up regional, cross-border trade would give farmers the option to focus on the commodities they grow best. They could tap this comparative advantage to go head to head with imports and begin reclaiming the markets they’ve lost. In 2004, the East Africa Community established the East African Customs Union to knock down tariffs between East African nations. But that hasn’t been enough to ignite trade.

New research by Karugia and others points to likely culprits that continue to stifle trade, including non-tariff barriers like customs backups, permits, taxes, roadblocks, and roadside corruption and bribes.

“African farmers deserve better lives and livelihoods. We must make markets work better for them so they earn higher incomes, send their kids to school, afford better health care and build their savings. Africa cannot be the world’s largest museum of poverty and misery,” said Akin Adesina, Vice President for Policy and Partnerships at AGRA. “African governments can no longer continue to pursue policies of abandoning their farmers. The subsidies that rich nations offer their farmers and high tariff and non-tariff barriers keep African farmers out of lucrative markets. The time to level the playing field for African farmers has come.”

Story originally posted on the ILRI website, 10 May 2009.