1. Making Fertilizer Markets Work for Smallholders
Presented by Sarah Gavian
International Fertilizer Development Center
At the AIARD 48th Annual Conference and 2012 Future Leaders Forum on Priorities for Inclusive Agriculture and Rural Development
June 3, 2012

2. Overview Overview of the fertilizer situation (in Africa)
Segmenting the “smallholder” concept.
Approaches to improving fertilizer markets for all.

3. Big Picture
African economies are growing, in fact above world averages
African agricultural sector growth is accelerating, but due to labor and area increases, not intensifying.
Although the agricultural sector is decreasing in overall importance, structural transformation - which wages equalize between sectors - is not occurring: agricultural productivity remains very low. (Binswanger-Mkhize 2012)
Food insecurity and poverty are falling, but not enough. Missed MDG targets means millions remain in poverty.

4. Hans P. Binswanger-Mkhize in Patterns of Growth and Structural Transformation in Africa Trends and Lessons for Future Development Strategies, IFPRI 2012,

5. Source: IMF analyses at http://www. odi. org

6. But structural transformation appears stalled
What’s thwarting the virtual cycle between economic growth and poverty reduction?
Nature of growth: the fastest growing African economies are the resource rich economies (minerals, petro chemicals).
With the agricultural sector, there is a failure to increase productivity for most smallholders.
Amongst other issues, fertilizer use in Africa is low and overall stagnant

7. Overview: Cereal Production
Cereal Production in SSA keeps pace with the rest of the world.
Source: FAO Data

8. Overview: Cereal Yields
Cereal yields increases in SSA have stalled
Source: FAO Data

9. Overview: Cereal Area Source: FAO Data
Area cultivated in S Asia and the World has increased somewhat since the 1960s, relative to Africa where area has more than doubled. (Note that World data is plotted on right hand axis.)
Source: FAO Data

10. Most SSA countries remain at very low levels of fertilizer use
Abuja Declaration = political target of 50 kg/ha
Recommendations often in the 200 kg/ha (accompanied by organic matter).
71% of reporting countries < 20 kg/ha
Avg. 6-8 kg/ha, mostly cash crops
Share of SSA countries by level of fertilizer use (kg/ha
nutrient consumption per hectare in Africa is still quite low. The majority of countries consume less than 20 kg of nutrients per hectare (25 out of 35 countries that reported in 2008). Only five countries of the 35 countries for which data is available came close to or exceeded the Abuja target of 50 kg/ha.
Source: Seventh Progress Report January-December Implementation of the Abuja Declaration on Fertilizer for an African Green Revolution

11. Overview: Share of Fertilizer Use
While SSA has 12% of the world’s population and 23% the world’s agricultural lands, it uses 3% of the world’s fertilizers

12. Aspects of smallholder diversity that influence the virtual cycle between economic growth and poverty reduction: farm size & gender

13. Farm Size
Population growth is taking its predicted toll on farm size (Jayne, Chamberlin & Muyanga, 2011)
Growing rural densities: 25% of the rural population resides in areas exceeding 500 persons per square kilometer
Large & growing numbers of farmers on < 1 ha
In four country study of nationally representative household data:
Bottom 20% of farm population is approaching landlessness (w/ less than .5 ha).
Bottom 40% have less than 1 ha of land.
These farmers are primarily subsistence farmers, with little marketable surplus or use of improved inputs.
Only 20% of smallholders have more than 4-5 ha. This 20% that is creating the marketed surplus
Much of the growth comes from large and small commercial farmers, who can take advantage of input and output price signals and subsidies.

14. Farmers with land can commercialize, reaping higher farm incomes
(Jayne, Chamberlin & Muyanga, 2011)

15. Farmers with land can commercialize, reaping higher farm incomes
(Jayne, Chamberlin & Muyanga, 2011)

16. Farmers with land benefit disproportionately from support programs
(Jayne, Chamberlin & Muyanga, 2011)

17. Women also have trouble getting fertilizers
Female farmers are as efficient as males farmers
They produce less because they control less land, use fewer inputs and have less access to important services such as extension advice.
Closing the gender gap could
increase agricultural output in the developing world by 2.5–4 percent
Reduce the number of undernourished people by 12–17 percent
Source: FAO’s The State of Food and Agriculture : Women in Agriculture - Closing the gender gap for development.

18. Implications
We need to rethink inputs interventions to ensure that a far greater share of smallholders can engage in growth processes.
Approach: address constraints along the two interlinked value chains that influence farmer access, availability and utilization of fertilizers

19. Approaches to improving fertilizer markets for all

20. The Double Value Chain for Inputs
Farmers’ decisions to invest in soil fertility and productivity is influenced by
Output markets
Input supply chain
Which are themselves highly interlinked

21. Unprecedented high prices for food, fuel & fertilizer

22. Fertilizer Retail Prices in Africa

23. Fertilizer Price Formation, an example

24. Lack of profitability at farm level
Benefit Cost Ratios for a 2011 study of 8 African countries indicates:
Fertilizer adoption at market prices not profitable (using 0 > BCR < 2.0)
Even at subsidized rates, fertilizers are often only marginally profitable
Especially when if subsidy is stand-alone rather than part of a larger agricultural support package with improved seed, farmer credit and technical assistance)
Source: forthcoming AGRA/NEPAD/AU/IFDC study of Best Practices and Policy Options for Implementing Fertilizer Subsidy Programs Successfully in Sub-Saharan Africa

25. Fertilizer requirements to meet agricultural policy objectives
IFDC studies quantities of fertilizer needed to meet production targets laid out in country implementation plans under CAADP (forthcoming)
From zero to doubling, depending on targeting strategy

26. Making Fertilizer Markets Work for All
Supply side interventions to decrease costs along the supply chain
Make fertilizer itself more efficient: new technologies
Decrease supply chain costs
Improve port capacity, transportation networks, warehouses
Extend and deepen retail into rural areas
Transport, warehouses
Agro-dealer training, certifying, financing & networking
Financing different levels of supply chain (e.g. African Fertilizer & Agribusiness Partnership initiative of AGRA)
Policies that promote private sector (get govt out of distribution) & develop local fertilizer resources (blending, phosphates)

27. Making Fertilizer Markets Work for All
Demand side interventions to improve farmer awareness on the benefits of fertilizer, its availability and affordability.
Related to fertilizer itself
Increase use efficiency (and thus profitability) through farmer training (extension), promotion of complementary packages (integration of Inorganic & organic soil fertility management, improved seed, irrigation, equipment, etc)
Policy: smart subsidies, fertilizer market information
Financing: smart subsidies (vouchers)
Information
Related to output markets
Invest in R&D to enhance productivity for viable subsistence smallholders (e.g. land saving technologies for those < 1 ha). (Jayne, 2012).
Market information systems: “smarter”, SMS based input price info (e.g., AMISTA
Finance: mobile-phone based money transfer service e.g., M-Pesa in Kenya
Risk Management: crop insurance & other risk sharing investments
Link inputs and outputs markets

28. Fertilizer Subsidies, smart & otherwise
Controversial but increasing in use (Dec 2010)
76% of reporting countries had fertilizer subsidies.
35% used input vouchers to administrate their subsidies
18% had fertilizer-for-work programs.
Methods to import & distribute subsidized fertilizers vary:
18% relied on gov’t importation and distribution
24% relied on private sector importation w/gov’t distribution
35% relied of gov’t importation and mix of govt & private distribution
Tanzania alone has importation and distribution of fertilizers for the subsidy program by the private sector only
Abuja Declaration Resolution 5 calls for improving farmers’ access to fertilizer by granting targeted fertilizer subsidies, with special attention to poor farmers.
Source: Seventh Progress Report January-December Implementation of the Abuja Declaration on Fertilizer for an African Green Revolution

29. Fertilizer Subsidies, smart & otherwise
Many lessons learned, including
Effectiveness increases when twinned with complementary inputs: soil nutrient testing, credit, quality seed, extension services, market information, market linkages
Need to accompany vouchers with other measures to target to resource-poor farmers, accompanied by:
A government-backed credit programs (credit guarantee, crop insurance scheme, etc.)
“subsidy for public works” that allows poor farmers to exchange labor to “top-up” the voucher
Accompanying need for data, monitoring, impacts assessment, policy analyses, learning

30. Successes at linking inputs & outputs
The Ghana Grains Partnership: comprehensive input supply program including credit and technical assistance as well as marketing of the final crop for farmers, creating a fully linked value chain. 
Syngenta Foundation financed initial inputs credit revolving fund.
Wienco (a jointly owned Dutch/Ghanaian company) provides seeds, fertilizers and chemicals on credit to well organized farmers groups following specific criteria.
The Municipal Agricultural Development Unit (MADU) provides technical support in the form of training and demonstration.
Farmer commits land and labor.
The maize growers’ association
Stabilizes prices and provides market linkages by purchasing the farmers’ total maize crop (recovering the inputs credit received), and storing maize in rented warehouses.
Manages a revolving credit fund (originally funded by Syngenta Foundation), which serves as a catalyst for wider private sector participation in rural agricultural finance
One Acre Fund in East Africa
Warehouse receipt systems (ex. IFDC’s Non-Cotton Inputs Programme in Benin, funded by DGIS)

31. Conclusions
We now have the knowledge and tools for improving the performance of the fertilizer sector through private-sector focused value chain interventions.
For agricultural growth to trigger virtuous cycles of poverty reduction, interventions reach not only commercial farmers but also subsistent smallholders
Fertilizers must become more profitable for all (decrease costs, increase efficiency)
Measures to generate farmer demand for fertilizers are critical and require tighter
Linkages to output markets
Much more attention to targeting the vast number of smallholders at risk of missing the boom.