Servicing Smallholders for Market Access Ramatu M. Al-Hassan Department of Agricultural Economics & Agribusiness University of Ghana Legon

Introduction Improved market access to smallholders well recognised as route to improving agricultural production and reducing poverty What types of strategies exist in Ghana? Do they address needs of smallholders? What options are available? 10/11/20142

What does Improved Access to Markets Mean for Smallholders?  Physical access to markets (transport systems, storage)  Information about market availability, market requirements, prices to improve decisions  Capacity to respond to markets (quantities, quality, timing of deliveries  resources, skills)  Benefit from responding to market requirements (price levels, price stability, promptness of payments)  Improving market access of smallholders implies enabling them to participate in a commodity value chain 10/11/20143

What smallholders need to access markets Good Transport system Good storage Market information – where is the markets, what does the markets want, what rules and regulations govern the market (standards) Resources for production Technical information and skills for production Business advisory services Mediation; trust 10/11/20144

Smallholder market access strategies Agri-business-farmer partnership appears to be dominant strategy for linking farmers to markets Market information networks 10/11/20145

Business-Farmer Linkages (1) Interests of smallholders Access to inputs Access to product markets Access to services (market information, technical production information, finance) 10/11/20146

Business-Farmer Linkages (2) Interest of Agribusiness Fill supply gap Access to labour Access to land 10/11/20147

Forms of strategies to link farmers to markets Informal – unmediated e.g.: staples  domestic markets horticulture  low end export markets Players are farmers & traders 10/11/20148

Formal linkages…  Short-term (seasonal) partnerships: ◦ Processor/trader/exporter and farmers negotiate terms at beginning of each season (e.g. domestic fruit processor)  Nucleus farmer/processor/exporter – outgrowers (more than a buyer-seller partnership) ◦ Some resource exchange (agro-inputs to outgrowers) ◦ Quality specifications – from product to process  e.g. High value export horticulture; domestic poultry  Farmer-owned company model (export horticulture; domestic staples) 10/11/20149

Nature of formal partnerships Mediated partnerships between farmers and agribusiness (NGOs, Development projects) Initiated by agribusiness Nature of Mediation Build capacity of smallholders to: Bargain with agribusiness Access services (extension, financial, market information; business development services) 10/11/201410

Sources of variation  Market destination – domestic or export  Type of commodity ◦ Staples: Domestic, informal partnerships with traders ◦ Industrial (oil palm, cocoa, citrus, cassava): Domestic/export, formal outgrower schemes ◦ Horticultural: Export/domestic, formal outgrowers, informal spot market 10/11/201411

Assessment Market linkage arrangements biased towards horticulture export commodities Largely successful  rapid growth in exports of NTAE albeit problems of standards Majority of smallholders still rely on domestic spot markets for staples Challenge is to transform this market as an integral part of agricultural modernisation efforts 10/11/201412

What is needed Private sector interests in developing the markets for staples Link trade to sub-regional markets 10/11/201413

Opportunities  Market Information Systems and Traders’ Organisation of West Africa (MISTOWA) to increase sub-regional agricultural trade  At least 20 agribusiness market information points in Ghana  Ghana Agriculture Producers & traders Organisation (GAPTO) actively involved  Market information shared through SMS and TradeNet website  Buyers and sellers conduct e-commerce  Large informal cross-border trade 10/11/201414

Including Smallholders on the platform Private sector participation as: Commodity Brokers Warehouse operators and collateral managers at the regional level starting with grains Well-organised delivery systems Ultimate is for a commodity exchange 10/11/201415

NECESSARY ELEMENTS OF A VIABLE COMMODITY EXCHANGE

Benefits  Market discovery and transaction costs are reduced  New commercial or credit-related contacts become possible: exchange can be depended on to evaluate risk of potential clients  Information is generated on current and future market opportunities  Market risks are reduced: vetting by brokers; blacklisting unreliable buyers and sellers; possible recourse to arbitration in case of contractual problems.  Risks related to product quality are reduced, because the exchange can define quality and grading standards, and may also offer its own facilities for grading. 10/11/201417

What is required of the Private sector initiators  Develop the necessary skills to understand commodity exchange operations, and build up the institutional capacity for the operations  Support a public relations and awareness raising campaign to make a larger public aware of commodity exchange operations  Interact with government to identify and remove barriers to commodity exchange establishment and operations.  Adopt a partnership model – cooperating with banks, warehousing companies and collateral managers, and government entities.  Consider a commodity exchange as a service provider rather than as a business competitor (market queens). 10/11/201418

Conclusion Foundation laid in MISTOWA initiative which only collects and shares market information. Time to share experiences and views about alternative market access arrangements for domestic staple crops Exchanges are working elsewhere e.g. Maize and beans in Kenya (KACE and its market information and linkage system) MOFA and MOTI&PSI should pay some exchanges a learning visit 10/11/201419