Agricultural Input Quality in Uganda: A Private Sector

Copyright © Agilis Partners Limited, 2015

Agricultural Input Quality in Uganda: A Private Sector Perspective

Benjamin Prinz and Philipp Prinz

Agilis Partners Limited 16 September 2015


Agilis Partners is an agricultural development company with interests across the value chain

Storage and primary processing Processing and storage facilities in Masindi, Kasese and Mubende

Grain merchandising and distribution Our customers include leading regional buyers

Agricultural development and commodity sourcing • Network of over 60 input retail and collection centres • 150 input sales representatives and village agents

Farming and production support • 25,000+ farmers • Large-scale soybean, maize and rice production

JI Village Agents

Processing & Storage Network

Market

Rural Agricultural

Dev. Centres


Why does this topic matter to us as a farmer?

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

50

0

62

5

75

0

87

5

10

00

11

25

12

50

13

75

15

00

16

25

17

50

18

75

20

00

21

25

22

50

23

75

25

00

26

25

27

50

28

75

30

00

Uganda Shillings

Yield per acre (kilograms/acre)

Impact of yield and expenditure on profitability

Revenue

Expenditure

ILLUSTRATIVE

Weed control

Hybrid seeds

Basal fertiliser

Top-dresser fertiliser


Why does this topic matter to us as a grain merchandiser?

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

0

20

40

60

80

100

120

140

160

500 750 1000 1250 1500 1750 2000 2250 2500 2750 3000 3250 3500

MT of throughput at facility

(25% of total supply) USD / MT

Yield (kilograms/acre)

The impact of production density on capital rental rates

Our supply access (25% of all supply)

Capital rental rate per MT

Annual processing capacity and supply availability

Total annual processing capacity 115,200

Total acres available 97,812

Capital services requirements

Capital investment 7,500,000

Years to return capital 7

Required IRR 15%

Annual capital service 1,714,286

ILLUSTRATIVE


A multi-dimensional challenge prevents producers from achieving their productive potential

Ugandan farmers lack reliable & value

responsive markets. Because today’s markets do not differentiate for quality and are highly unreliable, farmers do not invest in intensive

agricultural production.

Co

mp

etitive

Markets

The productive yields of the industry are fractions of the potential yield. High yield variety inputs are rarely

genuine, always costly and largely inaccessible.

Agricultural Services

Access to financial services to bridge the

working capital requirements between planting and harvest is limited by substantial

risks in today’s system. Fin

anci

al S

erv

ice

s


These market failures perpetuate poor quality and low uptake in the Ugandan agri-input industry.

• Low competition in the input retail industry and limited verifiable real-time information on quality of product (i.e. reputation risk takes a long time to catch up to the retailer) enable short-term profit maximization.

• Output market risk and limited liquidity drive high price sensitivity and low demand for differentiated inputs. This disincentivises input manufacturers and retailers to differentiate product.

• Farmers misconceive the value of inputs due to improper use. This drives low demand for inputs. This disincentivizes input manufacturers and retailers to differentiate product.

• Ineffective implementation of regulatory frameworks / consumer protection enables fraudulent business practices to thrive.


Agricultural Seeds and Plant Act of 1994

• Establishment of a National Seed Industry Authority: ‘There is established a National Seed Industry Authroity’

• Roles of the Authority: ‘Establishing a system of implementing seed policies…coordinating and monitoring the public and private seed sector’

• Labelling and packaging: ‘All seed offered for sale shall be properly labelled and sealed…Any person who sells for sowing any seed under a description other than its varietal name commits an offence.’

• Quality verification: ‘All…domestic varieties of seeds or breeding materials shall be tested for a minimum of three successive generations before their release’

• Consequences: ‘Forfeiture or destruction without compensation of that substandard prescribed seed.’


Our solution to this challenges starts with end-to-end intensification and integration of the agricultural value chain

Jose

ph

In

itia

tive

Tec

hn

olo

gy

Pla

tfo

rm

Competitive Markets

Agr

icu

ltu

ral

Serv

ices

Finan

cial Services

JI Village Agent

Joseph Center

JI Village Agent

Joseph Center

JI Village Agent

Structurally Aligned

Efficiently Capitalized

Regionally Integrated

Transparent & Formal

Kampala Juba Nairobi Kigali Bujumbura

Processing Network

Reta

il &

Co

nsu

mer

Po

st-

Harv

est

Man

ag

em

en

t &

Dis

trib

uti

on

Pri

mary

Pro

du

cti

on

Uga

nd

an S

up

ply

Reg

ion

al D

eman

d


This supports a village-based smallholder development ecosystem that addresses input, output and capital market failures in-unison.

Production: We stock high quality productive inputs like seeds and fertilizers. We negotiate with suppliers to obtain bulk pricing, guarantee genuine products and we localize distribution through our Joseph Centre’s production storage centres and human network.

Market: We are the only reliable and value responsive buyer of maize grain accessible to smallholders. Our fluid access to regional markets and working capital and our village-based penetration, increases farmers’ liquidity, reduces market risk and drives demand for quality inputs.

Finance: We arrange financing for farmers in partnership with Opportunity Bank. Our post-harvest and marketing capabilities and infrastructure reduce default risk and ensure farmers’ bankability; our village network of thousands of farmers delivers transactional volumes for lenders.

Production

Currently, we operate 60 rural input distribution and

grain collection hubs


We are strengthening the production link of the agricultural value chain.

• As a production nucleus, Asili Farms enables rapid commodity diversification and reduces raw material risk. This supports Agilis’s investments in post-harvest and grain merchandising infrastructure by increasing throughput.

• Bulk injections of over USD 1,000,000 in input purchases strengthen local and global suppliers’ ability and interest to serve the local industry.

• Asili Farms functions as a technology transfer center where we test and transfer technology to smallholders who supply the Joseph Initiative.

Asili Farms Farmer Appreciation Day Season A 2015


Proposed intervention priorities

• Regulate the industry to drive accountability and eliminate today’s widespread fraud

• Promote real-time dissemination of information on quality of agri-inputs • Increase public sector support of intensification of agricultural production (5-

5,000 hectares farmer) to leverage private sector accountability to strengthen the industry and its ability to serve smallholders

• Discontinue donor support for enterprises that engage in fraudulent business practices or supply poor-quality inputs

• Increase public sector support of formal-sector off-takers to spur farmer demand for high quality inputs by reducing market risk for the farmer

• Finance innovative solutions to quality input preservation and distribution to spur farmer demand

• Continue investment in extension services to promote optimal use


Documents

Agricultural Input Quality in Uganda: A Private Sector