Woolverton FAO Nairobi Research Towards a Commerical Model

7/22/2019 Woolverton FAO Nairobi Research Towards a Commerical Model

1/28

Towards a Commercial Model: The Kenya MaizeFarmers Perspective

Andrea Woolverton, Ph.D.Food and Agriculture Organization of the UN

Regional workshops Towards an Integrated Policy Approach toSmallholder Coordination

Nairobi, KenyaJune 6, 2012


2/28

Presentation Objectives

Project Background: Agricultural Transformation

and Commercialization

Discuss our preliminary research findings.

The question of the day: How can these findings

be used to create policy options that can beputinto action incorporating linked issues?


3/28

Agricultural Transformation

Simple, yet so complicated.


4/28

The focus has largely been on production

Less on.


5/28

Fluctuations are found in maize availability and

price during the year--- a boom and bust cycle.


6/28

The Project: Smallholders Perspective

in Smallholder Transition

Small producers (


7/28

Using

savings andloans,

I invest incrop

productionbecause I think

the return willbe greater than

the cost.

I make plantingdecisions by

estimatingexpected

returns andcosts.

I incorporateeffective

productionpractices into

my cropmanagement.

I manage for

the highestoutput.

Ireduce price-risk

through

riskmanagement

strategies

I

plan forselling

by separatingmy food

stocks fromselling stocks.

I

managemy

harvestedmaize

qualityaccording to

marketspecifications.

I sell to the

buyer whooffers the bestarrangement

for me.

Icaptureseasonal

valuethroughstorage.

I calculatemy

returns atthe end of

theseason.

A Commercial Farming Model for Tomorrow:

The Farmers Perspective of Maize as a Business

Producer objective:

As an agribusiness, my objective is to maximize my household income relative to my costs.

Source: Woolverton, 2012.

Surrounding agri-industry environment

Accessible price informationEnabling, enforceable lawsResponsive credit industry

Quality and trading standardsAgribusiness service providersRisk management instruments

The cycle continues from season to season.


8/28

Using

savings andloans,

I invest incrop



the cost.


estimatingexpected

returns andcosts.



my cropmanagement.

I manage for

the highestoutput.

Ireduce price-risk

through

riskmanagement

strategies

I

plan forselling



I

managemy

harvestedmaize

qualityaccording to


I sell to the


for me.

Icaptureseasonal


I calculatemy


theseason.

A Commercial Farming Model for Tomorrow:

The Farmers Perspective of Maize as a Business

Producer objective:



Surrounding agri-industry environment

Accessible price informationEnabling, enforceable lawsResponsive credit industry




9/28

Using

savings andloans,

I invest incrop



the cost.


estimatingexpected

returns andcosts.



my cropmanagement.

I manage for

the highestoutput.

Ireduce price-risk

through

riskmanagement

strategies

I

plan forselling



I

managemy

harvestedmaize

qualityaccording to


I sell to the


for me.

Icaptureseasonal


I calculatemy


theseason.

A Commercial Farming Model

Producer objective:



Surrounding agri-industry environmentAccessible price information

Enabling, enforceable lawsResponsive credit industry




10/28

Maize Producers in Transition

Who is the maize farmer? Does producers WANT to stay in agriculture?

Commercialization Benchmarking

Attitudes and Objectives

Planning: Estimating Costs and Returns Planning: Selling vs. Keeping

Maize Quality Management

Marketing: Choosing a Buyer

Marketing: Temporal Arbitrage (seasonal)

Method:

500 producer survey in Bungoma and Meru (June-August 2011)---

supplemented by producer focus groups


11/28


12/28


13/28

SampleBungoma (n=273) Meru (n=227)

Age 46 45

Education 9 years 7 years

Gender 48%F/52%M 38%F/62%M

Married 86% 71%

Land size 3.4 acres (2.2 maize) 2.1 acres (1.8 maize)

Dist to mkt/ext office 7 km mkt/6.5 km ext 20 km mkt/13 km ext

Household members 7.6 members 5.4 members

Diversification 5.5 crops 4 crops

Wealth Index 1.18 0.66

Own cell phone 77 % yes/ 23% no 60% yes/40% no

MARKETING

Maize Harvested 1264 KG (14 bags) 1127 KG (12 bags)

Sales/Purchases Sold 36%/Purchased 11% Sold 51%/Purchased 15%

Avg Prices/KG Sold 28 Ksh/Purchased 46 Ksh Sold 26 Ksh/Purchased 27 Ksh


14/28

Who is the maize farmer?

Who makes these decisions? Female Decision-makers Male Decision-makers

Crop mix for the season 90% self/10% otherwise 90% self/10% otherwise

When to plant and harvest 95% self/5% otherwise 88% self/10% otherwise

When to use fertilizer and qty 80 % self/20% otherwise 92% self/8% otherwise

To sell or store harvest 72 % self/28% otherwise 83% self/17% otherwise

Who to sell to and price 52% self/48% otherwise 80% self/20% otherwise

The farmer is a partnership---communication is key forcommercialization.


15/28

Part 1: Outlook for AgricultureBungoma Meru

5 year plan? 88% across sample would like to be more engaged in

agriculture.

Crop to provide opportunity

for youth?

Hybrid maize (30%), beans, kale, tomatoes

Grant of 50K 82% Agriculture 86% Agriculture

What would you invest in? Rent land for maize (42%), rent land for other crops (14%),

Purchase tools (9%), Hire labor (8%), Buy seed/fert (7%),

Invest in agriculture training (2%), other (18%)

Aside from agriculture? Business


16/28

Objectives and Attitudes

Bungoma (n=273) Meru (n=227)

Mean

Why do you grow maize? Food (90%), Immediately for cash and school fees

(10%)

Do you prefer to grow or buy maize

for your household consumption?

Yes 96%/ NO 4%

Is the maize available for purchase

higher, lower or same quality?

Lower (93%), Same 6%, Higher (1%)

Most small maize farmers do not see maize as an income generator---the food incentive appears to outweigh the income incentive at this stage.


17/28

Objectives and Attitudes

Bungoma (n=273) Meru (n=227)

Mean (Strongly agree/agree)

Farming is a real business.* 97% 95%

I view myself as a commercial

maize farmer.*

21% 22%

If I sell all my maize at harvest,

there will be enough to purchase

later.

17.2% 16.8%

Storing my maize for 2 months

after harvest would allow me to

sell my maize at a higher price.

91% 95%

The security of working for

someone else outweighs running

my own business.

3.7% 7%

*The more farmers agree, the more likely they are to have higher wealth and income.


18/28

Planning: Costs and Returns/Selling vs.

Keeping

At harvest, I plan for how much to sell and how much to keep to eat: 57%

Of those that are planning,

50% keep some

22% no surplus 26% keep what is left after cash requirements

2% keeps per household member

Did the amount of food kept for food last from long rains until short rains? 34% NO/ 66% Yes----(Why not? Consumed more than expected; had to sell for cash)

Bungoma MeruAt planting, I expect to receive a

certain price upon selling.

51% Yes/ 49% NO 50 % Yes/50% NO

I check prices in town before

selling at farm gate.

91% Yes/9% NO 89% Yes/11% NO

I know the current price in theChwele/Meru Town market?

34% Yes/66% NO 46% Yes/54% NO


19/28

Planning: Costs and Returns/Selling vs.

Keeping

Maize as a business (namely: planning) is a

new concept

We dont think about next season

Plant and fertilize what they can afford

Often sell at farm-gate without checking prices

Some trying to plan for familys maize needs


20/28

Maize Quality Management

We asked farmers if they believe maize quality

management could impact price received: color,

broken kernels, foreign material, moisture.

Most farmers say yes regarding price impact, butmanaging moisture was the most common

activity actually engaged in.

There was a wide range in the acceptable levels.(40%) Between 10-20%, (22%) 3%, (15%) Dont

know.


21/28

Marketing: Buyer Choice

Western Eastern

Selling outlet Female Male Female Male

Farm gate trader 11.5 9.9 4.3 2.8Local rural assembler/broker 19.7 19.8 32.6 39.8

Large local trader (lorry) 9.8 6.6 15.2 8.3

Large distant trader (100%) 0.0 2.2 2.2 0.0

NCPB (least % preferred) 0.0 1.1 6.5 0.9

Small (posho) miller 3.3 3.3 0.0 0.9

Nearby town market 9.8 13.2 28.3 33.3Direct consumer 31.1 24.2 6.5 6.5

School 14.8 18.7 0.0 1.9

Cereal bank 0.0 0.0 4.3 3.7

Large miller 0.0 1.9

Agro dealer 1.1 0.0

Do you sell to the buyer you prefer?Anywhere from 30%-80% are selling to buyers they prefer.


22/28

Marketing: Buyer Choice

Why do you trust this buyer ?

Price is not the only reason. Accurate measurement and prompt

payments are competing issues.

Western Eastern

Reason for trusting the outlet Female Male Male Female

Can negotiate prices 13.7 8.9 5.6 6.1

Measures my maize accurately 16.2 21.1 19.9 19.0

Offers me a good market price 16.2 24.0 24.8 24.0

I can contact this buyer after harvest 9.1 7.7 8.7 10.3Pays me promptly 26.9 20.7 29.2 29.3

Does not disappear with money 10.2 6.5 6.8 6.1

Buy in large quantities 2.0 5.3 2.5 3.4

Knows him personally 2.0 1.2 1.9 1.5

Picks at the farm gate 3.6 3.7 0.6 0.4

Offers me credit 0.0 0.8


23/28

Marketing: Seasonal Arbitrage

Storage Options

76% store at home

Why?

30% Not enough maize for storage requirements

24% Lack of information about storage

18% Fear of theft

10% No facility

10% Fees are too expensive

3% Too far away


24/28

Marketing: Seasonal Arbitrage

Constraints

Percents within Length of storage (months)

Factor preventing longer storage 1 2 3 4 5 6 7 8 9 10

My storage is susceptible to pest infestation 14.3 8.6 12.4 18.4 31.6 45.8 25 50 0 0

My storage is susceptible to theft 0.0 0.0 0.0 2.6 0.0 0.0 0 0 0 0

My storage is susceptible to mould or aflatoxin 3.6 0.0 11.4 5.3 5.3 4.2 0 0 0 0

I have to pay school fees 17.9 19.0 11.4 15.8 15.8 20.8 0 25 100 50

I have to pay immediate cash needs 53.6 43.1 44.8 42.1 36.8 29.2 25 25 0 50

Did not harvest enough to store 10.7 22.4 14.3 10.5 10.5 0.0 25 0 0 0

Consumed all stored maize 0.0 6.9 5.7 5.3 0.0 0.0 25 0 0 0Majority believe storing for 3-4 months post-harvest would bring better price, yet

we find that few are doing able to do this.

Ch ll t i li ti


25/28

Challenges to commercialization:

Farmers Perceived Constraints (vs. ?)Western Eastern

Access to Fertilizer/chemical

inputs1.36 1.18

Access to high quality seeds1.63 1.31

Access to credit for agricultural

inputs2.07 2.07

Access to credit for school fees2.15 2.09

Access to land for agricultural

production2.15 1.94

Access to water/irrigation2.18 1.41

Access to transportation2.21 1.75

Ability to store maize2.21 2.09

Access to hired labor2.24 2.16

Access to production training2.31 2.33

Access to family labor2.49 2.38

Access to marketing training2.49 2.47

Access to child care

2.57 2.63

Scale: 1=Serious Challenge..3=Not a challenge; Note: 50% had never heard of AFC


26/28

Breaking the poverty cycle

Historically, farmers have not

transitioned alone in any part of theworld.


27/28

Policy recommendations for

an Enabling Market EnvironmentExtension

Inputs

Training

are not new and they remain critical to build a strongprivate maize sector, including smallholders. Yet, they are

often general and difficult to implement.

In the next few days, how can you design

recommendations that can be implemented?

Which area is the most important focus right

now?


28/28

Thank you.

Feel free to contact at

[email protected]

Documents

Woolverton FAO Nairobi Research Towards a Commerical Model