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Smallholder Food Marketing Behaviour: Exploring the Role of Informal Credit and Traders in Stabilization of Food Crop Prices
67-82Views:132Many farmers in Africa sell their produce at low prices immediately after harvest because they need cash. They could solve temporary liquidity constraints by use of credit and store their produce to sell when prices are high. However, due to various reasons such many poor farmers have been excluded from formal financial services. In response, the informal financial market has expanded, but the question why informal credit has not facilitated storage to enable farmers benefit from intertemporal arbitrage opportunities remains largely unanswered. To answer this question, we investigate the role of informal credit markets and traders in stabilizing seasonal food crop prices. Our analysis is based on a household survey data, and in-depth interviews with key players in the informal credit market and grain traders in rural southwestern Uganda. We find that community-based self-help savings and credit associations provide credit for the majority (62%) of farmers. Informal credit still excludes the very poor and is not sufficient to enable farmers benefit from intertemporal arbitrage opportunities. Thus, poor farmers continue to ‘sell low and buy high’. The study also addresses a related fundamental aspect of food marketing: why is there no competition between traders bidding up prices after harvest and eliminating seasonal price fluctuations? We analyse traders’ costs and profit structure in the study area, and shed some light on imperfections in the grain market and the barriers that limit competition between traders. We find that grain trade is not highly competitive. High transaction costs and limited access to credit are the main barriers limiting competition. Supporting community-based self-help savings and credit associations to raise their portfolio can enable more farmers to borrow at the same time. Investing in infrastructure, organising and supporting small scale farmers to bulk their produce might lower transaction costs, promote competition and dampen price fluctuations.
JEL Classification: D53, O13, O16, Q12, Q13
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Effect of Training on Small-Scale Rice Production in Northern Ghana
13-20Views:175Training in modern farming methods enables farm households in developing countries to improve agricultural productivity. Notwithstanding the efforts of governmental and non-governmental organisations to provide farmers with agricultural training, productivity remains low. The existing literature provides little empirical evidence of the effect of training on agricultural productivity in Ghana. This study therefore seeks to bridge this gap by investigating small scale rice farmers’ participation in agricultural training programmes and its effect on productivity in northern Ghana. A treatment effect model was used to account for sample selection bias. The results indicated that participation in training increased with the number of extension visits, group membership, access to credit and the degree of specialisation in rice production. Furthermore, total output and labour productivity both increased with participation in training but the relationship with land productivity (yield) was insignificant. On average, participation in training was associated with 797kg increase in rice output, while labour productivity increased by 7.3kg/man-day. With the exception of farm capital, all the production inputs had a positively significant relationship with output suggesting sub-optimal use of capital in production. The study concludes that farmers’ training needs are not adequately being met while inadequate capital is constraining farm output. Increasing access to extension service and involving farmer-based organisations in the design and implementation of training programmes will enhance participation and farm performance.
JEL Classification: C21, D24, Q12
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