How agricultural markets are largely misunderstood

How agricultural markets are largely misunderstood

When policy makers, development agencies, the private sector and ordinary people talk about agricultural markets, they rarely talk about consumer power.  There is often too much emphasis on producers, financing, cold chain, transportation, value addition and processing, yet all these are meaningless if efforts are not devoted to understanding the consumer base.  Farmers and financial institutions may put all their energy and resources in agriculture production but they will lose income unless there are enough consumers to make farming profitable through purchasing power.

The consumer base is about the size of population

Investors and government departments can put in place the right cold chain, transportation and appropriate infrastructure but if the consumer base is too small and consumers do not have sufficient buying power, the notion of making agriculture viable and sustainable remains a dream. Demand is often given.  For instance, consumers do not start consuming more portions of food merely because there is surplus food on the market.

A household of six people will not change the pot size and start eating more merely because suddenly there are more tomatoes, meat, pulses or any other commodity. Appetite remains the same and that is why gluts are common where production is not matched with demand. VaPositori do not switch from their religious practices to start eating pork merely because pig production has gone up.

 

What does market advice mean under correct circumstances?

Contrary to policy makers who think production is more important than demand from consumers, stimulating production and providing market intelligence may imply advising farmers, irrigation schemes, parastatals and other food producers to reduce the size of land in response to the consumer base and consumption patterns. In most cases, consumers are already being served by existing producers and markets such that any increase in supplies of commodities risks distorting the market in ways that significantly slash incomes for farmers and other food producers. Decisions to put several irrigation schemes under crop production can undermine existing production practices when current producers are already failing to earn profit from the current consumer base because consumers are few and cannot afford to pay more due to lack of employment and other sources of income.

 

Need to revisit role of agricultural policy makers

In many African countries, ministries of agriculture and marketing authorities are over-extending their reach and muscling out the private sector.  Unless it is for supporting food security, when ministries of agriculture over-participate in production and markets, they destroy the appetite for the private sector to invest in agriculture. Ministries of agriculture and marketing authorities should mainly focus on creating an enabling environment and regulating the market space so that there is fair distribution of income and wealth from agriculture. If marketing authorities go around rehabilitating irrigation schemes and livestock marketing infrastructure, what will the private sector and farmer unions do?

 

When government departments and marketing authorities invade other actors’ mandates, they undermine commercialization of agriculture. Clear role definition can strengthen food production and stem overlaps as well as duplication of efforts. More importantly, markets are more than infrastructure. Travelling across Africa, one of the common sights are abandoned market sheds, livestock sales pens and other forms of infrastructure not being used because those who set them up did not consult the consumer base, users and consumers.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile: 0772 137 717/ 0774 430 309/ 0712 737 430

Written by Charles Dhewa

Charles Dhewa Agricultural Knowledge Broker Charles Dhewa is the CEO of Knowledge Transfer Africa, which he founded in 2006 after realising that agricultural value chain actors in developing countries needed a knowledge broker to keep reminding them of what they could be forgetting and under-estimating. Working at the intersection of formal and informal agricultural markets in Zimbabwe, his organisation has setup a fluid knowledge and information platform called MKambo which tracks, trends and ensures agricultural value chains are driven by knowledge, technology and innovation. Charles is always clarifying opportunities and influencing policy through his thought leadership blog ‘eMKambo’.

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