Agricultural value chain: an approach to agribusiness 8
How to Link farmers with market opportunities
Markets Linkages connect the organizations involved in producing the products and delivering the services for any and every market. As such when linkages are absent or weak, markets become inefficient. Businesses operating in developing countries with poor linkages are often forced to source goods and services from outside the local economy. The benefits of investing in linkage development are significant. Whilst linkage creation does take time and effort, linkages enable long term market development and deepening, drive cost and efficiency savings and support inclusion of the poor in the market economy. Thus, through supporting the development of market linkages, businesses can ensure that their short term investment has a long term impact that will ultimately lead to improved local capacity, create jobs and accelerate growth.
Many large firms have long recognized the need to build linkages along their supply and distribution chains (e.g. NESTLE Nigeria). Building linkages improves the efficiency, by not seeking ways in which to build the capacity of local farmers and marketers so that they can undertake to provide large firms with goods and services, all stakeholders are missing an important opportunity.
Advantages of Market Information and Linkages
Market information and linkages can create avenues that can bring the markets to the farmer. Various channels could be identified and farmers linked to those channels that suit their needs. The following channels are very important and they often vary according to the type of agricultural produce. Fresh produce is normally sold through markets, either formal markets, set up by central or local government, or informal markets, where trade has spontaneously developed. The main types of markets are described below. However, the creation of some enabling platforms that can help improve the relationship between farmers and markets through proper policy formulation is important in a deregulated economy. Conventional market types are as follows:
i. Wholesale Markets: Wholesale Markets are centres for the sale of farm produce in bulk.
ii. Retail Markets: These markets are spread throughout the country in major population centres. Produce at these markets are for direct sales to consumers.
iii. Farmers - Markets: These markets are for farmers to sell their produce directly to the public. Generally, smaller farmers, and those with specialized produce operate in these markets.
iv. Supermarkets: Supermarkets provide a one stop facility for the consumer to get all their food items inclusive of fresh produce. Most supermarkets in the country sell fresh produce. Produce is washed, graded and packaged for easy purchase by the consumer. These outlets provide an opportunity for marketing of produce at a premium price. What is required is consistency in supply and quantities.
v. Hotels, Restaurants and other Institutions: These outlets also provide another marketing point for produce. They provide an assured market. They prefer to purchase from a single supplier who can provide all of their needs at a negotiated price that can be more favourable to the farmer.
vi. Distributors: The rapid expansion of both international and local fast food outlets has created the need for bulk supplies of fresh produce. Distributors provide this service through purchases from various suppliers. They collect, store, wash, grade and package and transport to individual outlets.
Other Marketing Channels
(i) Farm Gate: On-farm or - farm gate - sales is where wholesalers and distributors purchase produce directly from farmers. They then arrange transport to processors, wholesale outlets, pack houses or directly to supermarkets.
(ii) Road Side Outlets: There is a proliferation of these outlets located on major routes throughout the region. Producers have the responsibility to transport to these outlets. The quantities sold are small and prices received fluctuate.
(iii) Group Marketing: This arrangement allows for the bulking of produce, grading branding and packaging. Using this approach allows producers to pursue multiple marketing channels.
(iv) Internet Marketing: Internet marketing of fresh produce is relatively new. This type of marketing can be focused on customers who require a higher quality product delivered to them. They are willing to pay premium prices.
(v) Contract Marketing: With contract marketing the producer sells to a buyer under a contract arrangement. Agreements may be formal i.e. a written contract or informal. The contract arrangement usually covers the quality requirements of the buyer as well as the price, quantity, timing, method of delivery and packaging.