AGRICULTURAL VALUE CHAIN: AN APPROACH TO AGRIBUSINESS 7
Agricultural Market Information
Introduction
Operating an agribusiness enterprise is no different from any other business, be it manufacturing retailing or services, such as banking and insurance. The underlying objective is to satisfy the customers need and to do so profitability. Marketing is at the core of any agri-business enterprise. Knowledge of the market will guide the production of products that when sold will provide the maximum net return. Due to the prevailing problems of limited information and knowledge, rural farmers have struggled with labor productivities, market-price driven decisions, small-scale productions, inadequate capital investments and exploitation by other traders which in turn decline the hope of improving their main source of income. Therefore, the accessibility, the understanding and the usage toward market information are the key factors to enhance the efficiency of their production and marketing. Knowledge of marketing will help the enterprise make the following decisions:
- What to produce and for which market? For example, which tomato variety is best for the target market and what packaging is needed?
- Where and when to sell? Different products will have higher or lower prices throughout the year.
- How much of the marketing job can be done by the farmer as an individual or as a group?
- What can be done to expand markets? Improvements may be possible in variety, quality, packaging, transport, etc.
- Which marketing arrangements are more desirable? This may involve a choice between farm gate sales, wholesale or direct to retailers.
Market Information and Agricultural Market Information
Information systems are fundamental to the creation of sustainable linkages. Good practice and innovation; disseminating knowledge (e.g. farming techniques) and market information (e.g. commodity prices) can help greatly towards improvement in efficiency. Market information Market information is facts and figures that will help farmers, consumers and others involved in the marketing process to make better decisions and minimize their risks. Market information may include the price of inputs, the current selling price of produce, potential buyers of the produce, quantities of produce required by different buyers, etc. Information and communication failures impact negatively on market linkages in a number of ways. In environments where local businesses have typically relied on informal networks to conduct business transactions, SMEs are often excluded from linking with viable business partners outside their networks (both regional and international) as they are unaware of many of the tender opportunities offered by larger firms.
Without formal information platforms, firms must rely on informal networks and feedback from competitors and partners to identify local suppliers. In order to overcome these challenges, many linkage initiatives should focus on interventions that aim to establish platforms and systems that collect, distil and disseminate information for both buyers and suppliers.
How does market information help farmers?
The benefits of reliable and transparent market information to farmers and traders in the various agricultural value chains include the following:
i. Better negotiating powers, especially of farmers, who are usually less well-informed about market developments than traders and other players further down the marketing chain, such as wholesale traders, exporters and large processors. This statement stresses that the information must be of good quality and not out of date. Especially, inaccurate information and data can lead to the wrong decisions. To strengthen their bargaining position, it is important that farmers have a good idea of market prices at different levels in the commodity chain, including what is happening on international markets since these determine export prices and ultimately farm-gate prices.
ii. Improved decision taking on where to sell, when to sell, and who to sell to are helped by reliable market information. It must be stressed, however, that although prices may be higher in locations outside of the farming communities, such as the urban centres, farmers and small-scale traders may not necessarily decide to sell in those markets since they also need take account of the transport and time costs, which will reduce their net margins.
iii. Timing of sales is particularly important for farmers and traders as there is the potential of earning more from delaying sale after harvest but at the same time there is the risk of prices falling. In Nigeria, where futures are not available, exposure to high price risk often discourages delayed sales. Another factor which often compels farmers to sell their crop early is the pressing need for cash to meet household consumption needs.
iv. Production planning: Market information can help farmers to plan their production. Especially with annual crops such as cotton and maize, farmers can quickly opt out of planting particular crops to alternative more remunerative ones. The same cannot be said of perennial crops such as cocoa and oil palm. However, unfavourable price trends over long periods will often discourage farmers from investing much in the maintenance of the cocoa farms and/or shift to the cultivation of other crops.
v. Quality related decisions: Buyers usually offer higher prices for higher quality produce. This means that sellers obtain what is described as a quality premium.
Sources of market information for farmers
- Traders/buyers
- Input trader
- Fellow farmers
- Media (newspapers, radio, television, farmer bulletins)
- Family and friends
- Agricultural extension officers
- Agricultural Research Institutes
- Internet
- Through phone calls
- Non-government organizations
- Farmers - groups
Types Market Information
Usually, entrepreneurs will seek information on how to make better decisions in the following areas:
Production information: which comprises the various techniques of production, all the agronomic practices down to the pre and post harvest best practices.
Marketing Information: this should include prices, various markets that offer different prices, input and output prices etc.
Financial information: various sources of finance and how to access them.
Linkages with other actors and various stakeholders along the value chain.