Information that Small Farmers in the South need

Market Related Information

A Date Market in Sanaa' Yemen

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Market related Information: Information that Small Farmers in the South need

Markets do not only enable trade in commodities. They also enable exchange of information about commodities. A perfect market is where there is total symmetry of information flows and equity of access to information for all actors about the marketed commodities. Market failures occur when there is asymmetry of information flows between actors in the market.

In my opinion, inequities in information access and asymmetric information flows related to agriculture have contributed significantly to the current soaring prices in food all over the world. At one hand, economically developing countries have neglected enabling agricultural market related information flows and improving information access for its farmers. At the other end, multinational corporations have huge capacities to monitor and make use of agricultural information for their own benefit. This asymmetry in information access has led to market failures for farmers, especially of the South and speculative trade at huge profits, already evidenced by the stupendous profits reported by Cargill and other multinationals trading in food in their current quarter of 2008.

It is also surprising to me that while a wide variety of causes have been attributed to increases in food prices, no one has pointed out the failure of international and national agricultural and trade agencies in bringing equity in access and greater transparency to agricultural market related information globally and especially farmers and producers of the South.

In this and following blogs, I wish to discuss market related information and how improving access and enabling its use by all involved in market chains can contribute to improved livelihoods of small producers, especially in the South. Whenever market related information issues come up for discussion among ICM managers and experts in agricultural research organizations, the usual contention is that it is not an issue for agricultural research. If the discussion is persisted upon, the focus becomes how to provide market prices to farmers. When I refer to market related information, I do not mean price alone. I mean all the information that is needed by producers and all actors in market chains to make these chains efficient and beneficial to all. For the producers this means what to grow and produce, when to grow, how to grow, where to grow, how to market, when to market, how to harvest and transport and where to get the inputs needed for production etc,. For the various intermediaries in the market chain a wide of information is needed. I illustrate this as a framework in the figure below.

If we follow the agricultural market chain, we can categorize information related to markets as as:

• Production, Productivity and Profit enhancement information needed by the producer
• Commodity Price Information
• Food Quality and Safety Information
• Labeling information

Production, Productivity and Profit Enhancement information

This type of information can be categorized further as:

• Information related to availability and prices of inputs for farming such as seed, fertilizer, pesticide, feed, medicines, equipment and equipment spares, diesel or petrol etc
• Information related to cultivating the crop or commodity such as time of cultivation, seed variety, potential yields, soil type needed, irrigation, pest and disease threats, prevention and control, harvesting, post harvest management etc
• Information related to marketing of the crop such as forecasted price, production forecast in the local area, local processors and marketers etc
• Rules, regulations and standards for cultivation including production quotas, subsidies or taxes, segregation, traceability and identity preservation for labeling requirements etc

From my experience in India, it is important not only to make farm inputs available in time for each phase in farming such as sowing, cultivation and harvesting but also to inform farmers of availability and price and financial arrangements such as for loans or subsidy for a successful harvest. Many a failures in an agricultural season could be attributed to mismanagement of this information. I have also observed cases of deliberate withholding of information to benefit speculators who black market farm inputs such as seeds, fertilizers and diesel during sowing season.

In the context of the South, the management of information related to availability and prices of inputs can be improved if Internet Websites and Cellular telephony are used to provide information and market the inputs. It is possible to make the process of purchasing inputs online if suppliers enter into e-marketing of their supplies and producers can be provided agricultural credit cards for purchase of inputs.

A significant change can occur in agriculture if rural banking in the South can be automated and made online. This banking can provide access to financial credit to farms. Credit is a critical input to market oriented agriculture as practiced by small holders. A major constraint in providing small farmers credit is the high transaction costs involved. By introducing ICTs, this transaction costs can be significantly reduced. With improved Internet and Cellular connectivity, it is not necessary for banks to open their branch offices in rural areas but provide automated teller machines (ATMs) and credit card readers to input providers. It is also possible that the ATMs be used as information kiosks. Similarly, cellular telephony, especially SMS, can also be used for financial transactions and purchase of inputs and access to financial credit.

Many a times the infusion of new agricultural technologies fails to take off in the South because the necessary infrastructure needed to support the use of these new technologies is not developed. A classical example is in Africa, where providing high input responsive seeds without making necessary arrangement to provide inputs like fertilizers have resulted in failures to yield benefits from the use of new seed technology. The use of ICTs can contribute significantly to improving the infrastructure needed for input supply.

As agriculture becomes market oriented, producers need information on consumer preferences to make decisions about what they would cultivate; linking consumer preferences information to farm input information becomes vital so as to make production profitable for producers. This information flows from consumers to producers through market intermediaries in the opposite direction to the flow of agricultural commodities from the farm to the consumer. When the markets for farmers are not local but national and global the flow of this information becomes more complex. It becomes imperative that market related information flows become organized and structured at the national and global levels. For producers in the South, this information flows through market actors across the chain. The process is slow. Further most market chains in the South are long with more than 7-8 intermediaries in the chain. This further slows down flow of information. In developed countries where agriculture is better organized, the private sector especially the Supermarkets and large processors, the Government and Farmer/Producer organizations as also marketing organizations all play a role in providing consumer related information to producers. Such structures do not exist for producers in the South. In some countries, commodity marketing boards have been setup but their role, from my experience in India, in providing relevant and useful information to producers have been limited. In my opinion, marketing boards should invest in providing this type of information along with other support they provide to producers. I also believe that farmer organizations are central and key to providing farmers with information on production, productivity and profit. I shall come to how information management to markets evolve with increasing capacities to produce and market of small holder producers.

As stated in a previous blog, farmers in the South need a basket of options as information for their farming. There are several ways in which this information is currently provided. In my opinion, the best way to provide this information is through farm models linked to real time, online databases. The farmer can input his farms details and the model, using weather and market forecasts, crop characteristics, inputs details etc can provide options to the farmer what his options are and what choices he/she can make. While large scale farmers in the North have access to these new precision farming technologies, small farmers in the South, who can benefit the most from this approach, are unfortunately left out as local agricultural research institutions do not take up research in developing suitable models and systems to implement precision farming technologies.

An emerging issue for small holder farmers for participating in markets is also about traceability and labeling of their produce. For the small producer, the cost of labeling products can be exorbitant and can eat away in the profits. This prevents small holders participate in markets. There is an urgent need to look at how costs of labeling for small holders can be reduced. There are technological solutions available such through use of radio frequency identification devices, aggregation at production and product level using ICTs etc. This is another area that has not really been researched upon.

In most market information systems, primary producers only get bulk market prices such as for a ton of produce. For small producers this information is useless. In case of vegetables and fruits, there is a wide variation of prices on day to day basis and the producer loses out as there are few means to verify the prices in remote locations. Here again, cellular telephony can contribute significantly to providing relevant market information.