Creating viable market linkages as a farming business
By Innocent Sigwadi
Agriculture is important to the economy in Zimbabwe with about 70 percent of the population relying on Agriculture for their livelihood. Agriculture supplies 60 percent of the raw materials required by the industrial sector and contributes 40 percent of total export earnings. Farming business like any other business is about making profit, and as such a farming business needs to have viable linkages with the market.
Strong links to the market are particularly important for farming businesses. Farmers in the cropping sector face issues such as post-harvest losses which can arise where the product is perishable such as with horticultural produce. As such the farmer need to ensure that they produce with a ready market in mind to reduce losses caused by delays in getting produce to the market.
Farmers face significant losses in quality and quantity due to challenges which include timing of harvest, harvesting methods and handling procedures and lack of storage facilities. Inadequate storage facilities expose produce to the weather elements, birds, insects and rodent damage. Thus, access to a ready market will reduce the risk of losses due to these challenges.
Buyers of agricultural produce can work to develop long term commercial relationships with farmers through arrangements such as contract farming. Contract farming has become an important source of agricultural financing in the country in recent times with many farmers finding it difficult and expensive to acquire financing from the banks.
Contract farming guarantees the contractor of a supply of raw materials at an agreed price whilst farmers benefit from a guaranteed market, subject to meeting agreed quality specifications at a minimum price which will allow them to make a decent profit. This may protect farmers from a situation where they have to sell unscrupulous buyers who come and buy from farmers at below market prices at the time of harvest. Farmers receive support in the form of extension services, inputs and working capital.
Contract farming can allow farmers to reduce the cost of production by negotiating for discounted prices when the contractor purchases in bulk. This reduction in cost is important as it will improve profit margins for the farmers. The access to a guaranteed market can be used by farmers to apply for loans to purchase farm machinery and implements such as tractors, ploughs and planters as well as irrigation infrastructure such as centre pivots.
Zimbabwe has made efforts to support farmers through government programmes which include command agriculture and the CBZ Agro-yields and a number of private agro-processing companies contracting farmers in the production of tobacco, cotton, maize, wheat, soya beans and even in livestock production including broiler chickens, layers and pigs.
There is a lot of potential to develop consistent and viable markets for small livestock including goats, sheep and indigenous chickens particularly in areas which have conditions that are ideal for these livestock. The market for cattle in rural areas is much more developed with cattle auctions taking place on a regular basis in many locations around the country. The lack of an easily accessible and consistent market leads to a situation where rural households are forced to sell at low prices to middlemen who take advantage of rural folk who sell when they are desperate for money for example when there is sickness or a funeral in the home, or when they have to pay school fees.
This situation is interesting because livestock classes such as goats and indigenous chicken are produced in large numbers in the drier regions of the country and people in urban areas would want to purchase consume these goats and chickens but they cannot easily access them. The development of a viable market for small livestock would encourage rural farmers to invest more in their production to address challenges such as high mortality caused by diseases and exposure to the elements and predators.
Innocent Sigwadi is a trained agricultural economist and currently working with United Refineries Limited as an Agronomist in the Soya Bean Out-grower Alliance (SOBOA). He has worked for the Ministry of Agriculture and in the development sector in various roles including as a business development officer for Khula Sizwe Trust, as a local capacity builder as the Netherlands Development Organisation (SNV,) marketing officer for the livestock and forestry projects at the Food and Agriculture Organisation of the United Nations (FAO)
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