How farmers can set rules of the game in agricultural markets

Understanding market forces at a granular level will enable farmers to set rules of the marketing game. While it is important for farmers to do their budgeting and costing, the market ultimately determines prices and commodity values. Since they do not have much control over the market, coordinating production and supply to the market is a fundamental step.  They should base their decisions on market trends over the past three seasons or so. Trends from eMKambo show that for a Zimbabwean tomato farmer to break even, a box of tomatoes should fetch between $3 and $4.

On the other hand, there is a sealing beyond which traders can make a profit.  Most traders aim for at least 10 -30% profit. Normally farmers who come to the market know how much profit traders make. Rather than assuming someone is fixing prices, getting organized can empower farmers to control the marketing process. Traders and the market always react to supplies triggered by farmers. A shortage in commodities is often good for farmers because traders compete for a few commodities.

Chart 1: Top ten commodities in Estimated Revenue terms – Mbare Market (June 2015)  

25 August 1

The above chart shows that tomatoes were the top earners followed by apples and onions while bananas and beans were almost at the same level. In a battle between field crops and fruits, groundnuts and oranges commanded the same respect.

All markets have a constant number of traders and corresponding capacity.  For example, Mbare has 2500 traders each with a certain capacity.  What fluctuates is the supply – one day there is a shortage, the next day there is an over-supply of vegetables or field crops.  Uncoordinated supply means farmers are competing among themselves.  Contrary to conventional myths, traders are not rigging the game nor are middlemen entirely responsible for this problem. When there is a glut farmers compete and suppress the price but when traders compete they push up prices, particularly during shortages.

 

Chart 2: percentage share of Estimated Revenue per produce class Mbare Market (June 2015)

25 August 2

According to the above chart, vegetables dominated the market followed by fruits and field crops in that order.  With most vegetables produced by underground and surface water, farmers and policy makers have to step up water harvesting practices and methods.

Chart 3: Estimated Revenue (E R) per province – Mbare Market (June 2015)

25 August 3

It is interesting to note that eight out of Zimbabwe’s 10 provinces supplied commodities to Mbare Market in Harare during the month of June 2015.  This demonstrates the power of African urban centres, particularly capital cities to drive agriculture production.

 

More information:

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

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

eMkambo Call Centre:

       0771 859000-5/ 0716 331140-5 / 0739 866 343-6

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