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3. HORTICULTURAL CROPS
Since horticultural produce marketing has always been liberalized, a large number of buyers have been involved in buying from farmers. This has largely been done without contracts. Farmers deliver their produce to the buyer's premises. If the buyer is satisfied with the quality of the product and the buyer and seller agree on the price, then the crop is sold. Selling horticultural crops through contracts is a relatively new marketing approach in communal areas. Companies involved in contracting the communal areas farmers to produce
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horticultural crops mostly sell the crop on the export market. Both documented and signed contracts and verbal contracts are used for marketing horticultural crops. Both seemed to work well.
All contracts for horticultural commodities either specify the area that farmers will grow to the crop or quantities they expect to market to the company. 'Implied contracts' are also used for horticultural crops. The contracts are signed between the company and a representative of a group of farmers eg. the Chairperson. The names of the members of the group are also attached to the contract. Making one contract for a group of farmers reduces the administrative costs for the company.
Five out of the seven companies involved in horticultural commodities signed contracts with farmers. The other two had verbal contracts. In the case of Canpac, farmers at Joanadale indicated that the verbal contracts worked well initially. However the company was also able to change the traditional system of grading whereby the crop was graded and weighed on the farm to a new system where the crop was graded and weighed at the company pack-house. This was possible since there was a signed agreement. Hortico, the other company with verbal contracts, did not see the need to sign contracts since that was going to increase its cost and besides the verbal contract was working well. More case studies of contracts are given in Boxes 1 and 2.
For export crop, crop prices awarded to farmers reflect the price on the export market. Due to the fluctuations experienced on a daily basis. Hortico, Canpac and Cairns determine the
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level at which prices are likely to be. Therefore prices at which produce is bought are set at the time the contracts is entered into. Nevertheless if the prices on the market rises or falls, the contracted price will apply. Both parties ie. purchaser and producer take risks in so doing. Selby Enterprises set prices at which they purchase produce on a weekly basis. This is done with the hope that such prices will more realistically reflect those prevailing on the market at the time of selling. Again farmers face the risk that the prices might fall possibly result in losses. The adjustment of prices is done in order to reflect the trend. Before the farmers are contracted to produce any commodity, Selby Enterprises determines when the market prices are likely to be highest. They therefore ask the farmers to plant the crop at such a time as to enable it to be harvested when the highest prices are obtainable on the export market. Consideration is also given to the feasibility of successfully producing the crop at the set time based on the crop's climatic requirements. More details on the contracts are given in Table 3 and Appendix 1.
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3.2 Organisation of farmers
Due to the small land holdings of communal area farmers in irrigation schemes, a large number of them producing the same crop would be required in a given location to justify companies organising them for horticultural crop production on contract. Farmers are organized into groups, although the number of members in a group varies from place to place. Hortico prefers to work with a minimum of 50 farmers around a collection centre. As more farmers join and the group gets larger, it is then split to numbers close to 50 again.
The approach to organise communal area farmers into groups has been widely adopted both for the purpose of contract marketing and other activities e.g. provision of credit by Agricultural Finance Corporation and provision of extension by AGRITEX. In marketing, the group approach has the advantage that farmers will be located close to each other such that their produce can be bulked up for more cost effective transportation. It is also possible to offer support services to such farmers. Groups have got office bearers such as chairpersons, secretaries, treasurers etc. These officials act as the link between the farmers groups and the companies. They also sign the contracts on behalf of the farmers.
Nevertheless, for fairness, even though produce is transported at once, where the produce has to be graded and paid according to the grade achieved, the companies involved have seen it fair to each farmer's consignment to be weighed and graded separately to determine how much is to be paid. However for paprika, a representative of Commodity Trading Enterprises was of the opinion that in the long run, given the quantities of paprika marketed by the smallholder farmers, preliminary grading can be done by the farmers. They would then lump their produce for marketing after they have determined what each farmer has contributed to each grade. The company then tests the quality of the crop in the laboratory and make one payment to the group. Farmers would then pay each other on the basis of the quantity each individual contributed to each grade. This would reduce the number of samples that would have to be tested. The grade determined visually usually does not always truly reflect the ASTA level in the paprika.
3.3 Grading and Payment
Payment is determined by the quantity and quality that an individual farmer has delivered. Grading is either done at the point of collection or at the company's premises. The commodity determines whether grading can be done at the farm or at the pack-house. For example baby-corn can only be graded once all the produce has been de-husked. The weight of the cob determines that weight on which the farmers are paid. Immediately after the husks have been removed, the crop has to be stored in a chilled place. It is therefore imperative that grading be done at the company pack-house. For paprika, if the grade is to be determined using ASTA then this can only be done at the factory since ASTA levels can only be determined through laboratory tests.
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For peas, extra fine beans and other horticultural commodities, it is quite feasible that grading be done at the farm gate. As such Canpac had graders who went around the producing areas and graded the produce in the presence of the farmers.
In all cases the grade is determined by an employee or in a laboratory of the purchasing company. In the case of paprika, the grade is based on the ASTA level achieved. This level is determined through a laboratory determination on a sample from the farmer's delivery.
When the crop has to be meticulously graded, in the absence of the farmer, as with Selby, Hy-veld and Commodity Enterprises the farmers can not be paid immediately. However a basic payment can be given out while the rest is paid once the grade has been determined. This is the practice with Hy-veld. Therefore unlike the other outlets where the deal is very quick eg. at Mbare Market, the farmer has to wait for at least a week before payment is made. This causes cash flow problems for farmers. The cash flow problem could have been avoided if they could maintain a constant weekly flow of crop delivery.
At Selby Enterprises a bulk cheque is issued to the whole group once produce has been graded. In addition a print out is also produced to show what each member of the group is supposed to receive. Hortico tells the farmers what grade they would have achieved as well. For transparency, this is done in front of the farmers. Therefore the farmers have the opportunity to assess the fairness or otherwise of the awarded grade. Payment is based on the grade obtained.
Paying farmers on the basis of the quality of their produce should act as an incentive for the farmers to improve the quality of their produce. However if the grading system is not explained to all the participants, some farmers might be left wondering whether they will be getting a fair deal. A typical example is Negomo Cooperative in Chiweshe Communal Area which delivers baby corn to Selby Enterprises. Out of the 300 members of the irrigation scheme only a few representatives were taken to Selby where the grading system was explained. The outcome of the visit was not explained to the rest of the farmers, as a result the majority of the farmers still feel cheated due to the variation in the amount of money they receive for the same weight of baby-corn sold. While this is based on the grade achieved by each farmer's consignment, farmers remain doubtful about the manner in which produce was valued. On the other hand the same arrangement worked to the satisfaction of Joanadale farmers when they produced baby-corn for Wholesale Fruiterers.
At Principe Irrigation Scheme in Shamva, farmers were not pleased to have their produce graded in their absence as had happened with field beans they had produced under contracts with a middle person. They thought that the companies could take advantage of their absence and award them inferior grades. It is difficult to verify whether companies actually practice this. However the companies indicated that they would want the farmers to realise the merits of producing high grades so that they would strive to improve on their management practices further. This would be beneficial to the viability of the company. At the same irrigation
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scheme, when baby corn produced for Hortico was graded at the scheme, in front of the farmer, the farmers were very satisfied.
With the exception of Wholesale Fruiterers which markets its produce in Zimbabwe, the other companies which contract farmers to produce horticultural commodities target the export market and therefore need to be very stringent when grading. Only first grade crop is accepted. Therefore the farmers are strongly advised to do their own preliminary grading so that they only deliver the best crop. They can then sell their other produce to Mbare where second grade crop will be marketable. In some instances when the farmers cannot supply first grade crop for one reason or the other, the companies might be forced to settle for second grade crop.
Mbare and other local markets as options to contracts
The requirement that farmers supply first grade crop only is very taxing. It means that when the crop is in the field management has to be at its best. With the necessary knowledge, farmers should be able to achieve this grade. If farmers do not achieve the first grade they are likely to end up delivering to Mbare Market.
Discussions with farmers indicated that delivering produce to Mbare Market was fraught with problems. The buyers at Mbare crowded the farmers and a lot of produce was stolen in the process. In fact it is suspected that some buyers organise themselves in order to steal from the farmers.
Prices at Mbare are sometimes quite good to the extent of being higher than those offered through contracts. For instance the 1997 tomato crop was not particularly good throughout the country due to the excessive rains which were experienced. As a result demand exceeded supply. Farmers who had managed to have a mature crop soon after the rain season could fetch $1,500 per tonne at Mbare. In comparison to the $700 which they had been contracted by Cairns, most farmers ended up delivering the contracted crop at Mbare. As a result Cairns had decided not to renew contracts with farmers in Murewa. In some instances the market is flooded such that the price at which the produce is bought might be so low that the farmers are not able to recoup the cost of transport they would have incurred, let alone recovering production costs. However this is dependant on the nature of the season. This is where contract marketing would become an advantage.
Most horticultural products are perishable. They would lose value if they were to be transported on public transport e.g. buses. The transport is slow and the manner in which the produce is handled is not conducive to maintaining good quality. Communal area farmers do not have their own transport which they could reliably use for transporting their produce. Interfresh (Pvt) Ltd sited the loss of quality during transportation on public means for not accepting most of the goods delivered by communal area farmers. By the time the farmer's produce gets to Interfresh depot, it has lost condition and is no longer first grade material
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which they prefer.
To alleviate this constraint, the companies purchasing perishable horticultural products for export on contract also provide regular transport services to the farmers during the time of harvesting. Company trucks visit the producers once or twice a week depending on the perishability of the crop. The transport costs are built into the producer price such that farmers take it as free service. Since the farmers are well organised, the mechanisms for provision of transport are well synchronised to ensure prompt delivery after harvesting, with little time wasted in collecting. To achieve this the farmers gather their produce, in packages clearly marked with the farmers' identity, to a central point where it is picked by the company transport. When working with irrigation schemes this is made much easier since the farmers plots are located in one place.
For crops like paprika, which are dried and do not loose quality that quickly, the urgency of timeous provision of transport is not great.
3.5 Production inputs and loans
For horticultural commodities the contracting companies supply the seed from which to grow the crop. This is more so for crops for export. This ensures that the farmers only grow varieties which the companies have identified to be on demand on the export market. In addition when the farmers are growing a very specific variety they are more likely to sell the crop through the company which contracted them since other companies are not likely to be interested in the specific species being grown.
Companies which contract farmers have also sometimes had to sell fertilisers and chemicals to the farmers. These are normally sold at cost. When given a loan then the cost is deducted from the money due to the farmers after delivery. At Joanadale Irrigation Scheme, Canpac used to go even further to pay the labour for picking the crop, expenses for land preparation which farmers had incurred. Land preparation was done by DDF. The company is now revisiting that arrangement. It now wants to give seed alone so that the farmers would provide all the other inputs.
It is recommended that companies continue to provide seed and deduct the cost of the seed from the money which farmers are to get at the end. However farmers need to be encouraged to be self sufficient in terms of the fertilisers and chemicals. Companies should only give loans for inputs to those who require them not to every farmer.
Farmers should use their own labour and resources for land preparation unless special land preparation, whose needs are beyond the farmers means, is required.
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3.6 Extension services
Extension back up is also availed through the companies. However AGRITEX extension workers who are in more contact with the farmers are better placed to do this. The AGRITEX extensionists also need training on the production of some specific crops. In the case of paprika production, the companies which contract the farmers provide manuals which farmers can follow. This is important for horticultural crop production since farmers might not be too familiar with some of the crops to be produced. In addition, crops like baby-corn and extra fine beans need to be harvested at very specific stages of their growth cycle. Farmers in Chiweshe, Murewa and Nyanyadzi were satisfied with the extension backup rendered by the companies or AGRITEX in horticultural production of contract crops. Hortico prefers to conduct its own extension through visits made twice a week. Farmers in Shamva who had produced for Hortico alluded to the excellent extension service rendered by the company throughout the production period. Nevertheless for farmers not producing on contract, extension advice was mentioned as one of the most limiting factors to increased production.
© Friedrich Ebert Stiftung | technical support | net edition fes-library | Januar 2002