• INTRODUCTION
• MARKETING OF AGRICULTURAL PRODUCTS: A HISTORICAL BACKGROUND
• MARKETING OF AGRICULTURAL PRODUCTS DURING THE 1990s
• SMALL HOLDER FARMERS’ MARKETING PROBLEM ANALYSIS
  • Storage
  • Road Infrastructure
  • Transport Facilities
  • Quality
  • Attitudes and Behaviour
• THE ZIMBABWE AGRICULTURE COMMODITY EXCHANGE (ZIMACE)
• HOW SMALLHOLDER FARMERS CAN MARKET THROUGH ZIMACE
• CONDITIONS OF TRADING ON ZIMACE
  • Trading
  • Commodities
  • Volume
  • Transport
  • Pricing

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INTRODUCTION

Zimbabwe's farming system is described as bimodal, with more than one million smallholder farmers and about five thousand large scale farmers. The smallholder farmers are comprised of producers from communal, resettlements and small scale commercial areas. Farming activities by small holder farmers was characterised with use of retained seeds and little or no use of inorganic fertilisers. This was mainly due to lack of knowledge and support services. However, the situation changed after independence. The small holder farmers increased their production levels as well as their share of the total marketed output. Increased production by the small holder farmers could be attributed to increased support services like extension services and credit facilities. Small holder farmers have ever been disadvantaged when it came to marketing their surplus produce. Although there were services targeted at increasing production, farmers were never trained on how to dispose their surplus production. This was mainly due to the marketing systems which existed then.

However, the situation changed in the early 1990s, when the government embarked on liberalisation programmes due to the general failure of parastatal marketing boards and donor pressure. Smallholder farmers have ever been disadvantaged even with any marketing system which operated.The situation has worsen given that now prices of agricultural commodities are market determined with the exception of the Grain Marketing Board (GMB) still setting floor prices for commodities which it used to buy and sell. Despite some agricultural producers getting high prices for their commodities, smallholder farmers are still getting peanuts. Thus, their is need to empower these farmers and train them in better marketing strategies to realise what they actually deserve, in terms of prices.

MARKETING OF AGRICULTURAL PRODUCTS: A HISTORICAL BACKGROUND

Direct market intervention in marketing of agricultural commodities was initiated in 1931 in response to the world depression which seriously undermined the financial viability of the maize industry. The era saw the commencement of racial discrimination in the marketing system. Maize from small holder farmers was only allowed access to the lower priced export markets. The maize Control Act was repealed in 1950 and replaced by the Grain Marketing Act which saw the establishment of the GMB. The Cold Storage Commission was formed in 1937, taking over various installations from a private enterprise which had been engaged in the beef trade. The Dairy Marketing Board was established in 1952, taking over the marketing functions of various producer co-operatives which were unable, at that time, to meet the expanding consumer demand for dairy products. Lastly to be established was the Cotton Marketing Board in 1969, taking over the responsibilities of the Cotton Marketing Committee. By 1970, the government prescribed prices for maize, groundnuts, sorghum, cotton, wheat, soybeans, coffee, beef and milk. Sunflowers and millets became controlled crops in 1983 and 1984, respectively. Before independence, the network of the marketing boards was well established only in the commercial farming sector and major towns, disadvantaging the smallholder farmers.

Thus, at independence (1980), the government inherited a marketing system characterised by massive differences in the level of services to the producers. Therefore, the political and social

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objectives of the post-independence government were committed to redress this imbalance. Thus, most marketing boards, especially the Grain Marketing Board was tasked to expand its depot network in communal areas until every farmer'(even in deficit areas) was within 45 kilometres of a marketing outlet.

Despite marketing boards being at their 'door steps’, small holder farmers still experienced problems when marketing through them. The following problems were being encountered:

• Most smallholder farmers are not well versed with the grading system of the marketing boards. Therefore, they prefer selling to private traders who grade products using visual assessments. However, these traders pay very little money for the commodities. For example, traders were buying maize grain at Z$10 per bucket (approximately 17 kilograms), cotton at Z$3 per kilogram in Hurungwe in May 1996.

• Most farmers can not meet the minimum quantity requirements individually.

• Marketing boards, especially GMB operates a centralised cheque processing system at its headquarters and this takes a month. The cheque will require another two weeks to mature in a bank and many smallholder farmers do not have bank accounts. Farmers end up changing the cheques in local stores where they are asked to buy goods worth upwards of 25% the value of the cheque.

• The smallholder farmers feel that the grading systems of the boards is unfair. Usually farmers send produce in groups to meet the quantity requirements. The GMB just takes a sample from the truckload and awards the same grade to the whole consignment.

• The smallholder farmers also feel cheated on weights. For example, the GMB accepts anything within the 89kg - 93kg range for maize grain. If a bag's weight falls below the range, a farmer is penalised and if the bag weighs above, the farmer loses since GMB does not pay for the extra weight.

MARKETING OF AGRICULTURAL PRODUCTS DURING THE 1990s

The government announced its commitment to reform the agricultural system in the budget statement of July 1990. This saw some commodities which were controlled being regulated and marketing boards commercialised. Although the GMB, through which most smallholder farmers sell their produce has not yet closed its depots in communal areas, the prices offered are not very attractive and its payment system is still centralised. The weak marketing infrastructure in rural areas also creates numerous problems which impede the sale of surplus crop production. This situation has resulted in the marginalisation of the smallholder farmer within the framework of the liberalised policy environment.

Marketing of agricultural products from rural areas requires good logistical planning, efficient handling, storage, transportation and marketing. Under the monopolistic parastatal systems, these infrastructural functions and services did not receive due attention and consequently have now become major constraints in the liberalisation of markets. This calls for assistance to the

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smallholder farmers in finding alternative marketing channels where better price opportunities could be experienced. Thus, the Zimbabwe Agriculture Commodity Exchange (ZIMACE) could be an alternative marketing channel for small holder farmers in Zimbabwe.

SMALL HOLDER FARMERS’ MARKETING PROBLEM ANALYSIS

Although there could be alternative marketing channels for the smallholder farmers, there are some technical constraints which need to be addressed before these farmers can fully benefit from any market outlet.

Storage

Smallholder producers should store some of their crops like maize in order to benefit from the present market opportunities. In a liberalised market, prices are market based, that is, prices of commodities are determined by the supply and demand conditions of the market. Thus, in the case of agricultural commodities, prices tend to be very low just after harvesting, which calls for farmers to store their commodities for later sale. However, the storage facilities of most smallholder farmers are not good and big enough to store commodities for later sale. Therefore, there is need for smallholder farmers to improve on their storage structures for them to benefit from this market opportunity.

Road Infrastructure

Most roads in rural areas where smallholder produces live are in bad and chaotic states. This results in charging exorbitant transport costs to producers, thus reducing the final margin. This situation forces producers to sell their commodities to private buyers who give them very little money. It is thus important to have these roads regularly maintained.

Transport Facilities

There are very few transporters available in rural areas to be used by smallholder farmers. Although the Zimbabwe Farmers Union has eased the situation, more trucks should be added to the fleet, to enable all smallholder producers to benefit from this facility. On the other hand someone should make efforts to lure some transporters to operate in the rural areas especially during the peak marketing period, that is, from June to August of each year.

Quality

Most smallholder producers lose a lot of money due to the quality of their products. There is need to teach farmers on how to handle their crops from the time they mature to the time they go to the market. Farmers should also be trained in grading and should know all the grades for the commodities they sell to avoid being cheated by buyers.

Attitudes and Behaviour

Smallholder producers’ attitudes need to change. Farmers should change their behaviour from being sellers of surplus produce to being market-oriented. This will help in the decision taken by a farmer in selling his/her produce. This idea of being seller of surplus is leading to farmers selling to private buyers who give them very little money of exchange commodities with consumables at unreasonable rates. For example 21kg of maize for 2kg sugar, 15kg maize grain for 750ml cooking oil and 9kg of maize grain for a bar of soap.

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THE ZIMBABWE AGRICULTURE COMMODITY EXCHANGE (ZIMACE)

The idea of ZIMACE arose in the early 1990s, when the government committed itself to liberalise agricultural marketing which was under parastatal control for years. It became apparent that an organisation was needed through which free marketing of agricultural commodities could occur. At a workshop on The Agricultural Sector Policy and Pricing held in Nyanga on 16-20 November 1992, it was recommended that a commodity exchange marketing system be implemented on an experimental basis as an alternative market for decontrolled commodities. Thus, ZIMACE evolved on 1 March 1994.

ZIMACE was started by interested parties in the private sector, viz, the Commercial Farmer's Union and Edwards and Company, a local firm of stockbrokers. Initially, ZIMACE employed brokers who traded for the exchange. Presently, ZIMACE does not employ any broker and is not actively involved in any trading. ZIMACE only provides a forum for deals to take place with an administrator facilitating the deals.

HOW SMALLHOLDER FARMERS CAN MARKET THROUGH ZIMACE

Smallholder farmers are capable of trading on the exchange and therefore realise higher prices. The exchange facilitates the trade of any agricultural commodity produced in the country. Below are some of the benefits of trading on the Exchange:

• Prices are market based, that is supply and demand determines prices.

• All deals are transparent: Prices are published and both producers and consumers can be assured that they are getting the best price possible at the time.

• Payment is prompt.

• Forward contracting is available for crops like wheat, maize and soyabeans and farmers can get part payment before delivery.

• Access to regional and international prices, giving opportunities of higher prices.

However, there are some conditions which farmers should meet first for their commodities to be traded on the Exchange.

CONDITIONS OF TRADING ON ZIMACE

Trading: Member brokers are appointed as agents by both producers and buyers and these will trade on their behalf. Broking fee is between 1 and 2 percent. There are seventeen member brokers (list attached) which farmers can use when trading on the Exchange. To be registered as a member broker, an initial fee of US$10 000 in Zimbabwean currency equivalent is required to buy a seat on the Exchange. In addition to this amount, there is an annual fee paid and this varies and depends on the financial status of the Exchange.

Commodities: All agricultural commodities, that is crops and livestock, can be marketed through the Exchange with the exception of milk.

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Volume: For common commodities like maize, sorghum, wheat soybeans and sunflower, a minimum of five tonnes is required. A minimum of one tonne is required for a commodity like beans. Cotton is sold on per kilogram basis and a minimum of five bales is required. Beef is sold per kilogram live weight basis. There is no minimum numbers set for beef but the numbers must be large enough to be cost effective.

Transport: Transport is negotiated between producer and end user, but broker is heavily involved.

Pricing: Prices are set based on the supply and demand of the commodities. Prices are quoted according to the place where they are. Forward prices, both offered and bided are available.

The costs involved in becoming a broker are too exorbitant for the smallholder farmers. However, farmers can make use of the member brokers. Some smallholder farmers traded their commodities through the Exchange after the 1996 harvest using some member brokers. Economic analysis made showed that many farmers traded their maize grain at a lower price than the GMB price of $ 1200. The main reason for this was that farmers were paying for the transport costs. On the other hand, another broker had some agents which bought maize grain at very low prices. This broker later sold the maize grain at very high prices through the Exchange. Farmers should be wary of these brokers and the ZIMACE administrator reiterated that farmers should ask for ZIMACE contracts from brokers to make sure that their commodities are traded through the Exchange. In other instances, some brokers can buy commodities which could be sold to end users like millers without going through the Exchange. These deals will not give the farmer competitive prices. Given the economies of size of most smallholder farmers, trading on ZIMACE calls for marketing in groups to meet the volume requirements. Marketing in groups is not a problem given the structure of the Zimbabwe Farmers Union. Smallholder farmers in all areas are already in clubs which can be used to market produce through the Exchange. However, farmers should be concientised on the advantages of selling through the Exchange.

On transport, farmers should be very careful because some brokers might take advantage of their ignorance. Discussions made with the ZIMACE administrator revealed that, transport costs are negotiated and should be met by both producer and end user of the commodity traded. For the farmers to be sure that their commodities have passed through the Exchange, they must ask for ZIMACE contracts from brokers. These contracts cover quantity, quality, passing of Ownership and risk, price, payment terms, delivery time, transport and packaging.

Despite that some farmers were conned by some brokers during the 1996/97 marketing year, ZIMACE is an alternative marketing channel for the smallholder farmers in Zimbabwe. By trading commodities through ZIMACE, a farmer is able to answer the following crucial questions in agricultural production which could not be asked during the era of parastatal marketing boards:

• Which Market shall I send to?

• Should I harvest today Tomorrow or Next week?

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• Should I store for later sell?

• How much should I plant this season?

• What shall I grow?

• What price should I accept?