Market Survey in the Upper East Region of Ghana

Transcription

1 Josef G. Knoll Visiting Professorship for Development Research Market Survey in the Upper East Region of Ghana Tsegaye Yilma Documentation of Research: XX/2006 Copyright 2006 by Tsegaye Yilma. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.

2 Table of Contents I. Introduction 3 II. Input Market 5 III. Output Market Tomato Marketing Rice Marketing Maize Marketing Onion Marketing 14 IV. Supporting Facilities 4.1 Credit Marketing Information 15 V. Annex 17 Market data from Regional Ministry of Food and Agriculture 2

3 I. Introduction: Conducting a large-scale market survey was beyond the scope of the Governance and Modeling project and therefore this survey was conducted to fill in the gaps left by the household survey conducted in June 2005, as well as to address the difficulties encountered in that survey. The market survey employed informal survey techniques, primarily key-informant interviews, and gathered secondary data from the regional Ministry of Food and Agriculture (See Annex for a typology of market data obtained). The survey was conducted in two rounds; the first in January/ February 2006, which focused on the input market, and the second in May/June 2006, which collected data on the output market. The following questions related to input markets in the project area are covered in this report: who are the input suppliers who are their major clients what are the common payment conditions what is the role of the credit market what are the conditions of credit provision With respect to the output market, this report examines the market conditions for the following crops, which are primarily produced through irrigation agriculture: tomato rice onion maize The marketing of maize is becoming more important as the regional ministry of agriculture embarks on a program to introduce pump-irrigated maize production. 3

4 The interviews were conducted with farmers, local input traders, local shopkeepers, market women (who trade rice in the local market) and women traders (who come from southern Ghana to buy tomatoes and are known locally as Market Queens). The issues discussed with farmers included their access to farm inputs, especially fertilizer, access to credit to finance their farming operations and constraints they face in selling their products. For example, with tomato producers the discussion included the role of Market Queens in setting output prices, the competition with producers in Burkina-Faso, and the potential effects of a processing plant that is expected to open soon, in the region. Market Queens, who were in the area during the survey, were brought into the discussion separately. The discussion with them included their view on the quality of tomatoes produced in the region, in comparison to those from Burkina-Faso. In the case of rice, the survey focused on traders selling imported rice in their shops, primarily in Bolgatanga, the regional capital, and traders who buy rice from local farmers and sell it to processors. The issues covered during the interviews included the quality of local rice and competition with imported rice. Interviews about onions were only conducted with farmers because most of the harvest had already been sold and therefore no traders were present in the area during our visit. Changes in prices and storage problems were the major issues discussed. Finally, because irrigated maize has just been introduced to the region, this report focuses on the experience of a single farmer, who serves as a contact farmer for MoFA, and on the analysis of secondary data. II. Input Market Small, private traders are the most important input suppliers and distributors in the region. Different types of fertilizers, herbicides, fungicides and seeds are handled by the traders, with fertilizer being the most important input. The types of fertilizer available in 4

5 the market are presented in Table 1. All the individual input traders in Bolgatanga, Navrongo and Bawku purchase their supplies from a single wholesaler called WIENCO, who is located in Tamale, about 120 km from Bolgatanga, the regional capital of the Upper East Region (UER). Table 1: Major types of Fertilizer Distributed by a trader in Bolgatanga Type of Fertilizer Quantity Sold in 2005 % of Total Sale (bags) NPK NPK NPK NPK Sulfate Amonia Urea Total bag = 50 kg. The primary costs involved in fertilizer marketing are transportation, loading and unloading. Most of the inputs supplied are used in irrigated agriculture, which is done during the rainy season, and therefore transportation does not seem to be a major constraint. Furthermore, the road between Tamale and Bolgatanga is in very good condition, with the result that trucking prices are reasonable (Table 2). Table 2: Marketing Margins of fertilizer in Bolgatanga (in 000 Cedis per bag) Fertilizer Supplier Price Transport Loading Other costs Sell Price SA However, there is a general increase in fertilizer price in response to the devaluation of the Cedis against the U.S. dollar (USD) (Figure 1). In the past, one USD could be 5

6 bought for less than 1000 Cedis, but in 2002 this valued jumped to about 8000 Cedis. The huge devaluation of the Cedis had a considerable impact on the price of fertilizer, because it is entirely imported. The impact of the increased fertilizer price was exasperated by a drastic drop in input credit available to both traders and farmers. Figure 1: Change in Fertilizer Price and Devaluation of Cedis Cedis/Kg Cedis/USD Years 0 Cedis/USD NPK UREA Source: MoFA UER Furthermore, fertilizer use by small farmers is affected by the failure of output prices to keep pace with input costs. Figure 2 illustrates the relationship between the cost of fertilizer and the price of rice. In the late 1980 s, a farmer had to sell 0.2 kg of rice, in order to be able to purchase 1 kg of NPK fertilizer. However, as the fertilizer price increased drastically in the mid 1990 s, the ratio jumped to about 1 kg of rice to 1 kg of NPK fertilizer. Figure 2: Change in the Ratio of NPK price/ Rice Price Kg Rice/Kg. NPK Years Source: MoFA UER 6

7 In addition to fertilizer and seeds, inputs such as diesel for pumps, oil, and tractor and bullock renting are becoming important in the region (Table 3). Diesel and oil are becoming particularly important inputs with increasing levels of irrigation. Table 3: Input Price in summer 2006 in the UER Items Units Price Diesel Cedis/gallon 35,000 Oil Cedis/gallon 80,000 Bullock Cedis/Acre 80, ,000 Tractor Cedis/Acre 160, ,000 In addition to private tractor rentals, the district assemblies have started to rent tractors to local farmers, as an initiative to contribute to poverty alleviation in the region. According to the information gathered by the survey, the price charged by the district assemblies is much lower than that charged by the private enterprises. This low price could potentially make the system unsustainable. Common method of land preparation III. Output Market Farmers using tractors from District Assemblies 3.1 Tomato Marketing 7

8 The UER is a leading producer of tomatoes in Ghana, primarily because of the Tono and Vea irrigation schemes located in the region. The tomato production systems can roughly be grouped into two types; tomato production in the Tono irrigation scheme and tomato production using wells and rivers. Both schemes contribute significantly to employment creation in the local community. Tomato farmers in the region sell the majority of their harvest to the Market Queens, who organize the labor needed to pick and load the tomatoes. Most of the tomatoes are then transported to the major urban centers of the south, such as Accra and Kumasi, where they are distributed to retailers, who sell them to the consumers. According to a discussion in Kandiga, located on the road from Bolgatanga to Navrongo, farmers stand at the roadside whenever they have ripe tomatoes and show signs to truck drivers passing though on their way to Navrongo to buy tomatoes. As a result of the poor information flow between farmers and traders, farmers face huge farm-gate price fluctuations. For example, during the last week of January 2006, farmers were selling a crate of tomatoes for 320,000 Cedis. Just one week late, when we did our survey, the price had dropped to 220,000 Cedis per crate. According to the farmers, their inability to store the tomatoes forces them to accept whatever price the traders offer. Unlike cereals, the overall increase in tomato price was not large; however, there were huge variations in price across months, with low prices during the major harvesting seasons (Figure 3). This year the price condition was better in comparison to last year with prices ranging from 180,000 to 260,000 Cedis per crate instead of only 80,000 Cedis per crate. The higher prices this year are a result of lower quantities of imports entering the 8

9 market from Burkina Faso and of increased demand due to the presence of an unusually high number of Market Queens. Figure 3: Monthly Variation in Tomato Price in Navrongo market Cedis/Crate Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: UER MoFA Despite the presence of numerous players in the marketing of tomatoes, there is no value-adding occurring in the supply chain, which only transports the product from the farmers to the consumers. The absence of value-adding activities, which could increase the storage time of the product, results in the huge price fluctuations. There is currently an effort underway to re-open a tomato processing plant in the region that has been abandoned for a long time. If the project succeeds, it could play a significant role in minimizing drastic price decreases as a result market gluts. The re-opening of the tomato processing plant is a new development in the region that could affect tomato production and marketing. However, tomato producers in Tono, who are the major tomato producers in the region, reported that while they have heard of the project, they have not been directly approached by anyone. By providing an alternative sales venue, the tomato processing plant would increase the negotiation powers of farmers in their dealings with the Market Queens and therefore its operation would be of major benefit to them. Taking seriously the lessons of the past would contribute to the sustained operation of such a processing plant. 9

10 The marketing channels for tomatoes are presented in Diagram 1. Farmers Market Queens Tomato Processing Plant Retailors Consumers Diagram 1: Marketing Channel of Tomato One important marketing challenge faced by farmers in the region is the competition from Ouagadougou producers. Farmers complained that Market Queens prefer the Ouagadougou tomatoes to the tomatoes from the study region. According to the estimate of one Market Queen, 60 % of her tomato supply is imported from Ouagadougou and the remaining 40% comes from the study area. One reason offered by the traders for their preference of the Ouagadougou tomatoes is their, which they attribute to good soil quality and the soil nutrient use of the Ougadougou farmers. Furthermore, the traders claim that the average tomato from Navrongo area has a shelf life, including transportation, of only 4 days, while tomatoes from Ouagadougou have a shelf life of 7 days. Some farmers agreed with the traders' comments and attributed the poor soil quality of their region to prolonged cultivation of the land, in comparison to Ouagadougou where farmers have only recently engaged in tomato production. Unfortunately, there is no soil quality data available to either confirm or challenge this claim. In response to the competition from the Ouagadougou farmers, some farmers in the Tono irrigation scheme have started to adopt some of the farming practices of the 1

11 Ouagadougou farmers. One such practice involves the covering of ripe tomatoes with grasses before harvest to decrease exposure to the strong sun. Some traders confirmed that they saw a change in the quality of tomatoes after the farmers started covering them with grasses. 3.2 Rice Marketing Rice is the most important irrigable crop in Ghana, with a huge potential to contribute to national food security. Farmers do not sell their rice directly to consumers because of the considerable processing necessary to prepare it for consumption. Instead, traders in the local markets buy the paddy from the farmers and sell it to processors, either the same day or shortly thereafter. Farmers Imported Rice Traders in Local Market Big Traders (who have shops) Processors Retailors Consumers Diagram 2: Marketing Channels of Rice There are two sources of rice for the consumers, imported and local (Diagram 2). The significant difference between the two sources is the high quality and relatively low price of imported rice. The poor quality of local rice emanates from production problems and post-harvest processes. Farmers winnow the rice directly on the ground, without using covers that could protect the rice from direct contact with the soil. This 1

12 method affects the taste of the rice and increases its sand content. Most shopkeepers were selling only imported rice, while the local rice was sold only in open markets. The shopkeepers pointed out that they would engage in the local rice trade if the quality, especially with respect to sandiness, were improved and the rice were packed in different quantities. The same traders pointed out that were it not for the poor quality of local rice, then it would be preferred by consumers because it can be easily cooked in rice bowls, a preferred method in the region. The high sand quantity and overall poor quality of local rice makes it particularly unpopular in southern Ghana. Therefore, efforts to improve the quality of the local rice are necessary to make it competitive with the better quality imported rice. An example of such an effort can be found in one NGO s effort to teach single mothers in Bolgatanga improved processing techniques. Farmers in the UER winnow rice on the floor which is the major cause of sand content of the local rice. The winnowed rice is transported to the market in bags and sold to big traders During the survey we observed that some imported rice from Asia was cheaper than rice from both the local region and from other West African countries. For example, one type of rice from Thailand was sold at 4700 Cedis per kg, while par boiled rice from Benin was sold at 6200 Cedis per kg and local rice was sold at 7300 Cedis per kg. 1

13 Drying on cemented floor Better quality and packed Local Rice 3.3 Maize Marketing Maize is another cereal crop gaining importance in irrigation farming in the UER. The regional MoFA has launched a program to produce maize immediately after the usual irrigation season and before the start of the rainy season; because of its seasonal orientation this program is called the Third Cropping season. The program involves the distribution of irrigation pumps to a group of farmers. During our visit, the farmers who received pumps either received them free of charge, because they are trial farmers, or with loan supports. During the survey, the problems of drying maize and transporting it from the farms were sited as potential challenges to the wider adoption of maize production. The drying problem emanates from the fact that the crop is harvested just as the rainy season starts. While the ministry is planning to encourage farmers to sell the maize green, most farmers interviewed were planning to sell the maize dried. Selling large quantities of green maize requires a well coordinated packaging system, which, though taken into account by MoFA, is not yet in place in the region. Without proper packaging, encouraging every farmer in the region to produce green maize will result in a glut in the market and will scare farmers away from practicing irrigated maize production. The ministry also wants to connect the program to some government institutions, such as training intuitions, that would purchase the cereals for staff. One 1

14 farmer reported that she sold her last year s maize production to government training institutions at a price of 250,000 Cedis per bag (1 bag = 80 kg). However, in order to avoid a market glut, MoFA must carefully quantify the demand from these institutions before encouraging large numbers of farmers to join the program. As can be seen from the market data from the regional capital in Figure 4, there is a general improvement in the price of maize in the region. In addition, the data reveals that the planned months of the third cropping season are the periods of high maize price. However, one can not generalize that the price will remain at those levels after the expansion of irrigated maize production, which will increase total supply. In addition, the market price is for dry maize and what the price for green maize will be during this time is unpredictable. Figure 4: Monthly Variation in Maize Price in Bolgatanga Cedis/kg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Months Source: MoFA UER In order to solve the drying problem for the next season, interviewed farmers planned to start planting early in the dry season in order to have sufficient drying time. This implies a shift in resources from other enterprises and would mean that maize production will no longer be a third cropping season activity, but rather a dry season activity. 3.4 Onion Marketing Irrigated onion production and marketing is a long tradition in the Bawku area of the UER region. The major marketing problem with onions is lack of proper storage 1

15 facilities. Currently, farmers can store onions for a maximum of four months, with most selling their produce within two months of harvest. Farmers reported that both the yield and price levels were better this year than last. Price fluctuations within a short period of time are very significant. For example, in April 2006, a bag of onions was sold at a price of 200,000 Cedis, while at the end of May 2006 the price had increased to 250,000 Cedis per bag. IV. Supporting Facilities 4.1 Credit The input traders interviewed reported that they purchase their supplies from wholesalers primarily with cash, but also with limited amounts of credit. For example, for each set of 300 bags of fertilizer purchased from suppliers (the amount that can be transported by a small truck in one trip), a trader pays cash for 200 of the bags and receives the remaining 100 on credit. All the traders interviewed have been in the business for more than ten years, which helped them build trust with their wholesalers and thus receive some supplies on credit. However, the credit is short term and must be paid back within two weeks. Since the repayment period is very short, the credits usually do not carry interest. But a trader reported that in rare cases if the fertilizer price increases significantly between the time of purchase and repayment, then the traders must settle their debts based on the new fertilizer price. None of the interviewed traders used bank credit to finance their business operations because of the high interest rates charged and the collateral requirements. The traders sell fertilizer to farmers exclusively on a cash basis, while they extend some credit to retailers. As with the wholesalers, no interest is charged and the pay-back period is quite short i.e. less than 2 weeks. 4.2 Marketing Information: Improving the livelihood of farmers requires interventions beyond increasing agricultural productivity; one aspect of particular importance in the UER is improving the flow of information amongst farmers and traders, particularly with respect to tomato 1

16 production and marketing. Establishing information centers, to gather and disseminate market information amongst farmers in the north and traders in the south, could be a valuable contribution to improving the livelihood of farmers. Mobile phones can and have started playing an important role in relaying information between farmers and traders. One interesting finding of the market survey was revealed by the traders in Bawku. They reported that when there are shortages in the local market they cross the border to Togo and purchase their supplies in a border town there. Likewise, when there are shortages in Togo, which is currently the case, the traders supply those markets with supplies from the study area. In all these transactions, mobile phones play a significant role in gathering market information and collecting disbursed credits. A Farmer using mobile phone, a technology playing significant role in marketing 1