MULTI CROP VALUE CHAIN PHASE II MAIZE TANZANIA. September 2014

Transcription

1 MULTI CROP VALUE CHAIN PHASE II MAIZE TANZANIA September

2 TABLE OF CONTENTS Summary Conclusions 4 1. Sector Fundamentals 5 2. Value Chain Opportunities Interventions & Impact Stakeholder Profiles 76 Appendix 91 2

3 SCOPE OF THIS STUDY Study Methodology +65 maize sector interviews including farmer groups, traders, processors, agrodealers, warehouse managers, government agencies, leading NGOs and financial Institutions Stakeholder Interviews Hypotheses Confirmation Confirmed economics of commercial sector Evaluated value chain constraints Net farmer impact of potential interventions Recommended interventions focus on organizing the value chain via farmer marketing groups and traders. Support of ongoing fortification and hermetic storage program development is also recommended. Recommendations 3

4 PHASE 2 TANZANIA MAIZE EXECUTIVE SUMMARY 1 SECTOR FUNDAMENTALS 2 VALUE CHAIN OPPORTUNITIES INTERVENTIONS 3 & IMPACT STAKEHOLDER 4 PROFILES Maize is the most important food crop in Tanzania, grown by 3.5 million farming households (60%), and accounting for 40% of calories consumed Yields have flattened, while production has increased steadily to ~5-6 million MT as land under cultivation has increased (~4 million ha) ~60% of maize is consumed on-farm, although other sectors such as exports and processing for animal feed are growing Value chain is extremely fragmented and disorganized (3.5 million farmers, many traders, 30,000 small flour mills) Economics make it difficult for SHF to profit unless yields improve significantly Despite this, surplus maize exists without strong demand pull Opportunities exist to organize the value chain to strengthen the demand pull offered by export markets and processors Interventions focus on organizing players and linking production to market focal points At full adoption, proposed interventions would improve SHF margins by 210% Develop farmer marketing groups to improve overall production and link to markets Organize export traders to increase competitiveness and link to farmers Promote hermetic storage to reduce post-harvest losses Support fortification (dosifier) technologies to facilitate improved nutrition Farmer and export trader groups require NGO support to build technical and business capacity and provide mentoring Market focal point partners include institutional buyers (NFRA & WFP) and processors (Kitenge Farms, Hill Foods) NGO most likely candidate to work with multiple storage technology manufacturers (A to Z, PPTL) to build awareness and promote distribution Sanku is the private manufacturer of dosifiers for small & medium mills 4

5 5 SECTOR FUNDAMENTALS

6 PHASE 2 TANZANIA MAIZE EXECUTIVE SUMMARY 1 SECTOR FUNDAMENTALS 2 VALUE CHAIN OPPORTUNITIES INTERVENTIONS 3 & IMPACT STAKEHOLDER 4 PROFILES Maize is the most important food crop in Tanzania, grown by 3.5 million farming households (60%), and accounting for 40% of calories consumed Yields have flattened, while production has increased steadily to ~5-6 million MT as land under cultivation has increased (~4 million ha) ~60% of maize is consumed on-farm, although other sectors such as exports and processing for animal feed are growing Value chain is extremely fragmented and disorganized (3.5 million farmers, many traders, 30,000 small flour mills) Economics make it difficult for SHF to profit unless yields improve significantly Despite this, surplus maize exists without strong demand pull Opportunities exist to organize the value chain to strengthen the demand pull offered by export markets and processors Interventions focus on organizing players and linking production to market focal points At full adoption, proposed interventions would improve SHF margins by 210% Develop farmer marketing groups to improve overall production and link to markets Organize export traders to increase competitiveness and link to farmers Promote hermetic storage to reduce post-harvest losses Support fortification (dosifer) technologies to facilitate improved nutrition Farmer and export trader groups require NGO support to build technical and business capacity and provide mentoring Market focal point partners include institutional buyers (NFRA & WFP) and processors (Kitenge Farms, Hill Foods) NGO most likely candidate to work with multiple storage technology manufacturers (A to Z, PPTL) to build awareness and promote distribution Sanku is the private manufacturer of dosifiers for small & medium mills 6

7 SECTOR FUNDAMENTALS MAIZE PLAYS AN IMPORTANT ROLE AS THE STAPLE CROP IN TANZANIA, 50% OF WHICH IS PRODUCED IN TWO MAIN ZONES Major Maize Production Regions in Tanzania 1,9 Agriculture Sector in Tanzania Rest of country (1.7 million MT) Shinyanga & Simiyu 142 Arusha Northern Highlands (16% production) 265 Manyara 199 Kilimanjaro Economy 27% of GDP (decreasing) & employs 75% of population mostly in crop cultivation 1 Maturity Poor infrastructure & long distances constrain development, driving informal trade to bordering countries Very limited extension services (4000 staff), Good Agricultural Practices (GAP), fertilizer and improved seed use are limited Less than 34% of SHF use fertilizer and 17% improved seed 4 Katavi & Rukwa Southern Highlands (35% production) 431 Mbeya 422 Iringa & Njombe 211 Ruvuma 000 MT Maize Production (5 yr average ) 1 Maize in Tanzania Contribution Maize contributes to 20% of agricultural GDP 2 and 31% of total production million, or 60%, of farming households grow 5-6 MMT 1,7 Yields are low (average 1.2 MT/ha) and flat, while postharvest losses are 20-40% 1 Market Widely grown for on-farm consumption and accounts for 40% of calories consumed 3 Approximately 40% is marketed Farm gate/rural market is $665 - $900 million USD 7 7 Sources: 1) 2007/2008 Tanzania National Census of Agriculture 2) National Agricultural Policy ) TFDA and ABT Associates Aflatoxin study 4) Tanzania WFP Food Security ) USAID COMPETE Survey Grain Storage ) USAID COMPETE Staple Food Analysis ) FAO Maize Value Chain Assessment ) Note that regional boundaries have recently changed and thus data reflects old boundaries, whereas map reflects new regional boundaries

8 SECTOR FUNDAMENTALS TANZANIA IS A MAJOR PRODUCER OF MAIZE IN EAST AFRICA, AND HAS A UNIQUE CAPACITY FOR HARVEST 3 TIMES PER YEAR FROM DIFFERENT ZONES Production Production may have doubled over the last decade, although USAID estimates a more moderate increase, and data is inconsistent across sources Bimodal rainfall in the northern regions produces 2 harvests in January/February & July/August 3 Unimodal rainfall in the southern highlands produces one harvest in June/July 3 Bimodal (green) & Unimodal (white) Rainfall in Tanzania 3 Million MT Official Production Historical Maize Production , Tanzania 1,2 USAID Estimated Production One harvest per year Two harvests per year East Africa Maize Production Mozambique Uganda Zambia Kenya Malawi Tanzania Ethiopia Million MT 8 Sources: 1) FAOSTAT ) USAID Maize & Rice Policy Study June ) WFP Tanzania 2012

9 SECTOR FUNDAMENTALS PRODUCTION HAS IMPROVED AS A RESULT OF INCREASED LAND UNDER CULTIVATION, WHILE YIELDS LOOK TO HAVE DROPPED FROM PREVIOUS PEAK Production (Million MT) / Area harvested (Million Ha) High yield years may be outliers Maize Production and Yields , Tanzania Yield (MT/Ha) Causes Starting in 1986, investments in agriculture, including improving access to inputs which led to yield improvements 2 Yields dropped significantly starting in 2001 without a clear reason. Experts suggest it is due to liberalization, widespread fake seed and fertilizer, and varying data collection over the years (could be 4 years of outliers) 3 Yield (MT/ha) Area harvested (Ha) Production (MT) Estimate that only 2-3% of maize farmers use fertilizer and improved seed appropriately Reunion Mauritius South Africa African Maize Yields, Ethiopia Mali Comoros Zambia Tanzania Potential to return to average yields of 2.5 MT/ha, with high producing areas achieving 4-6 MT/ha 3 Extra surplus worth $977 million at farm gate 9 Sources: 1) FAOSTAT ) Africa in Transition Macro Study Tanzania ) Expert interviews 4) Dalberg Report Tanzania Maize Mapping 2014

10 SECTOR FUNDAMENTALS MAIZE PRODUCTION VARIES ACROSS THE COUNTRY AND ACROSS YEARS, WITH >50% IN SOUTHERN HIGHLANDS AND NORTHERN ZONES 6,000 Production by Political Zone , Tanzania Southern Highlands & Northern regions are the most significant in terms of production and market access Maize regions of focus 5, MT 4,000 3,000 2,000 1, / / /2008* 2008/ /2010 Central Coastal Lake Northern Southern Highlands Includes Shinyanga Region which produced 600,000MT in 2010 but consumption outside region is limited Production Patterns Significant annual variation due to rainfall and previous year s maize and other crop prices 95% of production is by small holder farmers on average farm sizes of 0.7ha, only commercial farms exist 2 Maize is first grown for consumption with surplus then sold to neighbors or markets, if accessible Typically intercropped with squash, beans or sunflower, although this varies by region Dry maize (grain) is rain fed, while minimal irrigation (1.8% total land) is available for green maize production 3 Almost entire crop is white maize; yellow maize production is rare 10 Sources: 1) Ministry of Agriculture 2) FAO Tanzania Maize Value Chain Assessment ) Tanzania WFP Food Security 2012

11 SECTOR FUNDAMENTALS DOMESTICALLY, 580,000 MT OF MAIZE NEEDS TO BE DISTRIBUTED FROM SURPLUS TO DEFICIT REGIONS, OFTEN VIA POOR INFRASTRUCTURE Maize Surplus (green) and Deficit (orange) Areas and Regional Trade Flows 2 Implications Demand 580,000 MT move within Tanzania each year to meet food security needs in regions with deficits 1 Food insecurity National Food Reserve Agency (NFRA) purchases and stores a minimum of 150,000 MT of maize annually, with capacity to store 241,000 MT 3 NFRA distributes production by shifting maize from their southern warehouses to those in deficit regions Infrastructure Transportation is constrained by poor roads. Main roads are paved, but feeder roads remain poor 11 Sources: 1) Dalberg Report Maize ) FEWSNET Production and Market Flows Map 3) Interviews

12 SECTOR FUNDAMENTALS MAJORITY OF PRODUCTION IS CONSUMED ON-FARM, AND AT THE HOUSEHOLD LEVEL, WHILE EXPORTS, FOOD SECURITY AND FEED MAKE UP THE REMAINDER Estimated Market Share for 6 Million MT of Maize 1 Estimated Tanzania Production, 2014 On-farm consumption stored and eaten at the farming household On-farm consumption Saved seeds 57% 1% 16% 10% 4% 12% Domestic households Feed processing Food security Exports Saved seed maize grain saved as seed to be planted the next year Domestic households maize that is sold as grain to millers or markets. Households purchase either as flour or as grain to mill themselves Feed processing - maize for non-human consumption predominantly for poultry feed Food security National Food Reserve Agency and World Food Programme purchases Exports informal and formal to neighboring countries 12 Sources: 1) Based on interviews, FAOSTAT 2013, 2007/2009 Agriculture Survey, Context Analysis

13 SECTOR FUNDAMENTALS APPROXIMATELY 75% OF MAIZE PRODUCED IS CONSUMED ON-FARM OR PURCHASED BY DOMESTIC HOUSEHOLDS 58% On-farm consumption & saved seed 16% consumed by nonfarming households ~3.5 million MT is consumed on farm or saved for seed (includes potential losses) ~1 million MT is consumed at the household level (includes potential losses) Purchased by households or kept on farm Posho millers Posho flour Maize Purchased directly as grain or kept on farm and taken to posho mills for milling into flour Purchased by millers, sold as flour to households at retail markets Maize millers Commercial flour 13

14 SECTOR FUNDAMENTALS IN TOTAL, TANZANIAN HOUSEHOLDS CONSUME MILLION TONNES OF MAIZE EACH YEAR, PRIMARILY AS UGALI STIFF PORRIDGE MADE FROM MAIZE FLOUR Million MT Projected Consumption of Maize , Tanzania Sembe maize flour and ugali (served with meat) Consumption Usage Consumed as ugali a stiff porridge, eaten by rural and urban households alike Demand is increasing for unpolished (whole grain) dona flour which produces a more nutritious ugali Demand for grilled green maize is also increasing Waste maize bran from milling is also used for animal feed Quantity Tanzanians consume kg of maize per year 2, or 40% of household calories 1 Total annual consumption estimates vary from million MT, considerably less than production, and growing at 3% per annum 3 14 Sources: 1) TFDA and ABT Associates Aflatoxin study 2) World Bank Tanzania Food Balance ) Dalberg Report Maize Mapping 2014, based on 3% population increase

15 SECTOR FUNDAMENTALS THE FLOUR DEMAND IS SERVED BY FRAGMENTED SMALL SCALE HAMMER MILLERS, MOST OF WHICH ARE OUTSIDE THE COMMERCIAL MARKET Posho & Small Mills Medium & Large Mills Over 90% of milled maize is milled by posho & small mills 2 where households take their maize to be milled for a fee Strong consumer preference for the type of flour they produce 3 Handful of medium, sophisticated mills producing MT / day Largest five millers pushed out of the market by the smaller ones (Bakhresa/Azam General Mills of East Africa is only milling at 10% capacity) 1 Maize Flour Production Flour is produced by an estimated 30,000 competitive millers across the country, giving consumers many options Fortification Recent government regulation requires that maize flour produced by medium & large millers be fortified with 15 vitamins and minerals 4 Not yet being enforced and only a few millers have indicated plans to fortify, while size and dispersion of millers will make fortification difficult 15 Sources: 1) Interviews 2) FAO Tanzania Maize Value Chain Assessment ) Dalberg Report Maize Tanzania ) Tanzanian Food, Drugs, Cosmetics Regulation 2011

16 SECTOR FUNDAMENTALS THE FEED INDUSTRY, ALTHOUGH FRAGMENTED, DOES HAVE A HANDFUL OF LARGE PROCESSORS WHO SELL PRIMARILY TO THE POULTRY INDUSTRY Approximately 10% maize production goes to feed processing 500, ,000 MT maize is used for processing Handful of larger processors that purchase 100, ,000 MT of maize annually Remainder of ~400,000 MT processed for non-human consumption is purchased by large number of smallscale feed processors No evidence of any other significant domestic industry such as biofuels Maize pellets for animal feed Village chickens on top of broiler cages at market 16

17 SECTOR FUNDAMENTALS WHILE THE POULTRY SECTOR DEVELOPMENT IS UNDERWAY, THE MAJOR TIPPING POINT IS THOUGHT TO STILL BE 5-10 YEARS AWAY Demand Consumption Annual chicken consumption has doubled in the last 5 years, with local village chickens dominating 3,5 Tanzania Commercial Poultry Association indicates ~50 million day old broilers produced per year, up from 0.5 million in 2007/2008 2,6 Potential Experts expect the poultry industry to expand rapidly, but estimate this is 5-10 years off Urban domestic market (27% population is urban) 1 for chicken and eggs is growing, plus imports of over 1 million chickens each year 4 Constraints Poultry Producers Consumers tend to prefer taste of traditional local free-range chickens, however supply of these is limited in the biggest markets Chicken is the most expensive meat ( ,000 TZS/kg whereas beef is 5000 TZS/kg) and 98% of households do not own refridgerators 2 Feed Producers Price of maize is too high for poultry feed, soya availability is limited (maize makes up 65% of feed) - No consistent & reliable source of maize at the right price and quality Contract farming has failed in the past Millions of chickens Number of Chickens in Tanzania by Type, Total 2,5 Data is unreliable, but general trend stands Price of chicken needs to drop below beef, to 5000 TZS/kg, in order to shift the market. - Maize flour and feed miller Local Broilers Layers Total 17 Sources: 1) Index Mundi ) 2007/2008 Ministry of Agriculture Census 3) FAOSTAT 2009 Food Balance 4) FAOSTAT ) Ministry of Livestock 2014 Budget Speech 6) Stakeholder interviews (Hill Feed, Silverland Farms)

18 SECTOR FUNDAMENTALS FOOD SECURITY PURCHASES ACCOUNT FOR A FRACTION OF TOTAL PRODUCTION, BUT NFRA AND WFP ARE THE BIGGEST SINGLE MAIZE BUYERS 4% is purchased for food security purposes National Food Reserve Agency (NFRA) has a mandate to purchase at least 150,000 MT annually, with 241,000 MT storage capacity 1 Stored for distribution to food insecure regions Released to alleviate high maize prices Sold to World Food Programme (WFP) NFRA warehouse with maize stores World Food Programme purchases maize from NFRA, traders and SHF directly 3000 MT from SHF through Purchase for Progress 2 72,000 MT purchased total in , MOU to buy up to 200,000 MT directly from NFRA 4 Exports to food insecure countries in region 18 Sources: 1) Based on interviews, 2) WFP Purchase for Progress Report 3) WFP online purchase map 4) MOU between NFRA & WFP

19 SECTOR FUNDAMENTALS ALTHOUGH PREVIOUSLY LIMITED BY SPORADIC BANS, EXPORTS NOW REPRESENT A SIGNIFICANT PORTION OF THE MARKETED MAIZE Up to 12% is exported Official exports are minimal and trade has been sporadic over the last decade due to food shortages and export bans USAID report estimated much higher informal trade than official numbers in 2011 (114,000 MT) 2 Export ban has been lifted since 2012 Interviews with traders in Arusha indicate at least 200, ,000 MT is exported to Kenya each year Exports could be upwards of 700,000 MT in MT Official Exports Official Imports Historical Maize Trade , Tanzania 1,2 USAID estimate of actual exports in 2011 (114,000 MT) 2 Food shortages in 2004 & 2006 drove imports Export of dry maize 19 Sources: ) FAOSTAT ) USAID Maize & Rice Policy Study June ) Estimate based on official data, Kenya exports plus estimated other exports to south and west

20 SECTOR FUNDAMENTALS EAST AFRICA DEMAND IS STRONG AND GROWING, WITH TANZANIA WELL PLACED AS A NET EXPORTER TO MEET MUCH OF THIS DEMAND, PARTICULARLY IN LIGHT OF MAIZE LETHAL NECROSIS DISEASE Maize Surplus (green) and Deficit (orange) Areas for East Africa, East Africa Demand and Trade Demand East Africa 1.34 million MT maize deficit in 2009 to rise to 8 million MT in Strong demand in Kenya means prices there are 20% higher than Tanzania markets Patterns Flows to Zambia, Malawi, Burundi, Kenya, on to DRC, Southern Sudan, with the main domestic market being Dar es Salaam Maize Lethal Necrosis Disease Tanzania MLND has been identified in 8 out of 26 Northern districts 3 Estimated it will destroy 25% of production in those districts 3 Disease resistant varieties could be 5 years away 4 Kenya In % of maize was reported to be infected with MLND in Kenya 4 Potential crisis situation for Kenya. Maize from Southern Highlands could meet part of this demand while solutions are sought 20 Sources: 1) East Africa Trade Bulletin WFP ) FAO Maize Value Chain report ) SARI interviews 4) IITA interview

21 SECTOR FUNDAMENTALS THUS KENYA AND EAST AFRICA REPRESENT A GROWING MARKET OPPORTUNITY 000 MT Maize Production, Imports & Requirements , Kenya Production Imports Consumption East Africa Maize Imports, million MT in 2009 Supply & Demand in Kenya Production ~3 million MT per year and has remained stable 1 This season production has fallen 33% due to poor rains and planting delays 2 Structural deficit has increased to over 10% of production over last few years 1 Supply Up to 60% of Ugandan maize now goes to South Sudan 5, rather than to Kenya Official and unofficial imports from Uganda and Tanzania, and has also been met by international markets in the past 1 Demand Maize is staple crop in Kenya consume >77kg per person per year 4 Population is growing by 1 million per year 1 Estimate that Tanzania could supply 2 million MT a year 6 to meet some of this demand 21 Sources: 1) FAO Kenya Technical Note Maize ) East African newspaper Nov ) Feed the Future Kenya 4) FAO Food Balance Sheet ) The Citizen ) FAO Maize Report ) Dalberg Maize Report 2014

22 SECTOR FUNDAMENTALS BECAUSE OF ITS ROLE IN FOOD SECURITY, MAIZE IS A POLITICALLY IMPORTANT CROP IN TANZANIA AND MANY PLAYERS ARE INVOLVED Big Results Now Policy Goals Big Results Now is the Tanzanian government s initiative to transform the economy, with a large focus on agriculture Collective Warehouse-based Marketing Schemes (COWABAMA) Goals: Increase maize production by 100,000 MT by 2015 Increase exports of maize Increase maize farm-gate price for collective warehousebased marketing by 50% by 2015 Increase quantity of maize sold 275 warehouse rehabilitation & marketing schemes are targeted with an immediate goal of 30 operational by end of 2014/15 budget cycle, first 30 of these warehouse projects are funded by BMGF Current Maize Development Fortification & Health focus on improving nutritional aspects of maize flour Farmer organization development improving production and linking to markets Commercial Investment attracting large farmers Production improving soil health and maize varieties Storage hermetically-sealed bags 22

23 SECTOR FUNDAMENTALS HOWEVER THE ENABLING ENVIRONMENT AND INFRASTRUCTURE REMAIN CONSTRAINED Constraints in the enabling environment and infrastructure Unreliable and inaccessible roads for transportation of crop by farmers to warehouses or markets, and field to farm Unstable and often lack of electricity prohibits cost-effective milling facilities Unstable Farmers are disorganized - few farmer groups or associations exist for maize and there is a historical dislike of cooperatives Upcoming fortification regulations will be difficult for 1000s of millers to implement and for government to enforce Policy environment is not harmonized, creating conflicting policies that harm market development Underdeveloped Infrastructure Business and Finance Environment Industry Bodies and Sector Policies Research and Extension Services Erratic government bans on exports which are destructive to exporters and buyers Foreign investments remain cumbersome and access to competitive financing limited, with land tenure uncertain Contracts are unenforceable Interest rates for farmers are extremely high (30%) Uncertain Extension services are limited (4000 workers) and are not well supported (lack of education, training, transportation, etc.) nor linked directly to research Research is focused on variety development, diseases, droughts, pest, and fertilizer application Opportunity for improvement Relative degree of constraint More constrained Less constrained 23

24 SECTOR FUNDAMENTALS WHILE THE DOMESTIC MAIZE MARKET IS UNCERTAIN AND UNRELIABLE, THE NAIROBI PRICE IS GENERALLY HIGHER THAN TANZANIAN MARKETS Trends TZS / kg 1, Historical Wholesale Maize Prices , Tanzania & Nairobi Markets 1 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 Nairobi Arusha Dar es Salaam Iringa Domestic Prices are higher in Dar es Salaam due to high population & low production Prices are lower in Southern Highland cities like Iringa, where production is high Production, and thus prices vary from season to season Regional Typically prices are generally 20% higher in Kenya 2 Patterns Prices do not always increase over a season, which constrains Warehouse Receipt Systems Erratic prices means the market is unreliable and uncertain 24 Sources: 1) WFP Monthly Food Prices 2) Stakeholder interviews

25 SECTOR FUNDAMENTALS WITH OVERALL PIE INCREASING, ALL SEGMENTS ASIDE FROM SEED INCREASE, WITH DOMESTIC HOUSEHOLDS, FEED PROCESSING AND EXPORTS MARKETS BECOMING MORE IMPORTANT Estimated Market Share for Maize 1 Numbers indicate total market share while arrows indicate share trend 9 Overall Pie Increases Estimated Million MT % CAGR 45% 0.5% 57% 17% 1% 15% 16% 3% 10% 4% 18% 12% On-farm consumption Saved seed Domestic households (millers, markets) Feed processing Food security Exports 8% growth illustrates what is possible in the maize sector 2 On-farm and Food Security Consumption needs are met at current levels for growing population for both, shares drop as a result of total volume increase Domestic households Keep pace with population and increases slightly as medium-millers grow Feed processing Likely to achieve 15% market share if grows at 15% per year from poultry sector demand Exports Can easily increase to 1.7 million MT with increasing to a 18% market share 25 Sources: 1) Based on interviews, FAOSTAT 2013, 2007/2009 Agriculture Survey 2) Based on a 8.3% growth rate over last 50 years and since 1990, FAOSTAT 2013 See Appendix for full list of assumptions and growth rates for each sector

26 26 Value Chain Opportunities

27 PHASE 2 TANZANIA MAIZE EXECUTIVE SUMMARY 1 SECTOR FUNDAMENTALS 2 VALUE CHAIN OPPORTUNITIES INTERVENTIONS 3 & IMPACT STAKEHOLDER 4 PROFILES Maize is the most important food crop in Tanzania, grown by 3.5 million farming households (60%), and accounting for 40% of calories consumed Yields have flattened, while production has increased steadily to ~5-6 million MT as land under cultivation has increased (~4 million ha) ~60% of maize is consumed on-farm, although other sectors such as exports and processing for animal feed are growing Value chain is extremely fragmented and disorganized (3.5 million farmers, many traders, 30,000 small flour mills) Economics make it difficult for SHF to profit unless yields improve significantly Despite this, surplus maize exists without strong demand pull Opportunities exist to organize the value chain to strengthen the demand pull offered by export markets and processors Interventions focus on organizing players and linking production to market focal points At full adoption, proposed interventions would improve SHF margins by 210% Develop farmer marketing groups to improve overall production and link to markets Organize export traders to increase competitiveness and link to farmers Promote hermetic storage to reduce post-harvest losses Support fortification (dosifier) technologies to facilitate improved nutrition Farmer and export trader groups require NGO support to build technical and business capacity and provide mentoring Market focal point partners include institutional buyers (NFRA & WFP) and processors (Kitenge Farms, Hill Foods) NGO most likely candidate to work with multiple storage technology manufacturers (A to Z, PPTL) to build awareness and promote distribution Sanku is the private manufacturer of dosifiiers for small & medium mills 27

28 VALUE CHAIN OPPORTUNITIES MAIZE MARKET IS UNDEVELOPED & FRAGMENTED: APPROXIMATELY 40% OF PRODUCTION IS SOLD Total Production (5.2 MMT in 2012) 1 4% of production is green maize (on cob) Total Sold (2.1 MMT) Market is unorganized and dominated by traders Proposed interventions aim to organize both farmers & traders to improve efficiencies all round Aggregator-Traders 2 (85%) Transporter-Wholesaler-Traders 4 Organized Farmers 3 (15%) NFRA & WFP purchase 15,000 MT from famers Dry maize Flour Green maize (4%) Large mills Small & Medium mills NFRA (0.24 MMT) WFP (0.1 MMT) 1. FAOSTAT production 2. Aggregator-Traders primarily collect from small farmers 3. Farmers are organized as SACCOS, AMCOS, and other types of associations 4. Transporter-traders transport longer distances (i.e.. from town to Dar es Salaam) 5. Retail maize markets include sale of dry maize as well as green maize 6. Households buy dry maize and pay to have it 28 milled at a local posho mill Exports (informal & Formal) Retail Flour Markets Households Feed industry consumes processed & dry maize F Retail Maize Markets 5 Households 6 WFP Exports

29 VALUE CHAIN OPPORTUNITIES IN THE MOST PRODUCTIVE NORTHERN AND SOUTHERN HIGHLANDS, FARMING CONDITIONS MEAN FARMERS DIFFER FROM AVERAGE AND TEND TO APPROACH FARMING MAIZE MORE AS A BUSINESS Average SHF Northern Highland Farmers As defined by government statistics ha farm Yield of 1.2 MT/ha 3.5 million maize farming households total ~20% crop marketed Traditional practices million maize farmers on 0.99 ha farms, 1.50 MT/ha 5-yr average 4, who sell ~50% of maize 5 Plagued with droughts and unpredictable rains, with the short rainy season experiencing failures 1 Limited use of fertilizer More developed industry with higher concentration of processors Biggest constraint is weather affecting reliable production Southern Highland Farmers million maize farmers on 0.87 ha farms, 1.63 MT/ha 5-yr average yield 4, sell ~47% of maize 5 Fertile soil and predictable rains 1 and 50% of national fertilizer use 2 results in high yields Biggest constraint is access to reliable markets Presence of commercial farms and government focus (SAGCOT) Maize farming households 4 29 Sources: 1) Dalberg Report Maize Tanzania ) Tanzania Fertilizer Assessment IFDC ) 2007/2008 Agriculture Census 4) Ministry of Agriculture 5) LSMS Context Analysis Note: Numbers given are for previous regional breakdown (4 regions in south and 4 in north these 8 now make up 10 regions)

30 VALUE CHAIN OPPORTUNITIES WHILE FARM SIZE AND SYSTEMS ARE SIMILAR ACROSS THE COUNTRY, PRACTICES DIFFER SIGNIFICANTLY BASED ON LOCATION FERTILIZER IS USED IN THE SOUTH WHILE IMPROVED SEEDS ARE USED IN THE NORTH Across Tanzania, Maize Farmers Grow More than Maize Alone 1 Maize only Beans Groundnut Nuts/oilseeds Other Paddy Peas/beans Potatoes/yams/roots Small grains Sorghum Vegetables 0% 5% 10% 15% 20% Percent using input 30% Fertilizer, Seed Usage & Yields Vary Across Zones 1 14% 7% Inorganic fertilizer used 17% 46% 32% Seed purchased 9% 27% 10% Improved seed used Southern Highlands Northern Highlands National Percent of Farms 50% 40% 30% 20% 10% 0% Farm size is similar across regions 1 < 1 ha ha ha >5 ha Average ha High production zones offer opportunity to farm as business Higher fertilizer usage in Southern Highlands Higher improved seed usage in Northern Highlands Higher yields in both Southern Highlands Northern Highlands National average 30 Sources: 1) Context analysis of LSMS Data

31 VALUE CHAIN OPPORTUNITIES WITHIN THE KEY GROWING REGIONS IN THE NORTH & SOUTH, FOCUS WILL BE ON MIDDLE SEGMENTS OF FARMERS THAT ALREADY MARKET SOME MAIZE AND ARE MORE LIKELY TO USE FERTILIZER OR IMPROVED SEED Total # Farmers 2 Avg Size of Maize Farm 2 Sold 2 Farming Practices 2,3 Yields (MT / ha) 2 Total Production (MT) 2 Large commercial farmers or millers <500 1 > 20 ha 1 100% Full package ,000 Produce primarily for business & use technology 200, ha 80% Improved seed + fertilizer, Farmer Groups 3-5 1,920,000 Surplus that is sold but limited use of technology 1.2 million (34%) ha 20% Some inorganic fertilizer OR improved seed 1-3 2,160,000 Produce solely for food security 2.1 million (60%) <1 ha 0-5%* Traditional < ,000 * In high production years these SHF may sell, trade or give away surplus 31 Sources: 1) Dalberg Report Maize Tanzania ) Context analysis 3) See Appendix for further breakdown

32 VALUE CHAIN OPPORTUNITIES THESE FARMERS OPERATE IN A LONG & FRAGMENTED MAIZE VALUE CHAIN, WITH SMALL PLAYERS AT ALL LEVELS Maize constraints along the value chain Yields are low, due to: Soil is worn out, untested and fertilizer use is less than 34% 1 Lack of extension services & education to improve practices, although private agro-dealers may fulfill this role 96% of agriculture depends on unreliable rainfall Optimal input use is limited: Only 2.2% of all farmers access credit to pay for inputs 1 Appropriate inputs are not always available at time of need Not accessed Maize processors are fragmented Estimated 30,000 flour mills of all sizes, majority <5MT per day Maize millers are not yet fortifying Feed processors are small and dispersed and complain about high costs & poor quality of maize Contract & out-grower schemes have failed Farmers will side-sell if liquidity is an issue Contracts aren t honored and are not enforceable Opportunity for improvement Inputs & Production Storage & Aggregation Processing Market Functional warehouses are lacking: Government warehouses are in disrepair and many do not meet quality standards; few private warehouses available and distances are prohibitive Storage conditions are poor with high moisture levels and losses up to 20-40% Traders are the aggregators: Lack of supply aggregation results in multiple steps of trading, leading to inefficiencies in the value chain Traders lack access to finance to aggregate larger amounts Farmer groups are lacking: ~10-15% farmers in groups and struggle to access markets on individual basis Underdeveloped Market is uncertain and unreliable: Maize prices fluctuate and do not always increase later in the season Control (knowledge of prices & availability, aggregation, buyers) lies with middlemen No consistent quality grades are used Demand is geographically separate from supply Not accessed Relative degree of constraint 32 Sources: 1) Tanzania WFP Food Security 2012 More constrained Less constrained

33 VALUE CHAIN OPPORTUNITIES HUGE YIELD IMPROVEMENTS HAVE BEEN DEMONSTRATED WHEN INPUTS & GAP ARE USED BY HIGH PRODUCTIVE ZONE FARMERS Inputs & Production Impact Constraints Cases show that yields move from MT/ha to MT/ha when fertilizer, improved seed and GAP are used 1 Million MT Doubling Low Yield Production Results in Doubling Overall Production 2 Current production Potential production Limited access to finance to pay for inputs Widespread fake seed and fertilizer Limited knowledge of ideal fertilizer amounts and type to use Long distance from farms to agro-dealers times yield increase opportunity High yield Low yield New yields However, interventions to increase yields must be accompanied with linkage to markets to justify investment in surplus production 33 Sources: 1) Farmer group interviews 2) FAOSTAT 2013

34 VALUE CHAIN OPPORTUNITIES HOWEVER, ECONOMICS PROHIBIT THE PURCHASE OF INPUTS FOR SURPLUS FARMERS WHO ARE CASH CONSTRAINED AND LACK MARKET ACCESS USING INPUTS IS ONLY WAY TO MAKE A PROFIT Inputs & Production Farmer Cost Economics for Farmers in Middle Two Segments 1 $USD per Ha, per growing season $92 Full labor paid, 5 MT/ha, inputs, sell 80% Half labor paid, 1.7 MT/ha, no inputs, sell 20% Fully accounting for labor adds $287 to $84 baseline cost Using inputs adds another $287 $287 Margin positive due to inputs increasing yields to 5MT/ha & selling 80% crop $686 $46 $19 $56 $93 $93 $46 $23 $14 $287 $84 $62 $207 $287 Negative margin when yields are 1.7MT/ha & selling 20% crop $84 ($20) $64 Pre-harvest (clearing land, plowing, planting weeding) Harvest Post-harvest (threshing, transport) Cost of production Inputs (seed, fertilizer, fungicide) Cost of production with inputs Farmer margin Value of maize sold LABOR COSTS INPUT COSTS MARGINS 34 Source: 1) Farmer group interviews

35 VALUE CHAIN OPPORTUNITIES WHILE THE SITUATION IS EVEN WORSE FOR TRADITIONAL SHF AS ANY LABOR ACCOUNTING RESULTS IN LOSSES Inputs & Production Farmer Cost Economics for Traditional Farmers 1 $USD per Ha, per growing season Partial labor accounting would add $84 /ha, while full labor is $371 $207 $19 $658 No labor paid, 1.2 MT/ha, no inputs, sell 0-5% $93 $46 $46 $23 $14 $84 $62 If sell 100% of crop, margin is $141 if partial labor paid $225 $56 $93 $287 $141 Pre-harvest (clearing land, plowing, planting weeding) Harvest Post-harvest Cost of (threshing, transport) production Inputs (seed, fertilizer, fungicide) Cost of production with inputs Farm gate value if ($146) 100% maize sold Losses would be $146 or $433 /ha if inputs purchased ($433) LABOR COSTS INPUT COSTS MARGINS 35 Source: 1) Farmer group interviews

36 VALUE CHAIN OPPORTUNITIES OVERALL, MAIZE FARMING IN TANZANIA PROVES DIFFICULT TO MAKE A PROFIT SHIFTING TO FARMING AS A BUSINESS & USING INPUTS OFFERS THE ONLY PROFITABLE OPPORTUNITY Inputs & Production Farmer Income Economics for 3 Farmer Segments $USD per Ha, based on May 2014 sources Traditional farmers no costs or revenue Surplus farmers partial labor paid 2 & sell 20% Business farmers - labor fully paid + inputs 3, & sell 80% Total production cost $0 $84 $658 Inputs increase yield by 2.4 times 1 Average yield per Ha 1.2 MT 1.7 MT 5 MT Farm gate price per kg $ TZS $ TZS Total sales $0 $64 (20% sold) $ TZS $770 (80% sold) Sales increase from improved yields & more sold Farmer margins $0 -$20 +$92 (14%) When labor fully accounted and inputs purchased, margins are still low Interviews reveal average yield increase of over 250% from improved seeds and input usage 2. Includes paid harvesting, threshing and transport 3. Includes half paid labor for pre-harvest production and fully paid post-harvest activities Sources: Context Network stakeholder and farmer interviews

37 VALUE CHAIN OPPORTUNITIES BEYOND THE CHALLENGING ECONOMICS, COMMON FARM PRACTICES RESULT IN AS MUCH AS 40% POST-HARVEST LOSS Storage & Aggregation 100% 15% Potential On-farm Losses of Maize 2013, Tanzania 1 1.5% 13% 10% 3% 58% Potential harvest Field losses Harvest Threshing Storage Transport Actual Undeveloped kernels are one source of field loss Typical on-farm storage of cobs kernels are also stored in bags kept in homes Losses at the Farm Field loss varies greatly depending on seasonal weather, pests and disease Losses from poor storage can be as high as 30% and result in increased aflatoxin levels 1 With yield of 1.2 MT/ha at harvest, a 0.7 ha farm loses potential of ~340kg maize $374 million USD across 4.1 million hectares 2 $92 lost opportunity per ha 37 Sources: 1) Abass, A.B., et al., Post-harvest food losses in a maize-based farming system of semi-arid savannah area of Tanzania, Journal of Stored Products Research (2013) 2) Farm gate price of 300 TZS/kg ($0.19/kg) with 40% lost

38 VALUE CHAIN OPPORTUNITIES AND ALTHOUGH WAREHOUSES EXIST, THEY ARE IN DISREPAIR AND THE WAREHOUSE RECEIPTS SYSTEM HAS LARGELY FAILED Storage & Aggregation Warehouses Thousands of warehouses were built in 1970s and 1980s; most of these are now in disrepair BMGF helping to restore first 50 of 275 as part of Big Results Now in Southern Highlands Warehouse Receipt System has attempted to help SHF achieve better prices by providing upfront credit for maize deposited in warehouse and sold later, but system has largely failed Constraints Infrastructure Credit provider requires security company to guard the warehouse Management Requires a dedicated manager to manage proper storage, finances and have knowledge of market prices Market High costs of the above are not always offset by the advantage gained by selling later in the season Farmer deposits maize at harvest & receives credit WRS Buyer purchases late in season at higher price Credit Provider Shift focus to simplified warehouse storage facilities that offer group storage for aggregation, and perhaps take advantage of higher prices later, but avoid the costs of complicated receipt systems 38

39 IN ADDITION, WITH ONLY ~10-15% OF FARMERS IN GROUPS, INDIVIDUAL SHF ARE DISORGANIZED AND UNABLE TO ACCESS MARKETS VALUE CHAIN OPPORTUNITIES Storage & Aggregation Estimate of Farmers in Producer Groups 1,2,3 Farme r group s 10% Underlying Constraints Producer groups have often not worked without linking to markets, due to: Perceived lack of benefits from joining a group 1 Only join to access finance or subsidized inputs 1 Poor history of cooperatives in Tanzania, with associated lack of trust Opportunities to Organize SACCOs Savings and Credit Cooperative Societies that provide group savings, and often access to group credit, with some providing marketing AMCOs Agricultural Marketing Cooperative Societies in theory provide group marketing but in practice have failed in Tanzania Opportunity to organize ~3 million maize SHF who are not part of a producer or marketing group, as long as they can be linked to a market 39 Sources: 1) NAFAKA Baseline Study Report ) AgFiMS Tanzania Technical Demand Side Report )

40 VALUE CHAIN OPPORTUNITIES HOWEVER, WITH GROUPS, FARMERS CAN AGGREGATE IN WAREHOUSES AND ACCESS HIGHER LATE-SEASON PRICES Storage & Aggregation Opportunity Aggregation Bulking enables farmers to negotiate better prices with traders as it shifts some control to them Price increase from bulking was reported to be 20 TZS/kg ($1.25 per bag), or 5-10% 1 Delayed Sales Storage enables farmers to hold onto maize until later in the season, when prices are often higher, depending on the surplus With proper management, delayed sales can increase profits significantly, assuming practice is not widespread TZS/kg % Iringa Market Maize Wholesale Prices 2 Increases calculated from July/August to April/May +44% Harvest +42% Harvest +77% Harvest Harvest +1% Indicates Growing Season Rehabilitated IDODI SACCOS warehouse in Iringa District 5-10% price increase opportunity from bulk sales ~40% potential from delayed sales 40 Sources: 1) Farmer interviews 2) WFP market prices for Iringa market in Southern Highlands with unimodal production

41 VALUE CHAIN OPPORTUNITIES WITHOUT GROUP MARKETING AND WAREHOUSES, SHF RELY ON TRADERS WHO COLLECT, AGGREGATE, TRANSPORT & SELL MAIZE Storage & Aggregation Rural Farm Village Collector Town Wholesalers Regional Wholesalers End Markets 3-5% margin 3-5% margin ~18% margin Traders travel from farm to farm, collecting a few bags at a time Aggregators bring maize to wholesalers at local markets or informal locations Wholesalers arrange transport to other markets Traders bring maize directly to processors & large buyers, while Kenyan traders come to regional markets themselves Traders have roles all along the chain Connecting farmers directly to wholesalers or end markets could shift some of the ~25% margins to farmers or organized traders 41

42 VALUE CHAIN OPPORTUNITIES OPPORTUNITY TO CREATE DEMAND FROM MAIZE FLOUR PROCESSORS Processing LIES WITH SMALL & MEDIUM MILLERS AS LARGE ONES ARE PUSHED OUT OF THE MARKET Large Processors are Constrained Shifting out of maize processing and now focus on wheat as they cannot compete with the smaller millers Processing is dominated by small and medium millers who are better able to produce flour that consumers demand Shift Focus to Medium Millers I have personally tried since 1999 to turn around maize milling but we just cannot compete with the smaller millers on every corner. We ve even worked with Buehler to try to produce the flour consumers prefer, but just cannot do it at scale. Managing Director, Bakhresa Managing executive, Opportunity Bakhresa Group exists (General to connect Mills SHF of East to the Africa) thousands of small and medium millers, with focus first on the medium millers with larger purchasing & organizational capacity. 42

43 VALUE CHAIN OPPORTUNITIES MORE PROMISING IS THE FEED SECTOR, AS LARGER Processing PROCESSORS EXIST, ARE GROWING DUE TO INCREASED POULTRY DEMAND, AND WANT TO BE CONNECTED TO FARMERS Feed Producers Handful of large processors that purchase 100, ,000 MT of maize annually 1 and want to find a reliable source of maize Remaining ~400,000 MT processed by large number of small-scale processors Maize used for feed has grown on average 20% per year over last decade 3 Contract maize farming has been largely unsuccessful, but processors would like alternatives to reliably access quality maize MT 1,200 1, Maize used for Feed , Tanzania 3 +20% CAGR Livestock Sector Growth Annual growth of the livestock sector is 3-4% 4 Poultry dominates the livestock sector (~50%) 3 Poultry 36 million local free range chickens and 25 million hybrids in Today, we don t know where we will buy maize tomorrow, nor can we be assured of the quality. Connecting directly to organized farmers would assure us of source and quality. Managing Director, Hill Feed 43 Sources: 1) Stakeholder interviews (Hill Feed, Silverland Farms) 2) Ministry of Agriculture 2007/2008 Ag Census 3) FAOSTAT ) Ministry of Livestock 2014 Budget Speech

44 VALUE CHAIN OPPORTUNITIES FOR NOW, THE LARGEST DOMESTIC BUYERS ARE FOOD SECURITY PURCHASERS WHO HAVE YET TO BE FULLY LINKED TO SHF Market Food Security Purchases and Sources 2013, MT, Tanzania 1,2 Constraints Non-security Market, 1,065,000 NFRA & WFP, 235,000 Food security purchase opportunity of ~220,000 MT Traders, 220,000 NFRA and WFP only purchase above market price (+50 TZS/kg) at harvest their price remains the same throughout the season NFRA & WFP have not been able to pay farmers expediently, often taking 3 months SHF, 12,550 P4P SHF, 3,000 NFRA & WFP purchase 15,550 MT directly from organized farmers (7% of purchases) 15% price improvement opportunity ($6.9 million USD total) Opportunity to build capacity for NFRA and WFP to purchase from SHF directly, with particular focus on purchasing from surplus regions without strong markets. 44 Sources: 1) World Food Programme P4P country report 2) WFP P4P interview

45 LINKING SHF TO EXPORT MARKETS OFFERS HUGE OPPORTUNITY, ALTHOUGH LINKAGES NEED TO BE GEOGRAPHICALLY STRATEGIC TO ADDRESS HIGH TRANSPORTATION COSTS VALUE CHAIN OPPORTUNITIES Market At this price, only maize from Arusha 1000 & Iringa is profitable TZS / kg Regional Market Prices and Cost to Transport to Nairobi Compared to Nairobi Market Price Wholesale 5-year average price, Tanzania & Kenya Mbeya requires higher market price to cover transport cost 560 Constraints High transportation costs ($0.15/MT/km) 2 from Southern Highlands make export to Kenya prohibitive from some areas like Mbeya Arusha traders do buy from Southern Highlands when the demand in Arusha is high, otherwise they source locally 0 Arusha Dodoma Iringa Mbeya Arusha Market price Transportation to Arusha Nairobi price Mbeya Dodoma Iringa Opportunity to link SHF to export markets in a strategic manner Arusha & Iringa SHF could sell to Kenya, whereas Mbeya farmers may be better off selling to NFRA or southern export market. Reducing transportation costs, by organizing traders to develop their own fleets or improving infrastructure (revitalize North-South train route), would also benefit SHF. 45 Sources: 1) WFP market prices 2) Transportation cost set at $0.15 per MT per km based on interviews

46 VALUE CHAIN OPPORTUNITIES ORGANIZING THE MAIZE VALUE CHAIN WILL BENEFIT ALL PLAYERS LINKING PRODUCERS TO MARKET FOCAL POINTS WILL ENABLE THIS DEVELOPMENT Link northern SHF to northern export traders & processors Market Focal Points Available for Maize Surplus Processors Export market link Major domestic market NFRA warehouses High production zones with surplus SHF Link southwest SHF to NFRA & southern export traders Link central & southern SHF to domestic markets & processors, or northern exports as profitable 46

47 VALUE CHAIN OPPORTUNITIES ADDRESSING CURRENT VALUE CHAIN CONSTRAINTS COULD IMPACT OVER 3 MILLION MAIZE SHFS IN TANZANIA Constraints Total Farmer Impact 1 Inputs & Production Storage & Aggregation Processing Market Low yields due to high costs of fertilizer & improved seed with constrained economics Best practices in agronomy not well disseminated Post-harvest farm losses of 20-40% Lack of storage and aggregation at farmer level Millers are fragmented and not connected to SHF Millers are unable to fortify Feed processors struggle to obtain desired quality & price Export market dominated by foreign traders and not well organized Surplus is disconnected from demand +2-3 million SHF could benefit from improved storage +1 million Middle segment farmers could benefit from improved access to markets Lack of organization of VC is key limiting factor, with poor storage and aggregation further constraining all farmer segments Opportunity to tackle these constraints through the proposed interventions with primary focus on middle farmer segments & high production zones 47 Sources: 1) Based on 3.3 million maize SHFs for cross-crop storage and aggregation, 35% of maize SHFs could use additional input and production support and market linkages (~1.2 million)

48 48 Interventions & Impact

49 PHASE 2 TANZANIA MAIZE EXECUTIVE SUMMARY 1 SECTOR FUNDAMENTALS 2 VALUE CHAIN OPPORTUNITIES INTERVENTIONS 3 & IMPACT STAKEHOLDER 4 PROFILES Maize is the most important food crop in Tanzania, grown by 3.5 million farming households (60%), and accounting for 40% of calories consumed Yields have flattened, while production has increased steadily to ~5-6 million MT as land under cultivation has increased (~4 million ha) ~60% of maize is consumed on-farm, although other sectors such as exports and processing for animal feed are growing Value chain is extremely fragmented and disorganized (3.5 million farmers, many traders, 30,000 small flour mills) Economics make it difficult for SHF to profit unless yields improve significantly Despite this, surplus maize exists without strong demand pull Opportunities exist to organize the value chain to strengthen the demand pull offered by export markets and processors Interventions focus on organizing players and linking production to market focal points At full adoption, proposed interventions would improve SHF margins by 210% Develop farmer marketing groups to improve overall production and link to markets Organize export traders to increase competitiveness and link to farmers Promote hermetic storage to reduce post-harvest losses Support fortification (dosifier) technologies to facilitate improved nutrition Farmer and export trader groups require NGO support to build technical and business capacity and provide mentoring Market focal point partners include institutional buyers (NFRA & WFP) and processors (Kitenge Farms, Hill Foods) NGO most likely candidate to work with multiple storage technology manufacturers (A to Z, PPTL) to build awareness and promote distribution Sanku is the private manufacturer of dosifiers for small & medium mills 49

50 INTERVENTIONS & IMPACT INTERVENING IN THE MAIZE VALUE CHAIN IS COMPLEX; KEY DRIVERS IN THE LANDSCAPE SHAPE INTERVENTION CONSIDERATIONS Farmer groups are essentially nonexistent Intervening is difficult due to lack of organized structure in which to intervene as cooperatives are non-functional and groups are rare A number of NGOs are organizing farmers on a small scale Many interventions are currently being deployed in maize & interventions must align with these Many of them funded by Gates Purchase for Progress (P4P under WFP) Big Results Now rehabilitating 275 warehouses AGRA Soil Health program PICS3 bags WEMA Water Efficient Maize Africa Maize is a political crop and is subject to government interference Diversify interventions in order to mitigate risk from future government interference in exports, food security purchases or capacity for processors to purchase maize Formal linkages between buyers and farmers (out-grower schemes & contract farming) have failed in the past Across Tanzania, contract-based farming has been unsuccessful and most buyers are not interested in that model. Farmers chose to side-sell when they have liquidity constraints Contracts are thus not honored and there is no system to enforce them 50

51 INTERVENTIONS & IMPACT RECOMMENDED INTERVENTIONS ADDRESS CONSTRAINTS AND ORGANIZE THE VALUE CHAIN IN ORDER TO LINK SHF WITH MARKET FOCAL POINTS Farmer Marketing 1 Groups Association of 2 Traders Support of Value- 3 Add Programs Organize farmers into marketing groups that allow them to improve activities across the value chain Market Access training, group transport, link to buyers (NFRA, WFP, millers, feed processors) Group Marketing & Reduced Losses training, financial support to refurbish or build group storage Better Yields training (GAP, demos, farmer field schools), group credit for inputs Pilot organizing Arusha traders into an Association in order to better access export markets and improve efficiency Market Efficiencies link traders to Farmer Groups and to export buyers (Kenyan traders) Storage & Added Value facilities to aggregate enough maize for export, with ability to add value through cleaning, grading, quality control Supplement Hermetic Storage and Tuboreshe Chakula Fortification projects Post-harvest Loss Support commercial market development for hermetic storage Enable Medium Millers Provide funding to fortification equipment manufacturer in order to scale up dosifier equipment production & distribution for millers Underlying Financial Support Loan guarantees for savings & marketing groups, trader association, input suppliers 51

52 1 INTERVENTIONS & IMPACT INTERVENTION #1 PRIMARILY TARGETS THE MIDDLE FARMER SEGMENTS, INCREASING THEIR INCOMES BY MARKETING MORE MAIZE AT A BETTER PRICE, ALTHOUGH SOME BASE FARMERS COULD ALSO BENEFIT Primary target segment Large commercial farmers or millers Produce primarily for business & use technology Surplus that is sold but limited use of technology Continued organization of business farmers enables access to finance and better markets (such as export markets, NFRA/WFP quality markets, or millers) Shift to high quality production to target institutional and niche markets Organization of surplus farmers enables significant yield increases from input use, access to markets, better quality production and shifting to selling 80% of production Shift to farming as a business Organization of traditional farmers allows for improved maize production from GAP, better storage & post-harvest handling Produce solely for food security Linking to markets enables investment in surplus production 52

53 INTERVENTIONS & IMPACT 1 ORGANIZATION OF FARMERS IS KEY TO ENABLE SUCCESS OF OTHER INTERVENTIONS AND ORGANIZED MARKET DEVELOPMENT Intervention #1: Farmer organization into Marketing groups to improve production and link to market focal points Constraints Addressed Solutions Issues + Considerations - Poor yields & agronomic practices - Low & sub-optimal input usage Limited improved seed and fertilizer purchase with poor usage - Unsupported extension service - Poor storage conditions with high post-harvest loss Both on-farm and in local warehouses A B C Capacity building on production - Demo plots, farmer field schools, farmers as trainers Group marketing - Strategically link to buyers (NFRA, WFP, millers) - Business management training - Group transport to markets Develop group storage - Rehabilitate or build local storage facilities - Technical assistance - Hermetic bag promotion Recent efforts to improve yields via input use have been largely unsuccessful. Fake products, high costs and delayed access have hindered uptake. Without access to extension and financing, individual farmers have not reaped benefits. Financing for inputs is one of the most challenging unsolved constraints and has proven unsuccessful on an individual farmer basis. Group financing appears to be improving this but a long-term play, as primarily based on relationships and group trust. - Aggregation performed by traders D Underlying financial support - Group loans - Loan guarantees to savings groups Unorganized farmers are largely unaware of market opportunities and rely on traders to come to them. 53

54 INTERVENTIONS & IMPACT 1 FIRST STEP IN INTERVENTION IS STRATEGICALLY DEVELOPING FARMER GROUPS WHERE MARKET FOCAL POINTS EXIST Prior to any specific group activities, farmers need to be organized into appropriately sized groups, based on the available market focal points 1. Typically, geographies with potential markets are selected first and NGOs or private enterprises invite farmers to an information session to learn about the group system 2. Farmers then self-select into groups 3. Groups range from loosely organized structures with common interests to more formal ones, such as SACCOs, that are registered with the government A B C D Capacity building on production Enable group marketing Develop group storage Group loans 54 Sources: Faida Mali farmer group training

55 INTERVENTIONS & IMPACT 1 DETAILED INTERVENTION DESCRIPTION INTERVENTION #1A: CAPACITY BUILDING ON PRODUCTION Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Farming training through demonstration Farmer field schools where farmers come to learn about inputs & GAP, demonstration plots that compare with and without inputs Peer-to-Peer training Selection of influential farmers for intensive training on GAP, inputs, etc. These farmers become certified and subsequently train others at farmer field schools Key Dependencies & Risks Overseen by coordinating NGO or organization Implemented by a variety of NGO partners on the ground, based on geography Program would have an arc of piloting, testing, refining and scaling Gain to SHF (est.) Initial training of ~100 trainer farmers per district, who then run farmer field schools to reach 30 more farmers each (3000 by end of season) Each district could thus reach 9,000 farmers within 3-5 years, depending on initial interest, or 450,000 farmers across the 50 districts (if all districts implemented in first year) Potential Implementers Successfully training farmers requires access to land for demo plots, and building trust by demonstrating results over seasons. Peer-to-peer training works well as long as there is significant time commitment from the trainer farmers (could be 4 months). Thus, this intervention requires significant time investment each season. Average yield gain with improved seed, fertilizer & GAP 2-3 times gain in yield Potential benefit to SHF: $88 / ha Rural Urban Development Initiative (RUDI) Tanzania Grass Roots Oriented Development (TAGRODE) Njombe Agricultural Development Organization (NADO) 55

56 INTERVENTIONS & IMPACT 1 DETAILED INTERVENTION DESCRIPTION INTERVENTION #1B: ENABLE GROUP MARKETING OF MAIZE Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Business, financial and negotiation training Provide SHF with skills needed to operate as a business and manage group marketing Group transport Assist group in organizing transport of aggregated maize to market Link to buyers Informally connect with NFRA, WFP and medium millers so can sell directly to markets Key Dependencies & Risks Overseen by coordinating NGO or organization Implemented by a variety of NGO partners on the ground, based on geography Gain to SHF (est.) Reach the same number of SHF as extension capacity building, assuming they have access to group storage in order to aggregate Potential Implementers Group marketing requires building relationships between farmers and buyers. Thus, this is not a quick fix solution, but requires a time investment in order to be successful. Ability to successfully market maize also depends on geography. Links to markets are more easily developed in northern or deficit regions, whereas in the large surplus regions in the south, it may be more difficult to find good markets. Average price gain from bulk sales 25 TZS/kg Potential benefit to SHF: $29 / ha Rural Urban Development Initiative (RUDI) Tanzania Grass Roots Oriented Development (TAGRODE) Njombe Agricultural Development Organization (NADO) 56

57 INTERVENTIONS & IMPACT DETAILED ASPECTS OF BUYING ARRANGEMENTS WOULD NEED TO BE NEGOTIATED, BUT THERE IS BOTH INTEREST AND VIABILITY FOR MILLERS AND PROCESSORS TO BE CONNECTED TO PURCHASE FROM FARMER MARKETING GROUPS Supported by NGO Tzs/kg Farmers 0 Indicative Processor Purchases direct from Farmer Marketing Group Farmers Farmers Farmers ~330 Current Farmer Group Price 1 Farmer Marketing Group 2014 Pricing : / Tzs kg ~150 Transport 2 Trucking to be negotiated; 30+ MT purchase optimal ~480 Price to Processor Processor Price for delivered: / Tzs kg Processor Price Range Intervention Price in line with Processor Price Range Considerations While there are issues to work out, underlying economics can work for processors to purchase from farmer groups: The farmer group aggregates, cleans, grades, warehouses, and markets (these capabilities likely need development in conjunction with organizers) Trucking would be the major aspect to work out as farmer groups not equipped; traders have traditionally filled that function. However, at $.15 / MT / km for trucking, there is still sufficient margin The underlying contract is likely to be volume agreement with price to be agreed prior to delivery; a neutral price setting mechanism needs to be determined Benefits to SHF: With known buyer, SHFs have clear incentive to buy improved seed and increase yields w/ Intervention 57 1 July 2014 price in Iringa; 2 Trucking estimated at US $.15 / MT / km; 3 Price range for delivered maize 2014 quoted by Falcon Feeds Sources: Josefynne Milingi-Kaiza, Managing Director, BRITEN; Context interviews with Falcon Feeds and Hill Animal Feed

58 INTERVENTIONS & IMPACT 1 DETAILED INTERVENTION DESCRIPTION INTERVENTION #1C: DEVELOP GROUP STORAGE CAPACITY Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Cost-share rehabilitation of local warehouses for use by targeted farmers groups Cost-share construction of group warehouses if none presently exist for use by targeted farmers groups Technical assistance Train on proper post-harvest management techniques Access to hermetically-sealed bags Distribute or enable access to bags Key Dependencies & Risks Overseen by coordinating NGO or organization Implemented by a variety of NGO partners on the ground, based on geography Support commercial distribution of hermetically-sealed bags via agrodealers and link to farmer groups Gain to SHF (est.) Cost-share rehabilitation of 3 and construction of 1 new local warehouse per district over 3 years Potential Implementers Successful warehouse systems require more than a physical space. Technical assistance for proper storage and maintenance of the warehouse is required. Warehouses need to be located close to farms to avoid large transportation costs. Link to market in order to take full advantage of aggregation. Works best when seasonal prices always increase. Average post-harvest gain from reduced losses -- 20% gain in available maize Potential benefit to SHF: $51 / ha Rural Urban Development Initiative (RUDI) Tanzania Grass Roots Oriented Development (TAGRODE) Njombe Agricultural Development Organization (NADO) 58

59 1 INTERVENTIONS & IMPACT DETAILED INTERVENTION DESCRIPTION INTERVENTION #1D: LOAN GUARANTEES TO BANKS TO PROVIDE FINANCIAL RESOURCES TO SACCOS Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Loan guarantees to financial institutions to pass on financial resources to SACCOs (also to disguise donor involvement) SACCOs use member savings as collateral for loans to farmer groups that are co-insured by their members Capacity building Technical assistance, business and financial management support, and follow-up 59 Key Dependencies & Risks Group lending is less risky than individual loans as history of loan repayments is poor. Financial institutions are reluctant to lend to individual SHFs, especially for inputs/production of food crops where significant side-selling occurs. Linkages to markets is necessary in order for farmers to repay loans. This intervention needs to be linked to group marketing intervention. Funds and responsibility must be local (reason for using SACCOs) default rates will be high if farmers believe it is donor or government money. Guarantee to financial institution helps SACCOs access funds to stretch internal savings An alternative approach: Guarantee Fund to private trust (PASS) that links farmers to banks and provides loan guarantees Guarantee for input suppliers to strengthen supply chain advances to stock lists Gain to SHF (est.) Loans will fund the groups ability to purchase inputs, as well as purchase and market maize as a group Benefit captured in first 3 interventions Target to selected locations with group maize marketing intervention to insure revenue to repay loans Being selective expect ¼ to ⅓ of the SHF in group capacity building intervention might be/become members of viable SACCOs Private Agricultural Sector Support (PASS) Mufundi Community Bank (MuCoBa) National Bank of Commerce (NBC) National Microfinance Bank (NMB) CRDB Potential Partners AKIBA Commercial Bank (ACB)

60 INTERVENTIONS & IMPACT 1 SACCOS AND OTHER GROUPS ARE SUCCESSFULLY LINKING SHFS TO BUYERS IN INFORMAL MODELS THAT AVOID THE PAST FAILURES OF CONTRACT FARMING Purchase for Progress / WFP / NFRA Purchase maize from SACCOs Case studies Mbomole Investment Co. Purchase maize from farmer groups for milling Farmers Farmers Farmers Farmers Farmers Optional contracts Food security buyer Farmers Farmers Farmers Farmers Informal contracts Collection points & input supply Processor Traders Traders Traders Farmers Farmers Farmers Farmers Farmers Description Engaged with SACCOs to reach 19,000 farmers Signed contracts with 24 of 28 SACCOs worth $4.8 million from , buying 13,000 MT 1 Farmers are provided with capacity building & storage facilities Application WFP purchases through competitive tendering process with specified quality requirements NFRA is expanding their purchase from groups Collective storage and marketing enables access to guaranteed buyer, and allows sales at higher prices later in the season Description SHF groups and individuals bring maize to 7 collection points or mill, where they are paid on the spot (same price at collection points as at mill) With informal contracts, Mbomole provides SHF with storage for late-season sales, loans against their maize, and inputs Application Local medium size mill (10-15 MT/day) provides local market for maize Collection points reduce transportation costs for farmers and provide better access to inputs Farmer groups provide opportunity to improve production once linked to the market 60 Sources: 1) Purchase for Progress update Feb ) Context Network interviews

61 INTERVENTIONS & IMPACT 2 ACCESS TO EXPORT MARKETS IS LARGEST OPPORTUNITY FOR DEMAND PULL ORGANIZING TRADERS WILL IMPROVE EXPORT MARKET ACCESS Intervention #2: Organize traders into associations to improve efficiencies and access markets Constraints Addressed Solutions Issues + Considerations - Lack of access to markets for farmers Organized traders can connect more directly with SHF - Inefficient and long value chain - Demand disconnected from supply A B C D Organize into trader association Develop group storage - Build warehouse facility to aggregate enough maize for export, with ability to add value through cleaning, grading, quality control Group buying & marketing - Link to farmer groups - Link to buyers, specifically buyers for export Underlying financial support - Group loans - Loan guarantees to trader association Although many describe traders, or middlemen, as the ones who control the value chain, these are more likely those traders who are selling to the large commercial millers and traders, such as Mohammed Enterprises. Specific groups of traders near export markets, such as Arusha or Mbeya, are independent and would benefit from organization No maize trader association exists in Tanzania, although there is a Coffee Traders Association. This model should be piloted in one area before rolling out to other geographies. 61

62 INTERVENTIONS & IMPACT 2 DETAILED INTERVENTION DESCRIPTION INTERVENTION #2: TRADER ASSOCIATION DEVELOPMENT Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Organize traders into association Register traders in a formal association Storage Build or develop group storage facility for traders to use to aggregate, clean, grade or QC maize Linkages Link organized traders to organized farmers as well as buyers (institutional and exporters) Pilot in Arusha Start with a pilot of the ~20 maize traders in Arusha Initial pilot in one export city (Arusha) If successful, roll out to other areas with export market access: Moshi, Mbeya, Kigoma, Sumbawanga Key Dependencies & Risks Few trader associations exist in Tanzania This is a fairly novel structure that would need to be piloted and tested. Arusha traders were willing to become more organized, yet others may not be as open to the idea. Traders in other areas may operate more independently or informally and may not want to become more formal in operations. A handful of very large traders may oppose the competition. Gain to SHF (est.) Average price gain from more efficient value chain 25 TZS/kg Potential benefit to SHF: $44 / ha Potential Implementers Faida Mali TechnoServe BRITEN 2 Seeds Foundation MRA Management Associates 62

63 INTERVENTIONS & IMPACT 2 1 ORGANIZED TRADERS COULD BETTER ACCESS PRODUCERS & BUYERS, AS WELL AS OBTAIN CREDIT TO PURCHASE & SELL EVEN MORE MAIZE Arusha Maize Traders Association Purchase maize directly from farmer groups as well as individual farmers & traders Proposed Structure Farmers Farmers Farmers Trader Trader Trader Trader Kenyan Traders in Arusha Farmers Farmers Traders Traders Traders Group Storage / Maize Market Access to Finance Description Trader Association buys maize in a more organized manner they connect directly with farmer groups and thus capture more value between them and the farmers (currently they buy from individual traders) As a group they can access more affordable finance in order to buy and sell more maize With group storage or other facilities, traders can store maize to sell at a better price, or add value by cleaning or grading it Potential to also take over export component of value chain and take maize to Nairobi themselves, retaining more value in Tanzania 63

64 INTERVENTIONS & IMPACT 2 THE KIBAIGWA MARKET CAN BE USED AS A MODEL FOR DEVELOPMENT OF A MAIZE MARKET WITH GROUP STORAGE FOR THE TRADER ASSOCIATION Kibaigwa Maize Market Tanzania s largest maize market Case study Posted prices Maize storage Drying maize Cleaning equipment Purchases, Sales & Average Price MT TZS/kg Received Sold Price 0 Description Handles ,000 MT of maize per year Covers costs by charging traders small fee to use market and available equipment Demonstrated creation of demand pull for ~100,000 MT a year via a central maize market Cost $1 million USD to build by Agence Francaise de Development Keys to Success Transparency prices are posted daily and sent out via SMS to farmers Infrastructure storage space, cleaning & grading facilities Strategic location located in central Tanzania, on the main road to Dar es Salaam, so easily accessible for buyers 64 Sources: Kibaigwa market management team

65 INTERVENTIONS & IMPACT 2 NGO GROUP ESTIMATES THAT DEVELOPING A TRADER ASSOCIATION & RELEVANT MARKET INFRASTRUCTURE WOULD TAKE ~3 YEARS Proposed Process 1 Timeline ASSESSMENT & INITIATION 6 months Selection of traders Assess willingness to organize Bring traders together Form formal association or group Capacity building Assistance to further develop business skills, obtain finance LINK TO PRODUCTION Identify & select farmer groups Capacity building as needed Support linkage Problem solve, link to expertise INFRASTRUCTURE DEVELOPMENT Identify & select partner Private company or trader association Support development of physical market Access to finance, management support 1-2 years 1-3 years (could be concurrent) Interviews with Arusha traders confirmed their interest in forming a group as well as getting access to a physical structure like Kibaigwa Market 65 Notes: 1) Based on Faida Mali 10 step Market Linkage Approach

66 INTERVENTIONS & IMPACT 3 SUPPORT OF VALUE-ADD PROJECTS WILL ADDRESS LOSSES, SECURE MARKETS AND PROVIDE HEALTH BENEFITS Intervention #3: Provide support for ongoing projects with funding and marketing campaigns Constraints Addressed Solutions Issues + Considerations - Maize flour fortification requirement for large and medium millers - Current fortification equipment is too expensive for most millers - Post-harvest handling losses of up to 40% Losses occur both on-farm and for marketed maize A B Provide funding to flour fortification equipment company in order to help shift manufacturing to more costeffective location Support of hermetic storage container commercial market via: Marketing campaign to improve awareness Both of these interventions are small plays that may be better served by AGRA. Both should be coordinated with current projects: - Feed the Future Tuboreshe Chakula - Commercializing Hermetic Technologies for Grain Storage to Improve Market Access and Food Security in Sub-Saharan Africa (Gates Foundation grantee) Financial support of manufacturers 66

67 INTERVENTIONS & IMPACT 3 DETAILED INTERVENTION DESCRIPTION INTERVENTION #3A: FUNDING FOR FORTIFICATION EQUIPMENT Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Finance installation of 50 dosifiers Monitor 100 installed dosifiers for one year in order to develop business case $350,000 angel investment for dosifiers purchase and installation, plus monitoring throughout the year Current project aims to install 100 dosifiers from Sanku across Tanzania, reaching 1 million people This intervention would assist 50 of those, reaching 500,000 people Key Dependencies & Risks Relies on success of one small company Technology has been minimally tested in this format, installations were taking place in May 2014 Tanzania has not yet enforced the fortification regulation and if this remains, then may need to be consumer preference driven Gain to SHF (est.) Supports the medium sized millers and allow them to remain competitive Develops market for higher quality maize grain with an associated higher price Potential benefit to SHF: $39 / ha Qualitative health benefit Potential Partners Sanku Project Healthy Children (PHC) 67

68 INTERVENTIONS & IMPACT 3 DETAILED INTERVENTION DESCRIPTION INTERVENTION #3B: HERMETIC STORAGE MARKET DEVELOPMENT Key Intervention Elements Potential Programs Formats Size, Scalability & Timing Marketing campaign Generate awareness of hermetically-sealed bags, regardless of the brand Training Ensure all farmer organizers and trainers are made aware of these bags and when feasible, incorporate them into their training Linkages Link manufacturers to agrodealers to promote distribution Key Dependencies & Risks NFRA currently moving large volumes of bags often uses jute bags with hooks they would need to change their process as hooks cannot be used with hermetic storage bags 3 rd party / NGO works with manufacturers & agro-dealers: Raise awareness of benefits of hermetic storage (radio & mass media campaign) Support distribution NGOs involved in farmer groups to provide demos and training to groups & agro-dealers Gain to SHF (est.) Average post-harvest gain from reduced losses -- 20% gain in available maize Potential benefit to SHF: $49 / ha Could reach ~75% of farmers who sell maize (880,000) would use 6 bags for own consumption and another 6 for storing to sell later = 10.5 million containers Could reach 1/3 of SHF (695,000) with income from other business that store ~6 bags = 1.4 million containers Potential interest from processors for own storage A to Z PPTL Hill Group Potential Partners 68

69 INTERVENTIONS & IMPACT ASSUMING INTERVENTIONS CAN REACH 20% OF MAIZE HECTARES, 1 MILLION FARMERS COULD BE REACHED WITH A FINANCIAL IMPACT OF +$270MM PER YEAR BY YEAR 10 Number of SHFs impacted by interventions: 1,000,000 Net financial benefit per farmer Benefit per farmer from Int. #1: $ Benefit per farmer from Int. #2: $39.69 Benefit per farmer from Int. #3: $78.60 Net benefit per farmer Per annum Aggregate SHF benefit Per annum $ $270 MM 69 Assumptions of Context Network Analysis: 1.18 ha of maize grown per farmer $188 farm gate sale price 4.2 MT tons yield per Ha, less 10% storage loss 4.5 million hectares of maize in Tanzania At full adoption in year 10 (20% of maize hectares impacted by interventions in 10 years)

70 INTERVENTIONS & IMPACT POTENTIAL FARMER MARGIN IMPACT OF MAIZE INTERVENTIONS AT FULL ADOPTION REPRESENT ~210% INCREASE, IF ALL PRODUCTION IS SOLD Maize production value added $USD/ha Improve price from value chain efficiencies by connecting traders to SHF Improved price from quality maize for fortified flour Reduced losses from hermetic storage Increase yields from inputs & training, increase price from group marketing, decrease storage losses from group storage At full adoption the interventions would increase farmer margin by 210% Current Farmer Margin Yield Gain Price Gain Loss Improvement Price Gain Price Gain Loss Improvement Future Farmer Margin Intervention #1 Intervention #2 Intervention #3 70

71 INTERVENTIONS & IMPACT AT FULL ADOPTION, MAIZE INTERVENTIONS COULD EVENTUALLY INCREASE FARMGATE CROP VALUE BY ~$270 MILLION ANNUALLY Base Yield 1 Yield Gain Yield Gain Gross Yield Net Volume Price Price Gain Gross Rev. Net Income/ Gain MT/ha % MT/ha MT/ha % MT/ha MT $/MT $/MT $/ha $/ha $/ha Improved inputs & agronomic practices (1) % % $188 0% $630 $287 $343 Traditional production system (no purchased inputs) % $ $255 $ YIELD GAIN IMPACT $88 Improved price from group marketing (2) % % $188 8% $680 $21 $659 Traditional individual sales % $ $630 $ PRICE GAIN IMPACT $29 Improved post-harvest loss from group storage & training (3) % % $188 0% $630 $28 $602 Traditional post-harvest losses % $ $551 $ POST-HARVEST LOSS MITIGATION IMPACT $51 Increased price from shortening value chain and improving efficiencies. (4) % % $188 8% $595 0 $595 Traditional price remote from Arusha traders % $ $551 $ TRADER ASSOCIATION & STORAGE IMPACT $44 Medium & large miller demand increase from strengthened miller market (fortification creates new demand for quality maize) (5) % % $188 7% $590 $0 $590 Traditional markets % $ $551 $ FORTIFICATION FOR MILLERS $39 Improved post-harvest loss from better storage with hermetic bags (6) % % $188 $0.00 $630 $30 $600 Traditional post-harvest losses % $ $551 $ HERMETIC BAGS - (ON-FARM STORAGE) $49 Post- Harvest Loss Post- Harvest Loss Cash Outlays (Credit, Inputs, Fees) TOTAL POTENTIAL FARMGATE CROP VALUE IMPACT PER HECTARE ON SHF NET INCOME $299 Number of maize hectares in Tanzania at year 10 (8) 4,518,014 Assuming intervention measures eventually reach given % of maize hectares 20% 903,603 POTENTIAL FARMGATE CROP VALUE IMPACT OF MAIZE INTERVENTIONS AT FULL ADOPTION ($M) $ Numbers may not match exactly due to rounding 1. Improved input adoption is expected to increased yield from 7 to 17 bags per acre (as per interviews) 2. Group marketing is expected to increase price by 20 TZS/kg. If able to access WFP or NFRA buyers, then could be 50 TZS/kg. 3. Assumed that group storage with proper training would reduce total losses (field, threshing, storage, transport) to 10% from 30% 4. Assume Arusha traders pass on 25% of increased margin (100 TZS/kg) to SHF 5. Assume that a more developed market from millers who are fortifying would improve price by 20 TZS/kg 6. Assumed that each farmer would purchase 8 bags (800kg, ~50% of production) at $2 per bag; reduces on-farm post-harvest storage loss from 10% to 2% 7. Expert opinion based on LSMS data, Agriculture 2007/2008 Census, FAO Maize Value Chain Study 2012

72 INTERVENTIONS & IMPACT INTERVENTION #3A IS PERCEIVED TO BE THE MOST RISKY DUE TO OPERATIONAL COMPLEXITIES AND IMPLEMENTATION PARTNER RISKS Int #1: Farmer marketing groups Int #2: Trader association Int #3A: Dosifier Funding Int #3B: Hermetic Bags RISK ASSESSMENT Operational Complexity, Execution, Un-tested, Scale Non-Adoption Cultural, Conservatism, Lack of Perceived Benefit Partner Risk Compatibility, Management experience High High High Med. Med. Med. High Low Med. Med. High Low Overall Risk Med. Med High Low QUALITATIVE FOUNDATION PRIORITIES Gender equality benefits On-farm opportunities Family Home consumption Environmental sustainability Efficiency Health Reduced aflatoxin Nutrition Reduced aflatoxin 72 Enables qualitative foundation priorities

73 INTERVENTIONS & IMPACT ACROSS INTERVENTIONS, FARMER MARKETING GROUPS GENERATE THE MOST FINANCIAL UPLIFT Intervention impact on farmer net financial benefit 1,2,3,4,5 $USD, per farmer, per annum, additional net financial benefit to farmers from interventions Annual net financial benefit per farmer $250 $200 $150 $100 $50 $0 Lower risk Intervention #1: Farmer marketing groups Intervention #2: Trader association Medium risk Intervention #3: Price increase from fortification improvement of millers Higher risk In aggregate, net financial benefits for all interventions total $270 Baseline SHF margin is $235 7, suggesting intervention benefits can lift margins by over 215% Full financial benefit is dependent on market focal point buyers (NFRA, existing processors, new processors, exports) Intervention #3 is high risk from fortification, but low from hermetic storage aspect financial analysis focus on fortification price increase benefit Estimated risk assessment Rectangle represents assessed net financial benefit Vertical lines represent range based on +/- 10% price and yield shock Calculations assume full adoption and ramp up of intervention benefits 2. Range based on +/- 10% shock on price and yield and capped at $0 net farmer benefit (no storage loss shocks included) 3. Net benefits calculated off of average Tanzania surplus farmer profile for conservative purposes, where an average of 0.9 Ha of maize farmable land per farmer, with a base price of 300 TZS/kg and base yield of 1.7 MT per Ha is assumed 4. No direct costs to SHFs from intervention #2 assumed 5. No shock for storage loss taken into consideration, only price and yields. Note: Financial benefits based on farmers currently not benefitting from proposed intervention elements Source: Stakeholder expert interviews, farmer group interviews, industry expert interviews, Context Network analysis; conservative estimates used throughout analysis

74 INTERVENTIONS & IMPACT BOTH MEN AND WOMEN GROW MAIZE, BUT WHERE THERE IS READY ACCESS TO MARKETS, IT IS TIPPING TOWARDS A MAN S CROP; INTERVENTIONS CAN DIRECTLY ADDRESS GENDER ASPECTS Role of Women in Maize, Tanzania Maize is a mixed crop in Tanzania in terms of which gender grows and manages. However, there is evidence that it becomes more a man s crop once it can be readily monetized. Maize used to be a women s crop in Tanzania because it is a food crop, however, as it assumes importance in terms of generating cash, it can become a man s crop. How much of the crop to sell and how much to retain for family consumption also becomes the man s decision; some families sell all the output only to have to buy maize later in the year at a higher price. Elizabeth M.Temu, Gender and Training Manager, USAID contractor, Tanzania Farmer Marketing 1 Groups Association of 2 Traders Support of Value- 3 Add Programs Intervention Organize farmers into marketing groups with a view to Market Access Group Marketing & Reduced Losses Better Yields Pilot organizing Arusha traders to gain Market Efficiencies Storage & Added Value Post-Harvest Loss Support commercial market development for hermetic storage and associated education / public awareness Enable Medium Millers Funding for fortification equipment mnfctr to ultimately increase supply of fortified flour in market Recommendations & Implications Program design should make provisions to explicitly Include women in the organized farmer groups Educate and advocate collaborative household decision-making on how much of crop to sell 1 or 2 lead farmers changing behavior or group pressure can have significant impact gradually resulting in more collaborative decision making Program should seek out and include women traders who do exist in Tanzania - they are not organized, generally don t know each other, and lack networks and financial resources. Provision and storage of food is largely the responsibility of women on the farm; marketing and education campaigns should be tipped to them. While this will ultimately benefit nutrition of SHF households, no explicit gender aspect to the program. 74

75 INTERVENTIONS & IMPACT INTERVENTIONS CAN COORDINATE WITH CURRENT GOVERNMENT DEVELOPMENT INITIATIVES WHERE APPROPRIATE Interventions Mapped with Government Programs Impacting Maize Sector Inputs Production Aggregation & Storage Processing Market Big Results Now s program focuses on So. Highlands area; 10 warehouses should be launched in Aug in Mbeya out of initial 30. Intervention #1 will coordinate with this program whenever demand overlaps GoT proposal: 24 district warehouses to link to 275 below BRN 275 Warehouse Rehabilitation & Marketing Associations Feasibility to be conducted 2014/15 cycle Proposed Commodity Exchange NFRA, WFP &P4P (latter expires 2014) 1A CAPACITY BUILDING ON PRODUCTION 1B GROUP MAIZE MARKETING 1C GROUP STORAGE CAPACITY Linkage to volume buyers #1D LOAN GUARANTEES TO BANKS TO PROVIDE FINANCIAL RESOURCES TO SACCOS 2 ORGANIZE TRADERS 3A HERMETIC STORAGE (on farm) PPP: Cereals Board and Knotsgroove Grains Limited Silos & Funding 3B FORTIFICATION EQUIPMENT P4P Successor Program (PPP) Government Agricultural Bank 75 Source: BRN and Ministry of Agriculture Proposed donor interventions Existing programs Proposed or pilot

76 76 Stakeholder Profiles

77 PHASE 2 TANZANIA MAIZE EXECUTIVE SUMMARY 1 SECTOR FUNDAMENTALS 2 VALUE CHAIN OPPORTUNITIES INTERVENTIONS 3 & IMPACT STAKEHOLDER 4 PROFILES Maize is the most important food crop in Tanzania, grown by 3.5 million farming households (60%), and accounting for 40% of calories consumed Yields have flattened, while production has increased steadily to ~5-6 million MT as land under cultivation has increased (~4 million ha) ~60% of maize is consumed on-farm, although other sectors such as exports and processing for animal feed are growing Value chain is extremely fragmented and disorganized (3.5 million farmers, many traders, 30,000 small flour mills) Economics make it difficult for SHF to profit unless yields improve significantly Despite this, surplus maize exists without strong demand pull Opportunities exist to organize the value chain to strengthen the demand pull offered by export markets and processors Interventions focus on organizing players and linking production to market focal points At full adoption, proposed interventions would improve SHF margins by 210% Develop farmer marketing groups to improve overall production and link to markets Organize export traders to increase competitiveness and link to farmers Promote hermetic storage to reduce post-harvest losses Support fortification (dosifier) technologies to facilitate improved nutrition Farmer and export trader groups require NGO support to build technical and business capacity and provide mentoring Market focal point partners include institutional buyers (NFRA & WFP) and processors (Kitenge Farms, Hill Foods) NGO most likely candidate to work with multiple storage technology manufacturers (A to Z, PPTL) to build awareness and promote distribution Sanku is the private manufacturer of dosifiers for small & medium mills 77

78 STAKEHOLDER PROFILES BASED ON PROPOSED INTERVENTIONS, WE ENVISION TWO LEAD ORGANIZATIONS TO MANAGE SUBCONTRACTORS, WITH UNDERLYING FINANCIAL SUPPORT Farmer Marketing 1 Groups Association of 2 Traders 3 Add Support of Value- Programs Lead Implementing Organization Campaign Implementer Subcontractor NGOs - By geography - By market focal point Hermetic storage manufacturers Implementing NGO in Arusha Dosifier manufacturer Financial institutions 78

79 STAKEHOLDER PROFILES POTENTIAL IMPLEMENTATION STAKEHOLDERS FOR FARMER MARKETING GROUP AND TRADER ASSOCIATION DEVELOPMENT Name Description Lead Sub Agricultural Council of Tanzania ACT is the umbrella organization for the agricultural private sector in Tanzania. The partnership aims to reduce rural poverty by delivering appropriate agricultural inputs and improving output markets for Tanzanian farmers. It aims to blend commercial and developmental goals: its success will be determined by both business activities and effective public service delivery. ACDI/VOCA ACDI is currently coordinating the Feed the Future NAFAKA project for maize and rice. ACDI has been engaged across a number of value chains in Tanzania in an effort to boost smallholder farmer benefit. TechnosServe For 20+ years TechnoServe, has worked with Tanzanian farmers, cooperatives, suppliers and processors to strategically develop competitive industries around key crops, particularly cash crops such as cocoa and coffee, and staples such as maize and rice. Catholic Relief Services CRS has been working in Tanzania since 1962 and has experience organizing farmers across a number of value chains. They are currently working on the soya value chain, which will help to improve the feed sector in Tanzania. MVIWATA MVIWATA stands for National Network of Farmer s Groups in Tanzania in Swahili. They act as the voice of farmers across the country and was founded over 20 years ago. They helped to build and now manage the Kibaigwa Maize Market. Clinton Foundation Clinton Foundation is expanding it s Anchor Farm Project into Tanzania and developing a large maize farm in the Southern Highlands with the aim of benefiting 100,000 farmers. MRA Associates MRA is a Tanzanian management consultancy firm with experience in agricultural value chains. They have carried out feasibility studies and facilitation for a number of NGOs and development agencies. 79

80 STAKEHOLDER PROFILES POTENTIAL IMPLEMENTATION STAKEHOLDERS FOR FARMER MARKETING GROUP AND TRADER ASSOCIATION DEVELOPMENT CONTINUED Name Description Lead Sub BRITEN RUDI TAGRODE NADO INCOMET Faida MaLi 2 Seeds Network Building Rural Incomes Through Enterprise is a Tanzanian development organization that empowers rural agribusiness. They are currently focused on developing an agribusiness hub and spoke model to benefit SHF. Rural Urban Development Initiative is a Tanzanian private sector development initiative that focuses on capacity building for farmers in all regions across the country. They have created farmer groups and linked them to markets for a number of donor projects such as NAFAKA, Agra, Oxfam. Tanzania Grass Roots Oriented Development is an Iringa Region based organization that facilitates small scale farmers to increase the quantity and quality of their crops through a variety of means. They organize farmers and link them to markets. Njombe Agricultural Development Organization is a Njombe District membership based organization whose vision is to build and increase local capacity and improve agricultural development. Their partners include World Vision and Uyole Agricultural Research Institute. INCOMET is a Mufindi District based organization that works to improve opportunities for farmers and micro-entrepreneurs for production, processing and marketing of food crops. They work closely with Mufindi Community Bank. Faida Market Link is a Tanzanian company that carries out consultancies and implements donor funded projects in market linkage services. They facilitate contracts between SHF and agricultural companies via their Faida 10 step Market Linkage Approach. 2 Seeds Network is an umbrella organization incubating ag development projects across Africa. In Tanzania, they are currently implementing the Masoko Project, among others, to improve farmer s access to market information. 80

81 STAKEHOLDER PROFILES POTENTIAL STAKEHOLDERS FOR MARKET FOCAL POINT DEVELOPMENT Name NFRA / WFP Description National Food Reserve Agency has an MOU with WFP to increase their purchases of maize from SHF groups directly. WFP will then purchase maize from NFRA to meet their regional needs. Tofauti Ltd. Tofauti Sembe is a medium sized mill based in Iringa. They currently use only their own maize for flour processing in order to obtain the quality desired. They would be likely interested in connecting directly with SHF if quality was assured. Kijenge Animal Products Kijenge is an Arusha processor involved in maize milling for flour and animal feed. It is also working for the WFP to produce the Corn Soya Blend product. They would be interested in connecting directly with SHF. Monaban Trading & Farming KFS Monaban is a diverse Arusha company with business in dealing in imports & exports, farm products, milling, transporting and home & office furniture dealer. Kibaigwa Flour Supplies Ltd is Dodoma area cooking oil processor and sunflower and flour processor. They are located near the Kibaigwa maize market. SIZA Agroprocessing Mafinga (Southern Highlands) dealer in processing maize flour, rice, animal feeds and sunflower oil. Falcon Feeds Falcon Feeds is a feed processor in Dar es Salaam that sells feed to poultry farmers. Interchick Hill Animal Feeds Interchick is a poultry feed producer in Dar es Salaam that sells feed to poultry farmers and buys 5,000 MT of maize each year. Hill Feeds is a feed processor in Dar es Salaam that sells feed to poultry farmers and buys 20,000 MT of maize each year. They would be interested in being connected to farmers to ensure quality. 81

82 STAKEHOLDER PROFILES TOFAUTI LTD. MEDIUM MAIZE MILLER Overview & History Established as an Iringa maize grower 6 years ago Developed the mill in order to have a reliable market for their maize farm Produce a very high quality maize flour and sell to local institutions and buyers in Dar es Salaam Management / Leadership Carla Lawrence, Managing Director Interest & Capabilities They previously experimented with buying from other farmers but could not get reliable, high quality maize and this fell apart now they focus on their own maize Financials N/A Considerations & Preliminary Concerns Their flour is different that other brands on the market and they have struggled to get market acceptance They may have limited interest in purchasing from other farmers 82

83 STAKEHOLDER PROFILES KIJENGE ANIMAL PRODUCTS LTD. MEDIUM MAIZE MILLER & FEED PROCESSOR Overview & History Arusha based company consisting of 3 business: Maize milling plant (Kenmillers) Feed mill (Kijenge Animal Feeds) Commercial broiler farm (Kijenge Farm Chicken) Have 30+ years experience produce human foods and animal feeds Management / Leadership Monica Lyimo, Project Coordinator Derrick A. Mollel, Research & Development Officer Interest & Capabilities Currently expanding their facilities to increase animal feed production as well as manufacture Corn Soya Blend product for the World Food Programme Financials N/A Considerations & Preliminary Concerns N/A 83

84 STAKEHOLDER PROFILES MONABAN TRADING & FARMING CO. LTD. MEDIUM MAIZE MILLER & TRADER Overview & History Arusha based company with multiple businesses: Import & exports Farm product agent Miller (mainly wheat but some maize) Transporter (transport for WFP) Home & Office furniture Management / Leadership Philemon O. Mollel, Managing Director Interest & Capabilities They are leasing the old National Milling Corporation facilities in Arusha including the mill and silos They plan to expand business by building capacity in Kenya, but were open to the idea of expanding further south in Tanzania to access the maize there Financials N/A Considerations & Preliminary Concerns Major focus is on wheat with limited maize milling They can obtain lower transportation costs as they operate their own fleet 84

85 STAKEHOLDER PROFILES KIBAIGWA FLOUR SUPPLIES LTD. MEDIUM MAIZE MILLER Overview & History Dodoma based cooking oil processor and sunflower and flour processor that has been packaging and marketing maize flour since 2005 Located near the Kibaigwa maize market Management / Leadership Sebastian Msola, Managing Director Interest & Capabilities Have recently installed one of the dosifiers in partnership with Sanku and Tuboreshe Chakula This past year they trialed out-grower schemes for their sunflower farmers they experienced side-selling but hope to reverse this next season Financials N/A Considerations & Preliminary Concerns N/A 85

86 STAKEHOLDER PROFILES SIZA AGROPROCESSING MEDIUM MAIZE MILLER & FEED PROCESSOR Overview & History Iringa area dealer in processing maize flour, rice, animal feeds and sunflower oil Management / Leadership Sifa K. Gerana, Operation Manager Interest & Capabilities Prefer maize from certain regions and send a buyer there to check quality prior to buying Financials Have problems with access to capital Long repayment times on receivables Considerations & Preliminary Concerns High labour turnover 86

87 STAKEHOLDER PROFILES FALCON ANIMAL FEEDS LARGE FEED PROCESSOR Overview & History Biggest animal feed processor in Tanzania; based in Dar es Salaam Sells primarily to poultry keepers Buys from all over, throughout the year, from no specific source; traders deliver to factory Management / Leadership Hassan, owner and CEO Interest & Capabilities Interested in an alternative to traders, but price is very important to him Interested in contract farming He has no trucking or significant storage; delivery would have to be included Financials Buy 8000 MT maize per year; saw prices of this past year Did not want to disclose how much feed he sells Considerations & Preliminary Concerns In any arrangement, Hassan wants to preserve his ability to reject grain He does have requirements as to dryness, dust, etc. 87

88 STAKEHOLDER PROFILES INTERCHICK LARGE FEED PROCESSOR Overview & History Feed producer that sells only to poultry farmers Also the biggest chicken distributor in Tanzania; based in Dar es Salaam Buy MT of maize throughout the year Management / Leadership David Michelen Interest & Capabilities Not optimistic about buying directly from organized farmers Financials N/A Considerations & Preliminary Concerns N/A 88

89 STAKEHOLDER PROFILES HILL ANIMAL FEEDS LARGE FEED PROCESSOR Overview & History Dar es Salaam based feed processor that buys 20,000 MT of maize per year Sells feed to small poultry farmers Management / Leadership Hillary Shoo, Managing Director Interest & Capabilities Interested in being connected directly to farmer groups in order to guarantee supply, quality and price Financials N/A Considerations & Preliminary Concerns Have tried contract farming but without success 89

90 STAKEHOLDER PROFILES POTENTIAL MANUFACTURERS FOR FORTIFICATION EQUIPMENT & HERMETIC STORAGE Name Description SANKU Sanku is the manufacturer of the dosifier equipment used to fortify flour. They are currently installing the first machines in collaboration with Feed the Future s Tuboreshe Chakula project. A to Z A to Z Textile Mills Ltd. is a family owned company in Arusha. They have developed their own hermetic storage bags and plan to have them available in PPTL Pee Pee Tanzania Ltd is likely to be the PICS3 Tanzania partner to license the bags starting in Hill Animal Feeds Hill Feeds is a feed processor in Dar es Salaam that sells feed to poultry farmers and buys 20,000 MT of maize each year. They also manufacture plastic bag products and would be interested in hermetic storage. GrainPro, Inc. GrainPro, Experts in Ultra Hermetic Solutions manufactures hermetic storage bags, but has of yet to distribute in Tanzania. Purdue Improved Cowpea Storage The Purdue Improved Crop Storage (PICS) is a five-year project to improve cowpea storage in West and Central Africa, and is applicable for maize storage. The project is being implemented in 10 different countries in West and Central Africa, including Nigeria, Niger, Burkina Faso, Ghana, Mali, Senegal, Cameroon, Benin, Togo and Chad. 90

91 91 Appendix

92 APPENDIX ADMINISTRATIVE LANDSCAPE OF TANZANIA Region 30 large regions Districts 169 districts with local governments Wards/Shehias Several thousand wards, with in each District Villages ~10,000 villages 92

93 APPENDIX TANZANIA HAS A UNIQUE CAPACITY IN EAST AFRICA TO HARVEST MAIZE WHEN NO OTHER COUNTRIES CAN East Africa Maize Production Calendar 1 Short rain harvest only occurs in Kenya, Uganda and Tanzania Tanzania harvest begins in May 93 Sources: 1) East Africa Cross-Border trade bulletin

94 APPENDIX ASSUMPTIONS FOR ESTIMATED CURRENT AND FUTURE MARKET SHARE Estimated Market Share for Maize 1 Numbers indicate total market share while arrows indicate share trend Assumptions & Calculations ~6 million MT 57% 1% 16% 10% 4% 12% Current scenario ~8-10 million MT 2 45% 0.5% 17% 15% 3% 18% 2020 Scenario On-farm consumption Saved seed Domestic households (millers, markets) Feed processing Food security Exports 8.3% annual maize production growth rate since 1961 and from ; due to land increase results in 9.7 million MT in % population growth rate 2, Estimated sector growth rates: On-farm 3% - in line with population growth Saved seed -3% - estimate based on gradual switch to purchased seed Domestic households 8% - estimate based on population growth (3%) + urbanization rate (~5%) Feed processing 15% - estimate based on urbanization rate, opening up of broiler & hybrid poultry market Food security 3% - population growth Exports 15% - estimated based on East Africa deficit & large demand These growth rates result in 9.1 million MT in 2020 Tanzania s estimated capacity to be exporting 2 million MT (so could export 2 MMT in 2020) 4 ) 94 Sources: 1) Based on interviews, FAOSTAT 2013, 2007/2009 Agriculture Survey 2) Based on a 8.3% growth rate over last 50 years and since 1990, FAOSTAT 2013

95 APPENDIX ANNUAL GROWTH RATES OF MAIZE PRODUCTION, AREA HARVESTED AND YIELD Annual Rates of Change in Production (MT), Area (ha) and Yields (MT/ha) % % 80.00% 60.00% 40.00% 20.00% 0.00% % % % % Production Area Yield 95 Sources: 1) FAOSTAT 2013

96 WHILE YIELDS IN OTHER EAST AFRICAN COUNTRIES ARE INCREASING, TANZANIA YIELDS ARE DROPPING AND PREVENTING TANZANIA FROM BECOMING THE BREAD BASKET OF EAST AFRICA APPENDIX Maize Yields for East African Countries If average yields could return to 2.5 MT/ha, production would double to 10 million MT MT/ha This extra surplus is worth $977 million (at farm gate price of $0.19/kg) and could solidify domestic food security and meet regional East Africa demand Tanzania Ethiopia Uganda Rwanda Kenya 96 Sources: 1) FAOSTAT 2013

97 THE EXPORT MARKET HAS BEEN CONSTRAINED BY PAST BANS, HOWEVER IT APPEARS THE BORDERS WILL REMAIN OPEN AS LONG AS THERE IS SURPLUS PRODUCTION APPENDIX History Export ban on maize imposed in 2004 Temporarily lifted in January 2006, January 2007, May 2008, and October Ban formally lifted in 2012 following evidence-based work by USAID SERA Project that showed that export bans are not effective at ensuring food security, controlling prices or preventing exports, and hurt SHF 1 Strong markets available for SHF Improve yields to increase production Surplus production Tanzania s politicians have committed to keeping the borders open, although this has not yet been tested in a food shortage year Borders stay open & thus export markets are accessed Interviewees, however, believe the government is committed to making evidence-based decisions and would only ban exports if critically necessary 97 Sources: 1) SERA Policy Report 2012

98 POULTRY SECTOR HAS CHANGED OVER THE LAST FEW YEARS AND WILL DEVELOP FURTHER MAJOR CONSTRAINT IS THAT SUPPLY AND DEMAND ARE DISCONNECTED APPENDIX Supply & Demand of Chickens in Tanzania based on Market Type Largest producers Large producers, compete on quality Medium producers, compete on price Broilers & free-range from SHF, broilers from medium producers Individual farmers (~20 broilers /week) High-end bulk High-end retail Low-end bulk Low-end medium Low-end retail Urban hotels Fast-food (KFC, Subway), High-end supermarkets Medium scale urban hotels Local restaurants & bars, minimarts Butchers, single buyers Implications Local free-range, SHF SUPPLY Local/village market Households DEMAND Demand for broilers and chicken in general is highest in the urban high-end bulk and high-end retail markets, however supply of chickens of all types is lowest there Supply of free-range chickens locally is available, but demand there is lower and it is difficult to get these chickens to the high-end markets where both quality and price is required 98 Sources: 1) Stakeholder interviews

99 APPENDIX ACCESS TO FINANCE IN TANZANIA IS EXTREMELY RESTRICTED, PARTICULARLY FOR SHF Case study Finance for Agriculture Fewer than 5 commercial banks actively lend to Tanzania s agriculture sector 1 Only 10% of total lending goes to agriculture, with only 2% of that ($12 million USD) for primary production and small holder farmers 1 >57% of top 25% agriculture producers are financially excluded, this number would be much higher for all producer segments 2 Constraints Financial institutions do not have different requirements for lending to agriculture than regular borrowers 1 Interest rates of 30% Collateral required Banks have high transaction costs for farmers that are not organized One community bank is achieving success lending to SHF. Unfortunately this was the only example of successful lending to maize SHF found. Mufindi Community Bank Iringa District Description 60% of portfolio is related to agriculture Clients are SACCOs, farmer groups, informal groups Loans Provide grace periods based on crops grown (~8 months for maize SHF) Group loans: 30% interest rates for unguaranteed, 14% if fully guaranteed (as compared to 18% for commercial banks) Individual loans: 24% interest rate if have collateral Success Promoting culture of savings, business training & diversification of crops Collaboration with Cheetah Foundation to link farmers to markets and provide loan guarantees 6-8% default rate 99 Sources: 1) Dalberg Report Maize Tanzania ) AgFiMS 2011 Technical Demand Side Report

100 APPENDIX MAIZE FARMERS FALL INTO FOUR SEGMENTS, WITH THE MAJORITY FARMING ON SMALL PLOTS AT LOW YIELDS AND KEEPING IT FOR THEIR OWN CONSUMPTION Total # Farmers 2 Avg Size of Maize Sold 2 Location Farm 2 Yields (MT / ha) 2 Total Production (MT) 2 Large commercial farmers or millers <500 1 > 20 ha 1 100% Isolated, but mostly Southern Highlands ,000 Produce primarily for business & use technology 200, ha 80% Southern & Northern Highlands 3-5 1,920,000 Surplus that is sold but limited use of technology 1.2 million (34%) ha 20% Southern & Northern Highlands 1-3 2,160,000 Produce solely for food security 2.1 million (60%) <1 ha 0-5%* Across Tanzania < ,000 * In high production years these SHF may sell, trade or give away surplus 100 Sources: 1) Dalberg Report Maize Tanzania ) Context analysis

101 APPENDIX IN ADDITION, ACCORDING TO THE LSMS SURVEY, THESE FARMERS USE DIFFERENT AMOUNTS OF INPUTS DEPENDING ON GEOGRAPHY Farming Practices 2 Fertilizer Use Purchase Seeds Improved Seed Cropping System Large commercial farmers or millers Produce primarily for business & use technology Surplus that is sold but limited use of technology Full package 100% 100% 100% Improved seed + fertilizer, Farmer Groups Some inorganic fertilizer ~40% in Southern Highlands; 14% elsewhere 20-30% in high production; 10% elsewhere 47% in North, 18% in South, 31% average 38% in North, 16% in South, 30% average 28% in North,12% in South, 14% average 41% in North,11% in South, 14% average Monoculture of maize Maize + beans OR maize + paddy Maize + beans OR maize + paddy Produce solely for food security Traditional 0% 50% in North, 17% in South, 35% average 40% in North, 8% in South, 15% average Part of multicrops grown for own use According to this survey, input usage depends more on geography than farmer segmentation 101 Sources: 1) Dalberg Report Maize Tanzania ) Context analysis

102 APPENDIX PRODUCTION OF MAIZE IS COSTLY IN TANZANIA WHEN LABOR IS ACCOUNTED FOR Farmer Cost Economics for Maize 1 $USD per Ha, per growing season $19 $207 $287 $46 $23 $14 $62 $46 $93 $371 $371 $93 $56 Land clearing Ploughing Planting Weeding Harvesting Threshing Transport - field to farm Using recycled seed & no inputs Total cost Seeds Fertilizer Fungicides Total cost Using improved seed, fertilizer, crop protection 102 Sources: 1) Farmer group interviews

103 APPENDIX IN REALITY, PRODUCTION COSTS VARY WIDELY, AS MANY FARMERS USE ON-FARM LABOR FOR PRE-HARVEST ACTIVITIES Fully paid labor costs with no inputs $371 per Ha Fully paid labor costs with inputs $659 per Ha $207 $19 $659 $288 $56 $93 $93 $46 $46 $23 $14 $371 $371 $56 $93 $93 $46 $46 $23 $14 $371 $62 Pre-harvest Post-harvest Inputs Pre-harvest Post-harvest Inputs Paid post-harvest labor with no inputs $84 per Ha Half paid pre-harvest + fully paid post-harvest labor costs with inputs $515 per Ha Production method for ~200,000 SHF who market maize as business Production method for ~1.2 million SHF who market surplus maize $62 $23 $14 $46 $23 $84 $84 $23 $14 $46 $227 $0 $0 $0 $0 $46 $28 $46 Pre-harvest Post-harvest Inputs Pre-harvest Post-harvest Inputs $207 $19 $515 $ Sources: 1) Farmer group interviews

104 APPENDIX FARMER FINANCIAL BENEFIT WILL ENCOMPASS THE FOLLOWING CONSIDERATIONS Farmer financial gains - Increased farmer expenses from inputs = Farmer net financial benefit From market price increase ($) From marketable surplus (MT) From pre-planting E.g. Fertilizer, improved seeds, labor On a per farmer, per intervention basis From post-harvest Storage costs 104

105 APPENDIX IMPLEMENTATION SUCCESS IS LIMITED BY RISK FACTORS Risk factor Description Operational Risk from sustainable implementation Non-Adoption Risk from lack of continued adoption by SHFs Aggregate risk assessment Partner Risk from capacity of potential partners to carry out intervention Risk factors will be qualitatively assessed 105

106 APPENDIX INTERVENTION PRICE INCREASE AND MAIZE YIELD IS ASSESSED FOR EACH INTERVENTION Sensitivity of Farmer Net Financial Benefit for Intervention #1 Increase in $ per farmer Maize improved yield 217% 227% 237% 247% 257% 267% 277% 0% $ $ $ $ $ $ $ Improved price 8% $ $ $ $ $ $ $ % $ $ $ $ $ $ $ % $ $ $ $ $ $ $ % $ $ $ $ $ $ $ See Financial benefit model

107 1 APPENDIX TOTAL POTENTIAL GAIN TO AN INDIVIDUAL SHF WHO BENEFITS FROM ALL ASPECTS OF AN ORGANIZED MARKETING GROUP IS ESTIMATED AT $151 WHEN PROGRAM IS FULLY UP AND RUNNING Benefit Calculations for Intervention 1: Organizing Farmers in Marketing Groups 1 Improved input adoption (which is directly linked to the SHF s access to market) includes improved seed and fertilizer as well as better agronomic practices and is expected to increase yield from 7 to 17 bags per acre (as per interviews) or from a 1.7 MT/ha yield to 4.2 MT/ha. Costs to the SHF associated with input adoption are included. 2 Group marketing is expected to increase net price received by farmer by 25 Tzs/kg (8%). 3 $46 benefit from Post Harvest Mitigation assumes that with proper training, group storage would reduce total losses (field, threshing, storage, transport) by 10%. All calculations in table are calculated on a per hectare basis which are then translated to the average holding of the target SHFs which is.9 ha to arrive at the per farmer benefit. It is estimated that the program fully ramped up, can reach ~1M SHFs. 107

108 APPENDIX ANNUAL FINANCIAL IMPACT INCREASES OVER THE YEARS AS THE NUMBER OF HECTARES REACHED BY INTERVENTIONS RAMPS UP TO A FINAL 20% OF HA Incr. Inc./ Yr 3 Incr. Inc./ Yr 5 Incr. Inc / Yr 7 Incr. Inc / Yr 10 Sensitivity Range Improved inputs & agronomic practices (1) $343 $343 $343 $343 Traditional production system (no purchased inputs) $255 $255 $255 $ YIELD GAIN IMPACT $88 $88 $88 $88 Improved price from group marketing (2) $659 $659 $659 $659 Traditional individual sales $630 $630 $630 $ PRICE GAIN IMPACT $29 $29 $29 $29 Improved post-harvest loss from group storage & training (3) $602 $602 $602 $602 Traditional post-harvest losses $551 $551 $551 $ POST-HARVEST LOSS MITIGATION IMPACT $51 $51 $51 $51 INTERVENTION #1 TOTAL $168 $168 $168 $ Increased price from shortening value chain and improving efficiencies. (4) $284 $354 $425 $595 Traditional price remote from Arusha traders $263 $328 $394 $ TRADER ASSOCIATION & STORAGE IMPACT $21 $26 $32 $ Medium & large miller demand increase from strengthened miller market (fortification creates new demand for quality maize) (5) $281 $351 $421 $590 Traditional markets $263 $328 $394 $ FORTIFICATION FOR MILLERS $18 $23 $28 $39 Improved post-harvest loss from better storage with hermetic bags (6) $270 $345 $420 $600 Traditional post-harvest losses $263 $328 $394 $ HERMETIC BAGS - (ON-FARM STORAGE) $8 $17 $26 $49 INTERVENTION #3 TOTAL $26 $40 $54 $ TOTAL POTENTIAL FARMGATE CROP VALUE IMPACT PER HECTARE $215 $234 $253 $299 Number of maize hectares (millions) in year 4,214,033 4,298,735 4,385,140 4,518,014 Assuming intervention measures eventually reach given % of maize hectares 2% 5% 12% 20% POTENTIAL FARMGATE CROP VALUE IMPACT OF MAIZE INTERVENTIONS AT FULL ADOPTION IN TANZANIA $14 $50 $133 $ See Financial benefit model

109 INTERVENTIONS & IMPACT RECOMMENDED INTERVENTIONS ADDRESS CONSTRAINTS AND ORGANIZE THE VALUE CHAIN IN ORDER TO LINK SHF WITH MARKET FOCAL POINTS 1 2 Farmer Marketing Groups Association of Traders Combined annual net financial benefit per farmer $151 Combined annual net financial benefit per farmer $40 Organize farmers into marketing groups that allow them to improve activities across the value chain Market Access training, group transport, link to buyers (NFRA, WFP, millers, feed processors) Group Marketing & Reduced Losses training, financial support to refurbish or build group storage Better Yields training (GAP, demos, farmer field schools), group credit for inputs Pilot organizing Arusha traders into an Association in order to better access export markets and improve efficiency Market Efficiencies link traders to Farmer Groups and to export buyers (Kenyan traders) Storage & Added Value facilities to aggregate enough maize for export, with ability to add value through cleaning, grading, quality control 109 Support of Value-Add 3 Programs Combined annual net financial benefit per farmer $79 Underlying Financial Support Loan guarantees for savings & marketing groups, trader association, input suppliers Supplement Hermetic Storage and Tuboreshe Chakula Fortification projects Post-harvest Loss Support commercial market development for hermetic storage Enable Medium Millers Provide funding to fortification equipment manufacturer in order to scale up dosifier equipment production & distribution for millers