Improving access by smallholder farmers to organic crop supply chains : evidence from the Ezemvelo Farmers' Organization, KwaZulu-Natal, South Africa.
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Date
2005
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Abstract
The 48 members of the Ezemvelo Farmers' Organisation (EFO) in KwaZulu-Natal (KZN), South
Africa (SA), that were fully-certified as organic farmers were surveyed during October-December
2004 to assess their perceived level of satisfaction, trust, cooperation and commitment in a
formal supply chain producing amadhumbes (a traditional vegetable tuber), potatoes and sweet
potatoes for a major SA supermarket group. Empirical recursive models show that a high level of
satisfaction in the working relationship results in these farmers trusting the pack-house agent
more. High levels of trust, in turn, lead to higher levels of both commitment to, and cooperation
in, the supply chain. A simultaneous-equation model showed that EFO farmers with higher levels
of commitment tend to be more cooperative, and that members with higher levels of cooperation
tend to be more committed toward the working relationship.
These results suggest that strategies to improve the working relationship with the pack-house
agent need to promote satisfaction, trust, cooperation and commitment. For example, co-investment
in better crop storage facilities at farm-level would promote satisfaction and hence
trust. There is also scope for more cooperation in the planning of new organic crop products to
grow and market, and to remove some price uncertainty by giving EFO farmers more information
about prices that they will be paid by the pack-house agent in this supply chain. In addition,
satisfaction and, hence, trust, cooperation and commitment may be improved by adopting a formal
contract between the EFO farmers and the pack-house agent to replace the current, incomplete
verbal contract that governs trading. Some issues that may be addressed in this contract are
improved communication systems via regular meetings, renegotiations of trading terms so that
farmers can benefit from positive changes in organic crop prices; guidelines for paying farmers
more quickly by the pack-house agent; mechanisms to trace crop quality to a specific farmer to
avoid free riding; and penalties for breaching the contractual arrangements.
The 48 EFO farmers were also asked to give their perceptions of the main constraints on
organic crop production and marketing in the formal organic crop supply chain. They
perceived that uncertain climate, unavailability of tractor or draught power when needed,
delays in payments for crops sent to the pack-house, lack of affordable inputs (particularly
labour and manure), a lack of cash and credit to finance inputs, lack of affordable transport to
market crops, more work than the family can handle, a lack of manure to purchase; and a lack
of crop storage facilities and telephones to negotiate sales as the current top 10 constraints.
Principal Component Analysis summarized the underlying dimensions in the 20 constraints
ranked by these farmers as indicating "lack of market information and lack of market power";
"crop production expansion constraints"; "commitment to crop area expansion"; "lack of
liquidity"; "lack of proper storage facilities"; and "lack of information about alternative
markets".
Potential solutions to better manage these perceived constraints include: improved risk
management practices (e.g., supplemental irrigation, water-harvesting and small boreholes),
improving access to tractor services via improved tractor scheduling or using local contractor
services, quicker pack-house delivery payments, improving quality inspection at the departure
points at EFO farm-level to reduce crop rejection rates and "free riding" by producers of lower
quality organic crops, more interaction with the retailer to promote sales of organic crops,
providing advice on how the EFO farmers can improve their bargaining power, and providing
more information (e.g. crop prices) about other organic markets and changing consumer
preferences. Apparently, the costs and benefits of these potential solutions, and how they will
be financed, need to be evaluated.
Real accounting marketing margins since 2001 showed that the farmer's share of the
consumer's rand for the 48 fully certified organic EFO farmers rose, while their net returns
(selling price less accounting costs) were lower than those of the pack-house agent and
hawkers selling at the Isipingo market on the South Coast of KZN. Net returns for the 48 EFO
farmers also seemed to be relatively higher if they sold through the informal supply chain
(hawkers) rather than the formal supply chain. The EFO farmers' net returns may be improved
by lowering operating costs and by aggressive marketing to customers willing and able to pay a
price premium for organic crops. These farmers may also consider performing some of t he
marketing services themselves (e.g. crop cleaning, grading and packaging) if they have the
skills and can access more finance. There are, however, hidden benefits from maintaining the
formal supply chain relationship, as the pack-house agent helped to secure tractor services and
fencing, and facilitates access to the retailer.
Description
Thesis (M.Sc.)-University of KwaZulu-Natal, Pietermaritzburg, 2005.
Keywords
Agricultural produce--KwaZulu-Natal--Marketing., Agricultural produce--KwaZulu-Natal--Umbumbulu--Marketing., Farm produce--KwaZulu-Natal--Marketing., Farmers--KwaZulu-Natal., Farms, Small--KwaZulu-Natal., Organic farming--KwaZulu-Natal., Organic farming--KwaZulu-Natal--Umbumbulu., Root crops--KwaZulu-Natal--Marketing., Theses--Agricultural economics.