Stimulating reliable maize market through public-private partnerships can benefit smallholder farmers

In Kenya, maize mar­kets are frag­men­ted and volat­ile, es­pe­cially for vul­ner­able small­holder farm­ers. Many farm­ers con­tinue to trade dir­ectly with middle­men who often take ad­vant­age of them. Part­ner­ing with major com­mod­ity buy­ers is a win-win strategy to em­power small­holder farm­ers to live with prosper­ity and dig­nity and drive in­clus­ive trade and eco­nomic de­vel­op­ment.

One ex­cit­ing ex­ample of this type of col­lab­or­a­tion is Global Com­munit­ies’ part­ner­ship with Car­gill in Kenya. Since Novem­ber 2017, we have been work­ing with Car­gill to provide a stable, re­li­able mar­ket for 150 maize pro­du­cer or­gan­iz­a­tions in Na­k­uru, Trans Nzoia and Uasin Gishu counties in the Rift Val­ley re­gion of Kenya. In re­turn, Car­gill will se­cure sup­pli­ers they can count on to provide suf­fi­cient quant­it­ies and qual­ity of maize.

The part­ner­ship is sup­por­ted by the U.S. De­part­ment of Ag­ri­cul­ture (USDA), which has fun­ded Global Com­munit­ies’ Ag­ribusi­ness In­vest­ments for Mar­ket Stim­u­la­tion (AIMS) pro­gram since its in­cep­tion in 2014. Car­gill, a major com­mod­ity trader, pur­chases sev­eral thou­sand tons of grains in­clud­ing maize in Kenya per year.

RE­LATED ART­ICLE: Ag­ri­cul­ture min­istry pro­jects 44 per cent in­crease in maize pro­duc­tion this year

In the past, Car­gill has struggled to source suf­fi­cient volumes of maize in Kenya to meet the de­mand of its com­mer­cial cus­tom­ers. Car­gill usu­ally sources maize dir­ectly from maize traders who buy from farm­ers and re­sell to Car­gill.

They find that the qual­ity is often poor and end up re­ject­ing whole con­sign­ments. Like­wise, small­holder maize farm­ers struggle to find mar­kets that are re­li­able and can pay a good price within a reas­on­able time frame. With this chal­lenge in mind, Global Com­munit­ies and Car­gill partnered to identify and link Car­gill to suit­able farm­ers’ groups that can sup­ply good qual­ity – and suf­fi­cient quant­it­ies – of grain.

In the 2017/2018 har­vest sea­son (Dec. 2017-Feb. 2018), the part­ner­ship fa­cil­it­ated the sale of 6,200 bags (90 kg) of maize to Car­gill. This volume came from the sale from just nine farmer or­gan­iz­a­tions that were ready to sell at that time.  Pre­par­a­tions are already un­der­way to ex­pand this group up to 150 groups for next har­vest sea­son which be­gins in Oc­to­ber 2018.

In an ef­fort to scale up the volume, to date, Global Com­munit­ies has iden­ti­fied and pro­filed a total of 143 farmer or­gan­iz­a­tions based on their pro­duc­tion ca­pa­city and po­ten­tial to be a re­li­able sup­plier to Car­gill. Dur­ing the pro­fil­ing pro­cess, a needs as­sess­ment was con­duc­ted to identify spe­cific ca­pa­city build­ing needs. Global Com­munit­ies then hos­ted a series of en­gage­ment meet­ings to in­tro­duce the farmer or­gan­iz­a­tions to Car­gill.

For most groups, this was their first time to meet and learn about Car­gill. The for­ums were de­signed to share Car­gill’s pro­cure­ment re­quire­ments, buy­ing pro­cesses, and unique pay­ment method which pays farm­ers within 48 hours. This is par­tic­u­larly at­tract­ive to farm­ers as most buy­ers take 90 or more days to make pay­ments hurt­ing the abil­ity of farm­ers to pre­pare for the next plant­ing sea­son and meet their reg­u­lar house­hold pay­ments. 

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This fa­cil­it­ated en­gage­ment with Car­gill is a key step in de­vel­op­ing these mar­ket link­ages.  Farm­ers get to in­ter­act dir­ectly with Car­gill and un­der­stand Car­gill’s stand­ards and buy­ing pro­cesses.  Car­gill’s par­ti­cip­a­tion at the en­gage­ment for­ums led to higher cred­ib­il­ity, trust and ul­ti­mately to higher sales.

To build the ca­pa­city of these groups to work to­gether and to over­come key mar­ket obstacles in­clud­ing ac­cess to fin­ance, Global Com­munit­ies provided tar­geted train­ings to the farmer groups led by private sec­tor Busi­ness Ad­vis­ory Ser­vice Pro­viders (BASPs).  BASPs are a key part of the AIMS strategy of strength­en­ing the en­tire ag­ri­cul­tural mar­ket sys­tem. AIMS has iden­ti­fied and pre­qual­i­fied 43 BASPs to provide es­sen­tial busi­ness ser­vices – such as busi­ness plan­ning, fin­an­cial man­age­ment, and ag­greg­a­tion – to a range of ag­ri­cul­tural small and me­dium en­ter­prises at an af­ford­able price.

“These train­ings are an eye opener to us es­pe­cially on cash flow man­age­ment. We have been los­ing a lot of re­sources due to ig­nor­ance and is­sues that we have been con­sid­er­ing non-con­sequen­tial,” says Samuel Njoroge, Co­ordin­ator CHICO­FAR CBO, a farmer group in Na­k­uru County that was linked to Car­gill earlier this year. 

The busi­ness plans are ex­tremely im­port­ant to the farm­ers as they are a pre­requis­ite to ac­cess any type of formal fin­an­cing or credit which can be used to grow and in­vest in their maize pro­duc­tion busi­ness.

As with any new busi­ness re­la­tion­ship, earn­ing trust is a slow pro­cess. Many farmer groups de­cided to start by selling re­l­at­ively smal­ler quant­it­ies to Car­gill, to test if its pay­ment sys­tem func­tioned and if they really were re­li­able and trust­worthy. After this first ex­per­i­ence, many groups have seen that Car­gill is a good faith part­ner, and plan to sell more volume to it next sea­son.

RE­LATED ART­ICLE: Maize farm­ers by­pass volat­ile mar­kets, sell dir­ectly to millers

Barn­a­bas Kirwa, chair­man of Moiben Farm­ers Mar­ket­ing Fed­er­a­tion in Uasin-Gishu County, was ini­tially re­luct­ant to the part­ner­ship.  “If at all we would fore­tell the fu­ture of maize mar­ket this year, we would have en­gaged with Car­gill from the onset of our in­tro­duc­tion by Global Com­munit­ies,” he said. “We would not be suf­fer­ing losses ex­per­i­enced today. We shall plan ac­cord­ingly for the com­ing sea­son to sup­ply to Car­gill.”

We have learned that es­tab­lish­ing good pay­ment terms is key step, but often more is needed to work with farmer or­gan­iz­a­tions.  Car­gill is con­sid­er­ing provid­ing trans­port to groups that are able to ag­greg­ate suf­fi­cient quant­it­ies. This could be a big in­cent­ive to pro­du­cer groups that struggle with the high cost of trans­port and loss of grain in transit. 

Ac­cess to data is also an issue.  Al­though Car­gill posts prices at their grain de­pots, this in­form­a­tion does not al­ways get to farm­ers, es­pe­cially those who live far from the de­pots.  Car­gill is look­ing into how to dis­sem­in­ate price in­form­a­tion daily via the cel­lu­lar phone sys­tem.

Through this part­ner­ship with Car­gill, we have learned that the ca­pa­city and co­he­sion of the se­lec­ted farmer groups was not as high or as strong as ex­pec­ted. This came as a sur­prise since many of these groups had re­ceived con­sid­er­able sup­port from pre­vi­ous donor pro­grams.

Even when groups that had a ded­ic­ated ag­greg­a­tion cen­ter, mem­bers still sold in­di­vidu­ally as they did not trust the group lead­er­ship to man­age their com­mod­ity.  These groups still need much help in es­tab­lish­ing strong gov­ernance struc­tures, rules and re­la­tion­ships that in­spire con­fid­ence among mem­bers to ag­greg­ate their com­mod­it­ies.

We are en­cour­aged and in­spired by what we’ve seen so far in this part­ner­ship and are ready for a very pro­duct­ive and prof­it­able maize har­vest in 2018 and hope to ex­pand this model into other crops.

By Eliza­beth Adams, Tech­nical Spe­cial­ist, Ag­ri­cul­ture & Food Se­cur­ity