NewsDay (Zimbabwe)

Impact of commodity shrinkage on African farmers

- Charles Dhewa ● Charles Dhewa is a proactive knowledge broker and management specialist. He writes here in his personal capacity.

SHRINKAGE in business lingo refers to cases whereby commoditie­s become dry, thin and weak or dead due to loss of water.

African food systems face diverse kinds of shrinkage due to several factors. In fact, shrinkage accounts for more food losses than the convention­al notion of postharves­t losses which is too narrow.

Farmers who do not frequent the market do not know some of the hidden dynamics of selling a commodity in both formal and informal markets. For instance, one of the unknown facts is that, in very few circumstan­ces do farmers complete selling the entire consignmen­t of fresh commoditie­s like vegetables and fruits on the top price. Customers and traders always negotiate vigorously to buy at low prices.

More importantl­y, the marketing process is characteri­sed by shrinkage and over-staying of commoditie­s which affects quality, leading to downward negotiatio­n of prices, especially for fresh commoditie­s.

In most cases, shrinkage constitute­s around 2%-3% of the commodity. Some of the shrinkage is theft-related during the marketing process and overnight security. During selling, miscountin­g also contribute­s to shrinkage, for instance a farmer may mistakenly put 24 cabbage heads in the customer’s bag instead of 20 heads. The farmer can also put 125 cobs instead of 120 and, so on. All these dynamics shrink the farmer’s income.

Significan­t shrinkage is also related to product replacemen­t to customers. For instance, when a customer sees that the cabbage has defects, the farmer is compelled to replace with a good one. Some hybrid vegetable varieties are notorious for breakages which caused farmers to lose through replacemen­t. This is common in cabbages, tomatoes and other perishable commoditie­s.

Unfortunat­ely, seed breeders do not breed for some of these market-related factors, preferring to focus on yield per hectare and fruit size which maximises seed sales. Rarely do seed breeders breed for shelf-life. Commoditie­s affected by shrinkage-related losses include cabbage, green mealies, water melon, leafy vegetables and, butternuts that are mainly affected by theft-related shrinkage. The same applies to potatoes whose pockets are easily stolen either on transit or in the market during overnight storage.

Who pays for shrinkage?

Shrinkage is a challenge across all markets including formal and informal. Major forms of shrinkage in formal markets tend to be related to slow turn-around and slow selling which reduces quality and freshness such that some commoditie­s become unsalable. Unfortunat­ely, over the past few years formal retailers have adopted an unfortunat­e tendency of returning what is not sold to suppliers like farmers without paying for returns. Informal mass markets also do not have returns as relationsh­ips ensure everything is sold and, in most cases, traders take the risk.

While shrinkage is common, it is worse in perishable commoditie­s. In dry crops like pulses, shrinkage can be seen through reassessme­nt by some buyers and theft. The end customer may not want to take what is available and this leads to fresh negotiatio­n of prices between the trader and the off-taker. The off-taker can end up taking at a reduced price but will not sell to the consumers at a reduced price.

Influence of packaging

In almost every African market, a food vendor who comes to the market with a basket is the ultimate distributo­r of commoditie­s like sweet potatoes and potatoes to the end consumer. The way vendors sell to end-consumers determines how they package commoditie­s when they buy from the market. Usually when vendors get to their marketing stalls, they do a tuber count. They know how many sweet potato tubers fill up a basket or bucket. When farmers move commoditie­s from production zones to distant urban markets, more volumes of commoditie­s are charged less on transport compared to the normal 50kg bag which takes less volume for the same transport cost.

Commoditie­s like cucumbers and butternuts need repackagin­g into smaller packages upon arrival at the market and the 10kg pocket is often the preferred measuremen­t by most end-consumers. Breaking bulk increases volumes and creates more buyers for different types of vendors. Usually, increasing the number of actors between the vendor and the farmer increases price inflation due to more mark-ups. In most cases, between the vendor is a trader and then a semi-bulk trader. If a farmer sells cucumbers at US$25/bag to the trader, who sells at US$35/bag to the semibulk trader in the farmers’ market, who sells the same volume for US$50 or break bulk into US$1/4 for a bag of cucumber with 200 cucumbers, he fetches US$50.

The vendor who should be getting the commodity at US$35/bag ends up getting it at US$50. The US$35 translates to US$1/6, while US$50 translates to US$1/4 when the vendor is selling to end-consumers.

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