Marketing seasons are most trying moments for farmers
EVERY year, farmers have to contend with confronting and dealing with the anxious moments that come with marketing their produce.
Instead of waiting for the time with high expectations, they cannot help but tread very carefully and pray the markets will be lenient with them.
Such is the fate of the price takers that farmers are.
In economics, price takers are participants that are not empowered to dictate the prices in a market. Prices for the goods they produce are set by someone, somewhere, who may not even have an idea of how the production process would have gone.
The price takers, in this case — farmers — have to accept the prevailing market price.
They do not have enough market power to influence the prices of their goods or services and have to accept what the market offers them whether it will allow them to fund another season and take care of their socio-economic obligations or not.
The reality on the ground is that the goods that farmers produce are homogenous with what Farmer B brings in a 50kg bag treated as the same with what Farmer C brings in a similar package.
There is no brand loyalty. The fact that there are large numbers of buyers and sellers makes it impossible for any one of them to influence the market price.
No one farmer can speak on behalf of the multitudes of other farmers and push for a
universal pricing mechanism because their production circumstances are in most cases different to some extent.
One farmer cannot deviate from the market price of a product without running the risk of losing significant revenue or even failing to find a buyer.
The farmers’ situation is different from the buyers’ in the sense that the latter can easily assess vital information on many things that include prices of produce, which enables them to seek out the lowest prices.
Cotton prices, for instance, are not decided locally and farmers just have to take the figures dictated globally regardless of factors such as subsidy availability or unavailability to assist them during the production cycle.
It is not surprising that the Zimbabwean Government has seen it worthwhile to support the cotton production process through availing inputs and markets to make sure farmers manage to get decent revenue from the crop.
The Government’s decision came in the wake of very difficult seasons for cotton farmers when global cotton prices combined with other challenges almost destroyed the country’s textile and cotton industries.
Essentially, this move is meant to bring more ease of entry and exit into the markets for the farmers, as they will not be producing the crop under stringent conditions that normally come with some private contractors who sort of maintain an undue hold over the producers.
It does not require rocket science to realise that as price takers, farmers are forced to accept the prevailing market prices and sell each unit at the same market price although they participate in perfectly competitive markets.
Most price setters seem to work in cahoots when they set prices that always disempower farmers.
A glaring example of this has always been there for all to see at the tobacco floors where merchants just fall short of buying all the
tobacco for the same price, as if it is of the same quality yet the quality of the leaf naturally differs, thanks to the different parts of the crop from which it would have been plucked.
The way it was treated during curing also plays a part in the eventual quality so that difference in quality must also be felt in the pricing.
Tobacco pricing has always been laced with controversy year-in, year-out with farmers accusing merchants of deliberately downgrading their produce so that they offer little in terms of money yet most of the leaves would be of very good quality.
Whether the farmers’ allegations are true or false is a story for another day but the reality is that farmers are always on the receiving end just because they are price takers.
Price makers on the one hand, have the powers to influence market prices and enjoy pricing power. Unlike farmers who just take what is on offer, price makers are usually found in improperly competitive markets that may even be monopolies or oligopolies.
It is refreshing to note that the Government is currently seized with pushing for the adoption of innovative and sustainable agricultural practices to address problems of poor yields, poor market performance and competitiveness.
The smart agriculture that the Government is preaching day and night will help farmers transition from being merely subsistence to commercial producers while climate-proofing their operations and lowering cost of production at the same time.
The other solution the Government is striving to promote in the agriculture sector is in the form of value addition.
Through value addition, farmers will no longer be selling raw and homogenous products but something differently packaged and not priced the same with products in their unprocessed state.
This gives farmers the ability to bargain prices after factoring in the costs incurred during the process of production.
Although it may be a little difficult for them to set prices that are different from those on the global market, the farmers will still be able to choose buyers they can negotiate with.
Of course such a scenario would also require them to work as groups for easy market penetration. It is easier for a group to access information and even markets than for individuals.
They can always agree on their prices as a team, which gives them the power to be in charge of their destinies, as far as their business interests are concerned.
This permits them to attach the true economic value of their products even if they may not be able to listen much to the dictates of demand-and-supply that normally guide the production process.
For processed goods they can afford to store products and sell them when the markets are offering better prices or when supply has dipped.
This will allow them to ask for prices they see fit to allow them to break even or give them a minimal relevant portion of profit.
They can also diversify to specialty products, such as organic foods, which can be differentiated from homogeneous crops and are sold in special markets where they can demand higher prices. Other specialty goods, such as hydroponic tomatoes can also bring in higher prices through different marketing techniques.
But the farmers’ situation has always been awkward. When food prices increase, the amount of money making its way back to them does not always correlate.
In fact, what they see is an increase on their end in the form of the cost of inputs such as equipment, fertilisers, chemicals, seed, labour, fuel and livestock feeds to name a few.
However, when all is said and done, the sad still reality remains that the global marketplace sets the prices for the crops they grow, whether profitable or not. They must take it or leave it.
But the farmers’ situation has always been awkward. When food prices increase, the amount of money making its way back to them does not always correlate. In fact, what they see is an increase on their end in the form of the cost of inputs such as equipment, fertilisers, chemicals, seed, labour, fuel and livestock feeds to name a few.