Over the years, small-scale farmers growing white pea beans in Ethiopia have sold their produce through the informal market, relying largely on middlemen who dictate prices and walk away with huge profits, often leaving the farmers in poverty.
“When smallholders sell their produce individually, they are easily shortchanged by middlemen who give them very little money for their products, and they can hardly provide for their families despite their hard work on the farms,” Legesse Dadi, agricultural project manager for Catholic Relief Services in Ethiopia, told IRIN.
Some traders on the informal market are also more likely to tamper with weighing scales, which means farmers get even less money for their produce.
“In a disorganized marketing system, farmers rarely get value for their farm produce,” Dadi added.
But between 2008 and 2011, a project called New Business Models for Sustainable Trading Relationships helped link multinational food companies to smallholders in Africa. It enabled some 15,000 white-pea-bean farmers - there are about 450,000 bean farmers in Ethiopia - to access formal export markets by producing better crops and organizing themselves into small cooperatives through which to sell their products and bargain for better prices.
Many of the smallholders own half-hectare plots that can, during a good season, produce 500kg to 800kg of white pea beans.
But while smallholders often have the soils and skills to supply high-quality products to the food industry, according to a recent report by the International Institute for Environment and Development (IIED), “their entry into these markets is constrained by increasingly stringent standards, volatile prices and lack of credit”.
The farmers’ problems had been exacerbated by the absence of a ready market for white pea beans, which are not locally consumed, experts say.
“Traditionally, white pea beans have very few consumers within Ethiopia, and this means the farmers have to rely on [the] export market… which they have very little access to,” Dadi said.
The project, facilitated by Catholic Relief Services, the International Institute for Environment and Development, Rainforest Alliance and the International Centre for Tropical Agriculture helped address these issues. Farmers received assistance organizing cooperatives, which enabled them to sell in bulk and improve their bargaining power. They were also given access to storage facilities.
The government contributed by providing agricultural extension officers to teach farmers modern crop-handling methods. The bean farmers also received access to canning factories in the UK, which increased their productivity and product quality.
Five years ago, smallholders would receive US$0.12 from middlemen for 1kg of white pea beans; today the same quantity, sold on the formal market, fetches them $0.37.
According to the Sustainable Food Lab, one of the organizations involved in implementing the project, 100kg bags of white pea beans now earn farmers twice the income they get from the same amount of sorghum, the staple crop that is typically intercropped with beans.
On average, farmers are able to earn a profit of $144 and $187 per household per harvest season, an improvement over profits made on the informal market.
Gains all around
Experts say that access to formal markets, which allows farmers to fetch better prices, is an important element in increasing their income and quality of produce. Even so, the informal market cannot be wished away.
“The informal market is likely to continue to dominate in smallholder dried beans due to the highly dispersed and variable nature of production,” Bill Vorley, principal researcher on sustainable markets group at IIED, told IRIN via email.
“But the formal market and its associated investments… lead to improvements in productivity and income. It also generates higher-quality jobs in sorting and processing,” he added.
For vulnerable small scale farmers, better market linkages will have enormous benefits.
“If farmers have a reliable market, and the benefits of cash cropping are shared fairly between genders, it is entirely logical for households to achieve food security (and cash income, e.g., for education and health) through committing some of their land to cash crops,” Vorley said.
A 2009 paper emphasized that small-scale farmers have much to gain when “risk, responsibilities and benefits” are shared among smallholders and traders. “It is not only market inclusion that is the goal, but fair and equitable inclusion, whereby smallholders can improve their economic opportunity through raising product quality and meeting or exceeding market standards,” it said.