Understanding agricultural marketing channels
Hanks SaisaiIt is every farmer’s desire to have a target market for their produce. In essence, the ultimate goal of farming is for one to engage in the production of commodities that can be sold to generate an income.
However, farmers face several challenges when marketing their products making it crucial for the farmer to understand the different enterprise-specific marketing channels that are available in Namibia.
Livestock farmers must be cognisant of the respective marketing channels at their disposal and understand critical components of each marketing channel.
Firstly, a cattle farmer must understand the abattoir as a marketing channel for livestock. Cattle farmers can have access to abattoirs such as MEATCO, and BeefCor that slaughter cattle to produce beef, which is sold to export markets such as the EU, United Kingdom, USA, China, and Norway. Abattoirs have the advantage of offering secure marketing channels with predetermined prices according to cattle categories, age, and quality of meat.
However, the downside of abattoirs as a marketing channel is that a farmer will usually be a price taker. Additionally, when there is a disease outbreak, farmers cannot market their livestock to abattoirs.
The second marketing channel for livestock farmers is usually auctions. In Namibia, auctions are held in most cattle-producing regions such as communal areas South of the Veterinary Cordon Fence.
Auctions are conventionally organised by auctioneers such as AGRA, Blauwberg Auctioneers, Namibia Livestock Auctioneers (NLA), Windhoek Livestock Auctioneers (WLA) and Karoo Ochse auctioneers that are responsible for bringing sellers (farmers) and buyers together in order to successfully market livestock on offer.
Prices are usually determined through bids and offers that the buyers suggest for respective livestock being sold. Most prominent auction venues are usually equipped with weighing scales that are used to determine the prices of livestock. Auctions have the following advantages: the price is known, costs are known, competition among buyers results in good prices for sellers, they are regularly organized and money transfer to the seller is always immediate. On the other hand, some disadvantages of auctions are: Low livestock numbers may result in fewer buyers; buyers can collude on purchasing prices and at times a farmer may run the risk of going back home with unsold livestock.
Communal areas
The third livestock marketing channel is permit days which are usually common in communal areas. Usually permit days involve a single buyer in agreement with a community or group of farmers to buy livestock at predetermined prices on a given day at a given venue. In well-organised communities, the buyer agrees to buy livestock of different classes at certain prices. Usually, prices and venues are announced on the radio for interested sellers to bring livestock to permit days. The livestock have to be weighed one by one when being sold. Advantages of permit days are price is known, money is readily available for the seller, most buyers are willing to take all livestock on offer and permit days are regularly organised. The disadvantage is that due to a lack of competition from buyers, prices may be low.
In the case of crop farmers, there are a number of marketing channels for their produce in Namibia that is formally recognised. For crop producers, the first available marketing channel is to offer their cereal grains to local millers in their respective areas who usually process the grains into a staple powder that is used to prepare consumables such as pap, porridge, oshifima and others. This channel offers a reliable market; however, farmers get low prices due to oversupply of the produce.
The second marketing channel available to crop farmers is the informal market which is usually in the form of street vendors who procure produce directly from the farm gate. This market is reliable for farmers who are in close proximity to urban areas and usually farmers do not incur any transport costs as the buyer collects the produce from the farm. Additionally, the farmer is always a price setter in this marketing channel. However, a major disadvantage of this marketing channel is that not all produce will be sold by the farmer and may result in wastage if the produce is not bought on time.
Another option
Crop farmers also have the option to sell to wholesalers and retailers, however, these are highly sophisticated marketing channels with numerous terms and conditions that a farmer must adhere to.
These marketing channels offer competitive prices, and all the farmer’s produce can be purchased provided that it meets food safety, grading and sorting standards. Farmers may be offered a formal supply agreement that may be valid for 2 to 3 years, and this agreement will outline the quantity that must be delivered on a weekly or monthly basis for each respective commodity. For example, a farmer may be contracted to supply 10 000 kg of tomatoes monthly to enable wholesalers or retailers to distribute to their respective outlets. This being the most reliable and most sought-after market for horticultural products always requires farmers to have well-planned production schedules in order for them to meet the demand patterns of markets. The biggest challenge with this marketing channel is that farmers find it hard to keep up with demand patterns and hence become viewed as a supply risk by wholesalers and retailers who opt to import produce from advanced agricultural setups such as South Africa.
Success in most farming businesses relies on marketing channels available to farmers. Hence, farmers are always urged to study markets and analyse paradigm shifts in the sector. Additionally, before deciding on which marketing channel to focus on, farmers are advised to carefully study and understand each channel’s advantages and disadvantages for them to make informed decisions.
*Hanks Saisai is AgriBank’s Technical Advisor: Crops & Poultry