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Structuring trade to benefit the farmers

New CTA book details how farmers in Eastern Africa are increasing their profits by breaking free of the traditional system of trading.

June 21, 2016

Giving small-scale farmers the opportunity to store their produce and sell it when prices are high is one step along the road to prosperity. Traditionally, middlemen have exploited the farmers, who have had no choice but to sell their crops immediately after harvest when prices are at their lowest. Structured trade, of which improved storage is just one element, offers an approach that is benefiting millions of disadvantaged farmers and giving consumers a better deal.

Many African smallholder farmers are trapped in a cycle of poverty no matter how hard they work. They produce over 80% of the continent's food yet their families often go hungry. Poor farming practices and declining soil fertility mean low yields, but the way that crops are stored and sold make matters worse for the farmers.

Not having access to good storage and reliable credit puts farmers at the mercy of unscrupulous traders and middlemen. A new CTA book, In search of fair trade, shows how structured trade can benefit grain farmers and traders. The second in the series Stories from the Field, this short volume recounts the experiences of farmers, traders, warehouse owners, bankers and government officials in real-world situations in Kenya, Tanzania and Uganda.

Commenting on the book, Michael Hailu, Director of CTA said, "Structured trade is all about establishing orderly, coordinated systems of trade, from the farm through to the retail market. The narratives of people in this booklet tell the story of how structured trade has changed lives of smallholders in Eastern Africa."

Two farmers in Kenya explain the advantages: they used to harvest their maize, keep what they needed to eat and sell the rest for what they could get from travelling brokers; now they store their crop in the new warehouse of the local cooperative, safe from rats and weevils, take out what they need when they need it, and sell the crop once prices rise. Right after the 2015 harvest, maize was selling for €15 a bag; six months later each bag was worth €22.

1933 PDF 7Martin Kigano and Michael Wanyeki, chairman and assistant secretary of Ng'arua Cereals and Produce Cooperative, with the manager, Sophy Materu at one of their stores in Kenya. "No one can exploit our ignorance now," said Michael. © Charlie Pye-Smith, 2016.

The text is especially powerful as it uses the farmers' own words in eight stories drawn from the three countries. Long used to being exploited by brokers, the farmers can use their stored grain as collateral for bank loans to buy seeds, fertiliser or medicines or to pay school fees. "More and more people are now engaged in collective marketing and they can afford to buy more things," said Emiti Munisi, board member of the Kware Savings and Credit Cooperative Organisation in Tanzania. "Just look at the houses," pointing at the many new houses dotted around the maize fields.

"We believe that structured trading of grains, similar to the arrangements which already exist in this part of Africa for tea and coffee, could significantly improve the way grain crops are marketed, with benefits for both producers and buyers," said Gerald Masila, executive director of the Eastern Africa Grain Council (EAGC), which is working closely with CTA to advise farmers on how to operate.

The book also seeks to present a balanced view. One story describes the hard lessons learned when a trading system in Nakuru, Kenya, collapsed. And life is not easy for the small traders either. "Traders and middlemen often have a bad reputation, but they also face difficulties," said Kevin Kinyangi, the East Africa director of Techfortrade, a UK-based non-profit organisation that is developing a new approach to agricultural trade. Grain companies might reject the produce on quality grounds and the traders themselves have trouble getting credit. His organisation is developing 'open book trading', where everybody involved – farmers, traders, processors and buyers – can see exactly who makes what and where. By mid-2015, 25 traders in Kenya, Tanzania and Uganda were using the service.

1933 PDF 16Emiti Munisi, with her sacks of grain stored by the Kware Savings and Credit Cooperative Organisation. © Charlie Pye-Smith, 2016.

Structured trade is allowing increasing numbers of farmers to raise their incomes. However, even though it is fairer and more efficient, many challenges remain, such as poor handling practices and ignorance about grain and cereal standards. This booklet provides a valuable insight into the situation, and provides compelling evidence that structured trading systems can go a long way to raise farmers' income, tackle rural poverty and improve food safety.

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