INSTITUTIONS UGANDA


Coffee beans are checked for humidity by a depot committee, which processes and sells crops for many farmers.


© 2012 E. Maruyama/IFPRI


Where’s the Money? I


n villages across the world, smallholder farmers have banded together to cut their costs and raise their profits. Tese collectives of 10–30 producers give small- holder farmers many of the advantages of large-scale farmers by allowing them to share costs like fertilizer, processing, and transport and to jointly bargain with buyers for the highest price. So why do farmers often go around the groups and sell their crops individually—often for a lower price?


Too Much Uncertainty


IFPRI researchers Ruth V. Hill and Eduardo Maruyama recently completed a study of Ugandan coffee and maize farm- ers, showing that a bit of tweaking can make these collectives work better. Te researchers identified two types of farmer groups in Uganda: village-level producer organizations and district-level depot committees. Te producer organizations collect the crops at the village level. Ten the depot committee gathers the output


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from several producer organizations, processes the crop, coordinates transpor- tation, and finds a buyer.


How farmers’ groups can work better for farmers Cash Up Front


Depot committees cannot give farm- ers any assurances about the final price. “Tey might have an idea of what price they could get,” says Maruyama, “but they cannot easily predict the time it takes to bulk from all group members, find a buyer, and make the sale, and what the market price will be at the end of this process.”


Farmers balk at the lengthiness and un- certainty of this selling process. “Tough almost all of these coffee producers belong to a producer organization and are linked to a depot committee, they end up selling most of their product to traders,” Maruyama says. Tese informal traders, who regularly pass through rural villages, offer cash on the spot. Although they often pay a lower price, the quick cash lets farmers pay off their immediate expenses.


To address farmers’ need for cash, Hill and Maruyama tested a straightforward solution. Trough the depot committees, they supplied producer organizations with funds they could use to pay farmers a percentage of the projected revenue up- front, in cash. Te depot committees now had more output to sell and more time to find a buyer. When the coffee was sold to the highest bidder, the farmers would receive the balance.


Tis approach almost doubled the amount of output that farmers provided to the producer organizations, according to preliminary results of the study. Even better, participating farmers received significantly higher prices than those offered by itinerant spot traders. Some of the farmer groups participating in the study decided that this new approach was worth keeping: they are using the research results to secure bank loans and put the system in place for themselves.


– Susan Buzzelli Tonassi


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