“Were it not for brokers, I would be a millionaire.” While this is a common statement from small scale farmers in many developing countries such as Kenya, it is not necessarily true.
Are brokers in the agriculture value chains that evil? In this post we will give you their benefits such as giving you logistics services and their disadvantages such as price exploitation. The post concludes with recommended solutions for you to make more money from your farm.
Small farms operate in fragmented informal value chains limiting them in capacity and access to markets for their produce. As such, you have to rely on middlemen or brokers to market your animal and crop produce such as kales or milk. Unfortunately, brokers reap all your profits while you pocket none or little. They do this through price exploitation, misinformation and unfairness. On the other hand, the farm produce brokers has many benefits for food security and agriculture value chains in general.
Benefits of brokers in agriculture
The following are key benefits that middle men give you as a consumer, trader or farmer in Kenya.
- Logistics services
- Consistent supply
- Risk management
- Communication and Feedback
Brokers create place and time utility for you through logistics services, ensuring consistent supply, risk mitigation and offering relevance feedback to all market actors. These benefits are further expounded below
Its brokers who ensure access to produce at the right time, place and condition through logistics. The small scale farmers and small retailers such as grocery shops cannot afford to buy or lease a lorry or truck for long distance transport. Besides they lack access to storage and preservation equipment such as cold rooms and warehouses.
Its brokers who offer those logistics services. An example are fish traders transporting fresh fish from Lake Victoria in Western Kenya to major markets such as Nairobi.
These logistic services gives to fishmongers and fishermen to access and sell fish on time. Without brokers, fishermen would face food losses and wastage. On the other hand, fishmongers would have shortage in supplies pushing the prices high.
Brokers are responsible for sourcing goods on behalf of traders and consumers at the right quality, quantities and prices. They are able to fulfill these market needs through two services; aggregation and bulk breaking.
- Aggregation; Brokers will buy small quantities from many farmers and sell the accumulated load to a larger trader. An example is a broker collecting 2 crates of eggs from a 1000 farmers. She then supplies those to a large supermarket chain that require 2000 crates daily.
- Bulk-Breaking; Brokers on the other hand can get a large load and divide it into smaller affordable quantities fir their buyers are consumers. Imagine an onion broker who sources a ton from across boarder in Tanzania. He later divides these to 1-3 crates to supply to wholesalers in Marigiti farmers market in Nairobi.
Since the brokers have a large network of buyers and sellers, they can easily ensure each person market needs are met. You can get right quantities of your produce at an affordable price at your door steps.
Food Quality, Safety and price control
Brokers play a key important role in ensuring food safety and hygiene. When they are sourcing for produce from farms, they will only take which is of high quality such as appearance, sizes and color. In turn, both the buyers and consumers will enjoy high quality produce
Consider a broker who grades tomatoes into different sizes and ripening scale. The overripe and unripe fruits are sold at different prices and to different buyers. The rejected fruits are left to the farmers
This Brokers simple quality control ensures that food quality, safety and prices are withheld across the entire value chain from producers to the consumers.
Did you know that relying on brokers can help you farm or trade more profitably? Brokers undertake value chain activities such as marketing, transport and marketing. This frees your time and other resources such as assets. This will help you concentrate on your core business thereby succeeding and making more returns on it.
Assume you are a dairy farmer in Kenya. You are in need of animal supplements from Tanzania to make your dairy meal at home. Instead of you wasting a week sourcing and transporting them, you can just buy some from a broker within hours. You can then tend to your animals feeding better and feeding getting more milk yields.
Communication and Feedback
The middle-men are the most reliable media for passing information between producers and consumers and vice versa. In their extension services role, they inform the market actors, all the crucial information and feedback on various market expectations, consumer preferences and prices.
This will help producers to grow the crop or animal types and varieties that currently have high demand in the market ensuring a ready market at high prices. The traders can also package and present their produce in more affordable quantities and condition.
Disadvantages of brokers in agriculture
Access to market remain the key challenge for small scale farmers in Africa’s. Their profits are easily exploited by the brokers. They (brokers) take advantage of those fragmented and informal markets functions to reap the traders and consumers of their money and quality supplies. The key shortcomings of marketing brokers are
- Price exploitation
- Market unfairness
Brokers are accused of making all profits on expense of farmers and other traders. On one hand they will push to buy produce at the lowest possible farm gate price. On the other hand they will overcharge their consumers by selling produce on the highest possible selling price. At times they will just lower the buying price and rise their selling prices without any form of justification.
The brokers will end up making supernormal profits, instead of earning a commission like on other agency arrangements.
Brokers are known to misinform traders and growers on market performance to ensure their status quo remain. They will mostly misinform farmers about market prices to buy at lower prices. They will also misinform traders on availability of produce, this perceived shortage is to trick them to buy the underpriced produce at high prices.
On the other hand, the traders may misinform market actors on other market preferences and standards. As long as they make their profits, they may not act to report on food quality and hygiene.
Many countries in Africa do not have adequate standards, rules and regulations on engaging farm produce brokers. A little is executed on food handling, quality, competition and hygiene. Many brokers take advantage of this lacuna to choke market fairness.
Brokers also act to obstruct any market changes. They are known to sabotage any changes that are likely to benefit other market players at expense of their profits.
How can we eliminate brokers in Farmers’ Markets?
The brokers may cause more harm than good as shown above. On one hand, they create, place, time and price utility as well as consistent supply of quality and quantities of products in the markets. On the downside, they exploit farmers and consumers on pricing and may corrupt food quality and safety for profits.
Below are 5 solutions for farmers to eliminate brokers in order to market their produce better. The recommendations are very viable agriculture business solutions for youth and women in Kenya; while some solutions are best explored individually, Agcenture proposes you do it as a group investments.
Value Addition- A need to invest in food processing and preservation to reduce food losses. You can invest in cold rooms, grain silos, milk coolers etc.
Contract farming- You can eliminate the middle man by locking quantity, quality and prices with an out grower such as an exporter or processor. You can have more advantage of accessing quality farm inputs and extension services on time. The buyer will in turn buy your produce immediately after harvest. You can learn more about contract farming here.
Aggregation- mobilize many farmers to form trader groups and farmers’ cooperatives for bulking produce and collective bargaining for better produce. Besides, the group can make a better investments through the accumulated funds and knowhow.
Staggered Production -Use irrigation, greenhouses and staggered planting methods to be harvesting your produce during off-peak season to enjoy higher prices.
Agri-technology- Farmers and traders can use mobile Apps and websites to track price movements. They can also use the social media to reach out the consumers directly. By eliminating the middle man, the farmer will earn higher profits. An example is the famous Mkulima young website in Kenya