“Were it not for agriculture brokers and cartels, I would be a millionaire.” Many Small scale farmers say.
While this is a popular statement among Kenya’s coffee and dairy farmers, it is not necessarily true. Though brokers are seen as opportunists, they offer key services that make food systems function efficiently. Their benefits include offering logistics, information, and credit. On the other hand, they exploit prices, misinform small-scale growers, and promote unfair practices
In this post, we will give you the pros and cons of agriculture brokers. The post concludes with key recommendations for farmers to make more money from their harvests.
Why do we have agriculture brokers in Kenya?
In a perfect market system, farmers and consumers would trade directly without intermediaries
However, this is not the case among small-scale farmers in Kenya. They operate in fragmented informal value chains. It is the main reason that limits their capacity and access to better markets for their produce. As such, they have to rely on middlemen to market farm produce.
Unfortunately, the cartels end up reaping most profits while farmers pocket a mere portion.
Benefits of Agriculture Brokers in Kenya
Middlemen create place and time utility for you through logistics services, ensuring consistent supply, risk mitigation, and offering relevant feedback to all market actors. These benefits are further expounded below
Food brokers ensure access to produce at the right time, place, and condition through logistics.
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. Middlemen can offer those logistics services efficiently. An example is fish traders transporting fresh fish from Lake Victoria in Western Kenya to major markets such as Nairobi.
These logistic services allow 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 a shortage in supplies pushing the prices high.
Market intermediaries 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; A broker 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 1,000 farmers. She then supplies those to a large supermarket chain that requires 2000 crates daily.
- Bulk-Breaking; Wholesale intermediaries can get a large load and divide it into smaller affordable quantities for their buyers to be consumers. Imagine an onion broker who sources a ton from across the border in Tanzania. He later divides these into 1-3 crates to supply to wholesalers in the Marigiti farmers market in Nairobi.
Since the dealers have a large network of buyers and sellers, they can easily ensure each person’s market needs are met. You can get the right quantities of your produce at an affordable price at your doorsteps.
Food Quality, Safety, and price control
Brokers play a key important role in ensuring food safety and hygiene. When they are sourcing produce from farms, they will only take which is of high quality such as appearance, size, 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 scales. The overripe and unripe fruits are sold at different prices and to different buyers. The rejected fruits are left to the farmers
This intermediary’s simple quality control ensures that food quality, safety, and prices are withheld across the entire value chain from producers to consumers.
Did you know that relying on middlemen can help you farm or trade more profitably? They 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 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 getting more milk yields.
Communication and Feedback
The middlemen 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, of 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 conditions.
Disadvantages of agriculture brokers
Access to the market remains the key challenge for small-scale farmers in Africa. Their profits are easily exploited by the traders. They take advantage of those fragmented and informal market functions to reap the traders and consumers of their money and quality supplies. The key shortcomings of marketing brokers are;
Market dealers are accused of making all profits at the expense of farmers and other traders. On one hand, they will push to buy produce at the lowest possible farm gate price. They will also overcharge their consumers by selling produce at the highest possible selling price. At times they will just lower the buying price and raise their selling prices without any form of justification.
The cartels 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 remains. They will mostly misinform farmers about market prices to buy at lower prices. They will also misinform traders about the 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 about 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 intermediaries. A little is executed on food handling, quality, competition, and hygiene. Many traders take advantage of this lacuna to choke market fairness.
Middlemen also act to obstruct any market changes. They are known to sabotage any changes that are likely to benefit other market players at the expense of their profits.
How to eliminate agriculture brokers for more profits?
The brokers may cause more harm than good as shown above.
On one hand, they create, place, time, and price utility as well as a 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 cartels 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 investment to enjoy economies of scale.
A need to invest in food processing and preservation to reduce food losses. You can invest in cold rooms, grain silos, milk coolers, etc.
You can eliminate the middleman by locking quantity, quality, and prices with an outgrower. You can work with 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.
Mobilize other farmers to form trader groups, associations, and farmers’ cooperatives. Use these for bulking produce and collective bargaining for better prices. Besides, the group can make better investments in value addition through the accumulated funds and know-how.
Staggered production can help to deal with the challenge of traders by reducing market gluts, stabilizing prices, improving market access, and reducing the risk of crop failure. You can use irrigation, greenhouse farming, and staggered planting methods to harvest your produce during off-peak season to enjoy higher prices.
Farmers and traders can use mobile Apps and websites to track price movements. They can also use digital marketing over social media to reach out to their consumers directly. By eliminating the middlemen, their costs, and margins, the farmer will earn higher profits. An example of such a strategy is the Mkulima Young website which links farmers to buyers.