For investors keen to get into food systems, specialist traders are the right people to work with because, unlike opportunists, they know all the cycles of a particular commodity.
AMONG several characteristics that make African territorial markets different from other markets around the world is that most food commodities are controlled by specialists.
These specialists are passionate traders who stick with a commodity through thick and thin.
While opportunists may switch from tubers to tomatoes in pursuit of more income triggered by high prices, specialists don’t follow price changes or seasons.
Whether tubers like potatoes and sweet potatoes make more or less money, specialists continue to mobilise the commodities and avail them to diverse customers.
For investors keen to get into food systems, specialist traders are the right people to work with because, unlike opportunists, they know all the cycles of a particular commodity.
The power of crowd pullers
Every African territorial mass market gets its vibrance and power from commodities that are regarded as crowd pullers.
Examples include necessities like leafy vegetables, cabbages, tomatoes, potatoes, onion and specific fruits like apples, oranges and indigenous fruits when in season.
These commodities’ crowd pulling capacity cannot be compared to chunks, dried food or non-food items like plastic packaging.
Another emerging crowd puller comprises indigenous medicinal herbs that are now attracting tourists from outside Africa.
However, it is important to note that every commodity has its clientele base.
Whereas some traders prefer going to farms to buy first-grade fruit, tomato or cabbage, there are traders who have nicknamed themselves “super junks” who specialise in sprucing up commodities that are condemned by those who take first-grade commodities only.
The underlying philosophy for the “super junk” trader is that if everybody prefers first-grade commodities, who will take the lower-grade which has been produced with the same inputs as the first-grade?
If there were no super junks, food loss and waste would be worse in farming areas because farmers would throw away a lot of food.
There is always someone who benefits from what others consider rubbish.
Fascinating, but undocumented lessons from African territorial markets
Unscrupulous traders are in the habit of using transport cost to manipulate farmers.
When they go to the farm with a hired truck, they lie to a farmer that the truck has been hired for US$200 when in fact they have hired it for US$50.
Such misinformation is used to negotiate the price of commodities on-farm downwards at the expense of the farmer.
Farmers can protect themselves against this behaviour by constantly checking transport costs from their farming areas to diverse markets.
A farmer who has his/her own transport can actually bring commodities to the market and sell them at affordable prices to consumers because there will be no trader misusing transport costs to reap off both the farmer and the
consumer.
In most cases, traders want farmers to bring few commodities to the market as part of protecting the traders’ interests because more commodities in the market brought directly by farmers imply the traders will be removed as middlemen between the farmer and the consumer.
Why should a farmer who has produced a lot commodities only take a few and let the rest lose value on the farm?
Circumstances under which traders get commodities on loan
The majority of traders don’t have the capacity to pay cash up-front.
That means farmers who grow 10-100 hectares of commodities like cabbages, potatoes and tomatoes have to loan commodities to traders who pay for the previous consignment when they come to collect the second consignment on loan again.
The trader collects the second consignment after paying for the first one and the cycle continues.
However, in most cases, traders are reluctant to pay for the third consignment because it will be the last credit purchase.
Traders try to persuade the farmers so they keep the payment for the third consignment as a bonus for marketing services.
They mistakenly take the opportunity provided by the farmer as a right or sense of entitlement.
In some cases, farmers end up succumbing to that arrangement in order to preserve their relationship with traders for future marketing deals.
Depending on the type of commodity, commission for sales assistants ranges between 5% and 20%.
In potatoes it is 20% while for high volume and low value commodities like cabbages it is 5%-10% while for tomatoes it is 10%-20%.
However, the percentage is also negotiated downwards to specific figures.
It is critical for farmers to calculate their costs of production.
Very few farmers and consumers know that it costs one cent to produce a single tuber of onion.
That means farmers selling onions at US$1 for 25 tubers are actually receiving 4c and earning 3c as profit.
The cost of loading and off-loading a good product is the same as that for a bad product.
To what extent should farmers grow crops after finding a market?
Companies that manufacture inputs do not first find a market or buyers before manufacturing a wide range of inputs.
They just produce and assign their sales department to push the products.
Why should farmers be asked to first find a market before producing?
Farmers should not give all the consignment to one trader because the trader can manipulate the farmer in terms of price and quantity.
If you give the consignment to one trader, what do you do when the trader is not there or overwhelmed with selling another farmer’s commodity?
You can’t wait for him to finish while your commodity is getting destroyed on-farm.
It is unfair for a farmer to spend four months producing a commodity and someone sells it in a day and gets most of the money.
Why should traders, who do not produce a commodity, set rules of the marketing game?
They should not be allowed to do as they please, including knit picking.
In the African context, consumer decision tends to be complicated and sometimes spot-on.
The African off-taker is different from the colonial notion of off-takers which assume there is always captive group of consumers.