Value Chain Kastanek


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Value Chain Kastanek

  1. 1. NEWS 498 READY TO EDIT Karoline Kastanek Feature #2 – FINAL DRAFT LOCATED IN BFC May 5, 2010 In Africa grows a plant that may have the potential to restructure the continent’s agricultural stability – if the people of Africa want it. In Tanzania and Zambia, farmers grow sorghum is grown as a famine crop. Farmers grow it only as a backup in case their other crops fail to produce. A marketing and agricultural economics duo at The Ohio State University is working to make sorghum a more prominent crop instead of a backup crop. J. Mark Erbaugh and Don Larson serve as the principal investigators for the sorghum market development project in Tanzania and Zambia. Erbaugh and Larson recall joining the INTSORMIL team four or five years ago as the only economists. Their primary study: value-supply chain analysis. Value-supply chain analysis at a glance From field to table is a lot to analyze. A value-supply chain includes numerous variables – everything between the farmer planting and harvesting sorghum to the consumer buying and eating the food product with sorghum in it. Erbaugh and Larson analyze value-supply chains of sorghum in both new and barely existing markets. And that task becomes even more challenging when they try to build a completely new value chain. Because the value-supply chain involves so many variables, scientists must break it down into small segments for analysis. One of the first steps Erbaugh and Larson take to analyze the sorghum value chains is gathering information. “Social scientists gotta see the numbers,” said Erbaugh.
  2. 2. Tanzania and Zambia have no records of sorghum varieties planted, yields from farms, and prices the millers are willing to pay for sorghum. Without records, Larson and Erbaugh face a huge problem in analyzing the sorghum market. Erbaugh and Larson must also ask why sorghum is not consumed more in these African countries already. So far, these economists have learned from survey responses that African consumer behavioral patterns and attitudes toward sorghum and sorghum food products is the one of the main hindrances to demand for sorghum. Erbaugh and Larson said that consumers tend to associate sorghum with a lower income and poverty-level villagers. As consumers’ income increases, their demand for a variety of foods high in protein, meat or poultry, also rises, often leaving sorghum out of the diet. Negative consumer attitudes toward sorghum makes the task of building new value- supply chains challenging for Larson and Erbaugh. They must look for ways that sorghum can be integrated into different markets such as the beer market and find ways to create new markets. Farmers in need of connection At the same time that Larson and Erbaugh analyze consumer trends and demands, they also study the supply on the producer end of the value chain. It is important for Larson and Erbaugh to understand why farmers raise sorghum as a “backup crop” instead of a primary crop. The problem is complex. New varieties of sorghum are more expensive than native sorghum. One quote from government officials that irritates Erbaugh most is, “Technology’s on the shelf; all we have to do is move it out.” Erbaugh responds to that quote saying, “Much of the seed developed in Africa doesn’t make it off the shelf.” Most farmers realize that there is no profitability in sorghum production, especially compared to maize, which is subsidized by both Tanzania and Zambia’s governments.
  3. 3. “If farmers don’t see a demand for their crop, they aren’t going to pay extra money for better varieties of sorghum,” Larson said. Even if farmers do see a demanding market for sorghum eventually, they still will not have the collateral or the capital necessary to help them get a loan from the bank for the newly developed seed. Farmers in most developed countries such as the U.S., own the ground they farm – a source of collateral often used to receive bank loans. The governments and tribes own most of the land in Tanzania and Zambia. Like newly developed seed, fertilizer is expensive for farmers. The difference with fertilizer and seed is that farmers have found ways to grow sorghum – often poor quality sorghum – without expensive fertilizers. According to INTSORMIL’s 2008 Annual Report, none of the 2006 sorghum crop in Zambia had synthetic fertilizer applied to it. It is common in these countries for farmers to hire “pastoral farmers” to graze cattle on the sorghum and maize farmers’ fields. Cattle “naturally fertilize” fields with their manure. Farmers are more inclined to use this form of fertilizing because it offers more than just farming benefits. As one farmer said to Erbaugh, “This is a chance for our sons and daughters to meet new people from different parts of the country.” In essence, it gives the children a chance to find potential spouses. Another major problem on the producer end of the value-supply chain is the absence of market linkages – connections or relationships between farmers and processors. With no records, especially of the price sorghum is seasonally traded at, or how much crops farmers harvest from their fields, it is hard to form market linkages. Larson and Erbaugh are collaborating with an INTSORMIL scientists in Tanzania to obtain prices and yields.
  4. 4. The U.S. is fortunate in comparison to these countries. It has accurate record-keeping, mostly thanks to farm cooperatives or organizations, which sell grain to numerous farmers all at once and split the profits among the farmers. The production side of the value-supply chain seems almost helpless, right? Erbaugh and Larson don’t think so. The future holds many opportunities. Larson says that if African farmers can arrange contracts with grain possessors before planting the sorghum, they may be able to use that contract as leverage for a loan to buy new varieties of seed and fertilizers. Before they can get to this point though, Erbaugh and Larson have a lot of data to collect in order to achieve a couple of INTSORMIL’s key objectives: to increase the opportunity for farmers to sell sorghum and pearl millet and to better the livelihoods of farmers growing these crops by working with other international organizations. For right now though, they keep analyzing both ends of the spectrum from sorghum yields to trends in consumer preference. Side bar for Bernadette’s clear beer research When Bernadette Chimai started college at the University of Zambia, she never would have guessed she would be where she is today. Chimai is an agricultural economics graduate student. “I became curious. How could economics and agriculture work together,” said Chimai as she recalled the last time she switch her undergraduate major. Initially, Chimai wanted to study in the field of medicine. Eventually, as she worked her way to her last years of college, Chimai found herself on the path of agriculture, one of the primary reasons why she is now involved with INTSORMIL.
  5. 5. Chimai spent the 2009-2010 school year working directly with Erbaugh and Larson at Ohio. Chimai analyzed the sorghum clear beer value chain in Zambia to see how consumers respond to sorghum. “People see sorghum as a food for poor villagers,” said Chimai. These people, mostly urban dwellers and even the government, see maize and wheat as a more prestigious food than sorghum. The major problem with this idealism is that maize and wheat are not easily grown in these countries. The government favors maize so much that it subsidizes maize farmers, so that they can afford to grow it in their fields. Farmers often grow sorghum for personal use, mixed in with food made from maize and in home-brewed beer. When farmers make sorghum beer, it is typically unfiltered and very cloudy. Even most sorghum beer sold on the market is has sorghum sediments in it. This sorghum beer is usually sold in cartons and has very little eye appeal. Sorghum clear beer is nearly opposite of that. The Zambian Breweries produces sorghum bear that has been filtered for a clear look, and it is sold in, as Chimai says, “a pretty bottle,” meaning it stands out at the market next to its cloudy sorghum beer competitors. Chimai says the sorghum clear beer is priced reasonably so that almost anyone can afford to drink it. The Zambian government has even lowered the tax on sorghum clear beer to make it even more affordable and more popular, inadvertently increasing the demand for sorghum. The increased demand for sorghum now means that Chimai, Erbaugh and Larson must look for ways to strengthen the relationship between farmers and sorghum millers. Chimai, Erbaugh and Larson hope to eventually create a more stable flow of sorghum from farmers to
  6. 6. millers and then onto breweries. Much like fine wine, this value-supply chain will take time to mature.