Improving Agricultural Market Performance:
Developing Agricultural Market Information Systems
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forward supply contracts are negotiated with prices being agreed based on market information
provided by ESOKO.As is the case with other private MIS providers, the ESOKO business model targets financial
sustainability with revenues generated through fees charged for accessing information via
mobile telephones as well as subscriptions paid by registered inputs and output traders. They
also generate revenue through providing training services for implementers of various
government and donor-funded agricultural development programmes. In recent times they
have begun providing ICT support for monitoring smallholder farmers who are financed by
formal lenders. Despite these efforts, ESOKO as is the case for most private MIS providers,
generate only a small proportion of their overall income stream from user fees/subscriptions
but remain significantly dependent on donor support (Galtier et al., 2014).One of the main factors constraining the supply of finance to farmers is the limited capacity of
formal lenders to monitor activities on-farm in order to assure compliance with loan repayment
terms and conditions. Some of the 2GMIS providers are moving to fill this gap by deploying ICT
not only to monitor crop performance but also to offer tailored extension advice which can help
farmers act timeously to reverse on-farm developments which can lead to significant reduction
in output. The technology being deployed involves remote-sensing and provision of tailored
remedial actions and is sometimes termed as “Precision farming” (illustrated in Box 4).
Box 4: ICT and Precision Farming
Precision farming (also known as Prescriptive or Satellite farming) uses ICT in the on-field
monitoring of the development crops during gestation in order to respond as precisely as possible to
variations in sections of the field in a manner which optimises yield. It includes deploying Global
Positioning Systems (GPS) i.e. space-based satellite navigation systems which provide location and
time information in all weather conditions. The technology is being used in large-scale commercial
agriculture in the US and also in South Africa. For example, Monsanto is reported to be using remote
sensing and other cartographic techniques to map farms in the US and superimposing climate
information on the maps in order to determine types of seed suitable for specific farms. Farmers
using its FieldScripts system reportedly made yield gains of over 5%. In November 2013, Du Pont
Pioneer (seed producer) teamed up with John Deere to deploy similar technology to provide advice
on seeds and fertilizer to farmers in the field. Land O’Lakes (a farm-supply co-operative in the US)
bought Geosys (a satellite-imaging company) in December 2013 to boost its farm-data business.
Though none of these cases directly involve farm insurance, they point to the potential to monitor
on-farm activities, including precipitation and soil moisture, with a level of precision which can
reduce basis risk in index-linked insurance. It is an area which is therefore worth exploring.
Source: NRI (2014)
3.6.2 2GMIS MODELS LINKED TO COMMODITY EXCHANGES One of the features of successful agricultural commodity exchanges is the maintenance of a
reliable MIS (Onumah and Aning, 2009). Commodity exchanges provide a venue, which may be
physical or virtual (electronic), at which buyers and sellers are brought together to trade in
physical commodities and/or in derivatives, which are financial contracts/instruments, whose
values are derived from the value of an underlying asset. The underlying assets may be
commodities, equities/stocks, mortgages, bonds, interest rates and exchange rates or indices
such as stock market and consumer price indices. Exchanges which trade only physical
commodities for immediate delivery (i.e. delivery is made within three days) are described as
spot markets. The ones trading standardised contracts against which delivery may be made in