Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
38
processed products. The considerable water and energy required for industrial processing
drive production costs even higher.
Coordination among actors in the cassava value chain is weak. Outgrower schemes could
potentially give buyers better access to more raw material that meets their quality criteria,
but recent experience with contract farming to supply two large cassava processing
operations provides a cautionary insight into the economics of contract farming
arrangements. In 2012 in the aftermath of widespread flooding, cassava prices more than
doubled because of a supply shortfall. Contract farmers whose production was not
affected by the flooding expected to receive the higher market prices for supplying their
buyers (the processors), yet the higher prices made operations uneconomical for the
processors. Realizing that their businesses would not be viable with highly variable raw
material costs, the processors acquired large tracts of land to produce well over half of
their raw material requirements under mechanization.70
COCOA
Nigeria is the fourth-largest cocoa exporter in the world, and cocoa is Nigeria’s most
important agricultural export, valued at US$ 894 million in 2011.71 Most cocoa is exported
as beans (valued at US$ 786 million in 2011), but some is processed and exported as cocoa
butter (US$ 64 million) and cocoa powder and cake (US$ 43 million).72 Cocoa is primarily
produced in the southern states of Ondo, Cross River, Osun, Ekiti, and Abia.
Under the structural adjustment programs of the mid-1980s, the government began to
abolish agricultural commodity boards, liberalize export markets, reduce foreign exchange
restrictions, and devalue the currency. Nigeria’s cocoa industry has not fared very well in
the post-liberalization phase. The use of inputs (particularly fertilizers) has declined,
efforts to rehabilitate and replant aging cocoa farms are limited, and the quality of the
beans has declined. The emergence of a largely uncoordinated private trade following
liberalization reportedly has lessened quality controls and export coordination. Problems
in enforcing contracts discourage forward sales and limit the availability of credit for
upgrading technology and practices.
Farmers decide where to market their cocoa harvest based on several criteria, including
the time of payment, mode of payment, price of product, distance from farm,
transportation costs, and grading of product. In Osun State, farmers prefer to sell to
itinerant buyers, because poor roads have made transport costs so high. Production can be
rejected or the price reduced if buyers find the quality of beans to be inferior, so many
producers prefer to sell to intermediaries.73 As more intermediaries become involved in
the supply chain, however, cocoa marketing becomes less remunerative for smallholder
farmers.
70 World Bank (2014a).
71 FAO (2014).
72 FAO (2014).
73 Ogunleye and Oladeji (2007).