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GUIDE TO AGRICULTURAL MARKETING EXTENSION

with special reference to Vietnam

Module 1

Tiago Wandschneider and Ngo Kim Yen

CONTENTS

ACKNOWLEDGMENTS.................................….................................................... iv

INTRODUCTION...........................................…...................................................... 1

SECTION I: MARKETS AND MARKETING

CHAPTER 1: ROLES AND TASKS OF THE EXTENSION OFFICER 4

1.1 The role of the extension officer...........................…..................................... 5

1.2 Tasks and activities of the extension officer....…......................................... 6

1.3 Skills, knowledge and attitudes....................…............................................. 6

CHAPTER 2: BASIC CONCEPTS 9

2.1 Demand and supply...........…........................................................................ 10

2.2 Prices.....................................….................................................................... 11

2.3 Markets as places......................….............................................................… 12

2.4 Markets as demand........................…............................................................ 13

2.5 Market segments................................…........................................................ 13

2.6 Marketing................................................…................................................... 14

2.7 The 4 Ps of marketing..................................….............................................. 16

2.8 Market intermediaries......................................….......................................... 17

2.9 Supply chain........................................................…...................................... 20

2.10 Marketing costs......................................................….................................... 22

CHAPTER 3: KEY FEATURES OF AGRICULTURAL MARKETS 25

3.1 Short-term price volatility........................................................…................. 26

3.2 Price seasonality..........................................................................….............. 26

3.3 High inter-annual price variations..................................................…........... 28

3.4 High risk............................................................................................…........ 28

3.5 High marketing costs............................................................................…..... 29

3.6 Incomplete information..............................……………………………… 30

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3.7 Intense competition..............................................................................…...... 31

3.8 Low price elasticity of supply.................................................................….. 32

3.9 High price elasticity of demand ................................................................… 32

3.10 Long-term decline in real prices.................................................................... 33

SECTION II: MARKET INFORMATION

CHAPTER 4: INTRODUCTION TO MARKET INFORMATION 34

4.1 What is market information?.................................................….................... 35

4.2 Why is market information important?....................................…................. 36

CHAPTER 5: COLLECTING MARKET INFORMATION 42

5.1 Which type of market information should be collected?...............…............ 43

5.2 What are the main sources of market information?………….............…...... 45

5.3 How often should market information be collected?.............................….... 58

5.4 Which methods and tools should be used to collect information from market participants?....................................................................................... 58

5.5 How to contact market participants?............................................................. 62

5.6 Where to meet market participants?.............................................................. 63

5.7 How to check the quality of the information collected from market participants?.............................................................................................….. 64

5.8 How to record the information collected from different sources?................. 64

CHAPTER 6: PROCESSING AND ANALYSIS OF MARKET INFORMATION 68

6.1 Introduction............................................................................................…... 69

6.2 Analysing the supply chain........................................................................... 69

6.3 Conducting SWOT analysis.....................................................................…. 70

6.4 Analysing price trends……………………………………………………... 74

6.5 Analysing price seasonality.....................................................................….. 78

6.6 Discounting inflation………………………………………………………. 80

6.7 Calculating gross margins…………………………………………………. 81

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6.8 Analysing marketing costs and margins........................................................ 84

6.9 Future vision…………….............................................................................. 84

CHAPTER 7: EXCHANGING MARKET INFORMATION 87

7.1 What are the main options for exchanging market information?….............. 88

7.2 How to choose channels and methods for exchanging market information?.................................…..............................................................

93

CHAPTER 8: USING MARKET INFORMATION – THE EXPERIENCE WITH PERSIMMON IN DA BAC, HOA BINH 97

8.1 The context.................................…............................................................... 98

8.2 Collecting and analysing market information................................….......… 98

8.3 Exchanging market information................................…................................ 99

8.4 Outcomes................................…........................................................……... 100

ANNEX 1: READING LIST……………………………………………………… 102

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ACKNOWLEDGMENTS

Many people have provided comments to earlier versions of this module. Special thanks are due to Shaun Ferris (International Center for Tropical Agriculture, CIAT), Nico Janssen (SNV Vietnam), Ruedi Luthi (Helvetas Laos) and Andrew Shepherd (Food and Agriculture Organization, Rome) for their very detailed remarks and suggestions. We would also like to thank Tran Manh Chien (SADU Vietnam) for compiling information used in many sections of the guide.

In Vietnam, Hans Schaltenbrand (Helvetas Vietnam) provided continued encouragement and advice. We are also grateful to Pham Kim Oanh, her colleagues at the National Agricultural Extension Center (NAEC) and the teachers from the College of Agricultural and Rural Development Managers No. 1 (CMARD1) for helping us tailor the guide to the specific needs of agricultural extension officers in Vietnam.

Earlier versions of this module were tested in training in four provinces and six districts of Vietnam. This would not have been possible without the enthusiasm and dedication of national and provincial trainers, namely Tran Van On (consultant), Nguyen Van Cuong (College of Economics, Hue University), Le Thi Hoa Sen (Faculty of Agricultural Extension and Rural Development, Hue University of Agriculture and Forestry) and Tuyet Hoa Niekdam (Faculty of Economy and Administrative Business Management, Tay Nguyen University).

Finally, the authors would like to thank Andrew Bartlett (Helvetas Laos), Pham Van Luong (Helvetas Vietnam), Eugene Ryazanov (Helvetas Kyrgystan) and Tran Thi Huyen Trang (Organization Capacity Development, OCD) for their interest in the guide and constructive comments.

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iv

Introduction

INTRODUCTION

Background

The agricultural extension system in Vietnam is in transition. The aim is to move from what is essentially a production-oriented system to a more market-oriented service geared to helping farmers adapt to rapidly changing markets.

The need to implement this vision has led to the publication, in April 2005, of Decree 56, which revises the role and functions of the agricultural extension system (including forestry and fisheries). Extension is to continue playing an important function in the transfer of scientific knowledge and technology and the dissemination of information on production matters, but for the first time, significant emphasis is also given to its potential role in linking farmers to markets.

In other words, the extension officer is no longer regarded as someone whose main task is to promote increased productivity and production. His/her mandate is to support rural households and related enterprises to earn a good income from their activity. Assisting farmers and enterprises to understand the market and develop good marketing links goes hand-in-hand with the promotion of appropriate production technologies and practices.

While Decree 56 represents an essential step in the development of a more effective extension system in Vietnam, there is recognition that this is a long and arduous task. At the moment, the extension system is under-staffed and under-resourced. Extension officers earn a low salary, have to cover a large number of communities, and operate with limited budgets. And very few have the skills and experience to provide effective, market-oriented extension services.

Progress towards implementation of Decree 56 will require significant capacity building of existing staff and strong leadership from political and extension organizations at national, provincial, district and commune levels. Leaders can play a very important role in the allocation of financial resources, the development of staff capacity, and the institutionalisation of marketing within extension services.

Purpose of the guide

This guide was developed in the context of the on-going reform of the extension system in Vietnam. It emerged from a perception that poor knowledge about

1

Introduction

markets and limited marketing advisory skills constitute major barriers to the development of a more modern and relevant extension system. Consultation of various stakeholders confirmed that there is strong demand in Vietnam for reference and training materials dealing with marketing extension.

While some well-trained extensionists can make a difference at local level, they will be able to reach a much larger number of clients and deliver a much better service if additional financial resources are made available. Consequently, the impact of this guide can be significantly enhanced in contexts where increased resources are being allocated to agricultural extension.

The ability of extension officers to deliver effective services will also increase if the whole extension system is geared towards improving linkages between farming households and markets. While this guide does not deal extensively with institutional issues, some attention is given to the need for sharing market information and experiences between extensionists within districts, across districts and between districts and the province.

It is hoped that this manual will help clarifying the potential role of extension officers in a more market-oriented system. What can be expected of extensionists in a context characterized by weak human resources, limited financial resources and poor institutional development? What can they actually do? And how?

Users of the guide

The guide is first and foremost addressed to staff working directly with farming households and farmer organizations to improve their incomes. This includes managers and field staff from agricultural extension, agriculture and rural development, mass organizations, development projects and non-government organizations. These staff are referred to in this guide as extension officers.

In Vietnam, commune officers and village leaders are in regular contact with farmers and often provide some form of extension service. Cooperatives and other types of farmer groups also deliver extension services to their members. This guide provides an approach and ideas that they can apply when working with farmers.

The guide should also prove useful to consultants and trainers and to training and education establishments that offer courses in the fields of extension, agriculture, forestry, fisheries, agribusiness, rural development and economic development. These individuals and organizations are encouraged to adapt the guide to the specific requirements of students, trainees and other clients.

2

Introduction

While developed for the specific context of Vietnam, the guide is relevant to practitioners in other developing countries. The approach, methods and tools discussed can be applied in a wide range of socio-economic contexts.

Content and structure of the guide

This manual combines theory and practice in an accessible manner. It can be read as reference material, used as the basis for training, and/or consulted as a practical guide:

Basic concepts are explained in simple terms and illustrated with examples;

relevant information and analysis are presented in a summarized form;

appropriate tools and methods are introduced and described;

practical guidance in a number of areas is provided;

visual aids are included to facilitate understanding of the issues under discussion;

a list of relevant reading materials is provided (unfortunately none is available in Vietnamese);

while the text often relates to agricultural crops, the discussion is equally valid for animal, forestry, and fishery products.

The guide is divided in two modules. This first module provides a general background to markets and marketing, discusses the link between key concepts and agricultural extension, and presents a series of guidelines for collecting, processing, analysing and exchanging market information. A second module includes guidelines for supporting collective action as an avenue for market linkage development.

While dealing extensively with market information, this module has not been designed to guide the development of formal market information systems (MIS). These systems can play an important role in supporting marketing extension services, but are rather complex and costly to develop. The FAO and other organizations have published several useful guides and reports in this area, and users are encouraged to read these materials (many of which are available in the Internet) for guidance on how to establish and manage an effective MIS.

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SECTION I

MARKETS AND MARKETING

CHAPTER 1: ROLES AND TASKS OF THE EXTENSION OFFICER

CHAPTER

Roles an

improving farmers’ access to ma

enhancing their understanding of

helping them use market informaopportunities).

Tasks an

collection and exchange of mark

linking farmers to sources of ma

working with farmers to process

provision of advice (production,

transfer of knowledge and skills exchange visits and study tours);

facilitation of group formation an

working with groups of farmers

promotion of business linkages b credit sources and other service p

Skills, knowle

In order to provide market-oriented agofficers may need to cover a wide rangand be able to link these to productionof skills and knowledge.

4

SUMMARY d functions

rket information;

market information; and

tion (address problems and access

d activities

et information;

rket information;

and interpret market information;

post-harvest, processing and marketing);

(e.g. through training, demonstrations,

d action;

to develop business plans; and

etween farmers and input suppliers, buyers,roviders.

dge and attitudes

ricultural extension services, extension e of marketing and socio-economic issues,

. This requires new attitudes and a new set

Roles and Tasks of the Extension Officer

1.1 The role of the extension officer

In very simple terms, the mandate of the extension officer is to help farmers earn a good income from their farms. In order to develop farming as a successful business, farmers must be able to produce what the market wants at a relatively low cost. Extension officers can support this process, but this requires a good understanding of markets and the links between markets and production.

Extension officers can play three complementary roles in this regard:

i) improve farmers’ access to market information;

ii) enhance their understanding of market information; and

iii) enable them to use market information.

What is the role of the extension officer?

i. Improve farmers’ access to market information Ideally, market information should be the starting point for any decision regarding production, post-harvest, processing and marketing. Whenever necessary, extension officers can collect and disseminate relevant market information and/or link farmers to appropriate sources of information.

ii. Enhance farmers’ understanding of market information Access to market information is important but far from sufficient. Farmers often find it difficult to interpret market information and to understand its implications to their farming business. Extension officers can work with farmers to process and interpret market information as a step towards production and marketing decisions.

iii. Help farmers use market information Market information will only make a difference if farmers are able to act upon it. Farmers may be aware of opportunities but unable to exploit them. Can they develop appropriate plans? Do they have the resources to diversify into a new, remunerative crop? Or the required knowledge in the production and post-harvest spheres? Can they access the right seed to develop profitable off-season vegetable production? Can they bear the cost and risk of supplying a new market? Are they able to shift to new buyers offering higher prices? Extension officers can help farmers overcome these and other constraints.

This first module deals with the first two issues – improving access as well as understanding of market information.

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1.2 Tasks and activities of the extension officer

In order to improve access to market information, extension officers can either collect and disseminate such information, or link farmers to relevant sources of information.

Market information needs to be interpreted. Sometimes the extension officer will process and analyse market information before exchanging it with farmers. Other times the information will be processed and analysed together with farmers. Often there will be a mixed situation: part of the processing and analysis will be done independently by the extension officer, and part will be carried out jointly with selected farmers.

Once farmers have an understanding of the market situation, they are in a position to develop improved production and marketing strategies. It is the task of the extension officer to support them, and this may include:

the provision of advice in the production, post-harvest, processing and marketing spheres;

the preparation of business plans;

the transfer of knowledge and skills, for example, through training, demonstrations, exchange visits and study tours;

the facilitation of group formation and action; and

the promotion of business linkages to input suppliers, buyers, credit sources and other service providers.

1.3 Skills, knowledge and attitudes

A market-oriented agricultural extension system requires a whole new set of skills, knowledge and attitudes from extension officers. Communication and facilitation skills and good knowledge of production technologies are still essential, but extension officers are also expected to cover a wide range of marketing and socio-economic issues.

For example, in order to help farmers develop profitable farming businesses, extension officers need to:

understand the household economy,

assess the marketing system for existing and potential agricultural commodities,

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evaluate the ability of local farmers to compete in the market,

calculate the profitability of different production and marketing options,

help farmers develop business plans,

mediate between farmers and suppliers of inputs, buyers and other service providers,

support the development of collective marketing.

Most extension officers have limited background and experience in these areas. Moreover, because markets are constantly evolving, there is a need to re-assess marketing systems and farmer strategies on a regular basis. This requires a fair degree of motivation as well as a very flexible and pro-active attitude from extension officers.

The table below lists some of the skills, knowledge and attitudes that extension officers will need in order to provide effective market-oriented advice and services.

Skills

Planning

Computer use

Information collection

Market analysis

Competition analysis

Profitability analysis

Business planning and management

Communication

Networking

Training

Monitoring

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Knowledge

Household economics and livelihoods

Business principles

Markets and marketing

Production technologies and practices (agronomy, animal husbandry, forestry and fisheries)

Post-harvest technologies and management

Attitude

Flexible

Dynamic

Open-minded

Creative

See farmers and agro-enterprises as clients

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CHAPTER 2: BASIC CONCEPTS

CHAPTER

PPrices are mainly determ

DemandExtension officers therefore n

of supply

MA place where buyers a

exchange go

The demand for

MarkeGroup of buyers with si

MaAll activities involved in moving a

to the point

Process of finding out what clients w

Market inTraders and processors who handle

producer until it r

SuppMarket channels through which a pro

final

MarkeCosts incurred between the moment a

the moment it is pu

9

SUMMARY

rices ined by supply and demand.

and supply eed to have a good understanding and demand.

arket nd sellers come together to ods and services.

a product or service.

t segment milar needs and preferences

rketing product from the point of production of consumption

ant and satisfying such needs for a profit

termediaries a product from the time it is sold by the eaches the consumer

ly chain duct moves until reaching the end user or consumer

ting costs n agricultural product leaves the farm andrchased by consumers

Basic Concepts

2.1 Demand and supply

Extension officers should have a good understanding of supply and demand. Their advice to farmers should be informed by what is happening with supply and demand.

So what is demand? In very simple terms, demand is the amount of a product or service which buyers are willing and able to purchase at different prices. Buyers must not only want to buy a certain quantity, but also have the means or resources to pay for it.

What is demand?

Amount of a particular product or service which buyers are willing and able to buy at different prices

Demand is not static but constantly changing. Below are some of the common causes of changes in demand:

Prices. If prices rise, demand will tend to fall. If prices fall, demand will tend to increase.

Income. When the real income of consumers increases, so does their purchasing power and demand. When incomes contract, the opposite happens.

Consumer preferences. Demand is a function of consumer preferences, and these may change with changes in income and education levels and exposure to modern livestyles and advertising.

Competing or substitute products. Demand for a particular product will fall when alternative products become more available and/or cheaper. It will increase when such products become scarcer and/or more expensive.

Quality. Buyers are often sensitive to the quality of agricultural products. Improvements in quality can lead to an increase in demand, whereas a decline in quality can have the opposite effect.

We have now introduced the concept of demand. What about supply? Supply is the amount which producers and market intermediaries are willing and able to provide at different prices. While supply is strongly influenced by production, the two are not the same. For example, perishable produce may never be channelled

10

Basic Concepts

to the market due to spoilage. And some agricultural products may be stored and released into the market at a much later date.

What is supply?

Amount which producers and market intermediaries are willing and able to provide at different prices

The supply of agricultural products tends to be more volatile than the demand for these same products because of the strong influence that natural conditions have on production levels. Some of the main factors influencing the supply of agricultural products are discussed below:

Climate. Favourable weather conditions will translate into a good harvest and therefore have a positive impact on supply, while drought or floods will have the opposite effect. Pests and diseases can have a similar, negative impact on production and supply.

Production costs. An increase in the production cost of a certain commodity may lead farmers to shift to other commodities with better returns. A decline in production costs would have the opposite effect.

Prices. There is a clear tendency for farmers to expand supply when prices rise, and to reduce it when prices fall. In the case of storable crops, such as grains, farmers may be able to increase supply immediately by reducing consumption and releasing stocks. Investment in production is another common response, but it may take some time for this investment to generate increased supply.

Transport infrastructure. An improvement in transport infrastructure may reduce the remoteness of certain areas and enable the production of new agricultural products for sale in urban markets.

2.2 Prices

Prices are largely determined by supply and demand. Prices can fluctuate significantly, even during one single day. If large quantities of a certain product suddenly arrive on the market, a typical situation during the harvesting period, prices will fall. When there is a shortage of supplies in the market, for example because of a failed crop, prices will rise. During festivity periods demand for food expands, fuelling an increase in the price of many agricultural products.

11

Basic Concepts

Knowing what is happening with demand and supply is essential to understand not only short-term and seasonal price variations but also longer-term price trends. Knowledge of supply and demand may even enable farmers to anticipate future price changes.

Extension officers can work with farmers to develop the supply of products that:

i. have strong and rising demand;

ii. enjoy relatively favourable price trends; and

iii. meet the specific requirements of targeted buyers.

2.3 Markets as places

We have discussed the role of extension officers in helping farmers have better access to markets. But what is a market? According to one definition, markets are places where goods and services are exchanged.

What is a market?

A place where buyers and sellers come together to buy and sell goods and services.

Market places vary in their location and functions:

Assembly markets. These are rural markets where farmers and small collectors come to sell agricultural products to larger traders and agro-processors. The main function of assembly markets is to bring together supplies from a large number of dispersed farms within an area, thereby enabling buyers to access significant product volumes from one single location. In some cases, assembly markets consist of small areas where farmers and buyers gather for some hours during the peak marketing season. In other cases, they are permanent and held once or twice a week; sometimes even daily.

Wholesale markets. These markets tend to be located in towns and cities, or in their vicinity. Their main role is to gather supplies from different production areas for subsequent distribution to urban areas or for export. Wholesale markets supply retailers such as shops, market vendors, roadside sellers and street hawkers. Some may also supply agro-processors, wholesalers from other areas and exporters. In Vietnam, urban

12

Basic Concepts

wholesale markets for fruits, vegetables and flowers tend to operate at night.

Retail markets. Retail markets can be found everywhere – in villages, in small towns and in cities. Some are held daily whereas others open at certain days of the week. Their main function is to supply consumers and small businesses, such as restaurants and hotels. While retail markets are a very important source of supply, it is also common for consumers to buy from shops, roadside vendors and street hawkers. In addition, in large urban centres, supermarkets are becoming increasingly important retail outlets.

2.4 Markets as demand

A market can also be defined as the demand for a product or a service. In other words, a market can be regarded as a group of people who have certain needs and are willing to spend money in order to satisfy those needs.

What is a market?

The demand for a product or service

This definition is very relevant to the work of extension officers. Extensionists can play an important role in helping farmers understand and meet demand, i.e. satisfy the needs of current and potential clients.

2.5 Market segments

The market (demand) for a particular product is not homogeneous. People do not have the same needs and preferences; they demand different things. One way of making sense of demand is to divide the market into different groups of buyers, each with similar needs and preferences. Each separate group forms a market segment.

What is a market segment?

Group of buyers with similar needs and preferences.

Market segments include consumers with some common features – age, gender, religion, location, income and so on. For example, many young people in Vietnam

13

Basic Concepts

like soft drinks, while older people tend to prefer coffee or tea. Wealthy and health-conscious consumers in large cities in Vietnam are starting to demand safe vegetables, but this trend is less obvious in rural areas. Extension officers can work with farmers to help select and target remunerative market segments, a process known as market segmentation.

The table below differentiates the market for fish in a northern province of Vietnam into two main segments, according to income. One market segment is composed of high-income households while the other comprises low-income households.

Table 2.1 Fish demand in Phu To Province High-income consumers Low-income consumers

Product features larger and fresh, good taste smaller fish, soft bone

Preferred breeds carp, grass carp tench, mud carp

Prices 15,000 – 20,000 VND/kg 8,000 – 12,000 VND/kg

Consumption 15 kg/head/year 9 kg/head/year

Timing all year round July-August; December-January

2.6 Marketing

There are many possible definitions of marketing. According to one definition, marketing consists of all activities involved in moving a product from the point of production to the point of consumption. In other words, marketing are those activities linking producers and consumers.

As such, marketing ensures that products are available for consumption:

in the right place,

in the form wanted,

in the quantities and quality required, and

at the time needed.

This definition implies that there are a number of sequential elements or activities in agricultural marketing. Typical agricultural marketing activities include the shelling, drying, cleaning, sorting, grading, processing, packaging, labelling, transport, storage, advertising and selling of agricultural products. These activities

14

Basic Concepts

add value to agricultural products. Some may be performed on farm, but most are carried out off-farm by traders and agro-processors.

What is marketing?

All activities involved in moving a product from the point of production to the point of consumption

According to a second definition, marketing consists of identifying customer needs and satisfying such needs at a profit. In this definition, which is particularly relevant to farmers and agro-enterprises, emphasis is given to the fact that:

i. marketing is a customer-oriented and profit-driven process;

ii. successful marketing is based on long-term, mutually beneficial relationships between suppliers and customers.

Process o sati

Hence, marketing is much mosell it. It is about producing wIn other words, the needs andproduced, how it is produced, h

To be successful, farmers and what different buyers want, deneeds and generate a profit, proan appropriate manner.

What is marketing?

f finding out what clients want andsfying such needs at a profit.

re than just producing something and then trying to hat can be sold well and for a remunerative price. wants of the customer should determine what is ow and where it is sold, and when.

agro-enterprises need to analyse the market, find out velop products or services that can satisfy identified mote such products or services, and market them in

15

Basic Concepts

2.7

In omarrelatdefi

Figure 2.1 What is marketing?

The 4 Ps of marketing

rder to earn high income from farming, farmers must develop appropriate keting strategies. In this context, they must pay special attention to four inter-ed dimensions, known as the 4 Ps, which are intimately linked to the previous nition of marketing:

Product. What should farmers produce? Ideally, farmers should choose products that enjoy strong demand and high prices, and that they can produce at a relatively low cost. In addition, they should make sure that they meet market demand with regards to variety, colour, size, cleanliness, packaging and so on. Buyers often have clear product preferences and may be willing to pay a higher price for supplies that meet their specific requirements.

Price. At what price should farmers sell their products? Farmers have limited ability to set the price of their products, which is largely a result of prevailing supply and demand conditions. Still, there are some ways in which they can influence prices. One is by developing a product strategy in line with demand, as discussed above. Another possible strategy is to negotiate and supply buyers as a group.

Promotion. How should farmers promote their products? Promotional activities can facilitate sales and have a positive impact on prices. The

16

Basic Concepts

most obvious way for farmers to promote their products is through regular contact and direct communication with selected buyers. While companies often use the media (newspapers, television, radio, internet) to advertise their products, such promotion strategies are still beyond the reach of most farmers.

Place. Where should farmers sell their production? When deciding where to sell, farmers should consider the advantages and disadvantages of different locations and distribution channels. Each will offer a different combination of benefits (e.g. selling price), costs (e.g. transportation and time) and risks (e.g. likelihood of product rejections).

Production and marketing choices are influenced by many factors. Internal factors – i.e. farmers’ resources, knowledge and skills – are clearly important.

External factors also play a very significant role. Marketing choices are intimately linked to local agro-climatic conditions, the nature and structure of demand, the state of transport infrastructure, the level of competition from other supplying areas, government policies and regulations, and so on. External conditions change all the time, which makes marketing very challenging for farmers. Extension officers can play an important role in helping them adapt to a changing environment.

2.8 Market intermediaries

Farmers occasionally sell directly to the consumer, but as discussed this is not the norm. Most often, their products change hands several times before reaching consumers. The people who are directly involved in moving products from the farm to the consumer or end user are called market intermediaries.

Market intermediaries provide an essential link between farmers and consumers:

Most consumers live away from production areas and products must therefore be transported, sometimes over very long distances.

Agricultural production is generally seasonal while consumption is regular and continuous throughout the year. As a result, many agricultural products are stored for variable periods of time.

Most farm products are not in a form that is acceptable to consumers. They must be sorted, cleaned, processed in various ways and presented to the consumer in convenient quantities.

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Basic Concepts

Traders andsold

There are different typfunctions in the markeintermediaries that can b

Collectors

These are small local trafunction is to assembleprocessors operating wivolumes and use simplemay own or rent small t

Wholesalers

Wholesalers deal withmedium to large vehicWholesalers procure mosome also buy directlysupply retailers in towntraders, including expor

What are market intermediaries?

processors who handle a product from the time it is by the producer until it reaches consumers.

es of market intermediaries, each performing different ting system. Below we introduce four types of market e commonly found in Vietnam:

ders who buy directly from dispersed farmers. Their main local products for subsequent sale to larger traders and thin the region. Collectors have limited capital, trade small means of transport, such as motorbikes. Larger collectors rucks.

Figure 2.2 A pig collector

much larger volumes than collectors and rent or own les. They also tend to rent or own storage premises. st of their supplies from smaller traders or processors, but from farmers. The main function of wholesalers is to s and cities. Many also supply processors and other large ters.

18

Basic Concepts

A

Agro-agricufeed mlarge urban

gro-pro

processoltural coanufact

firms, em areas.

Figure 2.3 A wholesaler overseeing the loading of rice bags into one of his trucks

cessors

rs are those individuals and firms involved in the transformation of mmodities (e.g. rice millers, cassava starch factories and animal

urers). Processors can be very small household enterprises or fairly ploy traditional or modern technologies, and be located in rural or

Figure 2.4 A rice wholesaler supplying rice to a rice wine factory

19

Basic Concepts

Retailers

The main function of retailers is to distribute supplies to consumers. Retailers are very diverse in size and operation. For example, supermarket chains are fairly large companies that deal with significant volumes of a vast range of agricultural products. In contrast, small shops and market vendors sell much smaller volumes and fewer goods, and do not keep sizeable stocks.

2.9 Supply chain

Supply chain is a term used to describe the multiple distribution or market channels through which a product moves until reaching the consumer. Farmers rarely sell their products directly to consumers. Once they leave the farm, products normally change hands several times (go through different market channels) before being delivered to final consumers.

Market cha un

What is a supply chain?

nnels through which a product movestil reaching the final consumer

Figure 2.5 A vegetable vendor

20

Basic Concepts

Supply chains are also commonly referred to as:

market chains – to emphasize the fact that supply chains comprise a series of market transactions and are driven or shaped by market demand, and

value chains – to emphasize the fact that value is created along the chain and to highlight the importance of increasing the value of the whole chain and ensuring a fair distribution of benefits amongst supply chain participants.

Extension officers with some understanding of supply chains for specific agricultural products are well positioned to provide useful marketing information and advice on those commodities.

A diagram can be drawn to represent different information about supply chains, such as:

input supply channels,

buyers at each stage of the supply chain,

linkages between different market participants,

the main marketing activities at different stages of the supply chain, and

geographical product flows.

As an example, Diagram 2.1 below presents a very simplified version of the beef supply chain from Tan Lac, an upland district of Hoa Binh Province, in the northwest of Vietnam. Most sold cattle from Tan Lac is processed into beef and consumed outside the province, in major urban centres of northern Vietnam, such as Hanoi and Haiphong. Cattle/beef flows from other areas and neighbouring countries are not shown to avoid making the diagram too complex.

21

Basic Concepts

Diagram 2.1 Supply Chain for Beef Cattle from Tan Lac, Hoa Binh

2.10 Marketing costs

All marketing activities generate costs. These costs vary widely across agricultural commodities, depending for example on the extent of processing or the distance between production areas and consumption centres.

catt

le

Mea

t

Farmers

Slaughterhouses (mainly in towns and cities in northern Vietnam)

local collectors

retailers, pho restaurants and hotels (mainly in towns and cities in northern Vietnam)

cattle traders (other provinces)

What are agricultural marketing costs?

Costs incurred between the moment an agricultural product leaves the farm and the moment it is purchased by end users of consumers

cattle traders (district, province, other

provinces)

The costs incurred and the profits earned by market intermediaries account for the difference between prices at different stages of the supply chain. This is illustrated in Figure 2.6 below.

22

Basic Concepts

Figure 2.6 Prices along the supply chain

VND/kg Profit

Marketing and

processing costs

Retail price

Wholesale price

Processor price

Wholesale price

Farmer price

Production cost

In many cases, farmers perform some marketing functions, thereby incurring marketing costs. The most important ones are listed below:

Market research and promotion. Farmers often spend time and money collecting market information and promoting their products. They may need to contact buyers, visit other farmers and markets, call an extension officer, participate in a trade fair, and so on.

Product preparation. This includes cleaning, sorting and grading of produce. Household and exchange labour are typically involved in these tasks, but labour may also be hired to perform these tasks.

Packaging. Packaging costs are common in the early marketing stages. Simple and cheap types of packaging, such as jute bags, are commonly used by farmers.

Handling. When farmers rent transport they have to load and unload produce. Labour is sometimes hired or exchanged to carry out this activity.

Transport. Transport costs will vary according to the distance between the farm and the market or buyer, the quality of the roads, and the local availability of transport.

23

Basic Concepts

Product losses. Losses can affect both the quantity and the quality of a product. For example, many crops lose weight during drying and storage, and while in transit. Pests such as rodents and insects can cause much damage to grains. Perishable products, such as fresh cassava and many fruits and vegetables, deteriorate rapidly after harvest.

Storage. Storage costs typically include the cost of building and operating a store.

Processing. Certain products (e.g. cassava, sugar cane and mushrooms) are sometimes processed at farm level.

Fees and unofficial payments. Farmers typically pay a fee when selling at a market. In some countries, it is common for farmers to pay unofficial fees to the police during transport.

It is important to note that some of these marketing activities may be funded through credit. The cost of loans – i.e. interest payments – should also be regarded as a marketing cost.

24

CHAPTER 3: KEY FEATURES OF AGRICULTURAL MARKETS

CHAPTER SUMMARY

Agricultural markets have specific features that distinguishes them from markets for industrial goods and services, including:

Short-term price volatility

Price seasonality

High inter-annual price variations High risk

High marketing costs

Incomplete information Intense competition

Low price elasticity of supply

High price elasticity of demand

Long-term decline in real prices

These features, and their implications for farmers and extension officers, are discussed in this chapter.

25

Key Features of Agricultural Markets

3.1 Short-term price volatility

The price of agricultural commodities can change significantly within the same month, week or even day. These changes are associated with fluctuations in supply and demand.

Perishable produce is particularly prone to price instability because it cannot be stored for long periods. A sudden arrival of large amounts of fresh produce, or an accumulation of unsold stocks, will cause a glut in the market and drive prices down.

Short-term price instability often makes it difficult for farmers to anticipate the price they will receive for their products. Will this be the same as last week or last month? Will it be higher? Have prices fallen temporarily, in which case it might be better to wait a couple of weeks before selling? Or should farmers take advantage of a sudden increase in prices which is unlikely to be sustained for long?

Regular consultation of traders and agro-processors can provide some answers to these questions and help farmers decide when to sell.

3.2 Price

The price of mthat shown inconcentrated abundant and

However, forsignificantly stabilising eff

i) mu

ii) div

iii) ava

Short-term price variations and agricultural extension

Extension officer can help farmers understand and cope withshort-term price fluctuations.

seasonality

any agricultural products follows a clear seasonal pattern, similar to figure 3.1 below. This is often associated with the fact that supply is during certain periods of the year. During harvest, supply is prices are low, rising over time as supplies become scarcer.

products with a relatively stable supply, prices do not vary throughout the year. Below are four factors which can have a ect on supply and prices:

ltiple and long harvesting seasons;

erse harvesting calendars within the country;

ilability of off-season imports from other countries; and

26


iv) inter-seasonal storage.

Figure 3.1 – Price seasonality

Price

Time

Supply

Harvesting season End of harvesting season

Beginning of harvesting season

Q

uant

ity

Pric

e

Maize price seasonality in northwest Vietnam

A recent study of hybrid maize markets in northwest Vietnam showed relatively small price variations across seasons. This was largely due to the fact that very large volumes of hybrid maize were being stored for use during the winter months, a period when maize supplies from other regions (e.g. Nghe An and Daklak provinces) and China were also available.

Demand also influences price seasonality. There are specific periods of the year when prices change due to seasonal variations in demand. The most obvious example in Vietnam is the increase in prices during religious and other festivities, such as Tet.

Price seasonality may offer interesting opportunities to farmers. For example, local agro-climatic conditions may enable producers to harvest and sell certain crops when there is limited supply and competition in the market. In some cases, farm-level storage can generate profitable opportunities.

Extensio o

Price seasonality and agricultural extension

n officers can help farmers identify and take advantage offf-season production and marketing opportunities.

27


3.3 High inter-annual price variations

Another common feature of agricultural markets is that prices can change considerably from one year to the next, as shown in Figure 3.2. These price fluctuations reflect changes in supply and demand. Supply can be particularly volatile due to agriculture’s dependence on weather conditions and vulnerability to drought, floods and pest or disease infestations.

Figure 3.2 Farm-gate paddy prices in the Red River Delta, 1994 - 1999 (VND/Kg)

1500

2000

2500

3000

3500

1994 1995 1996 1997 1998 1999

VND

/Kg

Farmers’ reaction to changes in prices may exacerbate market volatility. For example, a rise in the price of a commodity may lead to an expansion of cultivated areas and an intensification of production, which may then result in over-supply and falling prices. The inverse can happen when farmers reduce planting areas and input use in response to falling prices.

Extensio informatincreaseover-rea

3.4 High

Agricultural discussed tw

Inter-annual price variations and agricultural extension

n officers can help farmers anticipate price variations by disseminatingion on supply and demand trends, which can signal an impending or decline in prices. They can also caution farmers against the risk of cting to high and low prices.

risk

marketing is a risky activity. In this chapter, we have already o major sources of risk, namely short-term and medium-term price

28


volatility. Producers may find that the market price at the time of harvest does not cover production costs or is much lower than anticipated, while traders may be unable to sell their stocks for a profit. Good access to market information can reduce but not eliminate these risks.

Farmers and traders also face the risk that their product will be rejected or sold at a discount because of poor quality. Sometimes the product is of poor quality the moment it leaves the farm. Other times it deteriorates or gets spoiled during transport, handling and/or storage. Insect infestation, bruising and physical deterioration are common forms of product losses.

Another frequent risk incurred by traders is the possibility that the purchased product may contain undetected foreign matter. Cases of farmers selling agricultural products mixed with sand, stones and other foreign matter are not uncommon. What farmers often fail to realize is that buyers who have had bad experiences because of poor quality or cheating will either stop purchasing from the area or will continue buying but at lower prices than they would normally be willing to pay. Extension officers can play an important role in raising farmers’ awareness about these issues.

Marketing risk and agricultural extension

Extension officers can help farmers understand markets better and develop improved links with buyers, thereby reducing the uncertainty associated with production and marketing decisions.

In addition, extension officers may consider providing information to potential buyers about local availability, quality and price of agricultural products. This can reduce the risks that buyers face when purchasing from certain areas and lead to increased demand and higher prices for local products.

3.5 High marketing costs

Prices paid by end users and final consumers are normally well above those received by farmers. This often leads to the conclusion that traders and processors are earning excessive profits at the expense of farmers, although such perceptions are rarely supported by data about the actual profits made along the supply chain.

29


When such data are available, marketing costs often emerge as a more valid explanation for the spread between producer and retail prices. For example:

assembling agricultural produce from small-scale, dispersed and often remote farmers is costly;

agricultural products often have to be transported over long distances and difficult roads before reaching the consumer;

along the way, produce needs to be cleaned, dried, sorted, packed and advertised in order to be acceptable to consumers;

more complex forms of processing are sometimes required;

additional costs may be incurred because of storage; and

product deterioration and spoilage are common.

Marketing costs and agricultural extension

In order to take informed marketing decisions, farmers must know the benefits and costs associated with different post-harvest and marketing activities. For example, should they clean and grade their produce? Should they store? Should they take their product to town instead of selling it at the farm-gate? Extension officers can help farmers calculate benefits and costs associated with different marketing options.

3.6 Incomplete information

Farmers generally have limited knowledge and understanding of how markets operate and insufficient information about supply, demand and prices. This limits their ability to target remunerative opportunities, meet buyer requirements, and negotiate favourable prices.

Although better informed than farmers, traders and agro-processors may also lack access to critical information. Insufficient knowledge of production areas inflates collection costs. Poor access to market information generates risks while at the same time limiting the ability of traders and processors to target remunerative markets and adjust to changing market conditions. Both types of information failure have a negative impact on demand for farmers’ produce and the prices they receive.

30


In order to and negotiaExtension oinformation

3.7 Intense

Domestic and ecompetition. Cfrom domesticcompetition proby farmers and

In Vietnam comthe past decadeto growing comfarmers are becthat will intensTrade Organiza

While export mbecoming a mahousehold incomore sophisticaable to innovateand domestic m

In short, farmercost. They shoproducts that arequirements.

Extension oby helping well locallymarketing s

Incomplete information and agricultural extension

target remunerative market opportunities, meet buyer requirements, te favourable prices, farmers need good knowledge about markets. fficers can help farmers access and interpret relevant market .

competition

xport markets for agricultural products are characterised by intense ompetition exists at all levels of the marketing system, and comes sources as well as from other countries. Understanding vides essential insight into the problems and opportunities faced

market intermediaries.

petition in agricultural markets has intensified significantly over . Developments in the production and distribution spheres have led petition between different areas of the country. At the same time, oming increasingly exposed to competition from imports, a process ify over the coming years as a result of accession to the World tion (WTO), which will lead to a reduction in import tariff barriers.

arkets are generally very quality (and cost) conscious, this is also jor feature of urban markets within Vietnam. Rapid growth in me and increased product choices has led consumers to become ted and discerning in their tastes and preferences. Farmers must be and meet the increasingly stringent quality requirements in export arkets if they are to compete in these markets.

s must be able to produce what the market wants at a relatively low uld focus on what they can produce well and supply good quality re prepared, packaged and delivered in accordance with buyer

fficer them f and btrateg

Competition and agricultural extension

s can help farmers compete successfully in the market placeocus on products in high demand and that can be produced y promoting adoption of appropriate production and ies.

31


3.8 Low price elasticity of supply

Generally speaking, the supply of agricultural products is not very responsive to prices, at least in the short-term. It takes time for farmers to adjust production in response to changing prices.

For example, if a decline in the price of a specific commodity occurs after planting, farmers will not be able to respond immediately by reducing cultivated areas. The only option available to them will be to reduce input use. Or prices may be rising, but farmers will need to wait for the right moment to plant and it may take time before harvest, especially in the case of tree crops. Producers may also have limited arable land and labour and lack access to the technologies that would enable them to expand production, such as improved varieties, irrigation, and agro-chemicals.

Low price elasticity of supply and agricultural extension

Extension officers can help farmers access and adopt technologies that will enable them to respond more quickly to an increase in prices.

3.9 High price elasticity of demand

Unlike supply, demand for most agricultural products is very sensitive to changes in prices. Often final users and consumers have several product options and are therefore able to shift from one product to another.

For example, when the price of cotton goes up, a garments’ factory can increase production of clothes made of synthetic materials and reduce its purchases of cotton lint. When the price of coffee increases, consumers can shift to tea or other drinks. When the price of grapes increases, consumers may decide to buy bananas, oranges or other fruits instead.

Farmers must be able to keep their costs low and deliver quality in order to cope with competition from substitute products.

High price elasticity of demand and agricultural extension

Extension officers can work with farmers to develop low-cost supply of good quality products, which are able to compete in the market with other products.

32


3.10 Long-term decline in real prices

The real price of agricultural goods is known to decline over the long-term. Such decline is generally more pronounced in the case of traditional export commodities, such as rice, tea, sugar, cotton, coffee and cocoa. The price for several export commodities in 1980 and 2002 is presented in the table below to illustrate the extent of the problem. The prices in 1980 are adjusted to reflect inflation (i.e. their real value in 2002).

Table 3.1 Changes in international commodity prices (US$/MT), 1980-2002 Commodity 1980 1980

(adjusted) 2002

Palm oil 617 1,345 312 Sugar 254 553 126 Cocoa 2,382 6,174 1,190 Coffee 3,989 8,696 1,234 Rubber 1,430 3,117 650

In order to cope with a secular decline in agricultural commodity prices, farmers must adopt a combination of strategies, which may include:

i. reducing average production costs through productivity gains;

ii. adding value to production (e.g. through improved cultivation and post-harvest practices, processing and labelling);

iii. diversifying towards high-value, high-growth market segments (e.g. organic or fair trade);

iv. diversifying towards agricultural products which enjoy more favourable long-term demand and price trends, such as fruits and vegetables.

Extensioand diver farmers tprice of a

Long-term decline in prices and agricultural extension

n officers can help farmers reduce production costs, improve quality sify towards more profitable products. Such developments will enableo maintain or increase profits despite an overall decline in the real gricultural commodities.

33

SECTION II

MARKET INFORMATION

CHAPTER 4: INTRODUCTION TO MARKET INFORMATION

CHAPTER SUMMARY

What is market information?

“information about the buying and selling of agricultural inputs, services and outputs”

Why is market information important?

Market information can help farmers take production and marketing decisions:

What and how much should be produced?

Should new crops be grown?

Should certain crops be produced during the off-season?

Which varieties should be planted and where can these be bought?

Which post-harvest activities should be performed?

Is storage profitable?

Where should production be sold?

Who should it be sold to?

Is it worthwhile marketing together with other farmers?

How to negotiate with buyers?

34

Introduction to Market Information

4.1 What is market information?

All information about the buying and selling of products and services can be classified as market information. Market information is much more than just information about prices and quantities. This definition is broad enough to encompass information about both input and output markets.

The table below presents several examples of agricultural market information:

Table 4.1 Categories and examples of market information Categories of market information Examples of market information

1. Inputs location and contact of input suppliers type and quality of inputs available prices of different inputs

2. Demand size of local, regional and national markets growth or trends in demand seasonality of demand

3. Buyers location and contact volume requirements quality specifications packaging requirements seasonal demand prices offered payment conditions support services provided (inputs, credit etc)

4. Prices prices in different markets price differences according to grade or

quality price seasonality price volatility within seasons price trends

5. Competition main supplying areas

What is agricultural market information?

“information about the demand and supply of agricultural commodities and related inputs and services”

35


quality of supply from different areas seasonality of supply from different areas imports

6. Marketing costs transport market fees unofficial charges Other

4.2 Why is market information important?

Farmers are constantly making production and marketing decisions. Market information can help them make choices, from the very first stages of the production planning process up until the moment when production is actually sold.

What and how much should farmers produce?

Information about costs and prices is essential for calculating the potential profit associated with different products and therefore for deciding what to produce. An understanding of how prices are likely to change in the medium term can be particularly useful, especially for tree crops, which take some time to mature.

Decisions about what and how much to produce will vary across areas as well as across households within the same area, depending on their land and labour endowments, their investment capacity, and their risk-taking capacity. What is important is that farming households focus on what they can do well so that they can be competitive. Understanding competition from other farmers and areas is therefore very important.

Should farmers grow off-season crops?

This depends on the profitability of off-season cultivation. Farmers can only assess this if they understand seasonal price behaviour and know the costs associated with off-season cultivation. They must also make sure that the required inputs, particularly appropriate seed, are available.

Which varieties should be planted?

Information about the performance of different varieties, and their availability and cost, can help farmers answer this question. Some understanding of current and future demand for different varieties is equally essential.

36


Which post-harvest operations should farmers undertake?

This depends on what buyers want and the premium they are willing to pay for clean, sorted, graded and packaged produce. Are the price gains from value addition high enough to compensate the labour and other costs that farmers incur with such activities? Or are farmers better-off if they allocate their time and resources to other activities?

Should farmers store their crops?

Some crops can be stored. This can be a good strategy if the price is expected to increase over time and to such an extent that it more than compensates for the costs and risks of storage. Are farmers better-off by postponing the sale until a later date or should they sell soon after harvest and use the income for meeting urgent consumption needs and making other investments?

Where should farmers sell their products?

Farmers will get different prices in different markets and locations, but they will also face different marketing costs and risks. Is it worthwhile for farmers to sell very small volumes to distant markets? Farmers may have to sell as a group if they are planning to channel their production to distant areas.

Who should farmers sell to?

This will depend on the volume and quality requirements of different buyers, the price and other terms that they are offering, and the costs of supplying them. Without such information, farmers are likely to continue selling to local collectors, who are the most accessible and convenient option.

Should farmers sell individually or as a group?

Because farmers usually sell small quantities, it is rarely economical for them to sell very far from home. The transport and time costs are simply too high. However, as a group, farmers may be able to target more distant markets and buyers. Therefore, it can be useful for farmers to know whether local and non-local buyers offer sufficiently attractive terms and conditions to justify group action.

How should farmers negotiate with buyers?

Information about current prices locally and in neighbouring areas can help farmers decide whether to accept the price being offered, negotiate or look for another buyer. It is also important to note that farmers will enjoy a stronger bargaining position when negotiating as a group.

37


Markets are constantly changing, and so are the answers to all these questions! Changes in demand generate new opportunities but also threats. Supply chain developments can open-up new markets, but also expose farmers to increased competition. In order to be able to adapt and respond to changes in demand and supply, farmers must have regular access to the right market and technical information. And they may need to develop group strategies.

38


Diagram 4.1 Market inform production

Question 1: Which crops should I grow and how much areashould I devote to each?

What are the price trends for different agricultural products that grow well in my farm?

What are the potential profits associated with different product options?

Will there be enough buyers interested in purchasing my production?

Can I compete with other farmers and production areas?

ld I grow off-season crops?

s seasons?

iciently high to justify the additional ciated with off-season cultivation?

d?

cost of such seed?

Question 4: Where can I buy my inputs from?

Who are the input suppliers in my area and nearby towns?

What is the quality of the inputs sold?

Who offers the best prices and purchasing conditions?

Do some suppliers provide input credit? What are the conditions attached to the credit?

ation can help farmers take appropriate and marketing decisions!

Question 2: Shou

How do prices vary acros

Are off-season prices suffinvestment and costs asso

Can I buy appropriate see

What are the sources and

39

Question 3: Which varieties should I plant?

For how much can I sell different varieties?

And for each variety, what is the cost of seed?

What are the demand trends for different varieties?

What are the varietal requirements of different buyers?

What is the competition that I will face from other farmers and areas for different varieties?


Question 5: Which post-harvest operations should I undertake?

What are the quality specifications of buyers?

Do they require clean or well dried produce?

Do they want the produce sorted and graded?

What type of packaging do they require?

Are buyers willing to pay a premium if I deliver produce that meets their specifications?

Question 6: Should I store my crops?

Should I store to take advantage of higher future prices?

Is the likely price difference high enough to justify the costs and risks of storage?

For how long should I store my crops?

Question 8: Who should I sell my production to?

Who are the potential buyers for my produce?

How can I contact them?

What are their product requirements? Can I meet these requirements?

What are the prices and payment conditions offered?

And how much will it cost me to supply them?

Question 7: Where should I sell my production?

What are the quality requirements and prices at farm-gate and in different markets or locations?

What are the transport and other costs incurred when selling at the farm-gate compared to other locations?

And what are the risks associated with supplying different locations?
40


Are local buyers willing to pay more for large volumes of standardized quality? How much more?

Are distant buyers paying a much higher price than local buyers?

And what is the cost of meeting their product specifications and supplying them?

Question 9: Should I sell individually or in a group? Question 10: How can I negotiate with buyers?

Are the prices offered by buyers in line with current market prices for similar quality?

Can I negotiate with buyers together with other farmers in my village and perhaps neighbouring villages?

41

CHAPTER 5: COLLECTING MARKET INFORMATION

CHAPTER

Which type of market info

Be selective!

Discuss with farmers their market in

Don’t try to collect too much inform

What are the main sourc

1. Traders and agro-processors

2. Farmers

3. Other extensionists

4. Market researchers

Multiple sources of market information

How often should marke

As often as time and resources allow

Collection of market information sho

Which methods and tools shouldinformation from m

Semi-open interviewing (w/ checklis

Cross-checking of information (trian

How and where to me

If possible, market participants shoue-mail

Traders and agro-processors can be vpremises, and on the road.

Sometimes an appointment in the of

Sometimes a visit is not needed; infomail.

42

SUMMARY

rmation should be collected?

formation needs.

ation at once!

es of market information?

5. Newspapers

6. Magazines, bulletins and newsletters

7. Radio and television

8. Internet

should be consulted!

t information be collected?

.

uld not be a one-off event.

be used to collect and cross-check arket participants?

ts) and direct observation methods

gulation and direct observation)

et market participants?

ld be contacted in advance, by telephone or

isited in markets, at home, in their own

fice or in a café can be arranged.

rmation can be collected by phone or e-

Collecting Market Information

5.1 Which type of market information should be collected?

The collection of market information should be an essential part of the extensionist’s job. This information can be very useful to farmers. And extension officers can only provide good marketing advice if they themselves are well informed about markets.

As a rule, extension officers should be very selective when deciding which information to collect:

The collection of market information is time consuming and can be costly. Extension officers are already over-burdened by having to service many communities and work with a large number of farmers.

Not all market information is relevant. Farmers already have some (even if imperfect) knowledge of markets, especially for traditional commodities which have been produced locally for some time. They access this information from input suppliers, buyers, other farmers, relatives and friends. They are also exposed to market information when visiting towns and cities, listening to the radio, watching television, or reading the newspaper.

Some market information can be collected by farmers themselves, and whenever possible, extension officers should encourage this.

It is easier to focus on a relatively small number of commodities, especially when the extension officer has little previous experience in collecting market information. Over time, the range of commodities covered can be expanded.

So one important rule is to avoid collecting too much information at once! the collection of market information should be regarded as a gradual, cumulative process.

In sum, the role of the extension officer is to help farmers access new and useful market information. What are the concerns and aspirations of farmers? Which marketing problems are they facing? Which questions about markets are they asking and cannot answer by themselves? What do they want to know? By listening to farmers, extension officers will become aware of their market information needs.

As a rule, special attention should be paid to agricultural commodities which are widely produced locally. Most farmers are reasonably well informed about the local situation, but extension officers can play an important role in helping them understand outside markets better.

43


Informvery imwhich farmerinformthe loc

Figure 5.1 Discussing market information needs with farmers

ation about markets for non-traditional agricultural commodities is also portant, as it can help farmers diversify towards remunerative options. But

new commodities should one focus on? Once again, specific requests from s are a very good starting point! It is important to make sure, however, that ation is only collected for commodities that can be produced successfully in al area.

Figure 5.2 Farmers requesting market information

44


5.2 What are the main sources of market information?

Knowing what type of information to collect is just the first step! Extension officers (and farmers) must then know where that information can be accessed from with minimum cost in terms of money and time spent.

Ideally, one should rely on multiple sources of market information. One single source is unlikely to provide sufficient information and understanding of the market. Several sources of market information are shown in the figure below and discussed in the following pages.

Figure 5.3 Main Sources of Market Information

traders and

agro-processors farmers

Other extensionists

market researchers

newspapers

publicatio

1. Market intermediaries

Market intermediaries (e.g. tradagricultural inputs and productmarket information!

When collecting market informmarket participants. Traders ashows that most are happy to prthe extension officer is workingTraders and processors like to sesee the extension officer as a ver

Extensionist/ farmers

radio and television

ns Internet

ers, agro-processors and transporters) buy and sell s for a living. They are an excellent source of

ation, extension officers should start by talking to nd agro-processors are very busy, but experience ovide information, especially if they are clear that with farmers to help them meet market demand. e farmers supplying what they need and may even y useful source of information about production.

45


Figure 5.4 Interviewing a wholesaler

Extension officers should consult several market participants, and encourage farmers to do the same, for example by sharing their telephone contacts. There are two main reasons for relying on more than one informant:

Different types of market participant are able to provide different types of market information (see Table 5.1 below). Some deal with a diversified range of commodities; others specialise in one or a very small number of products. Some trade within very localised areas; others buy products from different regions and supply regional as well as more distant urban markets. Some traders and processors even import from, or export to, other countries.

Consulting different market participants enables extension officers to check how accurate and complete is the information provided by each. Informants do not always supply reliable information, and it is therefore important to check this! This issue is so important that it will be discussed again in section 5.7.

One of the difficulties when interviewing market participants is distance. Local traders and processors are easy to reach, but not always well informed about markets as those operating at regional, national or even international levels. These tend to live far away.

46


Table 5.1 Type of market information per type of market participant Market Participant Type of Market Information

1. Input manufacturers and wholesalers (often from outside the district)

Current wholesale selling prices for different inputs Trends in input wholesale prices Advantages and disadvantages of different varieties, agro-chemicals, processing

equipment, etc

2. Local input suppliers (village, commune, district)

Local availability of different inputs Local input retail prices (current and trends) Sale conditions

3. Local buyers (collectors and small processors)

Exchange arrangements with local farmers Exchange arrangements between collectors and district or outside buyers Own product requirements Product requirements of their buyers Supply patterns within the commune and perhaps the district (e.g. volumes, seasonality,

trends) Local price trends for traditional agricultural products

4. Wholesale buyers/medium and large processors (often from outside the district)

Production trends in different supplying regions Competitive position of different supplying regions Demand patterns (volume, quality preferences, seasonality, trends) in regional, national

and sometimes international markets

47


Wholesale or ex-factory purchasing prices Price seasonality and trends

Marketing opportunities

5. Local retailers (villages and towns within the district)

Preferences of local consumers Seasonality of local demand Local demand trends Retail prices in local markets (current, trends and seasonality)

6. Urban retailers (outside the district)

Preferences of urban consumers Seasonality of demand in urban market Demand trends in urban market Retail prices in urban market (current, trends and seasonality)

7. Transporters Direction and magnitude of agricultural product flows from the district Seasonality of product flows Location and address of important traders and processors Transport costs

48


There are at least two ways of addressing the problem of distance, each worth pursuing:

One is to target outside buyers travelling to the local area to purchase agricultural products. Transport service providers also travel long distances and may therefore have interesting information about product flows between regions, transport costs to different areas, and the location and profile of non-local buyers.

Another option is to use telephone and e-mail for obtaining information from market participants. This is discussed in more detail in section 5.5.

2. Farmers

Farmers can also be a very good source of information about markets, especially those who have successfully diversified to new products, are particularly innovative in their marketing strategies, and have a good understanding of supply and demand for certain products.

Producers should be encouraged to interact and learn from these more progressive farmers. They can sometimes be found within the communes and the district where extension officers already work or in nearby districts. A visit to these areas may be required, but with the development of telecommunications and increased use of mobile phones in rural areas, it is often possible to exchange information over the phone. The contact numbers of good informants should always be shared with farmers.

3. Other extension officers

Extension and other officers within the district may have useful information about markets in their respective areas of operation. This information can be exchanged regularly over the phone and in meetings. Selected farmers can be invited to attend such meetings.

Extension officers from other districts within the province can also be very useful sources of information. So can colleagues from the provincial extension centre or other provincial agencies, from neighbouring provinces, or even from the national extension centre. Through them, it is possible to access information about non-local markets. Sometimes it is possible to contact them by phone and e-mail.

49


4.

ThHoorgorgins

Prodisandcom

Tauninffro

Figure 5.5 Government officers meeting to share market information

Market researchers

ere are not yet many experienced agricultural market researchers in Vietnam. wever, some may be found in universities, research institutes, development anizations and projects. Extension officers can consult specialists within these anizations to access relevant documents and information and gain important ight about agricultural marketing systems.

vincial extension officers are better positioned than their colleagues in the tricts and communes to develop contacts with market researchers at regional national level. Consequently, they can act as a very useful link between mune and district extension officers and market researchers.

ble 5.2 presents some examples of organizations and projects in Vietnam which dertake or commission market research for specific commodities. Detailed ormation about specific supply chains and marketing systems can be accessed m these sources.

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Table 5.2 Some examples of organizations and projects undertaking market research

Organizations / Projects Work areas / Market research / Commodities Contact

FAVRI Fruits and Vegetables Research Institute

Scientific research on fruits and vegetables

Research on marketing and consumption of fruits + vegetables

Monthly horticultural information newsletter and quarterly horticultural journal

Hoang Bang An Tel: (04) 8276257/ 8276254 Fax: (04) 8.276148 E-mail: [email protected]

IPSARD

Institute of Policy and Strategy for Agriculture and Rural Development

Strategy and policy advice

Agrarian systems research

Analysis of commodity chains and agricultural markets (rice, coffee, pepper, etc)

Strategic information for agricultural production and markets

Dang Kim Son Tel: (04) 972 3390 E-mail: [email protected]://ww.ipsard.gov.vn

CASRAD Center for Agrarian Systems Research and Development

Agricultural production and rural organisation

Value chain analysis and development (banana, lychee, persimmon, rice, safe vegetables, coffee etc)

Dao The Anh Tel: (034) 650-862 Fax: (034) 650-793 Email: [email protected]

GTZ

German Technical Cooperation

Development of small and medium enterprises

Local economic development in An Giang, Dak Lak, Hung Yen and Quang Nam

Thomas Finkel Tel: (04) 7710073/4/5 Fax: (04) 7710076

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mailto:[email protected]


http://ww.ipsard.gov.vn/


http://www.sme-gtz.org.vn/index.php?option=com_content&task=view&id=54&Itemid=94&lang=en_BG


Value chain analysis and development (coffee, cashew, longan, lychee, avocado, pomelo, dragon fruit, vegetables, pangasius, rattan, etc)

E-mail: [email protected]://www.sme-gtz.org.vn

DANIDA

Danish International Development Agency

Support to the fisheries sub-sector, including sea food exports

Private sector development in Ha Tay, Nghe An, Lam Dong and Khanh Hoa

Value chain analysis and development (e.g. vegetables)

JØrn Fredsgaard Sørensen Tel: (04) 944 52 48 Fax: (04) 944 52 47 E-mail: [email protected] http://www.gcf-vn.org

ILO

International Labour Organization

Integrated small enterprise development in Thanh Hoa, Quang Ngai, Binh Phuoc and Tra Vinh

Value chain analysis and development (fish, cashew, sedge, etc)

Bas Rosemuller Tel: (04) 9445112 Fax: (04) 9445114 E-mail: [email protected]

ACIAR Australian Centre for International Agricultural Research

Increasing market competitiveness of Vietnamese agricultural and fisheries products

Market research (e.g. cattle and fruits)

Agricultural market information (Red River delta).

Misha Coleman Tel: (04) 8317755 Fax: (04) 8317707

M4P Project

Making Markets Work Better for the Poor

Policy dialogue

Market research and analysis (e.g. cassava, tea, collective action and trademarks)

Dominic Smith Tel: +(04) 9331374 Fax: +(04) 9331373 E-mail: [email protected]://www.markets4poor.org

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http://www.sme-gtz.org.vn/


http://www.gcf-vn.org/



http://www.markets4poor.org/


OXFAM Hong Kong Food and income security, labour and trade

Market research and analysis (e.g. bamboo)

Richard Jones Tel: (04) 9454406 Fax: (04) 9454405 Mobile: 0912073504 E-mail: [email protected]

SNV

Netherlands Development Organization

Pro-poor extension and market linkages in Son La, Dien Bien, Lai Chau, Thai Nguyen, Ninh Binh, Dong Noi, Quang Binh, Quang Tri and Thua Thien Hue

Market analysis and advice (e.g. tea, cardammon, aromatic rice, sedge, longan, mushrooms, flowers, cattle, fish sauce, handicrafts)

Nico Janssen Tel: (04) 8463791 Fax: (04) 8463794 E-mail : [email protected]://www.snv.org.vn/

Fresh Studio Innovations Asia Consulting services and trading

Market research for fruits, vegetables and flowers

Value chain development

Siebe van Wijk Tel.: +84 (0)4 715 1488 Fax: +84 (0)4 715 1486 Email: [email protected]

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http://www.snv.org.vn/



5. Newspapers

Relevant market information can often be found in regional and national newspapers. Newspapers regularly feature articles where past and future price trends for specific agricultural commodities are discussed. These articles sometimes present information and analysis on supply and demand. Information about specific agribusiness companies and recent investments is also commonly featured.

One of the most interesting features of newspaper articles is that they enable extension officers to access information about markets in different regions of Vietnam and other countries at very low cost. Newspapers are cheap and can be browsed in just a few minutes.

Extension centres and stations can subscribe to a few regional and national newspapers. When reading them, extension officers need to pay special attention to information and analysis on markets.

Tips for collecting market information from newspapers

browse through the newspaper

pay special attention to articles related to agriculture (including animal husbandry and aquaculture)

highlight any market information

think about its relevance to farmers in your area

record all relevant quantitative and qualitative data in specific files, for example using a table format

6. Periodicals: magazines, bulletins, newsletters

There are many periodicals in Vietnam which publish useful information and analysis about agricultural markets. Some are dedicated to general economic and business issues, while others focus on the agricultural sector in particular. Some target the general public; others are more technical. As in the case of newspapers, periodicals provide an opportunity to access relevant information on distant markets.

Newsletters and bulletins published by market information services are particularly interesting. For example, the ministries of trade, finance and agriculture all have their own market information services and publish regular

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bulletins. Many provinces are also starting to develop market information systems, which often generate their own newsletters and bulletins.

The national and provincial extension centres are particularly well positioned to collect information from these sources and disseminate it to lower levels within the system. Selected staff within these organizations can act as market information officers, having the responsibility for disseminating the most useful information from different periodicals to the relevant provinces, districts and communes.

Examples of market and price bulletins

Vietnam Trade Information Centre, Ministry of Trade

Market Bulletin (daily)

Input Commodity Bulletin (daily)

Domestic Trade Bulletin (weekly)

Foreign Trade Bulletin (3 issues monthly)

Market and Price Research Institute, Ministry of Finance

Market Bulletin (daily, except Sunday)

Sunday Market Bulletin (every Sunday)

Southern Fruit Research Institute (SOFRI)

Information About Fruit Market (monthly)

Provincial Departments of Agriculture

Agriculture and Market of Dak Lak province (monthly)

Market Information on Agricultural and Forest Products of Binh Dinh province (weekly)

Market Information on Agricultural and Forest Products of Lao Cai (weekly)

7. Radio and television

Extension officers can access much information and gain significant insight about agricultural markets by regularly listening to the radio and watching television. Local and national radio and television stations in Vietnam often broadcast programmes focused on agricultural and economic/business matters. Programmes and the time of broadcast may change, and therefore extension officers are advised

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to search for this information on the websites of Voice of Vietnam (http://www.tnvn.gov.vn) and Vietnam Television (www.vtv.org.vn). The Voice of Vietnam website also provides information on the exact frequency of different national programmes in different regions.

Examples of radio programmes focusing on business and markets

“Agriculture and Countryside”: Monday to Friday at 5:30–5:50 a.m. and at 1:05–1:25 p.m.; VOV1 and VOV2.

“Briefing News: Weather and Prices”: Monday to Friday at 7:25–7:30 a.m. and at 1:05–1:25 p.m.; VOV1 and VOV2.

“Enterpreneurship and Businessmen”: Monday and Friday at 11:05–11:20 a.m. and at 7:05–7:20 p.m.; VOV1 and VOV2.

“Joining the International Economy”: Tuesday and Thursday at 11:05–11:20 a.m. and at 7:05–7:20 p.m.; VOV1 and VOV2.

“Market Prices Bulletin”: every day at 4:00–4:05 p.m.; VOV1 and VOV2.

Examples of television programmes focusing on business and markets

“Markets 24 Hours”: Monday to Friday at 12:20 p.m. and 6:45 p.m.; VTV1.

“Periodical on Mountainous Minorities”: Monthly at 3:30 p.m.; VTV1.

8. Internet

Internet is increasingly used as a source of information. Internet can now be accessed all over Vietnam, even in some of the most remote corners of the country. Extension officers with access to a computer can retrieve a vast wealth of information about national and international markets through the Internet, without even having to leave the office.

There are many websites in Vietnam with useful information about agricultural markets, including a few specialised, on-line discussion fora where users can place their own questions and request specific information. Specific information can be accessed through search engines, such as google (http://www.google.com.vn). By typing some key words, say “cattle Vietnam” or “cassava Vietnam”, extension officers will obtain a list of Internet sources where related information is available.

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http://www.tnvn.gov.vn/

http://www.vtv.org.vn/

http://www.google.com.vn/


Examples of useful websites in Vietnam

Official portal of MARD (http://www.agroviet.gov.vn/)

Business Promotion Website of MARD (http://210.245.60.189/)

Food Security Information Unit of MARD (http://www.mard.gov.vn/fsiu/)

VINANET, Ministry of Trade (http://vinanet.com.vn/)

Vegetables Market Newsletter (CIRAD/AVRDC/MARD) (http://210.245.60.189/html/DuanSusper/vietnamess.asp)

On-line Production and Marketing Periodical (http://210.245.60.189/tapchi/sxtt/)

Doing Business with Viet Linh (http://www.vietlinh.com.vn/e_index.html)

On-line Agriculture Discussion Forum (CIFPEN and VNMedia) (http://vnmedia.vn/giaoluu/)

On-line Agriculture Discussion Forum (Can Tho University) (http://forum.ctu.edu.vn/viewforum.php?f=10)

Farmer Page (On-line Question&Answer Forum) (http://vietnamgateway.org/vanhoaxa/index.php?chuyenmuc=02)

“Markets 24 Hours” (http://www1.thitruong24h.com.vn/)

Agricultural Commodity Markets Website (http://www.chonongsan.com.vn/)

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http://www.agroviet.gov.vn/

http://210.245.60.189/

http://www.mard.gov.vn/fsiu/

http://vinanet.com.vn/

http://210.245.60.189/html/DuanSusper/english.asp

http://210.245.60.189/tapchi/sxtt/

http://www.vietlinh.com.vn/e_index.html

http://vnmedia.vn/giaoluu/

http://forum.ctu.edu.vn/viewforum.php?f=10

http://vietnamgateway.org/vanhoaxa/index.php?chuyenmuc=02

http://www1.thitruong24h.com.vn/

http://www.chonongsan.com.vn/


Tips for collecting market information from the Internet

set-up a folder in your computer with the name “market information”

organise this folder according to topic (e.g. by commodity, input suppliers, traders, processors, etc)

use the search tool to find out the information you need using keywords (e.g. peanut prices, maize market in Vietnam, cattle Vietnam, etc)

save the relevant articles as favourites

record the relevant data and information in the respective folder, e.g. in table format

5.3 How often should market information be collected?

The answer to this question is simple: as often as time and resources allow! The collection of market information cannot be regarded as a one-off event. Nor should it be seen as a task to be mechanically performed once every month or every quarter. Rather, market information should be collected fairly regularly and flexibly, according to need, as part of the extensionist’s daily work. On a step-by-step basis. This is the only way extension officers can become a valuable (and valued!) source of market information and marketing advice to farmers.

In this context, it is important to re-emphasize that markets are constantly changing. Extension officers can only develop a sound understanding of market changes and communicate these to farmers in an effective way by having regular exposure to market information.

5.4 Which methods and tools should be used to collect information from market participants?

The collection of information from market participants will be new to many agricultural extension officers, but it is easier than often thought! Some simple rules should be followed, and these are discussed below.

Semi-structured or semi-open interviewing around particular issues or topics is an excellent information collection method. Such type of questioning resembles an informal discussion or conversation and is ideal for collecting information flexibly and rapidly.

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Checklists – i.e. lists of key issues and questions – should be used during these interviews. Such lists will remind the extension officer of the key points for discussion. It is important to note that a checklist is not the same as a formal (structured) questionnaire, which consists of a series of very carefully prepared questions.

Checklists will vary in size and content, depending on the range and nature of the information that one is looking for. Normally, it is necessary to prepare different checklists for different types of market participant. This is because each type is particularly knowledgeable about specific issues, depending on their position and function within the marketing system (see Table 5.1).

Table 5.3 presents an example that was used in interviews with maize seed traders in Hoa Binh province. Farmers identified poor access to maize seed as a constraint, and interviews with traders were conducted to better understand this problem and identify possible solutions.

Table 5.3 Checklist used to interview maize seed traders at district level

1. Seed types and quality

a. Types of maize seed available in the market

b. Quality of maize seed available in the market

c. Advantages and disadvantages of different varieties

2. Seed sales

a. Varieties of maize seed traded

b. Volumes of maize seed traded (for different varieties)

c. Trends in seed sales per variety, and reasons

d. Future trends in seed sales and prices, and reasons

e. Terms and conditions associated with seed sales

What is a checklist?

List of key issues and questions to guide a semi-structured interview

What is a semi-structured interview?

Informal discussion (semi-open questioning) around particular issues

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3. Seed suppliers

a. Suppliers of seed and their location

b. Changes in seed suppliers over the past 3 years (number, location, size), and reasons

c. Problems in seed supply

4. Constraints and opportunities

a. Key constraints to the development of the seed trading business

b. Solutions to these problems

c. Key opportunities to develop the seed trading business

d. Factors that could enable this development

e. Recommendations for improving access to seed by farmers

The ability to collect information from traders, agro-processors and other market participants will depend on the inter-personal and interviewing skills of the extension officer. It is important to be able to create a friendly and relaxed atmosphere during the interview so as to earn the informant’s trust. The ability to encourage lively and open discussions is very important for collecting the right information.

While not everybody has all the required interviewing skills, these can be to a large extent acquired through experience and practice. The box below provides some guidance (listening and probing tips). Extension officers are advised to go back to this list on a regular basis, and compare the recommended behaviours with those adopted during interviews. This will enable them to identify areas where some improvement is still needed. Over time they will become increasingly familiar with the proposed interviewing techniques.

Direct observation is another important information collection method and should be used alongside semi-open interviewing. Much can be learned from simple observation! For example, when visiting markets, one can observe the variety and quality of produce traded, check post-harvest handling practices, verify the means of transport used by farmers and traders, determine the approximate number and type of suppliers and buyers, confirm the peak and low periods of trading, estimate the volumes traded, and so on.

What is direct observation?

Collection of qualitative information through observation.

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During visits to trader and processor premises, one can see existing storage facilities, check the type and capacity of processing equipment, and assess with one own eyes the level of processing activity at particular moments in time.

Tips for interviewing market participants

Adopt a friendly and relaxed attitude

Make eye contact

Ask simple, clear and direct questions

When asking the questions, avoid influencing the reply

Use questions that start by “what, when, where, why, how and how much” for in-depth probing

Leave sensitive questions for last

Pay attention and show interest in what your informant is saying

Make your informant feel he is the expert

Do not repeatedly interrupt your informant

Use silence to encourage the informant to speak

Make acknowledging statements periodically

Ask for clarification when needed

Paraphrase statements from your informant to make sure that their message has been clearly understood

Question your informant when you are unsure about the accuracy of the information provided (e.g. give examples of contradictory information collected from other sources)

Record the interview or take notes of the main information provided

Avoid long interviews/discussions (these should not last longer than 30 minutes): market participants are very busy people

Give an opportunity for the informant to also ask questions (at the beginning, during and after the interview)

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Figure 5.6 Extensionist using direct observation methods during transport

5.5 How to contact market participants?

Market participants should usually be contacted in advance so as to inform them of the purpose of the interview and arrange a convenient time and place to meet. The telephone is perhaps the most useful means of contact. E-mail is also increasingly used. A more formal letter is less common but useful when the extension officer has never met the informant.

When contacting a market participant – say a trader or a processor – the extension officer should introduce himself or herself and explain the purpose and likely duration of the meeting. In order to foster trust and cooperation, s/he might want to mention whether the market participant has been recommended by a third party and whether they have some common acquaintance. Providing some background information to the target informant is particularly important during the first contact.

Sometimes it is difficult to contact key informants in advance. Extension officers may not know their telephone number or e-mail. In such cases, it is best to approach the target informant in person. The extension officer can then introduce himself/herself and request some information on the spot. Experience shows that traders, transporters and processors are often happy to chat about the market situation and exchange information.

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In cases where the extension officer knows the informant well and has a good relationship, it may make sense to carry-out spontaneous, unannounced visits. These short and casual visits offer an opportunity to maintain regular contact and further the relationship with the target informant.

5.6 Where to meet market participants?

Market participants can be visited or found in markets, at home, in their work premises, and on the road while collecting or transporting produce. In addition, it is sometimes possible to meet them in a more relaxed environment, such as a cafe or restaurant. Very useful information can be collected while enjoying a coffee, a tea or a meal! The extension officer will soon be known to local or visiting traders, and these may even start looking for him/her at home or at the office to exchange information.

While pnecessarextensionand/or e-

Figure 5.7 Collecting information from market participantsover the phone

ersonal contact is often essential, it may be possible to collect the y information by phone or e-mail. This should be relatively easy if the officer has previously met the target informant and exchanged telephone

mail contacts.

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5.7 How to check the quality of the information collected from market participants?

By comparing the information provided by different market participants, it is possible to determine its accuracy and validity. If different informants provide very different information, extension officers will need to probe deeper to determine which information is accurate and which should be discarded. This method is called triangulation.

Direct observation can also be used as an information validation method. This consists of comparing what informants are saying with what can be observed about their business and behaviour. For example, mere observation can confirm or refute statements about varieties traded, quality of produce, post-harvest operations, storage or processing capacity, number and type of suppliers, number and type of buyers, and so on.

5.8 How to record the information collected from different sources?

Figure 5.8 Cross-checking information from different sources

A lot of time can be spent collecting market information, but this information will be of little use unless it is appropriately recorded and stored. In other words, a database is required!

Market information that cannot be stored in a standard format should be recorded in a notebook or word file (if there is access to a computer). This information can then be shared with farmers and traders, or processed before being disseminated.

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On the ocan be example

As

Tbd

Po

Ain

Figure 5.9 Recording market information in a computer

ther hand, there is information that can be easily tabulated. Various tables developed, depending on the information collected. Below are some s of tables that can be easily developed and updated:

table such as 5.4 can be developed to store information about suppliers of pecific agricultural inputs.

he format of table 5.5 can be appropriate for recording information about uyers of agricultural products, both from the local area and from other istricts or provinces.

rice information (e.g. weekly or monthly) from particular areas, markets r buyers can be stored in a table such as 5.6.

wide range of information on local production can be provided to buyers table format, as in Table 5.7.

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Table 5.4 Suppliers of vegetable seed within and outside the district Address and

phone number Type of seed sold Quality of seed

sold Price of seed Selling

conditions Remarks/ comments

Supplier A

Supplier B

Supplier C

(…)

Table 5.5 Fruit buyers within the district, province and neighbouring provinces Address and

phone number

Type of fruits

purchased

Volume needs

Packaging and quality

requirements

Places of purchase

Prices paid

Payment conditions

Remarks/ comments

Buyer A

Buyer B

Buyer C

(…)

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Table 5.6 Ex-mill purchasing price for maize, CP Ha Tay Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Year 1

Year 2

Year 3

(…)

Table 5.7 Information about local banana supply Communes/ Villages

Peak harvesting

periods

Off-season harvesting

periods

Supply volume during season

Supply volume during

off-season

Variety Size Current supply

Current farm-gate/ assembly

prices

Remarks/ comments

X

Z

Y

(…)

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CHAPTER 6: PROCESSING AND ANALYSIS OF MARKET INFORMATION

CHAPTER

Most farmers find it difficult to interpr its implications to their farming businefarmers to improve their understanding

Some key areas

Supply chain (diagrams and drawin

Strengths, weaknesses, opportunitie

Price trends (graphs and tables)

Price seasonality (graphs and tables

Profit analysis (gross margins)

Marketing costs (tables)

Future vision (tables and Ansoff ma

68

SUMMARY

et market information and fully appreciatess. Extension officers can work with and use of market information.

and tools of analysis

gs)

s and threats (SWOT matrix)

)

trix)

Processing and Analysis of Market Information

6.1 Introduction

Many farmers find it difficult to interpret market information and fully appreciate its implications to their farming business. This chapter suggests some ways in which market information can be processed and analysed for more effective use by farmers.

Extension officers should consider working closely with selected farmers to interpret market information. These farmers should have relatively good numerical skills, be able to act as points of contact with communities, and play a leading role during meetings and discussions.

6.2 Analysing the supply chain

A mapping of supply chains is a useful starting point in the analysis of market information. Diagrams and drawings convey a significant amount of information and facilitate discussion and interpretation. Such tools help farmers visualise what is happening in the marketing system – product flows, distribution channels, range of buyers, marketing activities, prices along the supply chain, and so on.

Figure 6.1 Extensionist, local traders and farmers drawing a supply chain

Some local traders and agro-processors can add much insight and should therefore be invited to join farmers in the mapping exercises. Their participation also offers a good networking opportunity.

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An example of a supply chain diagram was already presented in Section 2.8 (see Diagram 2.1). Below we show another example, this time in the form of a drawing.

Figure 6.2 Supply chain drawing

After the existing supply chains for a specific product have been mapped and analysed, it may be worth repeating the exercise with a focus on how farmers and local marketing intermediaries would like to position themselves in the future. This will help them think about the required changes in the production and marketing spheres.

Mapping of supply chains can be time consuming. It may take some time and many consultations with different market intermediaries before extension officers and farmers can sit down and develop a comprehensive diagram or drawing of the supply chain for a particular product. However, once this is done, it will be relatively easy to update the diagram or drawing to reflect and communicate changes in the marketing system; say once every year.

6.3 Conducting SWOT analysis

Extension officers can help farmers conduct SWOT analyses to develop a better understanding of their strengths and weaknesses and the opportunities and threats that they face. Such analysis can be carried out for existing as well as new products. While market information is essential to the analysis, it is important to

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also take into consideration local production conditions and the socio-economic characteristics of farming households in the area.

SWOT analysis helps farmers develop production and marketing strategies that build on existing strengths and opportunities, and take appropriate action to address current weaknesses and reduce exposure to risks. At the same time, it enables extension officers to identify areas where their assistance may be required.

Figure 6.3 Extensionist and farmers conducting SWOT analysis

Strengths and weaknesses are mostly linked to internal factors, whereas opportunities and threats may relate to both internal and external factors:

Internal factors: e.g. skills and knowledge of farmers, their access to finance and social networks, the location and quality of their farms (agro-climatic conditions), and the distance between these farms and roads or markets.

External factors: e.g. technologies, demand conditions and trends, competition from other areas, and the policy and regulatory framework.

Guiding questions, such as those presented below, can help farmers and extension officers conduct SWOT analysis.

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Strengths

What are your advantages? What do you do well? What relevant resources do you have? What do other people (especially buyers) see as your strengths?

Weaknesses

What could you improve? What do you do badly? What do other people (especially buyers) see as your weaknesses?

Opportunities

Does location, local agro-climatic conditions, available technologies, and current supply and demand conditions generate interesting opportunities for farmers? Are there any trends generating interesting opportunities? (e.g. changes in

technology, changes in demand, changes in government policy and regulation, etc)

Threats

Do existing weaknesses generate threats? Do existing technological, supply, demand, policy and other trends threaten the

ability of local farmers to compete in the market place?

There are some rules that extension officers and farmers should follow when undertaking SWOT analysis, as highlighted in the table below.

Tips for conducting SWOT analysis

Be specific; avoid ambiguities.

Be realistic about strengths and weaknesses.

Compare farmers’ own views with those of buyers. What are the perceptions of buyers about the strengths and weaknesses of local farmers?

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Always analyse strengths and weaknesses in relation to competitors. In which areas are local farmers better (strength) or worse (weakness) than the competition?

Consult traders and processors before making a full assessment of opportunities and threats.

Consider where local farmers are today and where they could be in the short, medium and long term.

Keep the analysis short and simple.

The matrix format is commonly used to summarise the information generated during the SWOT analysis. In the example below (Table 6.1) this type of analysis was conducted to assess the potential for increasing the incomes from cassava cultivation in A Luoi, an upland district of Thua Thien Hue Province.

Table 6.1 SWOT analysis for cassava in A Luoi, Thua Thien Hue (2006)

Main strengths Main weaknesses

There is a significant area under cassava production Fresh roots have a relatively high starch

content throughout most of the year

Limited adoption of industrial varieties Farmers have limited capacity to invest

and take risks Farmers have poor knowledge of the

market Farmers have limited knowledge of

improved cultivation technologies and practices Cassava is often cultivated in sloped

land

Key opportunities Key threats

Local agro-climatic conditions are appropriate for off-season cassava cultivation Available technologies can generate

significant increases in yield Strong regional demand for industrial

cassava Limited competition and high prices

during the off-season months

Under current agronomic practices, cultivation in sloped land is leading to soil erosion and depleting soil fertility Production areas across the border in

Laos are starting to compete with A Luoi during the off-season The dry starch factory in Phong Dien is

increasingly well supplied, especially during the main harvesting season (October-February)

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Farmers in A Luoi could benefit significantly from adoption of high-yield and high starch varieties (e.g. KM94) and from shifting the harvesting and marketing of fresh roots towards March and early April. There could also be significant gains from adoption of improved agronomic practices, such as inter-cropping, mulching and fertilization.

The example of cassava in A Luoi also shows how SWOT analysis can help identify key areas for service provision. Extension officers have an important role to play in promoting adoption of industrial varieties and agronomic practices that raise productivity while minimising the negative impact of cassava cultivation on soil erosion and soil fertility. There is also a need to work with farmers to improve their understanding of the market, which is important if producers are to invest in cassava cultivation.

6.4 Analysing price trends

As discussed in chapter 4, an understanding of past price trends is important to decide what and how much to produce. Knowing how prices have changed in the past, and the reasons behind those changes, can help farmers form reasonable expectations about future prices.

In order to interpret past price trends and anticipate possible future scenarios, farmers must have information about demand and supply. Hence, when collecting price data, it is also necessary to gather information on the underlying supply and demand conditions.

For the same commodity, there may be significant differences in price trends across market segments, say between mainstream and fair trade coffee or between normal and pesticide-free vegetables. There could also be significant differences across varieties, as in the case of fruits and vegetables. In such cases, it may be worth disaggregating the analysis according to market segment or variety, provided the necessary data are available.

In order to access to historical price data and information, say for the past five years, extension officers can pursue some of the options discussed in section 5.2:

Market information systems. These data may be available in bulletins or requested from staff working in provincial and national market information services. Analysis of price, demand and supply trends may also be accessed from these sources.

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Traders and agro-processors. Companies often have records of prices for a number of years. More informal traders and agro-processors may lack detailed records, but be able to provide an approximate idea of price trends and useful information on supply and demand trends.

Market researchers. These may also be able to provide data and analysis on price trends.

Other sources. Information on markets trends can sometimes be accessed from specialised magazines dealing with agriculture and economic issues, television and radio programmes, and even newspapers.

It should be noted that historical price data may need to be processed before analysis and dissemination:

Weekly price data may need to be converted into monthly average prices to make the data more meaningful and facilitate interpretation. Likewise, if monthly price data is available for many years, it may make sense to calculate annual average prices.

In contexts where prices are rising, it is important to work with real rather than nominal prices. In other words, nominal prices should be discounted by inflation (see section 6.6).

It is also useful to quantify price changes over certain periods, both in absolute values and in percentage terms, in order to have a clearer idea of the extent of those changes.

Often, the data collected have already been processed. If this is not the case, this will need to be done by extension officers, independently or jointly with farmers and traders/agro-processors. Staff at the provincial extension centre or the provincial department of agriculture may be able to provide some assistance, which would be ideal, as the data could then be made available to many extension officers within the province.

Graphs can be a very useful tool for presenting and discussing historical price data. Sometimes the information collected from the above-mentioned sources is already presented in a graph format. Other times, these will have to be developed by extension officers, perhaps with the participation of farmers and traders/agro-processors.

The graph below shows the average monthly price paid by the largest maize buyer in northern Vietnam, an animal feed factory in Ha Tay, between January 2002 and

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December 2005. These data was collected directly from the factory. (It should be noted that the prices are nominal, not real, because they have not been discounted by inflation. Furthermore, the price curve is not continuous because there are months when the factory did not purchase any maize.)

Graph 6.1 C.P. purchasing prices for maize in Hatay, 2002 - 2005 (VND/Kg)

1500

2000

2500

3000

2002 2003 2004 2005

Pric

e (V

ND

/Kg)

As shown in graph 6.1, nominal maize prices in northern Vietnam have followed an upward trend during the 2002-2005 period. While the supply of maize has increased significantly during this period, demand has expanded even faster, fuelled by significant investment in the animal feed processing industry and increased pig raising activity in the Red River Delta region. Despite the avian flu epidemic, it is expected that maize farmers in the North will continue to enjoy favourable demand conditions. At the same time, in the coming years, the supply of maize is unlikely to continue growing at the same rate as in the recent past because of land availability constraints and competing product options in major producing areas. As a result, prices are likely to remain firm.

When discussing and analysing price trends, it is useful to focus on a series of guiding questions, as shown in the box below. Ideally, this type of exercise should be conducted for several products that are already or may be successfully produced locally so that farmers can make comparisons and take informed decisions.

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Guiding questions for analysis of price trends

Past price trends 1. Over the past 3 or 5 years, have prices been rising or falling? 2. By how much? 3. Are these trends stable or cyclical? 4. Do prices fluctuate much from one year to the next?

Demand and supply trends 5. What have been the demand and supply factors driving price trends? 6. Are these conditions likely to persist or change in the coming years?

Future price trends 9. Given anticipated changes in demand and supply, what is the likely direction

and extent of future price changes? 7. How is demand and supply likely to change in the future, and why?

Such type of questions were used to analyze price trends for cassava in Krong Bong District of Dak Lak Province. This analysis is based on information collected from farmers, traders and processors in the district and exporters in Nha Trang town.

Anticipating future price changes for cassava in Krong Bong, Dak Lak

Cassava is the most important crop in Krong Bong, after maize. In 2006 the district produced nearly 50,000 tons of fresh roots, compared to less than 10,000 tons in 2002. During that period, farmers expanded cultivated areas and adopted high-yielding varieties in response to a very strong demand for dry cassava (for ethanol) from China and for fresh roots from a new dry starch factory in the district.

As a result of very favourable demand conditions, the farm-gate price of fresh cassava increased from about 300 VND/kg in 2003 to 500-600 VND/kg in 2006. The price paid for dry cassava by local assembling traders also increased during this period, from 700-800 VND/kg in 2003 to 1,450-1,650 VND/kg in 2007.

Prices for fresh roots and dry cassava are likely to remain firm over the coming years due to strong domestic and foreign demand for ethanol and starch, investment in new ethanol plants in Vietnam, and intense competition from local buyers.

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6.5 Analysing price seasonality

It is not possible to take an informed decision about whether or not to supply the market during the off-season without first understanding the potential profits associated with such option:

price data for different seasons or periods within the year (and information on production or storage costs) are necessary;

a comparison between the profit from off-season production or storage and the returns from alternative investments can be very useful as well.

In this section we focus on the analysis of price seasonality. Profit analysis is discussed in section 6.7.

If possible, price information for at least the past three years should be collected and analysed. Price seasonality can vary significantly from one year to the other. Sometimes these changes may be temporary, as in the case of a bumper harvest, while other times they are permanent, as with the development of new supplying areas or a shift from one to two season cropping.

It may be possible to obtain price data from an existing MIS or from market researchers. Sometimes agribusiness companies will also be able to provide the required data, as in the case of maize in northern Vietnam (see graph 6.2 below).

Graph 6.2 shows that maize prices in northern Vietnam tend to rise from August until May or June, although in 2005 they kept falling, albeit mildly, until December. Over the past three years there has been a marked decline in maize price variations across seasons. The highest price differences between months was 33 percent in 2003, 25 percent in 2004 and only 14 percent in 2005. Seasonality is also becoming less predictable.

These data suggest that farm-level storage of maize from the June-July harvest for sale later in the year is a risky and not very attractive option. Maize is increasingly available in northern Vietnam throughout the year as a result of significant storage from C.P. Group and expanding winter supplies from provinces such as Nghe An and Dak Lak. Imports from China during the Winter season are also an option. As a result, selling soon after harvest seem the best option for farmers.

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Graph 6.2 Monthly average prices for maize in Hatay (C.P. Group), 2003 - 2005

1500

2000

2500

3000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Pric

e (V

ND

/Kg)

200320042005

The analysis above was conducted with farmers in several communes of Tan Lac district of Hoa Binh province, where several focus group discussions were organized. Local traders attended these meetings. The discussions were structured around a series of guiding questions, which are presented in the box below.

Guiding questions for analysis of price seasonality

1. In which period(s) of the year prices tend to be lower? What are the demand and supply factors that explain the relatively low prices during these periods?

2. In which period(s) of the year are prices normally higher? What are the demand and supply factors behind the relatively high prices during these periods?

3. Over the past 3 years were there any significant differences in price seasonality from one year to another? If yes, why?

4. Are seasonal price patterns changing over time? How?

5. Which supply and demand factors are driving these changes?

6. How significant are price differences between different seasons of the year? What is the difference between the lowest and highest prices within the year?

7. Is local off-season production profitable? How profitable?

8. Is storage for off-season sale a feasible and profitable option for local farmers or traders? How profitable?

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6.6 Discounting inflation

In sections 6.4 and 6.5 price analysis was conducted without taking inflation into account. This may be acceptable in contexts where inflation rates are very low, but when prices for inputs and consumption goods as a whole are rising rapidly, an increase in the price of an agricultural commodity may be illusory. In such contexts, it is better to work with real rather than nominal or actual prices (real prices = actual prices / consumer price index).

For example, if the price of paddy is rising but at a slower rate than the price of seed, fertiliser, bread, clothes, medicines and so on, then paddy is loosing value; over time the money earned from selling one kilogram of paddy will buy fewer and fewer goods. Nominal price may be increasing, but real price are declining. A graph plotting nominal prices over a period of time would suggest a positive trend, whereas a graph showing real prices would show an opposite trend.

Discounting inflation is easier than it seems. For example, if you are calculating long-term price trends for maize using annual data, then you just need to divide (deflate) annual prices by a consumer price index (CPI) for the respective year. If you are working with monthly data, then you should use monthly price indexes. A base date, say January 1990 or 1990, depending on whether one is deflating monthly or annual prices, must be established. All prices must then be deflated from this date onward, as shown in the table below. Annual and monthly price indexes can be obtained from the website of the General Statistics Office of Vietnam – http://www.gso.gov.vn/.

year

(a) Annual

average price for product X

(b) Consumer Price Index (1990 = 100)

(c) CPI divided by 1990 CPI

(d) Adjusted Annual

average price (d = a:c)

2000 120 300 1 120 2001 130 306 1.02 127 2002 135 318 1.06 127 2003 110 329 1.10 100 2004 125 334 1.11 113 2005 115 340 1.13 102 2006 130 349 1.16 112

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http://www.gso.gov.vn/


6.7 Calculating gross margins

Gross margin (gross income – production costs) is a measure of profitability of a farm. By calculating the gross margin for different product and technological options, farmers will be able to take informed decisions about what to produce, and how (see the earlier discussion in section 4.2).

For example, they will be able to compare the profitability of low and high-input maize cultivation, the profitability of maize and cassava cultivation, the profitability of a new crop versus existing crops, the profitability of growing lettuce during the main season and during different off-season, and so on.

ables 6.2 and 6.3 show gross margins in 2001 for rice grown in Can Tho rovince during the Summer-Autumn season. In table 6.2 gross margins are

calculated for rice grown under local agronomic practices, while in table 6.3 imilar calculations are made for rice grown using improved agronomic practices.

argins per hectare (returns on land) and per unit of labour (returns on bour) are presented. An analysis of profitability indicates the profitability of ce farming could be improved through a more careful use of inputs.

Figure 6.1 Collecting production cost data from a farmer

Tp

sBoth gross mlari

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Table 6.2 Gross margin per hectare for Summer-Autumn rice in Can Tho (2001) – farmer practice

Unit Quantity Unit price VND

Value VND

1. Seed kg 200 2,000 400,000

2. Fertilizer Urea DAP Phosphorous

kg

150 100 50

2,200 3,000 2,300

330,000 300,000 115,000

3. Insecticide VND 1 350,000 350,000

4. Fuel Diesel Lubricant

litre

60 3

5,500 10,000

330,000 30,000

5. Irrigation VND 1 50,000 50,000

6. Soil work VND 1 320,000 320,000

7. Threshing VND 1 320,000 320,000

8. Other facilities VND 1 160,000 160,000

9. Labour Cleaning field Sowing Weeding Fertilizing Spraying insecticide Pumping water Cutting Transporting Drying Other labour

days

10 5 30 6 6 13 18 8 8 12

20,000

200,000 100,000 600,000 120,000 120,000 260,000 360,000 160,000 160,000 240,000

9. Credit (1% per month) m onths 4 50,250 201,000

10. Total Cost ( = 1 + … + 12) VND 5,226,000

11. Total revenue ( = yield * price) Kg 3,900 1,350 5,265,000

12. Gross margin per ha ( = 11 – 10) VND/ha 39,000

13. Gross margin per unit of labour VND/ man days

336

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Table 6.3 Gross margin per hectare fo Summer- umn rice in Can roved practice

r Aut Tho (2001) – imp

Unit Quantity Unit price VND

Value VND

1. Seed kg 100 2,000 200,000

2. Fertilizer Urea DAP Phosphorous

kg

100 100 50

2,200 3,000 2,300

220,000 300,000 115,000

3. Insecticide VND 1 200,000 200,000

4. Fuel Diesel Lubricant

litre

60 3

5,500 10,000

330,000 30,000

5. Irrigation VND 1 50,000 50,000

6. Soil work VND 1 320,000 320,000

7. Threshing VND 1 320,000 320,000

8. Other facilities VND 1 160,000 160,000

9. Labour Cleaning field Sowing Weeding Fertilizing Spraying insecticide Pumping water Cutting Transporting Drying Other labour

days

10 5 25 5 4 13 18 9 8 12

20,000

200,000 100,000 500,000 100,000 80,000 260,000 360,000 180,000 160,000 240,000

9. Credit (1% per month) m onths 4 29,250 117,000

10. Total Cost ( = 1 + … + 12) VND 4,542,000

11. Total revenue ( = yield * price) Kg 4,000 1,400 5,600,000

12. Gross margin per ha ( = 11 – 10) VND/ha 1,058,000

13. Gross margin per unit of labour VND/ man days

9,706

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Some caution is needed when analysing gross margins. For example:

static and does no into cons eration hang

elds may drop over time due to pests or soil degradation.

e numbers may suggest that new crops are ery profitable, but ay face significant marketing risks because there are no

hed local market channels.

ices if ther major ex nsion in su ply ca

rof t beyon the reach f mostnt and recurrent costs.

The analysis is t take id future c es in prices.

Yi

Th v early adopters mestablis

Farmers may also be unable to sesignificant drop in pr

ll all their production and face a e is a pa p tering

for a small local market.

Some crops may be quite p itable bu d o local farmers due to high investme

6.8 Analysing marketing costs and margins

ut? Which market or buyer should they supply? And when should they sell? In order to maassociated with each option.

For n how much it wilfor dry

What a s are considering whether to store paddy at hmake than c of storage (e.g. chemicals, bags and loans) and provide a reasonable return on their investment.

Which post-harvest or processing operations should farmers carry o

ke an informed choice, farmers should compare the price and the costs (profits)

example, should farmers dry their paddy? This will depend ol cost them to carry out such operation and how much more they will receive

paddy.

bout storage? Imagine that farmerome for future sale, say three months after harvest. This strategy will only

sense if farmers are expecting prices to go up to an extent that will more ompensate for the costs

6.9

(and traders) to analyse market information, it is useful to discuss its implications in terms of future

ercise is called visioning.

Future vision

Once the extension officer has worked with farmers

production and marketing strategies. Where are farmers today and where do they want to be in the future, now that they understand better the market context and competition in the market place? And how can they move from the current to the desired state? This type of ex

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A table such as the one shown in the next page can be used to develop a future vision of what farmers want to achieve and how. This table was developed with persimmon growers in Da Bac district of Hoa Binh province. The example of

ant to be cautious and develop a gradual diversification strategy which does not expose them to unacceptable levels

he table below can be used to discuss the investment

persimmon in Da Bac is discussed in more detail in chapter 8.

When considering future production and marketing strategies it is important to weigh the benefits, costs and risks of different options. Diversification towards new products and new markets can generate significant benefits but will usually entail additional costs and risks. Farmers may w

of investment and risk. Tneeds and risks associated with diversification processes – both will tend to increase as one moves from option 1 to option 4.

Existing products New products

Existing markets 1. Market penetration strategy (lowest investment and risk)

3. Product development strategy

New markets 2. Market development strategy 4. Diversification strategy (highest investment and risk)

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Table 6.4 Visioning from current to a desired state (persimmon growers in Da Bac, Hoa Binh)

Activities for getting where farmers want to be Where are farmers today

Short-term ( < 1 years)

Medium-term (1 - 3 years)

Where do farmers want to be in 3 years

1. Farmers do not know how to grow quality fruits

2. Farmers grow red, astringent persimmon (Yen Thon and Nhan Hau), which suffers from abundant supply and weak demand

3. Farmers can only sell a small share of their production for a very low price

1. Purchase grafts of fuyu (non-astringent) persimmon from Moc Chau, Son La

2. Also purchase grafts of jiro (non-astringent) from Moc Chau to extend harvesting season and reduce production and marketing risks

3. Purchase grafting material in groups to reduce cost

4. Request training on grafting from district agencies and projects

5. Request training on cultivation practices from district agencies and projects

1. Continue purchasing grafting material of high-potential cultivars to expand areas

2. Start selling grafting material as a business

3. Request demonstration services on improved cultivation practices

4. Participate in cultivation training courses

5. Invest in improved cultivation practices

6. Conduct market testing and promotion for new cultivars

7. Develop group strategies to ensure good market linkages

1. Supply good quality persimmon to high-value urban markets in northern Vietnam

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CHAPTER 7: EXCHANGING MARKET INFORMATION

CHAPTER SUMMARY

What are the main options exchanging market information?

Direct contact with farmers

Telephone contact with farmers

Loudspeakers

Visits to urban markets

Meetings with traders and agro-processors

Exchange visits to other production areas

Cd-roms

Local radio and television programmes

Bulletins

Internet

How to choose channels and methods for exchanging market information?

Each channel and method has its own advantages and disadvantages

A combination of channels and methods should be used

Farmers should be consulted about their preferred methods and channels

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Exchanging Market Information

7.1 What are the main options for exchanging market information?

There are many possible channels and methods for exchanging market information with farmers. The most common are discussed in this section.

Sometimes market information will be exchanged with farmers after being collected and partly or fully analysed by the extension officer and other service providers, but often these different activities will go hand-in-hand. Often extension officers will collect and analyse market information together with farmers.

1. Direct contact

Direct contact is an obvious channel for exchanging information. Extension officers meet farmers on a regular basis, and can use these opportunities to share and discuss relevant market information.

Because of time constraints, it is recommended that informal discussions with individual farmers be complemented by more formal meetings with groups. The table below provides some tips on how to organize a meeting with farmers to share market information.

Preparing a meeting with farmers to share market information

Preparation Review the market information needs of the farmers you are going to meet Review the marketing problems they are facing Select the most relevant information/data from your data

base Organise it in a logical/systematic form Prepare figures, charts or tables to help farmers visualise

the content you are going to present.

Logistics Let farmers decide on the place and time of the meeting Make sure that the sitting arrangements are such that all

participants can hear and see what is being presented and discussed

2. Telephone contact

More and more farmers in Vietnam have access to a fixed line and mobile phone. Telephones cannot fully replace other information exchange media and methods, but they provide an excellent tool for communicating with farmers on a regular basis and for a very low cost (time and money).

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3. Loudspeakers

Loudspeakers are widely used in rural areas as a mobilization and information dissemination media. In some remote areas, loudspeakers are also used to broadcast radio programmes and training sessions.

Loudspeakers can therefore be used for disseminating very simple market information and mobilizing farmers to participate in related events, such as meetings and study tours. Such media is particularly useful in mountainous areas with poor transport and telephone connections.

4. Visits to urban markets

Visits to urban markets can be a very effective channel for accessing a vast amount of relevant market information. During these visits farmers will be able to see with their own eyes the type and volume of agricultural products being sold, check their respective prices, observe the number and type of sellers and buyers, and ask them all sorts of questions. Specific marketing opportunities can sometimes be identified. Contact information can be exchanged with potential buyers. This may prove very useful for future transactions.

Figure 7.1 Farmers visiting a market

Extension officers can play an important role in the selection of market(s) to visit. This should be closely linked to farmers’ information needs and potential opportunities. What is it that the extension officer wants farmers to be exposed to? What is it that farmers want exposure to? Which are the focus commodities?

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What are the key issues? The type of buyers in a particular market? The quality needs of specific buyers? Prices in a certain market or during a particular month or season? And so on…

Normally, farmers already have some knowledge of local markets. Any organised visits are therefore likely to target less known, non-local and often urban markets. Because such trips entail costs which extension services are rarely in a position to fund, the most obvious solution is for farmers to pay for transport, food and other costs associated with the visit. One or two farmers from different villages or groups could participate in the visit and feed the information back to the other farmers.

5. Meetings with traders and agro-processors

Meetings with selected supply chain actors can prove very fruitful. Supply chain actors can also benefit from meetings with farmers. These meetings can help them understand local demand for seed and other inputs or local supply of particular agricultural products. In addition, meetings offer an opportunity for input dealers to promote their services and for buyers to communicate their product needs.

Figure 7.2 Farmers talking to a wholesaler at his premises

Extension officers can help organizing and facilitating such meetings. Often these will take place at commune or village level, as this allows for the participation of many farmers. Invited traders and agro-processors are most likely to come from

90


the district. Outside traders and agro-processors, say from a neighbouring district, the provincial capital or a neighbouring province, can also be involved, but they will often have to pay for their own transport.

Meetings can also take place at the premises of the trader or agro-processor. This enables farmers to use direct observation to collect information. For example, when visiting an agro-processor, farmers can check his/her processing technology and storage facilities, which is important to understand scale of activity and purchasing capacity. They can also compare the quality of their products with those supplied by others.

In a no-project scenario, farmers typically have to pay for transport to the trader or agro-processor premises, and therefore only a few representatives will be able to attend the meeting. It is important that these farmer representatives are then involved in communicating the information and understanding gained to farmers in their communities.

6. Exchange visits to other production areas

Farmers can often benefit significantly from direct exposure to the experience of producers in other areas. This is normally done in the context of exchange visits. As discussed in the case of market visits, participating farmers may need to pay for transport and other costs associated with this activity.

The advantages of exchange visits are obvious. There is nothing like farmers hearing from other farmers about the pros and cons of a new variety, successful ways to add value to a specific crop, improved and locally appropriate storage practices, good experiences in collective marketing, the advantages and disadvantages of a particular market or buyer, the costs and benefits of participation in an existing contract farming scheme, etc.

7. CD-Roms

CD-Roms provide a very useful media to store information and present it in an attractive and convenient way to farmers and traders/agro-processors. Written information can be accompanied by photos and music. CD-Roms are relatively cheap to produce and can be viewed by farmers who have a television and cd player at home, as well as by their relatives and neighbours. Nowadays, many farmers in Vietnam have such equipment, even in poor areas.

Extension officers may need some training and access to software before they can produce CD-Roms with relevant information. They may also need a digital camera to take photos that help farmers visualize the messages being disseminated.

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Disseminating market information by CD-Rom

SADU Project has been working with farmers and local stakeholders in Da Bac district of Hoa Binh province to develop market-oriented production of persimmon fruit (see chapter 8). CD-Roms were used in meetings with farmers and local service providers to exchange information about production and markets.

During these meetings, several district and commune staff from the extension station, government agencies and mass organizations requested a copy of the CD-Rom to use in other meetings with farmers. Many village leaders and farmers also requested a copy to watch at home with their friends and neighbours. About 60 CD-Roms were distributed. Each cost VND 5,000 (about US$0.30).

8. Local radio and television programmes

Local radio and television can reach a large audience and provide a very cost-effective communication channel. This is especially the case when programmes are carefully planned and prepared. Programmes should be broadcast when target listeners are less busy with daily chores. Men and women may have different time preferences, and this must be taken into consideration when timing broadcasts. The choice of language is an important issue when targeting ethnic minority groups.

Target audiences (e.g. farmers and local traders) must have a say in the selection of information to be disseminated and the way this information is presented and discussed. Inviting farmers, traders and agro-processors to talk about their experiences and to share relevant information is one way of making the broadcasting interesting and relevant to listeners.

Developing radio or television programmes partly or fully dedicated to marketing issues requires dedication from extension officers. Price data may need to be collected daily or weekly. Resources may also be needed to pay for air time. Such costs must be anticipated and included in the budget of the provincial extension centre or the district extension station.

Ideally, many extension officers should participate in the development of local radio or television programmes. The provincial extension centre has a role in coordinating and perhaps funding inter-district collaborative work. Other provincial and district agencies – agriculture, trade and planning and investment – can also join such initiatives.

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Disseminating price information through the radio

Cashew is a strategic agricultural product in Binh Phuoc. An analysis of this sub-sector showed that farmers had poor access to current price information, therefore being in a weak negotiating position vis-à-vis buyers.

To address this problem, the provincial Department of Planning and Industry and the Binh Phuoc Cashew Association decided to develop a daily radio bulletin to disseminate prices and quality standards for raw cashew nuts.

Market prices in 12 districts are collected daily by staff from the provincial statistics bureau and the Youth Union for broadcast in the Binh Phuoc radio station the following day at 6:30 a.m..

The first price bulletin was broadcast on 15 March 2007. The daily bulletin will first be broadcast for 60 days as a pilot.

7.2 How to choose channels and methods for exchanging market information?

As indicated above, when exchanging and disseminating market information, extension officers can choose a range of channels and tools. Choices should be based on their respective advantages and disadvantages, which are summarised in Table 7.1.

Ideally, a combination of channels and methods should be used. Different dissemination activities complement each other well in terms of advantages and compensate for each others’ weaknesses.

Some information exchange and dissemination activities will be more expensive than others. Activities may also differ significantly in their duration. Some will be relatively simple and take little time, while others will have to be conducted a number of times, perhaps on a regular basis. Hence, extension officers must not into consideration not only their time constraints and those of target farmers, but also the availability of financial resources, including farmers’ ability and willingness to share costs.

Last but not least, when planning and implementing information exchange and dissemination activities, it is very important to consult farmers to properly understand their own preferences regarding different options.

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Table 7.1 Advantages and disadvantages of different dissemination channels and methods Channels and tools Strengths Weaknesses

1. Direct contact with farmers

Face-to-face interaction is a very flexible and effective form of communication

Market information can be processed and interpreted together with farmers

Time constraints may limit the number of farmers reached, especially when information is provided to individuals instead of groups

2. Telephone Convenient, flexible and cheap (for extension officers and farmers/traders/processors)

Allows for regular contact

Only allows communication with one person at a time

Does not allow for face-to-face communication

3. Loudspeakers Convenient and cheap (for extension officers and farmers)

Can reach a large number of farmers

Appropriate for remote areas

Not very effective when a vast range of information and complex messages need to be disseminated

Does not allow for interaction with target audience

4. Visits to markets A vast amount of market information can be gathered through direct observation

Traders can be a very knowledgeable source of information

These visits can lead to the identification of business opportunities and even agreements on concrete business deals

Collection and analysis of market information go hand-in-hand

Can be expensive to organise, especially when distant markets are visited

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5. Meetings with traders and agro-processors

Traders and agro-processors are often very knowledgeable about markets

Farmers can use direct observation when the meeting takes place at the trader or agro-processor premises

Business opportunities can be identified during these meetings

Agreements between farmers and traders/agro-processors can be reached during these meetings


Can be expensive to organise, especially when participants are travelling long distances

Traders and agro-processors may be reluctant to share information in the presence of other traders and agro-processors (competitors)

6. Visits to other production areas

Can be very effective for communicating new information and ideas

Farmers face similar situations and challenges, and therefore tend to understand each other well


Can be expensive to organise, especially when distant areas are visited

7. CD-Roms Cheap to produce

Ability to communicate messages visually

Can be seen by many farmers

Require some skills and specific software

8. Local radio and television programmes

Can reach a very large audience

Very convenient media for farmers

Time consuming and expensive to develop

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Possibility of involving traders, agro-processors and other relevant stakeholders

9. Bulletins Can be distributed to many people

Can be read by outside traders and agro-processors

Farmers may not have access to bulletins that are produced at provincial level

10. Internet Can be accessed by many people

Can be consulted by traders and agro-processors

Still a very new media in rural areas

May be difficult to access by farmers

96

CHAPTER 8: USING MARKET INFORMATION - THE EXPERIENCE WITH PERSIMMON IN DA BAC, HOA BINH

CHAPTER SUMMARY

Recent work with persimmon in Da Bac district of Hoa Binh province is described to illustrate how the collection, analysis and dissemination of market information can be linked to the development of competitive, market-driven production systems.

97

The Experience with Persimmon in Da Bac

8.1 The context

Da Bac is a mountainous district of Hoa Binh province with a population of approximately 52,000. Nearly 90 percent belongs to the Muong, Tay and Dao ethnic minority groups. The district has approximately 600 hectares under red (astringent) persimmon. Most area is under Yen Thon persimmon, although many farmers also grow the Tach That cultivar. Thousands of households in the district have small persimmon orchards.

Most persimmon trees in Da Bac were planted during the mid and late nineties with strong support from Project 747, which aimed to promote viable income generation options for ethnic minority population displaced by the Hoa Binh dam.

The persimmon market situation was relatively favourable prior to 2002 but has since deteriorated markedly due to a significant expansion in production from Lam Dong and several northern provinces. Most of these provinces grow astringent cultivars, mainly Yen Thon and Tach That, as in Da Bac. Some areas have their own soaked cultivars.

The major expansion in supply resulted in a collapse of market prices for red persimmon, especially Yen Thon. Increased competition from Chinese imports also contributed to this situation. Soaked persimmon from China is now sold in major urban markets, such as Hanoi and Haiphong. By 2006 farmers in Da Bac were only able to sell a very small proportion of their production and for a low VND/kg 750, compared to VND/kg 4,000 in 2001.

In November and December 2005, staff from SADU Project, the district Economic Section and the Extension Station conducted a rapid appraisal of persimmon markets to assess the situation and identify possible solutions to the current crisis.

8.2 Collecting and analysing market information

The team spent one week interviewing persimmon growers in Da Bac (focus group discussions), local traders and wholesalers in Dac So commune, an important fruit wholesale trading cluster in neighbouring Ha Tay province, and in Long Bien night market, the main fruit wholesale centre in Hanoi.

During the collection of market information, the team paid special attention to:

i. existing supply chains for Da Bac persimmon, ii. major product flows, iii. competitive position of Da Bac vis-à-vis other supplying areas in Vietnam

98


and China, iv. supply and demand trends, v. price trends, and vi. consumer preferences.

After an analysis of the information collected from farmers and traders, the team reached some major conclusions:

i. fruit markets in Vietnam are increasingly competitive, with consumers enjoying a wide range of product choices, both in terms of varieties and fruits;

ii. demand for persimmon is concentrated in large urban centres, such as Hanoi and Haiphong;

iii. there is an over-supply of red persimmon, especially Yen Thon and Thach That;

iv. soaked persimmon from China is very competitive and fetches a much higher price than persimmon grown in Vietnam;

v. Dalat (red) and soaked cultivars have higher quality and enjoy more favourable demand conditions than Yen Thon and Thach That, thereby being sold in the market for a much higher price;

vi. persimmon growers in Da Bac have experienced a sharp fall in prices, but this is linked to broader supply and demand trends, not to any concerted intervention by traders.

vii. non-astringent cultivars, such as fuyu, have good market potential but are not yet grown commercially in Vietnam.

8.3 Exchanging market information

Several activities were carried out after the rapid appraisal of persimmon markets to disseminate market information and discuss potential strategies for addressing the current crisis:

i. A provincial multi-stakeholder workshop was held in April 2006. There was consensus amongst participants that Da Bac growers can only become competitive if they shift towards cultivars with good market potential and improve cultivation practices.

ii. A persimmon working group composed of representatives from district agencies, including extension, traders and farmers was formed in June. The

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group met four times between June and October to propose and discuss appropriate interventions.

iii. A visit to Moc Chau, in neighbouring Son La province, was organized in July to gain exposure to non-astringent cultivars. Twenty-eight farmers and local staff participated. The following month, the same group visited Luc Yen in Yen Bai to learn more about local experiences with soaked cultivars.

iv. In September, this group also participated in visits to Dac So commune, Long Bien market and the Agroviet Trade Fair in Hanoi, where they met and held discussions with many persimmon traders.

v. Each of the above exchange visits and study tours was followed by meetings in four communes. CDs with relevant information and photos were shown and distributed to farmers. The experience gained from the study tours and exchange visits was also discussed. An average of 32 farmers attended the commune meetings. Many village leaders subsequently organized similar meetings in their respective communities.

vi. In November seven Dac So wholesalers visited some orchards in Da Bac and met farmers to discuss emerging developments and future coordination strategies.

vii. In April 2007 a first training on cultivation practices (pest management, pruning, fertilization) was delivered to 38 farmers. Trainees requested an exchange visit to areas where non-astringent cultivars are being grown to learn more about cultivation practices.

Most of these activities were disseminated at village and commune level through loudspeakers and featured in the Hoa Binh newspaper.

8.4 Outcomes

In October 2006, 49 farmers organized themselves in four groups and imported 600 grafts of fuyu persimmon (a new non-astringent cultivar which is harvested earlier than other cultivars in Vietnam) from Moc Chau for a total cost of VND 7.2 million. A total of 163 trees were grafted after some training from RIFAV specialists. Grafting material from these trees will be available for further topworking during June and July 2007.

These and many other farmers are planning to continue purchasing grafts from Moc Chau. Their intention is to buy both fuyu and jiro. The jiro cultivar is also new in vietnam and is harvested even earlier than fuyu. By investing in these two cultivars, farmers will be able to extend the harvesting season and reduce

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marketing risk.

In late 2006, the district Economic Section has developed a project to test and demonstrate non-astringent cultivars in four communes of Da Bac. This project is being implemented with funds from the provincial Department of Science and Technology (DOST). Around the same period, RIFAV has secured funding from the ADB Tea-Fruits Program to develop a similar project in five communes of Da Bac. So far, ten trial and demonstration sites have been established in five communes by these two projects, which will ensure that in three years planting and top-working material will be locally available at affordable cost.

Farmers and district agencies are now optimistic about the future of persimmon in Da Bac. The expectation is that persimmon will become a viable and sustainable source of income and local economic development. There is recognition that this will be a long and challenging process, which will require strategic support from different local agencies. The grafting and topworking of existing trees is a crucial step in the right direction, but farmers must also access training and invest in improved cultivation practices. Market testing and promotion of new, non-astringent cultivars and the development of group strategies for better market linkages will also play an important role in this process.

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ANNEX 1: READING LIST

Below is a list of relevant reading material (unfortunately, most sources are not available in Vietnamese).

Bergeron, E. and Tuong, N. V. (2006) Basic Business and Marketing Skills, A Manual for Development Workers in Mountainous Area of Northern Vietnam. Son La, Vietnam: SNV Netherlands Development Organization. http://www.snv.org.vn/DocFile/2006071411345272523134.pdf

Bergeron, E. and Tuong, N. V. (2006) Basic Business and Marketing Skills, A Reference Workbook for Income Generating Activities in Mountainous Area of Northern Vietnam. Son La, Vietnam: SNV Netherlands Development Organization. http://www.snv.org.vn/DocFile/2006071410505882889955.pdf

Dixie, G. (2005) Horticultural Marketing, Marketing Extension Guide No. 5. Rome: Food and Agriculture Organization of the United Nations. http://www.fao.org/ag/ags/subjects/en/agmarket/docs/horticultural_En.pdf

Ferris, S., Kaganzi, E., Best, R., Ostertag, C., Luncy, M. and Wandschneider, T. (2006) A Market Facilitator’s Guide to Participatory Agroenterprise Development, Enabling Rural Innovation (ERI) Guide 2. Cali, Colombia: International Center for Tropical agriculture. http://www.ciat.cgiar.org/downloads/onlinepublications.htm

Shepherd, A. W. (2000) Understanding and Using Market Information, Marketing Extension Guide No. 2. Rome: Food and Agriculture Organization of the United Nations. http://www.fao.org/waicent/faoinfo/agricult/ags/AGSM/unmis

Shepherd, A. W. (1999) A Guide to Maize Marketing for Extension Officers, Marketing Extension Guide No. 1. Rome: Food and Agriculture Organization of the United Nations.

Shepherd, A. W. (1993) A Guide to Marketing Costs and How to Calculate Them. Rome: Food and Agriculture Organization of the United Nations. http://www.fao.org/docrep/u8770e/U8770E00.HTM

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http://www.snv.org.vn/DocFile/2006071411345272523134.pdf

http://www.snv.org.vn/DocFile/2006071410505882889955.pdf

http://www.fao.org/ag/ags/subjects/en/agmarket/docs/horticultural_En.pdf

http://www.ciat.cgiar.org/downloads/onlinepublications.htm

http://www.fao.org/waicent/faoinfo/agricult/ags/AGSM/unmis

http://www.fao.org/docrep/u8770e/U8770E00.HTM

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