Rural Markets

Markets are important for agricultural growth and sustainable development. A lack of markets, or poor access to those markets that exist, not only affects farmers and livestock herders locally in rural areas, but is a drain on the potential of entire countries. Creating local and national markets and improved access to them, allows specialization and diversification into new agricultural products that make profits for rural households and decrease poverty and hunger.

The Importance of Market Access Marketing Smallstock and Their Products Institutions and Organization: Improved Market Access References and Further Reading

Access to markets for farm products, inputs and other goods and services allows scope for specialization and division of labour. The smallstock keepers may then produce a marketable surplus of animals or poultry, meat, milk or eggs for sale to others, who produce food crops and other goods or services that may be bought by the livestock producers. Livestock producers benefit from the exchange, since staple food grains are much cheaper per kilo and per Calorie of food energy than meat or milk.

These non-agricultural activities may include house building, bicycle repairs, crafts such as leatherwork or weaving, dress-making, food processing, firewood and charcoal selling, food retailing and local brewing and distilling. The products are described as non-tradable since they are delivered and used mainly within the rural community, and cannot be traded in international markets.

These activities are highly labour intensive, meaning that labour is the main input. As they expand, local opportunities for local employment grow rapidly. The rural non-farm sector produces increased housing, a major expenditure of prospering farmers, local furniture, local garments, and a host of rural services.

Their importance in contributing to rural employment and incomes (on average about 40%) is emphasized in the literature on rural livelihoods (e.g. Ellis 2000). The demand for the goods and services from the rural non-farm sector is said to be elastic with respect to income. This means that, as farmers' incomes rise, their expenditures on products of the rural non-farm sector increase more than proportionately. Thus, as agriculture grows, the rural non-farm sector grows even faster than agriculture and increases in its importance to the rural economy.

 

Escape from poverty requires production of a marketed surplus over basic subsistence needs, to pay for productive inputs, consumer goods and immediate cash requirements. Although herd or flock expansion may be based simply on the natural processes of reproduction and growth, the initial investment in a new enterprise and other forms of asset accumulation require cash savings or credit supplies. Sale of produce provides income to improve consumption levels, to purchase inputs (e.g. concentrate feeds, labour, drugs and veterinary services) and to invest in genetic material, housing, materials and equipment for improved livestock husbandry and increased future production.

However, limited market access is a key constraint on the rural poor. Remoteness and poverty both tend to reduce access to markets, particularly for disadvantaged groups, such as the illiterate or poorly educated and different ethnic minorities. There are five main physical reasons why market access may be difficult:

• poor road networks,
• high transport costs,
• poor postal and telecommunication services,
• low value to weight ratios of some products, such as manure, and
• the perishability of products, such as milk or meat.

These problems are made worse by the fact that the quantities sold by an individual smallholder or livestock keeper, are likely to be small. The unit costs of transport and processing are much lower for larger consignments. (For a fuller discussion of livestock marketing see Upton et al 2005).

In rural areas, where access to the larger urban markets is limited by these problems, many market transactions take place within the local community or village economy. Agricultural products and the necessary inputs may be bought and sold locally, while services may be hired.

Live animals, particularly small-stock, are bought and sold locally in village markets. Poultry, rabbits and smaller species, are often sold along with other commodities at the communal market place. However, specialized market places may be reserved for livestock such as sheep and goats. Many animals and birds are purchased for imminent slaughter and consumption, but some may be intended for future use in breeding or possibly even for intensive fattening.

Arrangements may also be available for the loan or hire of breeding animals, males simply for mating or females for producing young. Markets for these services are essentially a form of credit.

Transactions do not necessarily take place directly between the producer and the consumer. Market intermediaries may be involved, such as commission agents, traders or butchers. There is scope for specialization and division of labour within the market chain, to carry out functions such as transporting, processing or retailing. Although for local markets the need for transport is limited, for perishable products such as raw meat or milk some processing may be essential. In Latin America and the Near East, milk is often processed into cheese, in Africa into yoghurt in parts of Asia into ghee. There is also the production of dried meat in both Latin America and Africa.

Animals may be slaughtered at a communal facility rather than within the household. Specialist slaughter-men may be employed while there is scope for improved hygiene and meat inspection for disease control. Butchers then sell directly to consumers.

Products such as eggs, milk or honey may also be sold locally, but for milk and honey some basic processing is needed, cooling or fermentation to increase the shelf life of milk and extraction of honey from the comb. Special equipment is needed and there are economies of scale, even in fairly basic processing. Supplies from individual producers need to be aggregated for processing before packaging and redistribution for sale to consumers. In some cases, private individuals or agencies with access to the necessary finance may establish dairy facilities. Very often communal group action by the producers is the better alternative.

The development of a local craft industry, working in wool or leather, creates a market for the raw materials, which benefits producers and, in the case of leather, provides an incentive for flaying and tanning the hides of slaughtered animals.

Manure may be bought and sold, for use as a fertilizer, as a fuel or for building material. Although it is bulky and costly to transport, cases are reported of manure being transported over quite large distances for sale and use on high value crops (e.g. for use in potato and onion growing areas of Bolivia). Manure sold as fuel is generally dried before sale. Arrangements, between pastoral livestock owners and crop cultivators, for the post-harvest grazing of crop remains by the pastoral livestock, allow for fertilization of the land in exchange for supplementary feed.

Intangible benefits conferred by livestock ownership, such as the gain in status, are only realized in the context of the local community. The transfer of land use rights and labour hire are transacted in local markets, but access to new inputs, such as improved genetic material, pre-mixed feeds and animal health services, depends upon there being sufficient local market demand and/or special programmes to provide these inputs. Similarly the growth of the non-agricultural rural industries, that provide local goods and services, is highly dependent on the growth of this demand.

 

In village markets the market chains, between producers and consumers are likely to be relatively short. Most participants in the chain will know each other. The institutions governing transactions between individual buyers and sellers, are likely to be informal, social rules and customs. The transaction costs, of gathering market information, negotiating agreement on prices and enforcing contracts, are low because buyers and sellers, living in the same community, are likely to be well acquainted with each other. Social structures and the respect for elders or other leaders provide a mechanism for enforcement of agreements and the resolution of disputes.

Nonetheless, some of the traders and market intermediaries may have more knowledge of prices and conditions in the wider national markets as well as more financial resources than the smallstock producers. Producers may therefore be at a disadvantage in dealing with market traders and intermediaries. Local and national governments, concerned to promote rural development and poverty relief, through smallstock production, have a responsibility for improving the market environment, and market access for smallholder producers, in various ways.

• Improving the physical infrastructure of roads, stock routes, watering facilities, market places and municipal slaughterhouses.
• Stimulating the flow of market information, through the mass media and extension advice.
• Promoting competitive conditions, monitoring prices, and the meeting of quality and food safety standards.
• Strengthening the institutional environment, including establishing legal property rights and enforceable market contracts, setting of standards for weights and measures and quality grades and appropriate organizational structures for co-operative group activity.

Problems of mismanagement arise through lack of business skills and training, lack of finance, corruption and state interference. Thus many co-operatives have failed at the local level. None the less, despite failures in the past, co-operative group action remains an important means of strengthening producers' bargaining power and deriving some economies of scale in marketing.

In the section on Urban Markets it is argued that certain types of livestock, and livestock products, are 'tradable' in the larger urban and even international markets. Given the fast growing demand for livestock products in many developing countries, there is great potential for rapid expansion, of production, producer incomes and rural non-farm economic activity. This in turn will increase employment opportunities for rural smallstock producers.

Part of a rural market
in Tanzania