A brief synthesis

A brief synthesis

Intermediary buys from seller(s) andresells to buyer(s)

Classic Form of Intermediation

Intermediary

Seller

Buyer/consumer

sale

sale

Classic Form of Intermediation

New and Classic Form of Intermediation

Intermediary

Seller

Consumer

sale

sale

Seller

Intermediary

Buyer

One-sided platform

Two-sided platform

sale

affiliation

affiliation

Intermediary buys from farmers andresell products to a buyer at a profit

Classic Form of Intermediation

Intermediary

Farmer(s)

Buyer/consumer

sale

sale

$$$ profit

a) Intermediation by Product Distribution

b) Buying and Selling: Product Consolidation by

financing productionc) Supply Contracting

d) Market Facilitation with organizing and agricultural extension Interventions e) Store/Shop Operationf) Many Others (in developed economies)

• Distribution of products to a network of market outlets. Now includes repacking, branding.

• Terms of Payments 30, 45 or 60 and even a 90 day-terms.

• This model is supported by the presence of an NGO at the base/ grassroots level assisting small farmers in value adding, processing.

• The marketing intervention mechanism earns revenues through profit margins on the products being distributed.

a) a) Intermediation in Product Distribution

a) Intermediation in Product Distribution

Major Constraints:

• Consignment (deferred payments) were envisioned in the beginning but farmers demand payments upon delivery of products. Intermediation is constrained by the size of its working capital.

• this type of mediation is limited to non-perishable processed products especially food products such as fruit jam, jellies, muscovado sugar, organic rice, juice concentrates, etc.

• largely exemplified by rural cooperatives

• financing production is key to product consolidation &

achieve economic scale

• in some cases, drying, milling, sorting and grading, packaging

are included

• earn revenues from profit margins on financing, trading, and

also from processing, sorting and grading, packaging.

b) Buying and Selling: Product Consolidation by

financing production

Key Requirements:

1)very capable management personnel and set up;

2)large working capital/ credit access; and

3)effective monitoring system and technical agricultural services

b) Buying and Selling: Product Consolidation by

financing production

Major Problems

• Default loan payments

• Pole-vaulting

b) Buying and Selling: Product Consolidation by

financing production

c) Supply Contracting

• Intermediation mechanism enters into contract w/ a buyer

• consolidate products through sub-contracting

• earns revenues by defining profit margins from the contracted price or a certain percentage from the net sales

c) Supply Contracting

1.There are still a very few successful supply contracting experiences by NGOS.

2. Negative experiences were largely on the failure to

deliver contracted volume, agreed product specs (quality) and prompt delivery.

Limitations:

• Organizing small farmers along crop/product to ensure economy of scale (volume)

• Agri -extension – to achieve periodic production volume & product quality

• Capability-building – product quality & quality management, production management, business planning, etc.

d) Market Facilitation with organizing and agricultural extension Interventions

• Small farmers are paid when the buyer remits the payment

• Earns revenues by a fixed percentage from the net or gross sales as service fee (depending on agreement with farmers)

d) Market Facilitation with organizing and agricultural extension Interventions

Major Constraint:

a)Need for a start-up funds to finance the formation of small farmers groups (producer associations), capacity-building, agricultural extension and other technical assistance.

d) Market Facilitation with organizing and agricultural extension Interventions

e) Store/Shop Operation

• Small farmers supplies goods and products to a store/shop

• Store/Shop advertises agricultural products to consumers

• Earns revenues from profits of sold goods & products.

e) Store/Shop Operation

Limitation:

•Caters mostly to walk-in customers

Emerging and Classic Form of Intermediation

Intermediary

Seller

Consumer

sale

sale

Seller

Intermediary

Buyer

One-sided platform

Two-sided platform

sale

affiliation

affiliation

Emerging and Classic Form of Intermediation

Seller-Farmers

Intermediary

Buyer

Two-sided platform

sale

affiliation

affiliation

Formation of small farmers producer associations

Specialized agricultural-extension

Specialized training

Corporate social responsibility (CSR)/ Consumer Education

Business sector, CSO, small farmers/producer association partnerships

1.Intermediation mechanism that can move larger volume of products (economic scale), affecting larger sections of small farmers;

2. A mechanism that is sustainable, earning revenues either from profits, marketing fees or from specific percentage of sales as management fees.

Challenges in Market Intermediation

Challenges in Market Intermediation

4. Mechanism that can reduce the highest possible transaction costs in the supply chain.

5. A mechanism that is grounded:

- engaged not only in marketing but also proactively in

production and other services. - where farmers and buyers have a stake as

part- owners or shareholders

Other Marketing Services can otherwise be assumed as part of the services along with intermediation)

1. Product Development

2. Product Packaging

3. Product Exposure

4. Micro-financing agricultural production?

Thank you