Markets and enterprises in the domestication process

1. Markets and enterprises in the domestication process Diane Russell, Steve Franzel & Anand Aithal with friends Trees & Markets

2. Overview of the session • Why do we need to know about markets? • What do we need to know about markets? • Market systems • Market analysis • Strengthening market linkages • Talking to traders • Enterprise and business development

3. Why do we need to know? • Domestication, improvement and diversification involve choices, risks, resources and investments • Investments should pay off provide better returns to labor and build rural economy • One way for investments to pay off is for trees and tree products to be sold and/or be sold at a better price (improved quality, consistency) • Choice of species has to consider market potential (current and future)

4. What do we need to know? • How are people using tree and tree products? • What outlets exist for sales of these products at what levels? • [How] can these products be transformed to add value? By whom? • How are producers organized and [how] could they be better organized? • What traders, merchants are involved? • How is the market system organized? • What are the future prospects?

5. Elements of market systems • What kindof product? • Subsector groups different commodities/products • Commodity (raw graded) • Quality issues & certification • Product (what level of processing or finishing?) • Service (environmental, tourism) • Restricted broad consumer base • Multiple products and consumers

6. Elements of market systems • What is the marketshed? • Local (stakes, firewood, pulpwood) • Sub-regional/national (charcoal, timber) • International (hearts of palm, marula liqueur) • Dispersed production/sales (NTFPs) • Concentrated (coffee)

7. Elements of system • People • Producers and producer groups • Transformers, processors (e.g., craftspeople) • Traders, middlemen, merchants, shopkeepers • Bulkers, wholesalers, distributors • Manufacturers • Retailers, vendors • Salespeople • Consumers

8. Services and inputs Export services, advertising and promotion. Transport, warehousing services. Technology, packaging, ingredients, utilities, labour management, finance, certification. Transport, labour, finance. Agricultural research, (KARI), Extension and training (MOALDM and HCDA), farm inputs, transport, packaging. C O N S U M E R Fresh local market and vending : Domestic and catering market 55% Fresh fruit salad and juice market; Vending carts 5% Local Processed product outlets; supermarkets, shops, kiosks caterers 30% Processed export products market 5% Wholesalers/ distributors MSE processors (Incl. sun-drying) Medium scale processors Exporting firms Large scale processors Market Chain Middlemen Small and medium scale farmers Losses (losses/ unmarketed produce - 15%) P R O D U C E R Mango Marketing Chain Courtesy of TechnoServe, Kenya

9. Elements of system • Institutions and policies • International trade bodies • National rules and regulations on markets (e.g., licenses, restrictions) • On specific markets and commodities (e.g., charcoal, timber) • Regulating boards • Trade associations and guilds (e.g., timber manufacturers’ association) • Regulations governing associations and enterprises (e.g., farmer groups registration)

10. Elements of system • Infrastructure • Common areas and their management • Market spaces • Road and other transport systems • Irrigation, water delivery • Processing equipment • Marketing and business development services • Extension services

11. How systems work • Market “imperfections” are the rule not the exception • A perfect market matches supply and demand with price equilibrium • “Imperfections” come from imperfect information, inequities in power among actors, monopolies/monopsonies/cartels, rules and practices that encourage rent-seeking behavior • But it is not true that middlemen and traders always exploit farmers they play an essential role

12. How systems work • Market development starts from demand and not production • Producing more of a commodity or product can be a disincentive if there is no market outlet • If the aim of domestication is largely for market sales, strategies need to be developed with actors in the trade • Consumers have to be well understood

13. How systems work • Market systems change rapidly • Diversified options are necessary but this strategy faces commodity chains that demand large numbers of products of specified qualities • What is the role for market analysis and information market intelligence? • What information can be obtained readily?

14. Value addition • Ways to add value • Selection, grading • Preservation (e.g., boiling rattan in oil) • Transformation • Creation of product (e.g, basket) • Assembling (parts of a product) • Increasing market intelligence • Negotiating and facilitatingmarket linkages

15. Market analysis • Analysis • Information systems • Market intelligence (active, future-oriented)

16. Market analysis • Is only useful if it is used! What is the purpose? • Prioritization • Scoping (for partnerships) • Seeking key intervention points (Policy? Information? Quality improvement?) • Comparing across regions or sub-sectors creation of methods and tools

17. Market analysis • Varieties of analyses • Academic-quality studies emphasizing economic analysis (e.g., studies of NTFPs in Cameroon) • Rapid market appraisals of one product/species (e.g., tamarind study) • Studies of markets (“arrays” of goods found at different market sites and levels) • Studies of market systems analyzing roles of different actors (e.g., smallholder timber in Meru)

18. Market information • Many market information systems on the web e.g.,http://www.foodnet.cgiar.org/market/ Tropical Commodities and their Markets A Guide and Directory by Peter Robbins Published by TWIN 1995ISBN 0 7494 1672 0 PART ONE1.1 Markets for Tropical Products1.2 Exporting tropical products1.3 Trading Commodities on Future Markets1.4 Volatile Oils 1.5 Natural Fibres 1.6 Fruit and Vegetables1.7 Spices PART TWODIRECTORY OF COMMODITIES PART THREEUSEFUL ADDRESSES

19. Market information • A big challenge is to get information to end-users • Radio • Newsletters and bulletins • Networks and associations • Extension??? • Workshops and trade fairs • Mobile phone options

20. Market intelligence • Analysis and information (collected over time) used to create strategies for existing products • Add element of marketing • Add element of partnerships • Scenario development • What are the future demands and needs? • What areas, producers are well positioned to meet needs? • What policy changes might affect products (e.g., chemical use, GMOs) • Additional problems facing tree products