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Sorghum Value Chain Analysis in Ghana

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Sorghum Value Chain Analysis in Ghana N°28 OCTOBER 2020 Sorghum value chain analysis in Ghana withstand high temperatures. Sorghum remains important for Value chain analyses assist in informing policy dialogue food security in Northern Ghana despite being overtaken in and investment operations. They help the understanding recent times by maize and rice as the lead staple foods. Its of how agricultural development fits within market potential as an industrial crop is also rising due to its use as a dynamics. They permit an assessment of the value substitute for imported barley by the formal brewing industry chains’ impact on smallholders, businesses, society and in the country. environment. The European Union intervention The European Commission has developed a The European Union (EU) is investing €147 million of the 11th standardised methodological framework for analysis EDF National Indicative Plan in Ghana to promote sustainable (https://europa.eu/capacity4dev/value-chain-analysis- agribusiness development in order to increase the incomes of for-development-vca4d-/wiki/1-vca4d-methodology). SHF and expand opportunities for the most vulnerable, notably It aims to understand to what extent the value chain youth and women. allows for inclusive growth and whether it is both socially and environmentally sustainable. In line with the priorities of the Northern Development Authority (NDA), the EU targets the Upper West, Savannah The value chain context and North East Regions via 3 interconnected programmes: Sorghum in Ghana is important for both food security and (i) the Productive Investments Programme, which focuses as a source of income for households. It is mainly grown by on improving access to water for agricultural production; to smallholder farmers (SHF), the majority of whom commit physical market infrastructure, roads and storage facilities; less than 2 ha of their cultivated land to its production. and to energy for productive uses in value chains (VCs); (ii) the Resilient Agriculture against Climate Change (REACH) focusing The crop has been prioritised by Ghana’s Ministry of Food on protection of natural resources to foster sustainable and and Agriculture (MoFA) because it is drought tolerant and can inclusive improvement in the rural economy; (iii) the Market Oriented Agricultural Programme Sub-chain 1 Rural food & Rural pito (MOAP) under which €25 million is pito market consumers Smallholder Rural pito being invested in high-value crop VCs Farmers (SHF 1) brewers including sorghum. The MOAP is being Rural household implemented by the MoFA and GIZ, consumers initially in Southern regions of Ghana, Smallholder Sub-chain 2 Sorghum but has been extended to the Northern Farmers (SHF 2) Wholesale malt Urban pito/ urban house artisanal regions since 2017 with the support of markets beer the EU. Agri-input Urban pito consumers dealers Small/medium Brewers/ aggregators microbrewers Urban Seed Rural Retailers Sorghum household producers grain grain consumers collectors processors Lead farmers Commerical Large-scale Beer farmers grain Commerical aggregators brewers consumers Sub-chain 3 Production Aggregation Processing Consumption Figure 1 : The sorghum value chain in Ghana International Cooperation and Development Value Chain Analysis - Sorghum value chain in Ghana Functional analysis A multipurpose crop with high industrial potential an emerging industrial brewery sector with international standards. They allocate 2.4 to 2.8 ha of their land to white Sorghum is an energy-rich staple with important nutrition sorghum production. They receive support from large-scale benefits. It is gluten-free and contains essential minerals aggregators and commercial farmers in the form of credit such as potassium, phosphorus and magnesium. In Ghana, that they repay by supplying grains of equivalent value, to the milled grain is used to prepare a traditional porridge (tuo acquire inputs (fertiliser and pesticides) although the support zaafi). Sorghum brewing to produce a traditional beer covers only 20% of their needs. Aggregation is facilitated by (pito) is an important cottage industry in Northern lead farmers who are paid a commission based on the grains Ghana. The formal brewery industry in the country is aiming, volume. Also engaged in sub-chain 3 are lead and other in the long-term, to replace imported barley malt with medium-scale farmers (LMF), who produce and sell to the domestic sorghum malt in producing established brands industrial brewery sector. On average, they cultivate 5-6 ha of alcoholic and non-alcoholic beverages, thereby reducing of sorghum per season. Finally, some commercial farmers demand for foreign exchange without compromising on the (CF) produce exclusively for the industrial brewery sector. quality of their products. Sorghum grains which the SHF2 cannot sell in sub-chain 3 Production trend and crop performance is sold directly to small/medium-scale aggregators who operate in sub-chain 2 and deliver to wholesale markets in Sorghum production is mainly concentrated in Northern urban areas. Ghana. Between 1960 to 1990, production increased Output by type of farmer: continuously, peaking at over 387,000 t in 1998. Since then, Grain utilisation by farmer: •SHF1 = 173,140 Marketed surplus growth in sorghum output has trended downwards, falling to •SHF2 = 151,910 (55%) = 100,260 Home consumption •LMF = 92,875 (33%) = 3,530 Postharvest loss 278,000 t in 2018 (Figure 2). •CF = 33,045 (12%) = 1,070 Total = 278,000 •Total = 278,000 Though it is perceived as a food security crop, sorghum Flow of marketed sorghum grain: CF: 1,000 Industrial brewery: prices have consistently been higher than maize since 2008. Large-scale aggregators: LMF 3,000 18,000 LMF 17,000 17,000 In 2010, for instance, maize was about 25% cheaper than SHF2 = 14,000 sorghum whilst in 2017 it was close to 35% cheaper. This S/M aggregators SHF2 = 47,340 120,580 Wholesalers: 120,580 may be one of the reasons why maize is overtaking Rural collectors: SHF1 = 73,260 sorghum in terms of relative importance in the food 73,2600 Food grain retailers: Pito brewers: systems in Northern Ghana. SHF1 = 13,310 21,840 98,840 Small-scale Among the key factors affecting the sorghum VC performance Rural sorghum grain processors: 350 market: 13,310 is the low average yield, between 0.5 to 1.2 t per ha Household grain in the country. This is mainly due to the fact that most consumers: 21,360 SHF cultivate indigenous varieties with inherent low yield Figure 2: Production and utilisation of sorghum in Ghana (in tonnes) potential and scarcely apply yield-enhancing inputs such as fertiliser. When they practice traditional mixed cropping Policy programmes beneficial to the sorghum VC actors systems, the plant density tends to be low. In comparison, the average yield for sorghum is substantially higher in One of the flagship initiatives by the Government of Ghana Botswana (about 5 t/ha) as well as in Ethiopia and Uganda (GOG) is the Planting for Food and Jobs (PFJ) programme (about 2 t/ha). Nevertheless, evidence shows that when under which the GOG distributes improved seed, fertiliser and farmers apply inputs, even at lower levels, the impact on pesticides to farmers, including sorghum farmers. A subsidy yield is substantial. of 50% provided by the GOG aims to address affordability challenges which farmers face. However, it is evident that Farmers involved in three different sub-chains many SHF are unable to buy inputs to which they are enti- tled under the PFJ mainly because of acute liquidity problems The VC consists of three sub-chains, based on the main which they face during the planting season. end products supplied to consumers (Figure 1). Sub-chain 1 consists of mainstream SHF (SHF1), who cultivate The One District One Warehouse (1D1W) GOG initiative about 1.5 ha of land with traditional low-yield red varieties. is expected to improve postharvest crop handling by making Though they may use tractor services for ploughing, they do available modern, off-farm storage infrastructure. not apply any fertiliser or pesticides. The grain they produce is mainly for household consumption and for brewing pito which is consumed within the community. The emergent SHF2 are involved in sub-chain 3 targeting 2 Value Chain Analysis - Sorghum value chain in Ghana Economic analysis Viability for the actors within the global economy. The nominal protection coefficient is 1.1, an indication that players in the VC currently enjoy a certain The operations of all actors in the sorghum VC are profitable. level of protection (mainly in the form of subsidies farm inputs). Nevertheless, assuming the SHF1 cultivated only sorghum (currently it only counts for 30% of the planted area), the Growth inclusiveness and employment projected annual operating income would be about €132, which is below the national poverty line (€245 in 2017) The bulk of the total VA, about 37%, is net incomes to operating and also far below the national minimum wage (which actors in the VC. Small and micro-scale actors accumulate nearly is about €565 per annum). The emerging SHF2, who receive 80% of this net operating income. Of the total VA, about 22% is pre-financing to acquire inputs and ploughing services, record allocated to wages; 16% is contribution to public finances; 16% over 25% increase in yield and obtain premium prices for represents charges and fees paid to financial institutions, 8% is selling part of their crop through sub-chain 3. The projected depreciation; and less than 1% rent. So more than 50% of the annual operating income the SHF2 would obtain from growing VA benefits to small and micro-actors (30%) and workers only sorghum (instead of 40% of the planted area) is €287, (22%). This is evidence of growth inclusiveness in the VC. which is above the national poverty line though below the national minimum wage. The VC sustains over 180,000 jobs, including self-employment opportunities for SHF as well as people engaged in sorghum The annual operating incomes are €815 for the LMF (if only grain distribution (collectors, aggregators and retailers).
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