WFP Ethiopia Country Office
Purchase for Progress
2nd Round Case Studies Consolidated Final Report
Qt sold (mt) 6000 5000 4000 3000 2000 Qt sold 1000 0 2009 2010 2011 Years
Damot `s cooperative union quantity sold in Mt
July 2012
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Table of Contents
EXECUTIVE SUMMARY ...... 3 1. INTRODUCTION ...... 6 2. FARMERS ORGANIZATION ...... 7 2.1. Farmers’ Cooperative Unions ...... 7 2.1.1 Sidama Elto Farmers` Cooperative Union in SNNPR ...... 7 2.1.2. Damot Farmer`s Cooperative Union in Amhara ...... 12 2.1.3. Mira Farmers` Cooperative Union in Oromiya ...... 16 2.2. Farmer`s Primary Cooperatives ...... 20 2.2.1. Shende Primary Farmers’ Cooperative in Amhara ...... 20 2.2.2. Jalela Credit and Saving Primary Cooperative in Oromiya ...... 24 2.2.3. Dila Olka Farmers Primary Cooperative in SNNPR ...... 27 3. SMALL-HOLDER FARMERS ...... 30 3.1. A Female Head of Household & PC Leader in Amhara Region ...... 30 3.2. A Male Head of Household in Oromiya Region: Working as an Assembler for His PC ...... 34 4. APPENDICES ...... 36
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EXECUTIVE SUMMARY The baseline surveys of farmer organizations, smallholder farmers and traders in year one establish baseline values for a core set of key indicators against which the impact of P4P on these groups will be measured in end evaluation of the programs in 2014. In addition, annual monitoring surveys of the participating groups assess to what extent the program performs specified activities and produces expected outputs. Cases studies are also a critical element of the learning and sharing pillar within P4P.
The purpose of the case studies is to understand how P4P is affecting its target groups, to draw practical lessons by identifying needs and best practices in WFP’s initiative to provide a market opportunity to small-holder farmers through CUs. This report constitutes the second round of such case studies. Individual and group interviews were used using a semi-structured interview format where six farmer’s organizations and two smallholder farmers in Oromiya, SNNPR, and Amhara regions of Ethiopia were covered by the studies. Field work was undertaken from 15- 30 December 2011 where programme officers from VAM, P4P and PCU have involved in the studies. Here under is summary of the report:
Services/benefits: FOs (primary cooperative and cooperative unions) provide service including: (a) Agricultural inputs like fertilizer and seeds (which are of course limited by shortages and high prices); (b) Better markets for member products; (c) Seed multiplication especially maize; (d) Provision of consumable goods like sugar and oil for members and non-members; and (f) Dividend. These benefits and service are the driving force for membership.
Storage and financial capacity: While some PCs own modern warehouse, most PCs do have traditional warehouses. CUs on other hand have relatively better storage capacity except few like Mira CU that do not have warehouse at all. In both cases, FOs have limited storage capacity. To solve this problem temporarily, WFP donated rub halls to selected low/medium capacity CUs and five prefabricated warehouses are to be provided to selected CUs. Lack of credit is one of the major factors limiting CUs operation. FOs are denied credit for a number of reasons including lack of collateral and banks with poor past experience with cooperatives. When credit is supplied, it is significantly below the amount needed. Considering Sidam Elto CU in 2011, for example, the annual credit requirement was about Birr 20 million (USD 1,165,025.92), but the union received about Birr 3.5 million (USD 203,879.54) loans for grain marketing, improved seed collection and consumable goods distribution. On the other hand, CUs in Amhara region (like Damot) do not face such problem as the regional government in recent years provides collateral to access an annual loan from Commercial Bank of Ethiopia that reaches Birr 30 million (USD 1,747,538.88) per year for agricultural inputs and the CU renders 50% of the agricultural inputs cost to PCs as loan and utilizes the remaining money for procurement of grains. Unlike CUs in other regions, this helps Damot CU to aggregate large volume of commodities from farmers.
Aggregation and marketing: CUs aggregate commodities from farmers through PCs. Farmers prefer to sell commodities to FO because of different benefits including dividend, agricultural inputs and mark-up price per quintal. Moreover, most farmers do not want to sell their agricultural produce to private traders because they feel that private traders cheat in weighing commodities and farmers trust the FOs much more than traders as well. Most farmers sell immediately after
3 harvest to fulfil their cash requirement and some of them hold the grain stock for sale in May and June, when prices are higher. FOs remains in the market for a short period of time because of limited capital. According to the FOs` management, traders enter first into the market and even go to farmers’ homes to aggregate commodities partly because they have trucks and Isuzu vehicles. Sometimes they pay advance payment via their brokers as well. Traders are price settlers but they present themselves to farmers as if they are paying a higher price. When a FO enters the market, prices goes up but it is forced to quickly withdraw due to limited financial capacity. CUs have better market opportunity than PCs as they have options including government institutions, consumer cooperatives and NGO although most of them require limited volume. FOs gets market information from different places via telephone, on spot discovery and media and it is found that price fluctuation is highly constraining commodity aggregation.
Meeting market quality standards: FOs require quality product than traders and pay better price accordingly. However, FOs do not consider quality while supplying commodities to buyers other than WFP because there is no extra price for quality product rather there will be weight loss and it is a tough activity as well (NGOs require relative quality product than other buyers). “Member primary cooperative are sometimes preferred to sell to traders where quality is not a requirement” says CUs management.
Women participation: Women participation is low both at PC and CU level. Few unions like Sidama Elto are encouraging member PCs to increase women memberships and it has been indicated that women members are increasing at PC level (no data available yet) because of awareness creation by the NGO, government and the union as well. Unions like Damot on the other hand are lagging behind and the union believes that gender promotion activity requires the integration with PCs, government and other actors engaged in gender interventions. Mira union is exemplary in increasing women`s participation where women constitute 25% of the general assembly, 30% of the leadership and 35% in the PCs membership. “Women are actively participating in the different meetings and expressing their ideas”, says Feyessa, Union manager. Among the 19 member PCs in the union, two PCs are organized mainly by women (wives and female headed households) and the union is working in collaboration with the local government to organize three new women PCs as well. “Our interest is to work with women because they are trustful, hardworking and use money properly for their family” says Feyessa. In 2011, one PC organized by women supplied 30 mt maize to P4P- the largest supply by this PC to date.
Shende PC has been increasing female members since the first case study was conducted in 2010 from 355 to 545 in 2011. Recent increased awareness and understanding on the amount of dividends and other benefits that a member household receives is a significant contributing factor for the change. The executive committee members pledged that in an upcoming general assembly promotion will be made in order to increase enrollment & participation of currently married women; and then increase their proportion up to 80 percent of the total female members of the area. According to the management, fee is not a problem for women to join the PC. Dila Olka PC on the other hand has 200 total members of whom one quarter are women (almost all of the women members are married which is not common for most PCs). Women are joining this PC to receive Government subsidized sugar and vegetable oil (as priority given to members) and
4 receipt of shared dividends. During the recent general assemblies, half of member women attended the meeting and were free to express their ideas in the presence of men, according to the PC management.
Working with WFP/P4P: The CUs management highlighted the contribution of WFP in different ways including: (a) Improving their storage capacity through rub halls provision; (b) CU’s negotiation power with other buyers is improving over time; (c) CUs have got experience in the area of quality through trainings, technical assistances and equipment. The importance of producing quality product is becoming well known in recent years, particularly the last two years. Farmers, PCs and CUs all speak about quality commodity. Mira cooperative union informed us that quality product gets a better price and farmers need to produce and supply quality products. ‘’We used to thresh maize grain manually, broken grains and foreign materials were included as part of the product. With the idea of improving quality, our PC introduced a maize Sheller that avoids broken grain and foreign material while threshing ‘’says Tibau, a small holder farmer in Oromiya region; (d) CUs marketing options are expanding and plan to sell to agro processors. CUs are gaining experience with WFP’s procurement procedure and standards which enable them to be competitive in a broader market; and (e) CU`s aggregation capacity has been increasing, 2011 being exceptional year because of bad production.
However, the CUs interviewed cited few problems including: (a) P4P-contracted superintendents sometimes reject high quality produce; (b) WFP’s agreement is not flexible when price goes up right after signing the agreement and; (c) Delays in the final agreement after price negotiation.
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1. INTRODUCTION Cases studies are a critical element of the learning and sharing pillar within P4P. The baseline surveys of farmer organizations, stallholder farmers and traders in years one establish baseline values for a core set of key indicators against which the impact of P4P on these groups will be measured in mid-term and end evaluation of the programs in years three and five. In addition, annual monitoring surveys of the participating groups assess to what extend the program performs specified activities and produces expected outputs. Besides, the monitoring of P4P also reviews P4P verses to the local and regional procurement as well as market monitoring.
While the impact assessment and annual monitoring facilitates understanding of the characteristics of the participating groups at large, the case studies provide qualitative evidence and a more in-depth understanding of how, why kind of issues. The findings of the case studies are expected to further contribute to efforts by WFP and its partners reflect on what works, or not and identify lessons learned.
The purpose of the case studies is to understand how P4P is affecting its target groups, to draw practical lessons by identifying needs and best practices in WFP’s initiative to provide a market opportunity to small-holder farmers through CUs. This second round case studies are a follow up of the first rounds that have been conducted in 2010. The studies used individual and group interviews, observation and secondary source to collect the required information from target groups. For this effect, semi-structured questionnaires were administrated.
Six farmer’s organizations (primary cooperatives and cooperative unions) and two smallholder farmers in Oromiya, SNNPR, and Amhara regions were the target groups of the studies. The studies were conducted from 15 -30 December 2011. Officers1 from VAM, P4P and PCU have involved in the studies. The rest of the paper is structured as follows. Section 2 presents the cases from FOs (CUs and PCs) followed by smallholder farmers in Section 3.
1 Aschalew Feleke (VAM marketing officer), Tewledeberhan Girma (PCU M & E officer) and Yibeltal Fentie (P4P M & E officer)
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2. FARMERS ORGANIZATION
2.1. Farmers’ Cooperative Unions
2.1.1 Sidama Elto Farmers` Cooperative Union in SNNPR
Type of FO: Cooperative Union Location: Awassa, SNNPR, Ethiopia Established: October 2003 with by-laws Member PCs 62 (8,930 men and 486 women) Affiliates: Member of SNNPR CF and ECX Employees: 14 total (3 female) Leadership: 8 men (elected by the G. Assembly) Commodities: Maize, Beans and Teff Buyers: Priso institutions, WFP, consumer cooperatives, NGO, traders Supply side support: ECX, VOCA, Self help
Assets: Warehouse, forage combiner and new offices. Sidama Elto`s CU new office
Background: Sidama Elto Cooperative Union (CU) is located 275 Km from Addis Ababa, Southern part of Ethiopia. It is a medium capacity2 cooperative union with an asset of 1, 600 metric ton-capacity warehouse, forage combiner and new offices. The CU has a General Assembly, Board of directors, Controlling Committee, General and Deputy Managers and other staff. There are 62 members of Primary Cooperatives (PC) and six PCs have applied to join the Union, which will be approved by the general assembly. Because the CU is growing quickly, it is planning to reorganize its departments including human resource and marketing. Since participation of women is low in the union, the deputy manager reported that at least two women will be elected and included in the leadership in the upcoming general assembly. Moreover, women will be included in the new departments as well. The union is encouraging member PCs to increase women memberships and it has been indicated that women members are increasing at PC level (no data available yet) because of awareness creation by the NGO, government and the union as well.
Services: The CU have been providing a range of services including: (a) agricultural input like fertilizer and basic improved seeds for members followed by non-member farmers; (b) credit service for member primary cooperatives; (c) investigation of better markets for member products; (d) seed multiplication especially maize; (e) animal feed manufacturing; and (f) supplying of consumable goods (a shop where people come and buy these goods) like sugar and oil for members and non-members. In 2011, for example, the CU distributed about 646, 331 litres of oil and 3,800 metric tons of sugar to member and non-member farmers through primary cooperatives, consumer cooperatives and traders.
2 P4P Ethiopia’s CU capacity rating is based on criteria including assets, services offered to member PCs and volumes aggregated.
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The supply of consumable goods and manufacturing of animal feed are new service started in 2011. This is mainly because the CU continues to grow and expand its activities where the relationship the CU has with different organizations such as WFP is contributing to its growth and expansion.
Storage and financial capacity: The CU owns a modern warehouse with a capacity of 1,000 mt. In addition, the CU uses government warehouse (300-mt capacity) for free. To solve the storage problem temporarily, WFP donated rub halls with 600 mt in 2011, which makes a total capacity of 1,900 mt. The CU management highlighted the contribution of WFP in improving the storage capacity of the union. Nevertheless, the CU requires additional warehouse with 2,000 mt capacity. Although expensive, the CU also rents warehouses as required. A 500 mt capacity warehouse, for example, costs about US$1,165 (Birr 20,0003) per month.
The annual credit requirement for the CU reaches Birr 20 million (USD 1,165,026). In 2011 the union requested a total of about Birr 10 million (USD 582,512.96) from rural micro finance (9% interest rate) and Omo Micro finance (17% interest rate). However, the union received only Birr 3.5 million (USD 203,879.54) loan from the rural micro finance (and paid it back) where about 60% of the credit was for grain marketing and the rest for other purposes like improved seed collection and consumable goods distribution. Initially the cooperatives were getting loans from the Rural Micro Finance – this facility is now provided by the Omo Micro Finance which has been channelling small volume of credit to households, hence could not satisfy CU`s loan requirement, that is quite high. This financial institution charges higher interest rate to cover the cost incurred to reach households at grass root level. Although there are government and private banks in the region, CUs are not able to receive loan because of collateral problem.
Aggregation and marketing: The union P4P procurement modalities: Sidama Elto Farmer’s CU is a medium capacity union and has participated in direct aggregates commodities from farmers through its procurement in 2010 and 2011 with two (1,600 mt) and one PCs (most of the time the CU collects commodities contract (600 mt) signed respectively. There was no default in 2010 but defaulted 200 mt in 2011 owing to substantial from PC`s warehouses). Cooperatives (PC and CU) price increment. “we got invaluable benefits from WFP- we in the area remain in the market for a short period of built our capacity and got to know and contact other organizations ” but WFP’s agreement is not flexible in that time because of limited capital. According to the CU price goes up right after signing the agreement, said the management, traders enter first into the market and deputy manager at Sidama. While the agreed price upon contract was Birr 540 per qt (USD 31.46) in 2011, the market even go to farmers’ homes to aggregate price want up to Birr 750-800(USD 43.69 to 46.6). The union commodities partly because they have trucks and was forced to deliver the commodity to other buyers at the existing price. WFP recognizes that P4P does not enter into Isuzu vehicles, implying that the union is competing the market as early as possible and prices tend to go up in with traders for the commodities from their the due course. The CU believes that forward contracting will solve this issue. Hence the union signed a forward contract members. Sometimes they pay advance payment in 26th February 2012 to supply 400 mt of maize to WFP to st th via their brokers as well. Traders are price setters be delivered from 1 March to 30 April 2012.
3 1 USD =17.167 Birr
8 but they present themselves to farmers as if they are paying a higher price. When the CU enters the market, prices goes up but it is forced to quickly withdraw due to limited financial capacity. Moreover, traders do not give priority for quality product. Despite the importance of quality product, the existing market from other buyers is not encouraging as there are no extra prices for quality commodities. “Member primary cooperative are sometimes preferred to sell to traders where quality is not a requirement” says CU management. The CU has different marketing options including prison institutions, WFP, consumer cooperatives, NGO, traders and plans to sell to agro processors and Zonal government offices as well. In 2010, WFP was the major buyer (64%). On maize and beans (WFP commodities) in 2011, the CU sold as follows: Commodities Buyers Quantity (mt) Maize WFP 400 Maize Prisons 800 Maize Consumers 100 Haricot beans Traders 220 Total 1,520 Usually, buyers collect commodities from the CU`s warehouse. While 20% of the maize supplied to P4P was aggregated from non-members (as they could not get the required quantity from members), the other commodities were and collected from members. According to CU management, each buyer has its own pros and cons; for example, prison institutions are regular buyers but require small quantities (although they bought 800 in 2011). WFP, on the other hand, develops CU capacities in different ways but the agreed price is not subject to change in case of price fluctuation. According to the deputy manager, the CU’s negotiation power with other buyers is improving over time. According to the deputy manager, it would be good if cooperative experts from the Cooperative Federation, Zonal and Regional levels are available during price negotiation with WFP as CU colleagues alone are unable to influence WFP. Sometimes the CU wishes to sell at low prices to WFP considering the invaluable support being provided by the agency.
The CU gets market information from different places via telephone, on spot discovery and media and the CU management finds that price fluctuation is highly constraining commodity aggregation. Despite such challenges, the union managed to aggregate and sell a substantial volume of commodities, as indicated below:
Type of grain Commodities aggregated and sold in mt
2009 2010 2011
Maize 200.6 1,500 1,300
Haricot beans 98.5 1,100 220
Teff 18.9 221.8 120
Wheat 45.0 50 --
Fava beans 18.8 50 35
Pea 8.8 12.5 10.7
Total 390.6 2,934.3 1,685.7
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There is very big change in haricot beans and maize aggregation between 2009 and 2010 mainly because WFP bought large quantity of these commodities (1,000 mt maize and 600 mt haricot beans) in 2010. Considering maize and beans (commodities most needed by WFP, WFP`s share in 2010 and 2011 was 62% and 31% respectively. In 2011, due to drought-induced crop failure, which contributed to high market prices and a shortage of marketable quantity & quality of food commodities, the union (like most CUs/PCs) aggregated low volume of commodity as compared to 2010. The average full market price of maize (including additional cost to bring the commodity to WFP standards) has been increasing from $180.86 in October 2010 to $412.00 in September 2011, almost 127.8% increment.
P4P`s contribution: P4P has contributed in: (a) Improving the quality of commodities: The CU tries to buy quality commodity because of the awareness from WFP. The union cleans and fumigates commodities to maintain the required quality standards. The union learned the importance of quality control from WFP and the CU’s deputy manager promised to market quality products to other buyers too. The union has showed a significant improvement in warehouse management as shown below.
BEFORE: Sidama Elto CU warehouse management beginning of 2010
AFTER: Sidama Elto CU`s warehouse management in 2011
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(b) Expanding market options: The union is expanding its market options and plans to sell to agro processors. It has started communicating with different buyers like Gut Agro industry owing to support in terms of capacity building from P4P.” Market options are increasing “says Deputy Manager. Organizations are eager to work with the union when they see the Rub halls donated by WFP. “Organizations like ACDI/VOCA and Agro processers are approaching us once they know that the CU is working with WFP” continues the Manager. (c) Increasing the aggregation capacity of the CU: The CU`s aggregation capacity has been increasing, 2011 being exceptional year as mentioned above. P4P has contributed by donating temporary warehouse and developing the skills and knowledge of the union through training and regular technical assistance.
Positive factors and constraints: Limited credit and warehouse facilities are the major constraints. The union has a piece of land in the compound and are planning to construct additional warehouse if money is available. With a number of financial institutions in the area, a loan from a bank or micro finance institutions could be a solution to the financial problem although not easy to obtain because of collateral issues. Market price fluctuation is another challenge in that price of commodity goes up once price is agreed with buyers. On the other hand, accessibility of Awassa town where the CU is located, linkage with organizations like WFP, VOCA and new activities like forward contracting are an opportunity for the union.
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2.1.2. Damot Farmer`s Cooperative Union in Amhara
Type of FO: Cooperative Union Location: Bure, West Gojjam, Amhara Region P4P procurement modality: P4P considers Established: 2000 Damot CU as a high capacity union; hence Legal status: Legal with by-laws the union has been participating in soft Member PCs: 58 with 58,573men and 7,375 women tender procurement. In 2010, the union members signed three contracts to supply 2,512 mt of Leadership: 10 men, 2 women maize and delivered the commodity Commodities: Maize, Wheat and Teff successfully. In 2011, the union signed two Buyers: WFP, wholesale traders, flour factories, contracts to supply 900 mt maize but failed to brokers supply partly because of shortage of quality Affiliation: Member of the ECX, Abay Bank Sh. Co product and partly price went up right after Supply side support: VOCA agreement is signed forcing the union for side Assets: Tractors (2); truck (3); car, flour factory; selling. Damot CU is one of the potential WH with 5,000 mt capacity, trailer, unions planning to participate in the WFP Office building with furniture, regular procurement, despite failure to supply the 2011 contracts.
Background: Damot Farmers Multipurpose Cooperative Union is located 360 km from Addis Ababa, North West of Ethiopia. It is relatively a high capacity cooperative union whose capital has increased from Birr 185,000 - 20 million (USD 10,776.49 – 1,165,025.92) in 12 years since it was established. It is administered by a General Assembly consisting six members represented from each member of the 58 PCs. Daily activities are run by employees under four departments and accountable to a manager . The representation of women in various committees (like purchasing committee) is highly influenced by the prevailing socio-cultural situation in the region where women do not have the same opportunities as men. In most cases married women are not encouraged by the society to be members of primary cooperatives. However, changes are being seen in few PCs but at slow pace. The Damot CU believes that gender promotion activity requires the integration with PCs, government and other actors engaged in gender interventions.
Services: The Damot CU renders a wide array of services to member PCs, including tractor service, agricultural inputs, credit, freight transport, supply of essential consumable industrial goods, and procurement of grain aggregated by primary cooperatives (these services are the same for the last couple of years). Some of these services are also being rendered to non-member PCs. As a social role in the community, Damot CU has been supporting three HIV/AIDS positive orphans to attend their education with a monthly fee of Birr 300 per orphan (USD 17.48). The union has quality control and post- harvest handling equipment such as maize sheller, sampling spear, quality testing, sack sewing machine, grain cleaner,
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and fumigation sheet, all donated by WFP in 2010 and 2011 to improve the quality of agricultural commodities. Farmers are using the maize sheller from PCs –at a fee of Birr 5-8 per quintal (1 qt= 100 kg). The union has a plan to buy a combine-harvester, construct warehouses, establish pepper processing factory and improve freight transport services. The Damot CU plans to maximize profit by establishing a flour factory to process wheat grain. Furthermore, the by- products of the factory will provide livestock feed to support the introduction and expansion of commercial livestock fattening.
Credit and warehouse: The CU used to access loans from Government owned bank, Ethiopian Development Bank (EDB), however in recent years the regional government provides collateral to access an annual loan from Commercial Bank of Ethiopia that reaches Birr 30 million for agricultural inputs. The CU renders 50% of the agricultural inputs cost to PCs as loan and utilizes the remaining money for procurement of grains. Unlike CUs in other regions, this helps Damot CU to aggregate large volume of commodities mainly from farmers and non-members as well. The union has a warehouse with a capacity of 5,000 mt, which is not sufficient according to the union management. The union rents additional warehouse as required and is negotiating with town administration for land to construct additional warehouses .
Marketing of commodities: The CU has access to market information from mass media, office of agriculture, cooperative office and brokers; the information obtained from brokers is found to be updated and reliable for decision making and is shared with member PCs. Broadly, the marketing season for grain markets in the area extends from January to June. The peak marketing season, where farmers sell majority of the commodities, is March to June when farmers are looking for money to buy agricultural inputs. Farmers buy agricultural inputs in cash and this obliges them to hold more grain stock for sale during the planting season (March – June) to buy agricultural inputs. Normally, grain prices increase during the planting season and farmers obtain better price at that time compared to them selling at harvest period. Farmers have traditional storage facilities to store commodities for such long periods and this will reduce the quality of the commodity.
The Union monitors grain prices in the surrounding and distant markets after which price negotiation with the PCs begins. The two major factors considered for negotiation are prevailing market price and quality of commodity. The Union does not buy poor quality product and renders a price top-up (ETB 5 per 100kg) for quality differences of the product aggregated by PCs. The PCs prefer to sell commodities to the Union due to annual dividends, fair transport rates and to avoid corruption in the process of trading with traders. Traders aggregate small quantities and remain in the market longer than cooperatives. ‘’Traders enter markets ahead of CUs/PCs and cooperatives withdraw early due to capital limitation’’, says the Manager. However, during the peak marketing season both operate in the grain markets. Quality is not a requirement for traders and they even mix different qualities of the same commodity as compared to PCs/CUs particularly when prices are high.
The Union aggregates commodities from farmers through PCs and the commodities are then aggregated by the Union accordingly: Maize, Wheat and Teff. Moreover, Field peas, Beans, Chickpeas and Rapeseed are also aggregated and
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the Union has a plan to start Sesame and Haricot bean trading. In 2011 the CU purchased and sold 1,593 mt of maize, 1,221 mt of wheat, 198 mt of Teff and 40 mt of rapeseed, which were supplied by farmers through 8 member PCs. Considering maize, for example, one farmer, on average, supplied 0.4 mt maize, according to CU management. The graph below shows the volume of food sold in three consecutive years. The trend shows that the Union’s capacity to aggregate and sell commodities had been increasing between 2009 and 2011, however the 2011 drought in the Horn of Africa led to crop failure, which contributed to high market prices and a shortage of marketable quantity and quality food commodities; most cooperative unions supported by P4P defaulted on their supply contracts. Qt sold (mt) 6000 5000 4000 3000 2000 Qt sold 1000 0 2009 2010 2011 Years
The volume sold in 2011 is low because of limited supply of commodities, according to the Union. PCs, however, say that there were no supply problems from farmers but rather the Union did not want to buy.
Experience of tender management: The union sells commodities through open tender that demands performance bond of 10% on total cost of quotation. Once the tender is analyzed and the winner identified, both parties enter into a legal agreement. In the process of selling commodities, the CU experienced defaulter when the price volatility and other factors obliged traders to prefer losing the performance bond instead of a higher loss. As a mechanism the CU is looking for increase in performance bond to 20% to be exercised in the upcoming marketing season. However, 20% of performance bond requirement may limit the number of competitors. In case two rounds of tenders fail to get competing buyers, the CU is free to sell 10% of total available volume through negotiation with potential buyers. These examples to a certain extent tell us that the union is strong enough to manage tenders. In this regard, the training given by WFP on contract management and the experience of the Union with soft tender has contributed a lot to developing the capacity of the Union. The union credits P4P with introducing it to WFP procurement process, assisting the Union to gain experience in cleaning, fumigating, warehouse management, packing and tender management. It is advisable to extend the required assistance so that the Union would participate in competitive market like WFP regular procurement. The Union has no experience of traders complaining about quality products (in fact, traders do not as such require quality). The Union has started working with WFP Ethiopia in 2010 to increases the income of smallholders through aggregating and supplying grains to WFP from member farmers by maintaining organization procurement standard and quality. The Union
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appreciates the intervention of WFP in terms of paying better price for quality products. Opportunities and challenges
Moreover, the Union appreciates the quality - Collateral provision of the regional government to access analysis and post-harvest handling equipment bank loan, working relationship with partners (WFP, donated by WFP, the technical assistance and ACDI/VOCA, Regional government, PCs), tax holiday to training as well. import consumable industrial goods, and being located in a Conclusion: The engagement of Damot CU in productive area are some of the envisaged opportunities. aggregating agricultural produces improves the - On the other hand, the Union has constraints including but functioning of markets and competition with not limited to: warehouse shortage, price fluctuation, conflict traders; evidenced by the fact that farmers are of interest from member PCs, and access to power and water obtaining fair markets prices. The move to operationalize the flour factory. towards paying more for better quality product encourages farmers to think about productivity - Moreover, the Union is dissatisfied with the way the and quality. The provision of quality checking superintendent (quality control Company) and the hub equipment by WFP to the union minimized the (destination where the food is delivered to ) are working as complaint of the CU on WFP Superintendent part of the food approved/graded by the superintendent was as both parties employ scientifically proven rejected by the hub after delivery. According to the Union, equipment that avoid visual bias. However, they failed to supply 900 mt in 2011 because the hub has monitoring the utilization of the donated quality refused to accept the approved food as well. These checking equipment in advance of actual complains by the Union were taken seriously by WFP which procurement, and undertaking joint quality sent a team to verify the claims. The team confirmed that the tests can avoid complaints about WFP commodity was below WFP procurement standard. Superintendent and hence encourage the Damot CU to aggregate and supply more by maintaining the standard of WFP procurement. Quality is the first skill that the union needs to be acquired to compete in the broader market and in the WFP regular procumbent. Finally, record keeping and increasing the participation of women in the Damot CU leadership should be strengthened.
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2.1.3. Mira Farmers` Cooperative Union in Oromiya
Type of FO: Cooperative Union Location: Shashemene, Oromiya region, Ethiopia Established: 2009 with by-laws Member PCs: 19 (1,677 men and 283 women members) Affiliates: Oromiya Coop. Bank, Leadership: 7 men and 3 women Employees: 5 total (1female) Commodities: Maize, Beans, Wheat Buyers: WFP, traders, prisoners, brewery factory Supply side support: Center for Development Initiative Assets: None Partner`s warehouse used by Mira at Shashemene
Background: The union is located 275 Km Addis, in southern Ethiopia. It has a general assembly- the highest decision making body, a board of directors, purchasing committee and five employees. The board members from the 19 member primary cooperatives constitute the CU`s general assembly. The five board member of the union includes the chairman, vice chairman, secretary and two members. The purchasing committee also includes a chairman, secretary and one member. The general assembly meets on yearly basis in Shashemene where plans, achievements and other issues are discussed.
Services: The union has been providing services (the same as previous year) including grain marketing, agricultural services (improved maize seed), training on improved agricultural practices (in collaboration with office of Agriculture), technical assistance and market linkage. In 2011 the union has linked one member PC to Zonal prison institution to supply maize and another PC with Brewery factory to supply wheat. The service gaps include supplying of fertilizer, transport facility for grain marketing, limited capacity building and consumable commodities.
Storage and financial capacity: The union does not own a storage facility. The union pays 1,200 Birr per month for a 200 mt capacity warehouse which belongs to one of the union`s partners, Community Development Initiative (CDI). Moreover, it rents a further warehouse whenever necessary (there are a number of warehouse in the area for rent). The union rents an office for 600 Birr per month as well. The union has requested land from the municipality to construct a 1,200 mt capacity warehouse, office and quality inspections centre. The funds will be mobilized from different sources such as PCs and loans from financial institutions. Although there are Commercial Banks in the area, securing credit is not easy as they all request collateral which is challenging for the union. The union is currently a member of the Oromiya Cooperative Bank (it is shareholder) and hopes this will help solve its financial problems as the union will able to get loan
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with minimum collateral. In 2011, the union received 300,000 ETB credit (without interest rate) from CDI (a supply side partner) for commodity aggregation and paid the loan back. The CU has increased its capital to Birr 1.2 million (although still small to run its business); the manager attributes this to different factors, including P4P`s support as P4P is contributing to improve the capacity of the union in terms of technical, managerial, marketing capacities. P4P procurement modality: Mira CU is a low capacity union and participated in direct contract in 2010 (600 Aggregation and marketing: The union has a purchasing mt) and 2011(500 mt) with one contract signed each committee responsible for collecting market information on year. There was no default in 2010 while 300 mt different places including Addis Ababa. Whenever the union defaulted in 2011. Sometimes price goes up right after wants to sell and buy commodities, they collect market prices signing an agreement as a result; (a) The union may from traders, brokers and check ECX prices. According to not able to aggregate commodities; and (b) The union the manager, however, there is no regular updating of market may look for other buyers for a better price. In 2011 for prices. The union is improving pricing of commodities partly example, the union aggregated from PCs at 2, 750 Birr through trainings and negotiating experience from WFP (USD 160.19) per mt (excluding, loading and purchases. While negotiating, the union usually considers its unloading, cleaning, etc), but prices goes up to 2,900 relationship with the organization, stock available and future ETB (USD 168.93) when the union sign the agreement prices in addition to the prevailing market price. with WFP. In the due course, prices increase to Birr 3,000 (174.75) per mt and went up further to 7,000 Birr The union buys from its member farmers and pays (USD 407.76) per mt. What happened was the union immediately and no advance payment from the union and signed an agreement without having a stock and PCs traders side). Since the union is new and low capacity (with were not interested to supply to the CU and new no transport facility), the PCs sometimes deliver the harvest was not available as well. As a result, the union commodity to the union. Traders who have trucks, on the defaulted to avoid losses. The loss would have been other hand, go to farmers home and collect commodities reached Birr 450, 000 (USD 26.213.08) had the union through brokers. In general, the union pays a better price honor the contract, according to the manager. considering the quality of the product and to encourage member PCs. If the prevailing price, for example, is 420 ETB per quintal, the union pays 430 ETB (additional price of ETB 10 per quintal). PCs prefer to sell to the union considering the support being provided including dividends. Some PCs managers, however, want to continue to sell to traders and make side business as a personal advantage.
The union remains in the market for a short period of time, mainly from Dec to Feb, while traders start buying earlier as they do not require high quality standards (moisture content is high right after harvest) and have the financial capacity to wait in the market for longer. Sometimes there is a long procedure for the union to participate in the marketing process. “Prices go up whenever there is an intervention by farmer’s organization” says the manager. However, the involvement of the union in the market does not as such affect the entire local market price because the union is marketing limited quantity. What causes the local price to increase is that traders aggregate in bulk from the area and deliver commodities
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to other areas like Moyale (Kenya boarder). Moreover, buyers from other regions aggregate from this area. However, the price of maize goes down in the area whenever there is inflow of maize from surplus producing areas. While selling, buyers collect commodities from the union`s warehouse. In the event that prices are forecasted to be going down, the union tries to sell the commodity as soon as possible to avoid losses. The union’s buyers include WFP and traders. In 2011 for example, it supplied 200 mt maize to WFP aggregated mainly from members and partly from non- members. In 2012 it plans to supply 600 mt of maize to WFP and traders, 200 mt beans to
WFP and traders, agro processor and Meeting market quality standards: The CU requires quality exporters, 60 mt of wheat to a prison product than traders and pay better price accordingly. institution and NGOs through direct negotiation and sometimes the union sells Member PCs are trying to aggregate quality commodity from the commodity via tender where traders and farmers (a product not broken, low moisture content, etc) and prison institution participate. Because the the union further clean the commodity to maintain the union is so new, it does not have enough required quality standard. The union got experience in this capital or manpower to fully utilize the market regard thanks to the skills from WFP`s through trainings, at this time. technical assistances and equipment. However, the union does not go through such process while supplying Women participation: Women constitute commodities to other buyers because there is no extra price 25% of the general assembly and 30% of for quality product rather there will be weight loss and it is a the leadership. According to the union tough activity as well. NGOs require relative quality product manager, women constitute 35% in the than other buyers. The maize quality in Shashemene where PCs membership. “Women are actively the union is located is better than in Wellega (highly surplus participating in the different meetings and area) but similar price, according to the union manager. expressing their ideas”, says Feyessa. Despite of this, the manager believes in quality product and Among the 19 member PCs, two PCs are he feels that it is human being who is consuming these food organized mainly by women (wives and commodities, for which quality is unquestionable. female headed households) and the union is working in collaboration with the local government to organize three new women PCs and include them in the union. “Our interest is to work with women because they are trustful, hardworking and use money properly for their family” says Feyessa. In 2011, one PC organized by women supplied 30 mt maize to P4P- the largest supply by this PC to date. Although there are improvements regarding women participation in the area, including the decision making process due to awareness and training programs by government and NGOs, there is a lot to be done on gender. ”They are changing not only economically but also socially” says the union
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manager. The CU has been giving priority to women in terms of training opportunities, technical assistance and other supports. The Union promotes the women PCs to visitors.
Positive factors and constraints: The main constraint is capital. Capital means so many things for the union as it requires capital for aggregation, warehouse, transportation, etc. ”We have limited capital and it’s not sufficient for grain marketing let alone for other purposes such as warehouse construction“ says the manager. The second problem is logistics in that some of the PCs are far from the union (up to 92 km single travel) to give the required technical support. Currently the union is using public transport and transport from its partner, CDI. Market fluctuation is also a constraint. On the positive side, it has a good relationship with the local government, commitment from member PCs, and a good relationship with organizations like WFP and traders.
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2.2. Farmer`s Primary Cooperatives
2.2.1. Shende Primary Farmers’ Cooperative in Amhara
Type of FO Primary cooperative Location Shende town, Wonberema District, Amhara Region Established 1979 with bylaw Members 3,412 (80% smallholder farmers) Female members 545 (16%) Leadership 10 men, 1 woman Commodities Maize and Wheat Buyers Damot CU, Traders Affiliation Member of Damot CU and Abay Bank Sh. Co Supply side support None Assets 3,300 mt capacity warehouses, Office, Hotel and shop
Services: The primary farmers’ cooperative as it has done before has continued to provide services such as supply of improved seeds, fertilizers, insecticides & pesticides for its members and retailing consumer goods and engages on marketing of agricultural commodities. The PC purchase retail consumers’ goods (sugar and oil) from Damot CU by paying in cash and sell for farmers and people in the vicinity with reasonable profit margin. The PC is not interested to take loan for expanding its service of sale of consumer goods because of lack of well-structured linkage with the Damot CU for buying the goods through the union from whole sellers. Accordding to the PC management, the Damot CU does not give due attention to facilitate purchase of consumers’ goods/commodities from whole sellers who are located in Addis Ababa and nearby major towns and supplied back to the PC. On the other hand, the PC has no the capacity and time to manage the procurement of consumer goods (collect pro-forma, review them and subsequently perform the procurement). Of course, it is the leadership4 believes that getting loan is very important for the PC expanding its retail goods service.
The government supplies improved seeds and fertilizers for farmers through the PC on credit with 50 percent down payment. In fact, in the area about half of the farmers buy improved seeds (mostly from the PC) and fertilizers with 100 percent cash payment. The cooperative previously provided pedal pumps for irrigation on credit basis but now this service stopped. Because currently members of cooperative are not interested to get pumps through credit as their belief on its benefit is very little. Earlier the cooperative provided credit for its members who engaged in fattening but now it interrupted the service because of using the capital for other priority activities (such as constructing store, expanding aggregation of commodities, etc.) that the leadership (executive board committee) believes these activities benefit all the
4 The leadership of the PC includes board of directors, controlling committee and has staffs responsible for the day to day activities. The PC is members of Damot CU, one of the P4P targeted cooperative unions
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members. The leadership reveals lack of knowledge and skill on use of modern agricultural equipment (which improves quality of agricultural produces) as a fettering factor for expanding types & scales of services that the cooperative provides. Of course, the chairperson of the cooperative’s executive board committee (Ato Yayeh) is aware of the modern agricultural equipment including the quality control and post-harvest handling equipment WFP provided to Damot CU. In the conference of general assembly, the importance & benefit of using maize Sheller and Combiner for reaping and threshing of wheat & teff was discussed. Members on the meeting also discussed and agreed on buying Tractor for providing plowing service to members but it could not be materialized because of lack of knowledge on how to go about the procurement process. In fact, the cooperative has adequate capital which enables it to purchase a Tractor. There is no private sector which provides the services of Combiner and maize Sheller on rent. The primary cooperative wishes the cooperative union buys Combiner as their members need the service badly and also the leadership thinks that the union has the capital for purchasing.
Storage and finance: Since the first case study was conducted last year, the PC has built a mud wall store which has a capacity of 10, 000 quintals (1,000 MT); as the construction is finalized, it is supposed to start provision of service towards end of December, 2011. The leadership of the cooperative feels that the problem of storage will relatively be solved due to the construction of the additional store; but not as such confident in its adequacy by taking into account the need on the ground. The PC uses its own capital for aggregating commodities, does not face money shortage for aggregating commodities and the major commodities that the PC trades are: wheat, maize and cabbage.
Aggregation of commodities: Ninety percent of commodities purchased by the farmers’ cooperative were supplied by the member farmers. The PC pays in cash for farmers who sell their produces on the spot unless there is lack of access to withdraw money from bank in the same date. If in case, there is lack of access to withdraw money the farmers sell their commodities on credit to be paid within 4 or 5 days. This shows that the member farmers have close tie and trust in their cooperative. The PC determines purchase price for each commodity it buys based on a price that private traders offer in the day in the local market. The cooperative pays up to 5 birr (0.29 USD) higher variation per quintal (100 kg) than traders; however, such decision is not easy as the management is led by executive board committee. Many farmers bring out maize for sale from Mid-January to July and wheat from April to June. According to the PC, June - July is the period when they need money to buy agricultural inputs (improved seeds and fertilizers). In the view of executive board members of Shende PC, traders start buying commodities immediately after harvest as they purchase commodities which do not meet quality standards like dried well, pure, etc. The PC begins purchase after the traders already entered into market and it pulls out before them because September is the month that the PC closes its financial transaction for the budget year. In fact, the management body of the PC feels that from September onwards until the next harvest season the supply of commodities in the market dwindles.
The PC works on quality improvement by educating/communicating farmers to supply quality commodities. The PC`s purchasing committee are also well informed and aware of quality check (impurity, spoil, dryness, etc.) while purchasing commodities. The member farmers are also aware of the fact that there is relatively stringent quality check when they sell
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commodities to the PC than private traders. As a result, they bring their produces for sale to the PC if only they are relatively good quality or meeting the quality standard; otherwise, they go for selling to private traders who do not bother for buying quality commodities. Once commodities are purchased, cleaning of stores, proper store handling & management measures are taken to maintain quality of commodities until sale. Ato Yayeh Menlargeh added that “the increase awareness on quality improvement and assurance at the primary farmers’ cooperative level is the added advantage of working with WFP through the cooperative union”.
Sales and contract management: The PC sells its commodities to Damot CU through negotiation/contract and through tender to traders. However, More than 95 percent of the commodities that the PC aggregated were sold to Damot CU mainly because traders feel that the PC sells its commodities to Damot CU (as it is affiliated member) so that they are reluctant to compete even though the PC advertises for open bids. Even sometimes, once bid documents are received, the Damot CU comes and forces the PC to cancel the bid and directly sell to the union. This, therefore, discourages private traders from participating in competitive bids that the PC announces. In addition, as there would be possible suspect of corruption when commodities were sold for private traders, the management of the PC does not opt to sell for private traders for avoiding such suspicion. The selling price for each commodity is determined based on the average price that a given commodity was bought, and also transport, labor wage and other costs incurred. The price that the CU offers for buying commodities from PC is not as low as to cover the costs incurred and minimum profit margin. Therefore, the PC prefers to sell to the CU because the price offer is profitable and it gets dividends from the union. The PC does not have recent experience that it sold its commodities by loss. In 2011, the type and amount of commodities that the cooperative bought and sold include: wheat – 8,145 quintals; maize – 7,479 quintals; and cabbage - 189 quintals. The amount of commodities that the PC purchased from its members and sold in 2011 is lower than what it traded in 2010. The main reason for reduction on quantity of commodities aggregated by the cooperative is that the inability of the cooperative union to collect the commodities as per the agreed timeline deterring the PC from aggregating more quantity of commodities as there was no free space for storage.
The PC sells its commodities on the basis of signed contract; however, as its main buyer is the CU it has not so far implemented forfeit measure for default of contract. As executive committee reflected, for example, once the CU signed contract for purchasing 6,000 quintals (600 MT) of cereal, it defaulted/broke the contract after sometime, but the PC did not take any legal measure as per the agreement as the PC is affiliated member of the union. After the termination of the contract the PC treated the commodities for preservation from attack of insects until they would be sold in the next season for private traders.
Trainings: The executive board committee members of the PC received training on record keeping and documentation; however, the committee does not believe that it was adequate enough so as to effectively manage and implement the activities. The training was conducted by the District Cooperatives Promotion & Coordination Office. Moreover, the PC has participated on record keeping training organized by WFP. Ato Yayeh Menlargeh (chairperson of the executive board) further emphasized on the importance of receiving training that “making people accountable without provision of proper
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training on financial management and reporting is not reasonable. That is, when problems happen on decision making, financial management and reporting, the office of cooperatives’ promotion & coordination points out finger and also accuses us, but the office does not organize appropriate & adequate training and does not provide on-the-job training/mentoring through supportive supervision to enhance our capacity”.
Women participation: The PC has been increasing female members. Since the first case study was conducted last year, for example, the PC has increased its female members from to 355 to 545. Recent increased awareness and understanding on increment of amount of dividends and other benefits that a member household receives is a significant contributing factor for the change in attitude of males in the community in general and husbands in particular for their motivation to allow their wives and other adult female family members enroll in the PC. The executive committee members pledged that in an upcoming general assembly promotion will be made in order to increase enrollment & participation of currently married women; and then increase their proportion up to 80 percent of the total female members of the area. As leadership it is the belief of the executive board committee that women enrollment & participation in the farmers’ cooperative is an added advantage for the organization as they have different views which are useful and invaluable inputs for the growth of the cooperative.
According to the management, fee is not a problem for women to join the PC. The membership fee is 10 ETB (0.57 USD) per member farmer (onetime payment). In addition, one has to buy a minimum of one share at 40 ETB (2.31 USD) for membership. The membership and shares fees have increased by 100% from 5 birr to 10 birr and from 20 birr to 40 birr respectively since December, 2010.
Challenges/constraints that the PC encounter are: (a) Lack of skilled manpower for processing procurements such as tractor; (b) Lack of coordination for purchase of consumers goods through the CU; (c) Lack of capacity building activities like training for enhancing the capacity of executive board members; (d) Lack of vehicle/truck for transporting consumers’ goods/commodities which would be bought from Addis Ababa and other major towns; and (e) Little attention from Damot CU to buy and collect the bulk of commodities that the PC would aggregate. As long as the CU scales up its capacity and efficiency to buy and collect, the PC feels their members could supply sufficient commodity.
Conclusion: Even though the P4P material & technical support to the Damot CU for encouraging to supply quality standard commodities for WFP and broader market somewhat inspired the Shende PC for accumulating good quality commodities from its member farmers, it is hard to say that the small-holder farmers sizably benefited from. Therefore, it seems wise strategy to provide technical & material support directly to the PC for ensuring aggregation of commodities which meet quality standard as they are very close to the farmers who produce & supply the commodities and also they buy considerable proportion of the commodities from their member farmers. If the PC have better knowledge & understanding on the economic values of supplying quality commodities as well as devoting to work towards that, the small-holder farmers will supply good quality commodities and receive higher prices which enable them improve their livelihoods (one of the ultimate goals of P4P).
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2.2.2. Jalela Credit and Saving Primary Cooperative in Oromiya
Jalela Primary Cooperative is located about 8 Km away from Shashemene town, was established in 2000. Type of FO Primary cooperative After five years, the PC obtained legal status with bylaw. Location Shashemene District, West Arsi, Oromia The PC is organized to serve women with female-only membership. The cooperative started with four women Established 2000 but legal in 2005 with bylaw in 2000. As the cooperative became more profitable, Eligibility: Female and must purchase shares membership increased to 165 women within five years. Member 165 women At the cooperative’s establishment, members were contributing Birr 0.25 per month to accumulate and run a Affiliation Mira CU, Duro Shala Credit and Saving CU credit and saving scheme. With the cooperative’s hard Grinding mill; arable land; livestock; Assets work and good reputation, they increased the share modern store value to Birr 80 and registration fee to Birr 20 to join as Birr 20 registration fee., Birr 80 to buy Membership member. When a woman joins the cooperative, she has share to save Birr 10 on monthly basis. Most of members (80%) are spouses while the remaining are widowed.
The PC has 3 hectares of cultivable plots where they do everything from cultivation to harvesting. The PC is affiliated to Mira CU and Duro Shala Credit and Saving Union. About 80% of members have a landholding size of less than one hectare. The organizational structure is similar to other PCs, whereby the General Assembly is the higher body and activities are run by committees. Committee members meet frequently to discuss issues that come up while operating their activities. The PC employs a shop seller, an accountant, guards and staff for livestock feeding. Since the establishment of the PC, the chairperson has not changed and there is no system is in place for elections. The PC runs a wide range of services including credit and savings, supplying food and non-food commodities, grinding mill, livestock breeding (bull and goat), poultry farming, aggregation of agricultural commodities and educational material support for orphans.
PC member taking care of poultry and bull
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The PC provides short term (six month) credit to members that range from Birr 300 – 700 with a fixed interest rate of Birr 30 irrespective of loan amount. The bulls and goats that provide cross breeding services are a local breed with good traits of production. The grinding mill operates using diesel but with the increasing fuel prices, they found it unprofitable and they have temporarily stopped services until they come up with a solution. The PC has identified opportunities for the expansion of services, including: cash capital to increase loan size and extend loan periods, dairy farming, diversifying commodities for sale, accessing electricity to run the grinding mill and strengthening commodity aggregation.
PC`s warehouse and shop services
The PC has strong support from government (local district government and Agricultural Research Institutions) and NGOs CDI, Kale Hiwot Church, World Vision, and Foreign Ambassador’s Spouses Living in Ethiopia) and Cooperative Unions. The NGOs support the PC in various ways, such as providing construction of a standard warehouse, dairy cows and goats, chickens, weighing scales, office construction and training on the management of the credit and saving scheme. The PC has a good record keeping system in place where every transaction is recorded.
Chairlady, explaining records to WFP staff
As a resident operating in the local markets, the PC has full information about commodities prices in their local area. In addition, traders and cooperative union working with the PC provide information on market prices. The executive
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committee holds meetings to discuss on what to buy, where to buy and at what price. The PC aggregates maize, haricot bean and teff for sale to traders, the Mira cooperative union and members. The PC aims to aggregate high quality commodities, which it sells to the Mira Cooperative. The PC typically aggregates grain from nearby Shala markets and the Aware government school farm, rather than directly from members (as the members and non-members in the area is deficit in production). In order to aggregate grain (in a certain instance), the PC took a loan from a subgroup of Women called Ras Agez Maheber, organized by the NGO that provides financial and technical support to the PC (the PC`s credit and saving funds are not allowed to be used for commodity aggregation). In 2010, the PC supplied 30 Mt of maize to P4P through the Mira cooperative union. Haricot bean production in 2011 was poor in the local area and could not be aggregated from members
Traders typically enter the market early and remain the whole market season; however, due to a lack of sufficient capital, the PC entered late in the market season and pulled out early. The PC prefers to sell commodities to the Mira cooperative union because it belongs to the union and obtains dividends, trusts the union on the weighing of and fair payment for supplied commodities and relies on the union’s support. The PC explained that if traders provide a better price, they deduct from the real weight of the commodity, thereby compensating the better price with cheating. Similarly, the PC believes that farmers prefer to sell to their organization (if there is surplus production); however a lack of sufficient capital hampers the PC from aggregating more commodities from farmers.
The PC believes that good working relationship with partners, who support them both financially and technically and assistance from local administrations in terms of providing of arable land and construction sites are invaluable. However, limited access to capital, long term loans and a hydroelectric power supply to run the grinding mill at low cost are constraints to expanding their business and services.
The PC’s main objective is to run the credit and saving scheme; but has keen interest to aggregate commodity from markets subject to cash availability. The leadership of the PC, particularly chairperson, is held for the last five years by the same woman most likely hinders the participation of others in the leadership. The participation of the PC in aggregation, though not sourcing from members, will have higher impact on household income where the P4P programme is seeking to attend in its life time. However, bad harvest of the current season in the area coupled with limitation of capital to aggregate from markets restricted their participation in supplying grain to Mira cooperative Union and hence to WFP
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2.2.3. Dila Olka Farmers Primary Cooperative in SNNPR
Type of FO Primary cooperative
Location Boreja district, Sidama Zone, Southern region
Established 2008 but legal in 2005 with bylaw
Member 200 with one quarter women
Leadership 8 (all men)
Member of Sidama Elto Cooperative Union, the Sidama Zone Coffee Growers Union and the Affiliation Sidama Chalala Saving and Credit Association
Assets The organization’s only asset is cash capital of less than 30,000 Birr (USD 1,747)
Commodities Maize, haricot beans and coffee
Buyers Its affiliated organizations
Supply side support None
Background: The Dila Olka Farmers Multi-Purpose Primary Cooperative (PC) was established in 2008 with bylaw (rules and regulations). The PC is located 20 Km away from the district capital of Sidama zone in the Southern Nation, Nationalities and Peoples Region (SNNPR). The primary cooperative comprises of 3 Kebeles (lowest level of district consisting of a group of villages or town) with 200 members of whom one quarter are women (Almost all of the women members are married which is not common for most PCs). Membership nearly doubled from 112 to 200 during the four years since the PC was established and about half of the PC’s members have landholdings of less than 2 hectares. Women are joining the PC to receive Government subsidized sugar and vegetable oil (as priority given to members) and receipt of shared dividends. During the recent general assemblies, half of member women attended the meeting and were free to express their ideas in the presence of men, according to the PC management. The PC is affiliated to the Sidama Elto Cooperative Union, the Sidama Zone Coffee Growers Union and the Sidama Chalala Saving and Credit Association.
Organizational structure: The higher body of the PC is a General Assembly that comprises representatives from member Kebeles. Under the umbrella of the General Assembly, there are five board members (5), three members of control committee and three members of credit committee. All committee positions are occupied by men. However, the PC would like to include at least two women in leadership positions in the control committee and a cashier position in the upcoming General Assembly to be held in August 2012. The existing committee will finish their first term in August 2012. Committee members may continue to serve in their current positions or be replaced by new leadership depending on the decision of the General Assembly.
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Markets information, aggregation and pricing: The PC largely depends on Sidama Elto CU for market price Facilities and services: Although a young information and consults the CU in advance of aggregating cooperative, the PC provides services to commodities. The PC aggregates maize, haricot beans and farmers which include aggregation of grain coffee beans. Aggregation of coffee started in recently, in and coffee, supply of subsidized goods October 2011. The PC aggregates a small quantity of grain such as sugar, vegetable oil and fertilizer. at a time due to shortage of capital and small loan available The PC plans in the future to strengthen from the Sidama Elto CU. The PC sells the aggregated grain existing services, supply improved seed commodities to the Sidama Elto CU and coffee to the Sidama and trade commodities like soap, salt, Coffee Growers Union. The Sidama Elto CU provides Birr 5 cement, corrugated iron to protect – 10 per 100kg above market price depending on the quality members from high market prices. The PC and prevailing market price. Local traders enter the market only receives support from the Sidama first because they have more capital available and are the Elto CU (trading, financial service and sole decision makers of their purchase rate. The PC also technical support) and SNNPR federation pulls out of the local market earlier than traders due to (interest free loan). The organization’s only exhaustion of resources available from the CU. The PC asset is cash capital of less than 30,000 purchases commodities of higher quality as compared to the Birr. The PC does not have a store and local traders but there is no value addition by the PC. The office, but it does rent a store with a 35mt quality of the grain is checked with visual observation and capacity at a price of ETB 200/month (UDS based on the experience of purchaser. The PC purchased 17.48). coffee beans with a value of Birr 500,000 in 2011. The SNNPR Cooperative Federation provided an interest free loan for the purchase. The PC stored the coffee beans in a rented store and the coffee will be sold in March/April 2012 to get a higher price.
Marketing season: The PC’s skillful management of the purchase and sale of aggregated grain allows it to rotate commodities to overcome storage problems. The grain market season starts in December and typically extends to June, depending on the household’s capacity to cover their expenditure until the June price rise. In addition to a cash shortage which prevents the PC from aggregating more, the PC does not own a grain store. It is more profitable to store commodities and sell at the end of marketing season. The PC only optimizes on where the grain is sold, which provides little profit margin as the price difference between the purchasing and selling locations is marginal. The lost profit due to the lack of store can be compensated to some extent by the dividend received from the CU.
The PC aggregated 45 Mt of maize in 2009, 80 Mt of maize and 20 Mt of haricot bean in 2010, and 80 Mt of maize in 2011. The PC has started aggregating commodities for the 2012 marketing season: in December 2011, the PC procured 5 Mt of maize that it sold to the CU with a profit margin of Birr 10/100kg. It plans to aggregate 200 Mt of maize and 150 Mt of haricot beans in 2012. The PC has access to a short term loan from their cooperative union but it is too small an amount to buy a large amount of grain. In 2009 and 2010, the PC accessed loans amounting to 30,000 Birr and 50,000
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Birr respectively, which could buy at maximum 15 mt of maize at a time. The PC delivered 80 Mt of maize and 20 Mt of haricot bean in 2010 and 80 Mt of maize in 2011 to P4P through the Sidama Elto CU. The PC has a list in hard copy of members and non- members who sold grain that indicates the quantity and price of sale.
Main constraints: The PC’s main constraints are a lack of storage, lack of access to capital, absence of full time employees and tough competition with traders. The lack of store is the PC’s most immediate constraint, as the store affects the PC’s competitiveness with traders, who can offer a better price for commodities with the intention of keeping the stock for sale at a later date.
Conclusion: Dila Olka Farmers Primary Cooperative is interested to become more engaged in marketing agricultural commodities and expanding its services to members, but a critical shortage of capital remains a bottleneck in materializing this ambition. The PC’s leadership is working for free as they are elected by the general assembly. However, the problem of storage and access to capital to build a store are the main limitations facing the PC. Hence facilitation of an advance payment or longer term loan for construction of a warehouse needs should be considered by supply side partners.
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3. SMALL-HOLDER FARMERS
3.1. A Female Head of Household & PC Leader in Amhara Region
Female Farmer Dejeyetnush`s Factsheet Shende, Wonberema District Location West Gojjam, Amhara Region Female head of household (3 females Headship and 1 male) Affiliation Shende Farmers’ Primary Cooperative 3 hectares (2 hectares owned Land size and 1 rented) Membership Since 1997 Crops cultivate Wheat, maize, teff and millet
Livelihood sources: The hardworking farmer, Dejeyetnush, diversified her income and livelihood sources by engaging in agriculture, property rental and working for a government office as a cleaner. Dejeyetnush earns a monthly salary of Birr 550; but this is insignificant for her compared to her annual income from agricultural production. As she practices mixed farming, she is engaged in both crop production and livestock rearing.
Assets: - Dejeyetnush owns two houses: one in Bure town and one in the rural Kebele where her farm plots are situated. The roofs of both housing units are made of corrugated iron sheet. The housing unit in the town has five rooms which are rented at Birr 100 per room per month as additional income for the family. Dejeyetnush owns 2 oxen and 3 cows and works three hectares of cultivable land.
Significant story of hard working woman farmer – Dejeyetnush In the current agricultural season Dejeyetnush grows maize, wheat, teff and millet, which respectively occupy 0.5 hectares, 1.5 hectares, 0.75 hectares, and 0.25 hectares of the total 3 hectares of land she uses for agricultural production. In the previous agricultural season, almost half of the land was occupied by teff, but most of the land is now used to grow wheat. She uses crop rotation, which means that she rotates the cultivation of different types of crop from one year to the next. In order to improve productivity, she uses improved seeds, fertilizers and pesticides of the recommended proportion by the agricultural extension worker, irrespective of their price in the market. She bought the improved seed for wheat from the Shende PC on loan by paying a 50 percent down payment. The majority of her teff production is used for family consumption. The majority of the other commodities produced are sold. In the next agricultural season, Dejeyetnush plans to expand her agricultural production by renting an additional plot of land and to plow her fields by tractor rented from private owners. Her family members are involved in agricultural activities and
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domestic chores. She relies on the concerted effort of her family members to realize her dream of further changing her family’s lives through agriculture.
Dejeyetnush records all expenses that she incurs on her agricultural production. She does not have problem of estimating the money she spends and the income she gains from agriculture. To this effect, she is studying for a diploma in Accounting through distance education and she is going to graduate in July 2012. The studies have significantly helped her to record and document all of her agricultural transactions. In order to make decisions on producing more of one commodity compared to others, she takes into account the current productivity and the forecast market value during sale. As Dejeyetnush is proactive in agricultural trials that enterprises introduce in the area, she entered into a forward contract with an Improved Seed Promotion Enterprise for growing improved maize seed on her 0.5 hectares of plot of land. The enterprise provided her with the seed and she covered the costs of the other inputs (fertilizers and pesticides/herbicides). When the maize crop is harvested, the enterprise will purchase the maize at 750 Birr per quintal (100 kg) as per the signed forward contract. However, she is not happy with the purchase price of the forward contract because she thinks that “the price offer of 750 ETB per quintal for the improved maize seed in the forward contract is not attractive against the costs incurred and labor intensity of the production process”. In order to maintain the quality of maize, she tries to harvest after the maize is well dried. She also treats the maize with chemicals to protect from insect infestation during the three months storage before being brought to market.
Dejeyetnush very much appreciates the income she earns from agricultural production. She says that nothing can substitute the income gained from agriculture, including her monthly salary as a government employee. Dejeyetnush plans to discontinue her current government job in the District Higher Court. She wants to expand and fully concentration on her agricultural work as the income she gains from agriculture is tremendous. Dejeyetnush earns more than 20,000 ETB per year from agricultural. She uses her agricultural income to cover the school expenses of her children, build rooms for rental and buy house furniture (such as a sofa set and TV) and other household materials. She accentuated the paramount importance of agriculture in changing the life of the hard working farmer by saying: “I have a young graduate brother who is working in a government office and he is paid more than two thousand Birr per month. But when I evaluate his living standard in contrast to myself as a farmer, his is much below. Therefore, in my view, income from employment is not as beneficial as engaging in agriculture as long as one strongly toils and concentrates on it.” She further elaborated, “I recently visited his family in Bahir Dar [capital city of Amhara region- northwest part of the country] and saw how he suffers to fulfill his family’s basic needs with his monthly income and then I invited him to come to my locality, which is our birth place, to celebrate the feast of the upcoming Ethiopian Christmas [07 January, 2012] with us as we are going to slaughter an ox for sharing with ten neighbors and we have already started preparation to make it a colorful event”.
She stores her agricultural produce in traditional storage (made of local materials such as wood), which has a capacity of 12 quintals (1.2 MT), and the rest in the house where the family lives. In order to safeguard against insect infestation during storage, she first treats the commodities with chemicals and then puts them in sacks. If the commodities are not consumed or not sold within three months, she treats them again with chemicals for storing them longer than three
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months until she makes a decision for sale, taking into account whether the market price is financially attractive. Dejeyetnush sells most of her agricultural produce to the Shende PC. She prefers to sell agricultural commodities to the cooperative because she gains dividend from her three shares and the cooperative supplies her agricultural inputs (such as improved seeds, fertilizers and chemicals for weeds and pests). Dejeyetnush does not want to sell her with agricultural produce to private traders because she feels that private traders/merchants cheat in weighing goods and the price they offer is lower than what the PC gives her. She trusts the cooperative much more for sale of her agricultural products. Dejeyetnush harvests maize in December or January of each agricultural season and she usually sells in June. But for the current main harvest season (2011/2012) she plans to sell in July or August with the anticipation that prices will be high at that time. Using a basic accounting and ledger system, she records all of her expenses for commodities until they are ready for sale. She only decides to sell when the price covers all the expenses incurred and the expected profit margin. She also gets market information from traders/brokers and other farmers before she decides to sell her commodities. Dejeyetnush wants to continue to sell to the cooperative and supply quality commodities. She also advocates to other farmers to produce and supply good quality agricultural goods to the market as she feels that the quality of products is decisive in getting a better market price and increasing one’s income.
Dejeyetnush actively participates as a member of the executive board committee of the farmers’ cooperative in which she enrolled years ago. She is also involved in voluntary activities like educating people in her community on family planning, reproductive health and gender issues. She advocates for gender equality and confronts gender based discrimination and mistreatment. For example, the chairman of their Kebele rejected female farmers who requested for agricultural inputs on credit basis because he believed that the woman farmers would lease their land for share cropping and would not use the inputs for their own farming. She motivated the four women who were deprived from receiving the inputs to go with her to appeal the decision at the District administration office. As a result of the help they received from Dejeyetnush on how to plead their case to the administration, the four female farmers were allowed to receive the agricultural inputs on credit.
Dejeyetnush strongly believes that women should organize themselves to benefit from agricultural activities and from the cooperative where they are members. She emphasizes that if women are organized, they can get credit from different organizations and save money through their association to make capital. The saved capital could be used as loan money for woman farmers to buy inputs for farming their agricultural land. She further said that as women in her locality are not organized, they have difficulty accessing credit for agricultural activities. As a consequence, they rent their land for cash or for share farming to other better-off farmers with little benefit for them and then they survive very poor. She concluded her comment about woman farmers and poor women in her locality by saying that: “the first thing for poor women to get out of poverty is to have the determination to explore and use all the possibilities which help them get out of abject poverty”. To this effect, she believes that women should receive training, which will help to raise their knowledge and change attitudes. Dejeyetnush believes that women’s involvement in decision making and control of income is progressively increasing through improved awareness of women and men from awareness raising trainings conducted in the community. She further explained that the female health extension workers have significantly contributed to improving awareness on the importance of women’s participation in decision making and having control on household’s income.
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She added that the enrollment and participation of women in the Shende PC is continually growing because of the increased awareness of the services provided by the cooperative for members and distribution of dividends. In Dejeyetnush’s opinion, the domestic chores for which women are mainly responsible do not hamper females from enrolling and participating in cooperatives and being members of the leadership committee, as long as they have the determination. Dejeyetnush emphasizes that female members of the cooperative convene and attend the general conference which is held twice a year. She also said that women express their views, issues and concerns as equally as men at the conference. The main issue that the women voice at the general conference of the PC is the shortage and poor quality of improved seeds that the cooperative sells to its members. Dejeyetnush also forwarded her suggestion to the PC in which she is member of executive board committee: “the primary cooperative should have a plan for its activities. It should increase its negotiation power with the cooperative union and other entities to enable that preferred types of improved seeds with adequate quantity are available for the farmers as there is a serious shortage in the area.” Dejeyetnush says that she has not faced major challenges as a farmer in general and female in particular in her agricultural activities as she conducts her agricultural work in a planned and organized manner. She confronts and overcomes the challenges in systematic and strategic ways rather than surrendering.
In summary, Dejeyetnush is strong farmer who relies on agriculture to change lives for the better. If Dejeyetnush and other woman farmers are identified and supported though training, credit, and other material support for improving the quantity and quality of their agricultural produces from growing to harvest, storing and marketing, it will be possible to improve their livelihoods. It seems quite important to extend P4P’s support and intervention to small-holder farmers directly, as they are at the heart of supplying good quality agricultural commodities to WFP through their PC. Although Dejeyetnush sells commodities to Damot CU through her PC, she is not aware about P4P. Damot CU is one of P4P’s targeted CUs which has been supplying a relatively large volume of Maize to P4P. It is also very useful to provide training on quality improvement and marketing to active PC members like Dejeyetnush. These members can reach a large number of small-holders farmers through outreach and peer education programmes, which will raise awareness on producing marketable quality commodities.
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3.2. A Male Head of Household in Oromiya Region: Working as an Assembler for His PC
Smallholder Farmer Tibau Hulatu Factsheet Location Gojededa village, Shall district, West Arsi, Oromiya region Headship Male head of household Affiliation Mefertu Danisa Bonge primary cooperative Land size 1.5 hectares owned, 2 hectares rented Membership Since 2004 Crops cultivate Maize, beans, millet, potato Livelihood Agriculture and small business (grain trade)
Tibau Hulatu lives in Gojededa village, Shall district, West Arsi zone of Oromiya regional state. He owns 5 oxen, 10 cows, 12 calves, 2 donkeys, 34 goats and 4 sheep. The livestock are managed by his household members, particularly his children and his wife. He has a bank account in his name. Tibau has seven family members (3 males and 4 females) and depends on agriculture and his small business of trading grain as his major livelihood sources.
Division of labor: Traditionally, certain tasks are assigned to specific male and female household members. However in recent years, change in the division of labor has been observed as a result of continuous awareness raising by various agencies. Changes in the role of men in the household include fetching water by the husband, preparing food for household meals and sharing ideas on household matters. In Tibau’s family, family members are engaged in most activities irrespective of their gender. Tibau focuses on agriculture and fetching water for consumption and livestock and his wife on food preparation. Their three children who are attending school take care of the livestock when they come back from school. Decisions on agricultural production are made jointly but decisions on the use of income are made by Tibau without his wife’s involvement.
Production and marketing: Tibau owns 1.5 hectare of cultivable land and annually rents 2 hectare of land to produce maize and haricot beans as rain fed agriculture. The productivity of agriculture in Ethiopia largely depends on the use of modern agricultural inputs and timeliness of rainfall. With the increase in arable land by 0.5 hectare, Tibau`s production has increased in the last two years and he has obtained better income from the sale of his agricultural produce. In 2010, he produced 5.8mt of maize and 1.7mt of haricot beans. In 2011, Tibau produced 10mt of maize and 2mt of haricot bean, which is 72% and 18% more than in 2010. Most of the haricot beans serve as a cash crop, while maize is used for both consumption and sale. Since the 2010 agricultural season, Tibau sold 88% (15 quintals) of his haricot beans and 74% of his maize production (45 quintals) to a primary cooperative and traders. For the 2011 harvest, he saved his produce for future sale with the exception of 2.5mt of maize sold to cover miscellaneous expenses. Sacks and ttorage made of wood are used to keep the commodity in good condition and fumigation is practiced whenever needed to protect from weevil.
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His major production costs are agricultural inputs, labor, land rent and draft power. His preferred marketing channel for his produce is through the primary cooperative. He also aggregates and stores grain for sale during the lean season when the primary cooperative ceases to buy produce. He says that he prefers to sell to the cooperative because they are trustworthy, offer a better price and have a good reputation for support. For example, the cooperative distributed grain to its members at a low price when drought hit in 2008.
Maize production is earlier in West Arsi compared most other maize producing parts of the country. As a result, farmers would like to sell their maize immediately for a high price, but the maize has high moisture content and the cooperative will not purchase most of the maize. Tibau holds the grain stock from his own production and the grain he aggregated from markets for sale in May and June, when prices are higher and he can sell to traders who can offer a better price. The idea of quality products is known but does not incentivize most buyers to offer a higher price. In recent years, particularly the last two to three years, quality is becoming more important. He explains that ‘’the Mira cooperative union informed us that quality products gets a better price and farmers need to produce and supply quality products. We used to thresh maize grain manually and broken grains and foreign materials were included as part of the product. With the idea of improving quality, the primary cooperative introduced a maize Sheller that avoids broken grain and foreign material while threshing.’’ Traders provide advance payment based on personal relationships with the intention of selling the grain at future prices. Traders mix good quality and poor quality produce. However, for the same quality produce, the cooperative offers 5 Birr on top of the prevailing price offered by traders.
Benefits and needs of PC membership: Tibau and his wife are members of Megertu Danisa Bonge Primary Cooperative (member of Mira CU- one of the P4P targeted CUs). He explains that everything the household needs for agricultural production is available from markets, but the issue of expired commodities on the market, particularly agricultural inputs (fertilizer, chemicals), are concerns for him. The cooperative is trying to supply these inputs in good condition directly to farmers. Furthermore, the supply of basic food items such as sugar and edible oil at a subsided and affordable price would be unimaginable from traders. Were the sale of these items not through the primary cooperative, the subsidy that the government puts on these items would have gone to traders and farmers wouldn’t be able to afford trader prices. Additionally, in 2008, there was a drought and prices of maize increased to Birr 600 per 100kg. The cooperative had a stock of maize. To overcome the food insecurity, the cooperative distributed the maize at half price of Birr 304 per kg to members as a loan to be repaid at harvest. The primary cooperative also provides training related to improved agricultural practices and uses of agricultural inputs to increase productivity. The cooperative leaders are elected every term and all members are invited to the general assembly meeting. Tibau explained, ‘’I have been appointed by members for a leadership position, however, as I am engaged in personal business in addition to the agricultural activities, I have declined to be part of the leadership.’’ He added that ‘’my wife is a member and I have no reservation if she is elected to the leadership position. I made myself ready to accept the role that women can play in the leadership positions when we decided for her to be a member.’’ Increased prices of agricultural inputs and improved seed, difference in prices of agricultural produces and agricultural inputs, fragmented arable land and recurrent moisture stress are the main constraints that Tibau faces to boost production.
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4. APPENDICES Interviews cited - cooperative unions
Damot CU Sidama Elto CU Mira CU
Mr. Belay Zeleke, Acting manager (male, 32 Ms.Simret Simano, deputy manager Mr. Feyessa Lemma, manager years old, BSc degree); Mr. Motbynor (female, 29 years old, BSc degree) (male, BA degree) Gebayehu, board member, 35 yers old; Mr. Ayehu belay, Secretary, 38 years old)
Date: 17 Dec 2011 Date: 22 Dec 2011 Date: 24 Dec 2011
Location: Bure, West Gojjam Zone, Amhara Location: Awassa, SNNPR Location: Shashemene, West Region, Arsi, Oromiya Region
Interview language: Amharic Interview language: Amharic Interview language: Oromiya and Amharic
Interviews cited - primary cooperatives Shende PC Dila Olka PC Jalaaa PC
Mr. Yehun Atenafu, manager (male, 39 Mr. Marsa Dangisa, manager Manger and board members years old, grade 10 completed); Mr. Getinet (male, grade 8); Mr. Getachew Yigzaw, accountant (male, 33 years old, Gesese, secretary (male, grade 8) grade 10 completed); Mr. Yayahe Mendale, board member, grade 10 complete)
Date: 17 Dec 2011 Date: 23 Dec 2011 Date: 27 Dec 2011
Location: Wonberma Woreda, West Gojjam Location: Boreja district, Sidama Location: Shashemene District, Zone, Amhara Region Zone, SNNPR West Arsi, Oromia Region
Interview language: Amharic Interview language: Amharic Interview language: Oromifa
Interviews cited - farmers Dejeyetnush Yenesew, farmer (female, 33) Tibau Hulatu, farmer (male, 26 years old)
Date: 19 Dec 2011 Date: 28 Dec 2011
Location: Wonberma Woreda, West Gojjam Zone, Amhara Location: Gojededa Village, Ganesabunegie Kebele, Region ShalaWoreda, West Arsi Zone, Oromiya Region
Interview language: Amharic Interview language: Oromifa and Amharic
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