For the last 2 months I have been working with a small-scale nucleus farmer in Wa, in the Upper West region. To give a very general explanation, a nucleus farmer is someone who provides inputs to a certain number of outgrowers, who have to repay him in kind at the end of the harvest.
But for this post, let’s focus on equipment. This year, with the help of a big value chains project, this nucleus farmer scaled his outgrowers operations from 100 to almost 400 farmers but with the same equipment as last year. The idea I am trying to bring here is that he is now at a breaking point where his equipment, if used at a full capacity, is just able to support outgrowers needs. That also means that if something goes wrong at the wrong time, there is a direct impact on the outgrowers and by definition on his nucleus farming business. Let’s explore this idea more in depth.
His most important pieces of equipment are his 2 tractors and his pick-up truck, which is used to transport the inputs (seeds and fertilizer bags) to the farms. So let’s assume one of them broke down in a critical moment of the season. What does it mean for his business? We can easily get 2 big impacts out of this potential situation:
- Direct financial impact, resulting in reduced revenues and extra costs from the need to hire other equipment service providers and to repair the broken equipment.
- Impact on outgrower performance, because rain irrigated farming is all about timing and delayed inputs often have a very negative impact on yields.
The end point of all that is simple: this nucleus farmer cannot afford any equipment problems. It is easy to say but when you see the working conditions (terrible land preparation or war-like roads) and the poor condition of this equipment, the risk of breakdown is very high.
So now I am asking the question: what is going to happen if receives a third tractor from a USAID grant? Is he going to increase his outgrowing operation to 500 farmers and stay on this breaking point? Is always increasing the size of the business really the path to success, especially in the case of an outgrower scheme?
I know it is often pretty awkward to end a blog post with questions so I would like, as a closing note, to give my own perspective on the possible answers to these interrogations.
On the project side, I think a grant for a piece of equipment like a tractor should never be delivered without some sort of engagement from the farmer to improve his business management capacities. This could take different forms:
- Cost-shared management training between the project and the nucleus farmer
- Follow-up (financial and technical records) and monitoring of the equipment use
Finally, on the nucleus farmer side, scaling up quickly to more outgrowers is a very short term and unsustainable way of increasing the profit of the business. The challenge now is to try to convince these nucleus farmers that it’s worth investing in the outgrowers they already have. Helping them increase their yields is, in the long run, the best way to sustainably increase income of both the nucleus farmer and the small-holder farmer.
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Fantastic post with some solid analysis and interesting recommendations. One area that seems logical to improve for the nucleus farmer would be risk management and maintenance systems – even without increasing/changing the amount of equipment I think that businesses need to better assess the risk of various breakdowns and take steps to mitigate those risks. This could be an interesting overlap with Romesh’s work on maintenance systems with the cashew processing plant in Wenchi.
I really like the idea of investing in the existing outgrowers. If you were going to advise on how to do that, what types of qualities or numbers would you look for to choose who to invest in? What activities or new types of equipment could a business invest in to increase outgrower yields? It would be a really interesting cost comparison between (A) return on investment in a new tractor used to expand numbers of outgrowers vs. (B) return on investment in a mechanized planter and offering planting services to existing services.
Thanks for sharing David – would be sweet to see a photo of the tractors or the roads!
Thank you for sharing your experience! I just want to add a few of my own observations with the two outgrower operations I have been working with.
They interact with approximately 3000 farmers each. One owns five tractors, one owns six. Obviously, they cannot plow for everyone at the right time with those resources, so they hire normal tractor operators in critical times. These are just as unreliable as tractors owned by the aggregator, and even more, as the private operators sometimes take a sneaky day off their assigned tasks to perform some ploughing for other clients who might offer a better price. This delays the beginning of the production period for the outgrowers and increases the risk of low yields for the aggregator.
With this, I want to emphasize the importance of investing in the farmers a nucleus farmer has. The objective being higher yields, we can assess the efficiency of what is being done now: trainings, handouts, etc. I think the relationship between the aggregator and his outgrowers is critical. Possible ways forward include a lead farmer system, commission on yield for field staff, demonstration plots in communities, positive rewarding systems for individual farmers or FBOs who perform particularly well, etc.
Mike, the idea of offering planting services is very interesting. As for investing in a new tractor to expand the number of outgrowers serviced, I think the strictly middleman role of the aggregator is often neglected. I am not sure about this, so please put me back on the right track if I went astray. While helping the farmers by providing them with credit and an end market, nucleus farmers have to put money in the bank, an important challenge when the credit part of the business enjoys a weak 60 % recovery rate. Advertising, getting the word out there as a possible end market for farmers might be a good way to increase those volumes of grain to trade. Even if they do not enjoy the credit, farmers might be happy to know that they won’t need to rely only on market women when October comes.
It’s really great that both of you shared your own experiences about about equipment and outgrowers scheme. I wanted to mention that what Pascal wrote about dealing with normal tractor operators is also a big source of problems for the nucleus farmer I’m working with. This would be really interesting to see if these unreliable tractor operators are the norm and what could be done about it. How can make it easier for a nucleus farmer or an aggregator to monitor their work and make sure that everything is being done according to the contract?
Coming back to what you both said, the solution is probably somewhere on the farmer’s side. If a nucleus farmer doesn’t have time to follow the tractor himself maybe one the farmer can. And that’s where the idea of a lead farmer playing the role of a field staff for the nucleus farmer is so interesting!
[...] mirror – http://www.investinpeople.ca/iip/805 Untapped Markets: Equipment breakdown – http://untappedmarkets.ca/2011/07/equipment-breakdown/ Bernard: Vert Burkina: la crainte et l’émerveillement – [...]
Good to see such sharing of experience and thinking among EWB folks in Ghana. Mike drew my attention to this blog. I am with USAID/Africa Bureau, working on a team with the World Bank and GoG on design of a Commercial Agriculture Program in the northern Ghana regions.
Clearly there is a need to improve business management skills, and to foster a culture of planning. But I agree with David when he says that “helping farmers increase their yields is, in the long run, the best way to sustainably increase income of both the nucleus farmer and the small-holder farmer.”
I would suggest that this requires a bit of a paradigm shift: a focus on _quality_ of land preparation and investing in soil health/tilth, which is more than fertilizers. Good seed help, but you need soil fertility too.
Poor quality and rapid plowing without knowledge of soil quality differences — in much of Africa, and certainly in n. Ghana, poor intrinsic soil fertility is a key constraint, and is limiting. Some soils will not respond to standard fertilizer mixtures. Poor plowing will lead to inconsistent stand establishment, exposes soils that are erosion-prone and that should be kept covered. Once the soil is gone, it is difficult to reclaim. In these areas, multiple-cropping, agroforetry species interplanting, with groundcovers, and crop-livestock systems, est. should be encouraged. Trees like Faidherbia albida are excellent in the Savannah for intercropping — drops its leaves in the wet season and leafs out in the dry season — crop yields are significantly increased. Check out this link to pursue this line of thinking:
http://www.worldagroforestry.org/evergreen_agriculture
Thank you Walter for sharing your thoughts on this post and on the challenges of small-holder farmers in northern Ghana.
I think the point your bringing about land preparation and soil health is, as you said, critical for long term sustainability of farming in the region. I can even share some of my field experience regarding to these problems.
I think farmers here are starting to understand that the soil of their farms is getting poorer and poorer every year. I heard a lot of links made between the poor yields of a farmer who have been farming the same land for ten years and the good yields of someone who is farming a virgin land. I think a lot of farmer understand that the soil fertility is decreasing rapidly and the fact that they themselves see it as a problem is even more alarming. Right now, I think they don’t see any other solutions than farming a new land but it is impossible for most of the farmers because traditionally you are given a land and you have to stick with that.
But to come back to the ways to increase soil fertility, I think that agroforestry interplanting and conservative farming are theoretically really great ideas but my short experience in Ghana tells that trying to encourage these practices with farmers would be like trying to teach a kid to read and write when we already have a lot of trouble teaching him to speak. The comparison is imperfect and the idea is not to compare a farmer with a kid but what I mean is that I see some projects struggling trying to convince farmers to use a good planting distance or to wear protective clothing when spraying chemicals. And these are really small behaviour changes compares to conservative farming or trees interplanting.
If we take the example of tree intercropping, farmers mindset is that they should cut the trees so it would be easier for the tractor to plough the field. From what I’ve heard, «less trees» rimes with better land preparation! The only exception is probably for trees producing cash crops like shea tree or dowadowa tree.
Same thing with conservative farming. How much energy will it take to change farmers mindset, making them understand that now, the success is not in tractor ploughing and more fertilizer but in keeping trees and farming residues on the farm! I may be wrong and knowing the little 3 months I’ve been in Ghana it wouldn’t surprise me but I think that the mindset change involved in these technologies is way to big to be a success with farmers right now in northern Ghana.
But then, the problem of soil fertility remains and I have no answer. I would be curious to know how occidental farmers deal with the decreasing of soil fertility, knowing that very few of them use conservative farming?