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A
marketing survey of Njabini location, South Kinangop Division,
Nyandarua District
Final
Report (Dec 2000- April 2002)
Introduction
A marketing survey was initiated in December 2000 in response
to farmer complaints of exploitation by middlemen and the
identification of potato marketing as a serious constraint
to potato production in Nyandarua district (Kinyae et al,
1996). The survey was to provide information on the marketing
channels for potatoes from Njabini to Nairobi and its environs.
The functions of all the players in the chain and the payoffs
for each particular function with the end goal of exploring,
with farmers, possible market functions that farmers can perform
and thereby capture a larger share of the price paid by consumers
for potatoes. Njabini was selected due to its proximity to
both the urban Nairobi market and the National Potato Research
Centre (NPRC) and due to the importance of potato in the farming
system of the area.
Site
Njabini lies in the southern part of Nyandarua district in
Central Kenya. It is in South Kinangop division where there
is 1 agricultural extension staff for every 863 farmers. Njabini
comprises of 4 sub-locations, Njabini, Kiburu, Tulaga and
Muruaki. Land parcels range in size from 5 to 100 acres. Farmers'
land ownership rights are secure with landowners having titles
deeds to their land i.e. freehold ownership, although grown
children with their own families will live and farm on parental
land that they have no title deed too; at their parents discretion.
The soils are ande-luvia phaeozeous along the Aberdare to
sodic planosol on the Kinangop plateau. Rainfall is bimodal
starting in the months of April/May and Oct/Nov and averaging
900 to 1,500 mm per year. The Aberdare Mountain range influences
temperatures, which range from 11-21oC. Frost is frequent
in the months of January, July and September when night temperatures
can get as low as 1.7oC.
Methodology
i)
Njabini farmers
a) Two structured questionnaires were administered to 37
farmers in Njabini location. One questionnaire focused on
the farmer's potato business in relation to other farm activities
while the second questionnaire focused solely on potato prices
paid to each farmer and the quantities they sold at the various
prices over the survey duration. Some of the farmers were
selected randomly while others had previously expressed an
interest in potato marketing. Farmers were selected in such
a way that each area had a few farmers representing it. Area
representation was important because farmers when negotiating
potato prices with the primary buyers usually base their negotiations
on the area price. Farmers in an area are located geographically
close such that information on potato prices can be easily
and readily passed from one farmer to the other.
b) Potato price/quantity data from each farmer was collected
fortnightly due to a combination of distance and poor road
conditions. The survey area was divided into two sections
such that farmers in one section were surveyed every alternative
week. The survey was a weekly exercise. A few of the initially
selected farmers dropped out of the survey mainly by their
unavailability every time we visited or by their reluctance
to give information borne by a suspicion we were unable to
assuage. The Njabini collaborator was invaluable in retaining
farmer's interest in our visits by providing practical advice
on the farmer's enterprises and by being widely knowledgeable
so as to answer questions related to potatoes or cabbages
or dairy etc. The exercise also provided farmers with an opportunity
to get a few tubers of clean potato seeds, place orders for
certified seeds and/or know what the National potato program
and its Njabini sub centre could do for them.
ii)
Nairobi wholesalers and retailers
a) Two structured questionnaires were administered to 32
potato wholesalers in 2 markets and to 45 potato retailers
in 5 markets in Nairobi and its outskirts. One questionnaire
focused on the wholesaler's/retailer's potato business while
the second questionnaire focused solely on potato prices paid
to each wholesaler/retailer and the quantities they sold at
the various price over the survey duration. Wholesalers/retailers
were selected randomly based mainly on the fact that potato
was on their selling agenda and they were willing to participate
in the survey. The survey was a weekly affair. A few of those
initially selected dropped out from the survey either by no
longer coming to the market or by simply expressing their
deep distaste for the regular and continual questions from
which they perceived no benefit streams accruing to them and
were thus unwilling to continue participating.
iii)
Wholesalers in other towns
a) Weekly/monthly wholesale price data from other wholesale
markets in Kenya (including Nairobi) for the period January-December
2001/ January-December 2000 were obtained from the market
information branch, farm management division of the Ministry
of agriculture.
Results
i) Background Information
Farming appeared to be the most stable activity with farmers
averaging 19.4 years in the trade followed by wholesalers
(9.2 years) and lastly by retailers (6.8 years). Wholesalers
sold the largest quantity of potatoes, averaging 22 tons per
week, followed by farmers (1.42 tons) and retailers (1 ton).
Potato was ranked as the most profitable enterprise by 60%
of the retailers and by 35% of the farmers. Potato wholesalers
deal only with potatoes, which are sold in bags from the back
of lorries.
ii) Market Agents
a) Farmer Characteristics
Farming activities are mainly (52%) carried out by both men
and women together although clarification on who does which
activity/task was not done. 65% of the farmers had 3 different
crops/enterprises on their farms with potato, dairy and cabbage
being the most common. Potatoes occupy approximately 38% of
the total farm area, an average of 2.43 acres and is ranked
2nd in profitability by 48.6% of the farmers, 1st
by 35% of the farmers and 3rd by 16% of them.
Potato Marketing
Farmers sell approximately 65% of their
potato crop, eat 15% of it and keep the remainder as seed
for the next season. Only 2 farmers sold potatoes beyond the
farm gate in Nairobi (as a broker) and in Muranga town (his
own crop only). The rest sold their crops at the farm.
Market Requirements
White skinned potatoes usually attract a
premium with the variety Roslyn Tana fetching the highest
price. The variety Nyayo usually fetches the lowest price
in the white skinned category although it is in great demand
for short periods of time when farmers in certain parts of
the country are planting potatoes. Red skinned potatoes fetch
the lowest prices and farmers will usually mix them with white
ones to get an average price that is lower than for the white
skinned but higher then for the red skinned. Sometimes red
skinned potatoes fetch a premium according to farmers but
this did not occur during the survey period.
Price Determination and Payment Terms
The primary buyer (broker, Aga Khan women
or others) comes with the price, which the farmer negotiates
on depending on the price received by the farmer's neighbours,
the quality and quantity of the farmer's potatoes and the
monetary needs facing the farmer's household at the time.
In 27% of the farms the primary buyer leaves a deposit (varying
in quantity) once an agreement on price and quantity has been
reached. Harvesting is done by the farmer who hires labour
or uses family labour to harvest the agreed upon quantity.
Seed selection is done during harvesting and tubers selected
as seed are usually left in the field to be collected later
for storage either in the field or in a store. Packaging and
selection of the remaining potatoes is done either by the
farmers (for brokers) or by the primary buyers (Aga Khan women
and those with special orders).
Storage
Farmers tend to store only their seed, which
in some cases also serves as food in times of scarcity. We
encountered only two cases of deliberate storage (as opposed
to storing because the buyer refused/delayed in collecting
harvested and packed potatoes). In one case the farmer actually
made a loss by storing for 3 weeks due to price fluctuations
such that the price rose initially and the farmer did not
sell anticipating a further increase which did not come. The
price then started to fall and the farmer decided to sell
at the price he would have sold at initially but now he had
to remove all those that were damaged since they were rotting.
In the other case the farmer made a profit since the farmer
was also a wholesaler in Muranga town. The price improved
from ksh5/kg to ksh9.4/kg after storage of 4 weeks but the
losses from rotting of damaged tubers were high although the
farmer still felt that storage had been profitable.
Credit
Less than 20% of the farmers had received
credit in the past mainly through farmer co-operatives to
buy dairy animals and inputs. For the rest farming was either
too unstable/risky (and repayment would be a problem) or credit
was unavailable (they had never thought of it and/or they
didn't even know where to go to access it).
The majority (58%) held membership in milk
co-operatives but a third of this membership was inactive
with members either not taking their milk to the co-operative
or taking very small quantities of it. Most of the co-operatives
had collapsed under the weight of mismanagement that resulted
in poor/no payments to farmers and high commission charges.
Information
(a) Technical information
As expected the Ministry of Agriculture
(including livestock and Farmer Training College(FTC) training)
provided the bulk (40%) of the technical information that
farmers had although most of that training had occurred in
the past (e.g., the FTC has not been in use for the last couple
of years). The Kenya Agricultural Research Institute (including
all NPRC-Tigoni and NHRC-Thika personnel activities) provided
21% of the information and chemical companies provided 8%.
The information received by farmers was mainly on cabbage
and potato followed by dairy. A quarter of the farmers had
never received any technical information.
(b) Price
Price information, besides that which the
broker comes with, was accessed from trucks/buyers coming
from town by 28% of the farmers, from radio (15%), newspapers
(10%) and neighbours (5%). A quarter of the farmers had no
access to any other price information but the broker. A few
farmers (13%) had access to additional price information but
they did not consider it useful since they believed that the
broker determined price regardless of the farmer's information
status.
Government Interventions
Farmers desired government intervention
that would reduce market risks for them mainly through the
control of prices, bag size and potato supply into the fresh
produce market. The farmers desired to remove market control
from the brokers to the government and get either an alternative
market or control produce flow into the market. Interventions
desired were; setting up a minimum price (29% of farmers),
setting a minimum bag size (20%), setting up of a nearby processing
plant (8%), setting up of a central market/store to control
produce into the market (8%), provision of loans/inputs (8%)
and improvement of roads (8%).
b) Primary Buyer Characteristics
There are 2 main types of primary buyers
(i.e., having direct contact with the farmer) the lorry assemblers
and the Aga khan women. A few cases of buyers with special
orders were encountered.
Lorry Assemblers
Lorry assemblers usually buy enough potato
bags to fill a canter lorry with a capacity for 40 bags; thus
the name. They are the most prominent buyers in the area,
buying the bulk of potatoes. The lorry assemblers, henceforth
in this report refereed to as brokers, are usually men that
live within the area and that farmers have fairly easy access
too. Potato buyers who are usually wholesalers and who want
a specific quantity of potatoes hire them to meet that demand.
The buyer provides the bags that the broker needs to fill
with potatoes at an agreed upon price. Brokers usually know
which farmer has a crop and the maturity of the crop. According
to farmers the broker knows even before they do that their
crop is ready and will approach the farmer telling them that
their crop is now ready for harvesting. The broker walks from
farm to farm negotiating with each farmer for a specific number
of bags for which he leaves behind the empties. Since farm
sizes are small and farmers are geographically distributed
brokers often walk for long distances to ensure that their
orders are met. After harvesting the farmer packages the non-seed
sizes after selecting the large sized ones. The large ones
are not packed into the bag. The potato bag filled with potatoes
to the brim is carried to the farm gate closest to the road
and the large tubers (approx.20-60kgs) placed on the ground
next to the bag. The broker comes back with sisal twine to
the farms, and sews up each bag by placing the large tubers
on top in a net like sisal extension that ensure that the
bag appears attractive to buyers. After sewing the broker
leaves the sacks and moves to all the farms where he contracted
farmers and does the sewing. In the evening (usually late
in the night) the broker comes with a truck and picks up all
the bags while paying the farmers. When collecting the bags
the broker will in some cases rescind on the agreed upon price
usually on the pretext that the market situation has changed
since his price negotiations with the farmer. In some cases
the broker will not come back for a couple of days citing
transport problems and will then usually lower the price since
the potatoes are now "old" or "no longer fresh".
When the broker does not come back on the same day it is the
farmer's responsibility to cover the potatoes to prevent them
from greening. Since the roads in the area are bad the bags
are collected in bits and placed in a central place where
the road is fairly smooth. When the buyer's requirement is
met the bags are packed into a lorry and taken to market.
Aga Khan Women
Aga Khan women, as the name implies are
women who buy potatoes with a quality emphasis. They buy fewer
bags then the brokers and select the potatoes that they will
buy from the farmer unlike the broker who leaves it to the
farmer to fill the bag. They do not take small sized tubers
or those that are damaged but they usually pay better than
the brokers by Ksh100 per bag. They do not fill up a bag like
the brokers instead they have half filled sacks, which they
tie with some twine. Farmers with good potatoes prefer them
but those with poor ones find their potato grading uneconomical/undesirable.
The women negotiate with a few farmers and when the farmer
finishes harvesting the women come back and select the tubers
they will buy. The women then hire a lorry to collect all
their half-filled potato bags from the farm and another to
transport them to the roadside just outside the Aga Khan (otherwise
known as City Park) market in Nairobi. These women sell the
potatoes to retailers in the Aga khan market on Tuesdays and
Friday's. They mainly sell 2 varieties, from Nyandarua namely
Tana Kimande and Tigoni and receive a price premium compared
to the wholesaler since their potatoes are good sized and
clean.
Other Buyers
Other buyers that we encountered were buyers
with specific orders to retail outlets or other such places.
These buyers have a quality requirement similar to the Aga
Khan women but they tend to find one farmer (or a few farmers)
who generally has a good crop that’s extensive enough
to yield over a length of time. They then source their potatoes
from the one farmer (or farmers) throughout the season.
c) Wholesaler Characteristics
Wholesaling is a male prerogative with 83%
of wholesalers being male. The majority of wholesalers (55%)
joined the trade as a result of advice from others (i.e. friends,
family, etc.) although none received formal business training.
More than half (59%) of the wholesalers completed high school
while 37% completed primary school.
Wholesale Markets
Table 1:
Characteristics of 2 wholesale markets
|
Market
|
Days/wk of selling
|
Fee Charged (Ksh)
|
Ownership
|
Preferred
variety
|
Services
provided
|
Price*
(ksh/kg)
|
Quantity*
(kg/wk)
|
|
Wakulima
|
5-6
|
25/bag/day
|
City council
|
White
|
Space
|
6.55
|
31,127.6
|
|
Kawangware
|
2
|
25/day
|
Private
|
White
|
Space
|
6.15
|
5,296.8
|
* Weekly market averages over the entire
survey period
Market Services and Complaints
(i) Wakulima wholesalers complain of little
services for the fee that they pay on a daily basis. The City
Council provides selling space for the lorry mainly at the
back of the market. A few lorries do park inside the market
but the space inside is inadequate and the majority park outside.
During the rainy season the market gets flooded with muddy
water that can only be negotiated in gumboots and wholesalers
say this discourages their customers from entering. Parking
space for customers is also limited and there is no security.
Council actions that interfered or were
detrimental to wholesaling include the high fee charged (cited
by 40%), paying more than once for the same unsold bag of
potato (20%) and dirty market (17.5%).
(ii) Kawangware wholesalers had fewer complaints,
which could be because they paid for the space only and it
was clear that was all that they would get since the market
was also dirty.
Sources of Potato
More then half of the wholesalers source
their potatoes directly from farmers mainly in Nyandarua district
(different parts of it). The remaining wholesalers buy from
either market brokers (selling on behalf of a seller for a
fee/commission) or from sellers (who buy from farmers through
brokers) in the market.
Marketing
Market Requirements
Tuber size and variety were the most important attributes
wholesalers considered when buying and selling potatoes with
specific varieties attracting price premiums. In general potatoes
with white skin colour were most preferred but there were
also specific varieties that wholesalers liked regardless
of skin colour, namely Arka, Meru (Kerrs pink) and Tana. These
varieties were perceived to be good for making chips. Both
Meru (Kerrs pink) and Tana received a price premium most frequently
from wholesalers and their clients. A good potato was defined
by 42% of the wholesalers as having large tubers, by 22% of
them as being of a specific variety and by 17% of them as
being white skinned.
Credit
The majority of wholesalers extended credit
to their clients, which is repaid within a stipulated time
period (only 1 wholesaler did not extend credit). The majority
requires payment to be done once the buyer has sold their
potatoes. Although they extend credit 57% of the wholesalers
do not receive credit from their suppliers.
Informal credit was of greater importance
than formal credit to the wholesalers. Formal credit had been
received by only 17% of the wholesalers at some time in the
past while 41% of them were active in providing and accessing
informal credit in the form of merry go round and trader welfare/credit
groups.
Wholesaling Challenges
(a) The most cited problems with suppliers
and buyers dealt with pricing and competition. Supplier problems
include prices charged, price negotiations (long and unfruitful),
price fluctuations and competition from other buyers (in order
of importance). Selling problems include competition from
other sellers, poor sales when supply plentiful, price negotiations
and debt default (in order of importance). Price negotiations
between wholesalers and their customers took an average of
9.27mins.
(b) Wholesalers did not store deliberately
but would keep the potatoes until they were sold. Losses from
this type of storage resulted mainly in the wholesaler selling
the potatoes at a low price.
(c) In order to meet the challenges facing
them wholesalers formed groups/loose associations. The main
groups/associations were informal credit groups (41%), trader
welfare associations (10%) and potato wholesaler groups (7%).
Information
Wholesalers got information about their
own market from other traders (38%) and from the potato supply
coming into the market (31%). About half (48%) of the wholesalers
had no information on other markets while those with this
information accessed it from other traders (31%) and customers
(17%) coming into the market. Information on new technologies
was not forthcoming and wholesalers do not get to know about
new technologies
d) Retailer Characteristics
Women dominated potato retailing with 64%
of retailers being women. A little less than half (42%) of
all the retailers entered the trade due to advice from friends
(29%) and family (14%). More than half of the retailers (51%)
completed high school while 42% completed primary school.
Retail Markets
Table 2:
Characteristics of 5 retail markets
|
Market
|
Days/wk selling
|
Fee charged
(ksh)
|
Ownership
|
Variety preferred
|
Services provided
|
Price**
(Ksh/kg)
|
Quantity**
(Kg/wk)
|
|
Gikomba
|
7
|
25/day
|
City council
|
White
|
Space, arbitration
|
6.84
|
1,529.6
|
|
Wakulima retailers
|
6
|
50/bag +370/month
|
City council
|
White
|
Space
|
15.63
|
234.3
|
|
Wangige*
|
2
|
20/bag
|
County council
|
White
|
Space
|
6.31
|
2,375.3
|
|
Kangemi
|
7
|
0
|
Public
|
White
|
Space
|
6.57
|
1,632.1
|
|
City Park
(Aga khan)
|
7
|
0
|
Donated
|
Arka, gorofu
|
Space
|
16.32
|
241.3
|
* Retailer pays ksh10/bag getting into the
market while the client pays ksh10/bag to get the same bag
out of the market
** Weekly market averages over the entire
survey period
Ownership, Fees and Services
3 of the retail markets (Gikomba, Wakulima and Wangige) are
owned by the government through the city or county (for towns)
councils which built the markets and who were suppose to maintain
them and provide basic services for a fee. Kangemi is an
open-air market where sellers have rigged makeshift stalls
either covered with a plastic covering or without. City Park
was donated by a local foundation, the Chandaria foundation,
it is located in a high income area. Retailers in the different
markets paid different prices to carry out their retailing
activities and also had different complaints.
(i) Gikomba retailers complain of small
space, limited selling time (4am to 8am and then the clothes
sellers move in and occupy the same space), mud during the
rainy season, lack of security and toilet facilities.
(ii) Wakulima retailers complain mainly
of a lack of control on hawking activities, which is thought
to discourage clients from entering the market.
(iii) Wangige retailers complain of double
payment since the retailer pays for a bag on bringing it into
the market and the buyer also pays for the same bag on leaving
with it from the market.
(iv) Kangemi and Aga Khan retailers did
not voice any complaints probably since it was their market.
They paid no fee and thus expected nothing.
Sources of Potato
The majority of retailers (36%) source potatoes
from wholesalers who come to the market, 34% get them directly
from farmers while 28% source them from Wakulima wholesalers
market. Retailers sold an average of 3 different products
(potato and mainly any two of carrots, onions, tomatoes or
cabbages) to individuals and hotels/kiosks.
Marketing
Market Requirements
Tuber size, potato variety and freshness
of tubers were the main attributes considered when buying
or selling with tuber size being more frequently cited than
both variety or tuber freshness. Specific potato varieties
attract a price premium although in 39% of the cases no price
premium was attached to superior attributes, it was one price
for all. A good potato was defined by 38% of the retailers
as being of a specific variety and by 24% as having large
sized tuber.
Credit
The retailers did not use formal credit
but 40% were active in informal credit activities in the form
of merry go rounds (36%) and lending groups (4%). The majority
of retailers (56%) give credit to their clients and receive
it from their suppliers with repayment done at an agreed upon
time.
Storage
Retailers took an average of 4 days to sell
their potato stock resulting in storage problems mainly of
rotting and greening of tubers.
Retailing Challenges
(i) Pricing by the supplier was the greatest
challenge to retailers (39%) followed by issues of quality
(17.6%) which include mainly poor quality tubers (9.8%) and
a refusal of the retailers grading requirements by the supplier
(3.9%).
(ii)
Retailer problems with those who buy potatoes from them hinge mainly
on the price (39%), competition from other sellers' (25%)
and potato quality (9.8%).
Information
Retailers got information on their market
from other traders (62%), they set prices (17%) and from prices
at the wholesale market (13%)
Information on other markets was obtained
mainly from other traders (27%) and customers (27%). Information
on new technology was not forthcoming for 91% of the retailers
with the rest accessing it from the media (8.9%).
Table 3:
Marketing margins received by different market agents
|
Market Agent
|
Marketing Margin*(%)
|
|
Producer (in Njabini)
|
39.3
|
|
Broker
|
6.7
|
|
Wholesaler
|
15.8
|
|
Retailer
|
38.6
|
* Based on the final consumer price, it
denotes the portion of the price paid by the final consumer
that goes to various marketing agents.
Table 4: Marketing costs and margins
Price (ksh/kg) % of retail price
Weekly sales (ksh)
i.
Farmer in Njabini
Farm Gate 4.227
39.3 5991
ii.
Broker in Njabini
Gross Margin 0.716
6.7 1014.8
-Sisal twine 0.05
0.5 70.87
Net Margin 0.666
6.2 943.94
Wholesaler
Gross Margin 1.696
15.8 37587.43
- Transport 1.43
13.3 31692.23
-
Fee
-
Wakulima 0.15337
1.4 3399.05
-
Kawangware 0.010437
0.01 231.31
Net Margin
- Wakulima
0.11263 1.05
2496.15
- Kawangware 0.255563 2.4
5663.89
iii.
Retailer
Gross Margin 4.15
38.6 4143.97
-
Transport
(unloading and/or Mkokoteni from wholesale market)
-
Aga Khan 0.5851
5.4 584.25
-
Gikomba 0.2251
2.09
224.77
-
Wakulima retailers 0.3185
2.96 318.04
-
Kangemi 0.0491
0.46 49.03
-
Wangige 0.1347 1.25
134.5
-
Market
Fee
-
Gikomba 0.1187
1.1 118.53
-
Wakulima retailers 0.3185
2.96 318.04
-
Wangige 0.0539
0.5 53.82
Net Margin
- Aga
Khan
3.5649
33.2 3559.72
- Gikomba
3.8062
35.4 3800.67
- Wakulima
retailers 3.513 32.7 3507.9
- Kangemi 4.1009
38.15
4094.94
- Wangige
3.9614
36.85
3955.64
*For ease of calculation
the average quantity for all wholesalers/retailers is used
in calculating margins instead of the average quantities for
each market
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