Food System Transformation and Market Evolutions: An Analysis of the Rise of Large-Scale Grain Trading in Sub-Saharan Africa
August 1, 2017 - Author: Nicholas J. Sitko, T.S. Jayne, William J. Burke, and Milu Muyanga
IDWP 153. Nicholas J. Sitko, T.S. Jayne, William J. Burke, and Milu Muyanga. 2017. Food System Transformation and Market Evolutions: An Analysis of the Rise of Large-Scale Grain Trading in Sub-Saharan Africa
Also published as Feed the Future Innovation Lab for Food Security Policy Research Paper 48.
CONCLUSIONS AND RECOMMENDATIONS
The rise of LSTs in SSA grain markets suggests that important transformations are occurring in the middle segment of the agri-food system that challenges the dominant understanding of the constraints and opportunities in these markets. An important policy concern is how to effectively leverage the benefits of growing LST investment in grain markets, while managing downside risks associated with market power and limited market participation by poorer, more marginal segments of the rural population.
Policy tools and investments to help strike this difficult balance include: 1) Support competition from domestic traders through competitively priced and accessible commercial credit markets. The ability to leverage grain stocks through warehouse receipts or moveable collateral legislation may be particularly important; 2) support horizontal aggregation structures to help small farms with limited surpluses to sell to cost effectively link to LST
market channels; 3) implement policies to improve grain price predictability, including clearly defined policies for triggering government action in cross border trade and marketing board activities; and 4) develop innovative financial tools to help defray risk and costs to LSTs of providing input credit and other services to smallholders in order to help expand the scope and scale of these activities to marginal regions, communities, and producers.
For African agriculture to contribute to a broader process of economic transformation, in the context of rapid population growth and increased climate uncertainty, marketing arrangement that create incentives and services to support smallholder intensification is critical. With effective policies and investment, the rise of large-scale grain trading offers new opportunities to support smallholder intensification.