| dc.description.abstract | The agricultural sector dominates the economies of most countries in Sub-Saharan
Africa by providing food, employment, income and foreign exchange. The
liberalization of domestic markets and globalization have provided new opportunities
and challenges, such as better prices, that could benefit poor smallholder farmers in
developing countries. To take advantage of these new opportunities and challenges,
smallholder farmers must be able to participate in productive activities in which they
have a competitive advantage. Unfortunately, smallholder farmers face high
transaction costs and uncertainties arising from inadequate input and product markets,
market access barriers and cost of information and other market imperfections that
restrict market access.
The question then is how smallholder farmers can be integrated into high value
markets through interventions that increase productivity and reduce transaction costs.
The current study attempts to answer this question by using green pigeon pea as an
example. The objective of the study was to assess the effects of transaction costs on
the efficiency of green pigeon pea marketing channels. The study also explored
opportunities to reduce transaction costs, so that farmers can take advantage of these
i emerging and promising markets.
The study used the Policy Analysis Matrix (PAM) approach to analyze the
efficiencies of different marketing channels of green pigeon pea. Unlike the
traditional PAM analysis, the current study incorporated transaction costs to adjust the
social prices. Nominal Protection Coefficient (NPC), Domestic Resource Cost (DRC),
and Private Cost Ratio (PCR) ratios were calculated to circumvent the problem that
would anse due to dissimilar technologies that are employed by different
intermediaries in different marketing channels.
The results indicated that the export channel had the lowest DRC and PCR, while the
farm level had the highest DRC and PCR. Inclusion of transaction cost increased the
PCR and DRC, hence reducing the efficiency. Sensitivity analysis indicated that
group marketing with well-laid contracts with exporters would improve the
competitive advantage of farmers.
The study concluded that the export market channel is both privately and socially
most profitable. The study therefore recommends that the export channel should be
promoted and that the farmers should be vertically integrated with this channel.
Farmers should also be availed credit facilities to enable them produce the ICPL
pigeon pea variety that meets the export demand specifications. Farmers should be
encouraged to form marketing groups and be trained on the managements of these
groups. Contract arrangements should also be made between farmers and exporters to
facilitate smooth flow of market information and hence reduce transaction costs. | en |
