Goubkatimali. How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana. By Dick Commandeur

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1 Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana By Dick Commandeur

2 Introduction The Procurement Governance for Home Grown School Feeding (PG-HGSF) project, implemented by SNV, worked with the Ghana School Feeding Programme (GSFP) and the District Assembly of Karaga to create a market for smallholder farmers of the Goubkatimali Farmer Based Organization with school feeding caterers. The caterers showed interest to buy rice, but the organization was not prepared to respond to their requirements regarding quality and time of delivery. The project developed a producer organization (PO) strengthening methodology based on 5 intervention areas: managing supply risks, strengthening membership, managing the PO as a company, developing market and buyer relations and optimizing the financial capacity of the PO. The experience of the Goubkatimali PO shows that business-oriented support can result in profitable relationships between smallholder farmers and formal markets. SNV is a not-for-profit international development organisation. Founded in the Netherlands 50 years ago, we have built a long-term, local presence in 38 of the poorest countries in Asia, Africa and Latin America. Our global team of local and international advisors works with local partners to equip communities, businesses and organisations with the tools, knowledge and connections they need to increase their incomes and gain access to basic services empowering them to break the cycle of poverty and guide their own development. This report is based on research funded by the Bill & Melinda Gates Foundation. The findings and conclusions contained within are those of the authors and do not necessarily reflect positions or policies of the Bill & Melinda Gates Foundation. Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana 2

3 Background The Goubkatimali PO of Tulinga is located in the Karaga district of Ghana s Northern Region, one of the country s major rice producing areas. The PO was formed in 2007 and has a 28 men and 19 women farmer members. Goubkatimali is recognised by the district Department of Agriculture as a Farmer Based Organization. However, because almost every resident of the small community is a member, the PO saw itself more as a community than commercial organization. The member farmers produce mainly rice, maize, soy and groundnut for cash and sustenance. The women grow the soy and groundnut on an average of one acre per family. For rice and maize, the men are more active, growing an average of two acres per family. Almost 50% of their maize, soy and groundnut production is for domestic consumption throughout the year while the rest is sold for cash. Rice is the main cash crop for Goubkatimali families, accounting for about 85% of their domestic income and production, processing and marketing is done on an individual or family basis. The men sell their rice to the women, who sell it as paddy or, after processing, as parboiled rice on the local market. With parboiling, the price of the rice is doubled. Rice production in Karaga is also supported by other development initiatives, such as the Rice Sector Support Project, a 5-year project funded by the French Agency for Development, through the District Agricultural Development Unit, falling under the Ministry of Food and Agriculture. The project aims to introduce new improved rice varieties: Agra rice (UPIA2) and Jasmin rice (UPIA3), developed by the Alliance for Green revolution in Africa (AGRA). The families of Goubkatimali had an inconsistent availability of paddy and processed rice to satisfy the demand from caterers, due to the following challenges: Low productivity and quality of rice production. Lack of cooperation in the rice production chain between the men who farm the rice, and the women who processes and sell it, even when both are Goubkatimali members. Women lack capital to purchase, process and sell rice in large quantities, limiting the motivation of the men to produce and sell more to them. Insufficient quality of processed rice: broken grains and brown color because of the water used for processing, that made the parboiled rice inacceptable for caterers. Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana 3

4 Approach and Results The objective of the project intervention was to link the farmers of Goubkatimali with the school feeding and other formal markets to improve the production, income and organization of the PO and its members. SNV challenged the members to assess the market opportunities, starting with school feeding, and identify how their organization could embark on a change process to meet their demands, looking at issues such as the PO s management, teamwork and gender issues, all in the framework of the 5 PO strengthening intervention areas developed by the project. The preparation for the support consisted of a review of documentation from the organization and the school feeding market. SNV s work with the PO started with a needs assessment, focused on understanding the perspectives of the organization and the farmers, organizational capacity gaps to consider for the success of intervention and an analysis of opportunities. Main outcomes of the assessment were: The farmers prioritize the rice production, because of the importance as cash crop and the possibilities of improvement. Most farmers hardly sell outright after harvest; they prefer to keep their produce and sell when they have expenses. The standard practice of the farmers to sell the paddy rice to women processors when they need cash affected the volume that women can process for the market, and also their returns. There was a need to delay the payment till the processed rice was sold so that larger quantities of rice can be ready for market at any given time. Some farmers have experience selling to school feeding caterers. Caterers prefer mostly paddy rice and receive their payments from the government after services are rendered, which can be during the next production cycle for farmers. For farmers, who are used to receiving cash when their goods are sold, providing goods on credit is a challenge. To increase rice quality and quantity, the farmers need to work with the district Department of Agriculture to obtain seeds of improved rice varieties, AGRA rice and Jasmin rice promoted by the Alliance for Green Revolution in Africa (AGRA) and introduced by the Rice Sector Support Project. These varieties would allow the farmers to double productivity from 1 to 2 metric tons (from 10 to 20 bags) per acre. The organization identified the need for training in leadership, management and member involvement. The assessment led to a business plan focused on adopting improved rice varieties, better rice quality, vertically integrating production, processing and marketing by delayed payment mechanisms between rice producers and processors/sellers, and the establishment of formal contractual sale arrangements with school feeding caterers. The plan also outlines steps for the organization to strengthen leadership and management. To strengthen the linkage between primary rice production and processing, an internal agreement was accepted with the producers will supply rice on credit to the processors and the women will realize the payments once the processed rice is sold. The project provided equipment to improve on the quality of the processed rice: improved cooked stoves and vessels for parboiling were installed, as well as threshing boxes, a cemented drying floor and tarpaulins. The PO renovated a local storage facility owned by the community. Technical support in improvements in rice processing was implemented in close collaboration with the Rice Sector Support Programme, the District Agricultural Development Unit and the Women in Agricultural Development unit (also falling under the Ministry of Food and Agriculture). The PO leadership was trained in storage management. SNV organized meetings between the representatives of Goubkatimali PO, caterers and the District Assembly responsible for implementing the School Feeding Program. The District Assembly agreed to be a liaison between the rice processors and the caterers: The District Assembly would receive processed rice from the PO, of improved quality as the result of project support, and distribute it to school feeding caterers on credit. The Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana 4

5 District Assembly guaranteed payment to the PO by deducting the costs of the rice from the GSFP s disbursements to the caterers and paying the PO directly. The District Assembly also encouraged caterers to buy rice from Goubkatimali PO, showing that the quality is up to their standards. The combination of these activities led to sales of 8.5 metric tons of parboiled rice to six caterers in the first three months of 2016, for a total value of US $3,500. Figure 1 Meeting with the DCE of Karaga, Tulinga Rice processors reps and School feeding Caterers The new successful business activities with caterers deployed by Goubkatimali generated interest from several other formal buyers, including the Avnash Company Limited, a huge rice processing company in the city of Tamale, the Processing and Marketing Company SAVBAN, and a Licenced Buying Company for the National Buffer Stock Company, a parastatal strategic food reserve. These new buyers brought up requirements regarding moisture content and grain size and this is still a challenge, but at the same time a stimulus for the PO to further improve the storage and processing operations. Finally, Karage secondary school was identified as a future buyer. Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana 5

6 Lessons Learned and Conclusions The project intervention led to improvement in agricultural production, as the identification of new markets and the business orientation of the PO induced the farmers to adopt new seed varieties with higher productivity and responding to the requirements in the market. The strengthening of the Goubkatimali PO covered the 5 intervention areas developed by the project: The supply risk was managed at different levels: To increase the production of paddy rice, the farmers were trained and linked with support programs for the introduction of new rice varieties with higher productivity. To guarantee the supply of paddy rice for the processing and direct sale, an internal credit mechanism was set up that encouraged producers to sell to their organization with delayed payment, enabling to the PO to process and sell higher volumes of rice despite limited availability of working capital. Before the intervention, processing was done individually, but now the PO is processing and selling goods as an organization, showing their business capacity to potential buyers. Together with the availability of the warehouse, managing supply risk converted Goubkatimali in a reliable business partner for caterers who require frequent deliveries of small quantities, as small as one bag per week. The membership of the PO was strengthened through leadership training and putting in place transparent mechanisms for delivering rice to the PO with delayed payment. Also the provision of valued services to the members through supply of new seed, market access and credit, strengthens the relationship. The boundary between being community organization and producer organization still needs further clarification, but the fact that the members decided to make additional productive investments in the organization may indicate that this is going into the right direction. The management of the PO as company has taken its first steps from the discussions and plans on how to serve the school feeding and other formal markets. The system for delivery, the equipment and warehouse and the training for improved processing all led to more efficiency in the operations of the PO. Seeing the PO as a company also resulted in joint marketing of the rice, which was previously done individually. Market and buyer relations were developed by way of establishing agreements with caterers and through guaranteed payments from the District Assembly. The role of the District Assembly was important for building trust between the business partners. The door to relationships with other formal private and public buyers is opening, making it possible for the PO to further plan its development and operations. They saw the importance of improving their product quality and coordinate delivery timing to meet the preferences of different buyers and received the tools and knowledge to do it. To better connect with buyers, SNV encouraged Goubkatimali to register on the mfarm market intelligence platform. The PO s financial capacity was optimised through delayed payment mechanisms for the member suppliers, which reduced Goubkatimali s need for working capital, and through equipment donation by the project that increased the assets of the organization. The results of the PO s formal business relationships will facilitate future investment based by generating operational margins and supporting applications for loans. The success of the commercial activities led the members to capitalize their organization with additional working capital: 7 bags of paddy rice worth GHc 1400 and GHc 820 in cash, with a total value of around 550 US$. This working capital serves for aggregating 18 bags of paddy rice to be processed and sold at any time. The increased processing capacity means that the PO can reap 50% greater profits by selling as the rice as parboiled instead of paddy/unprocessed. The case shows that the appearance of a nearby formal market of school feeding can trigger farmers and informal POs to change their production and organization, leading to business orientation and giving access to a whole scope of new formal support and market relations. Goubkatimali How the school feeding market improved agriculture production and income for farmers in Tulinga, Ghana 6