MARKETING HIGH VALUE FOOD COMMODITIES

A high value food product represents the outcome of a sequential series of investments, activities and decisions. This process begins with the articulation of consumer demand and leads to decisions by farmers to produce particular crops, animals. It continues through a series of activities which produce and subsequently transform the crop or animal product in form, time and place to match consumer demand.
Food marketing is the physical and economic bridge which links raw material production and consumer food purchases. It involves a set of interdependent decisions, investments, institutions, resource flows and physical and business activities.
As the bridge between producers and consumers, food marketing must fulfill a number of functions simultaneously:
1) Stimulate and support raw material production;
2) Balance commodity supply and demand;
3) Stimulate demand and enhance consumer welfare.

1) Stimulate and support raw material production;
Food marketing plays a critical role in stimulating orienting and facilitating raw material production at the farm level. This requires the communication of information to the farmers regarding what and when to produce, the provision of financial and other incentives to produce food items for sale, the facilitation of farmer access to those production resources (e.g. credit and material inputs) needed to respond to such incentives and the reduction of transaction costs between producers and consumers.
2) Balance commodity supply and demand;
Food marketing institutions provide the organizational framework for coordinating production and consumption. This framework balances the supply and demand for food raw materials and commodities, not only in quantitative terms, but also in terms of quality, time and space. This coordination entails logistical and informational tasks, transactions for current or future supplies, quality control measures and physical transformation of the raw materials/commodities themselves.

3) Stimulate demand and enhance consumer welfare.
Food marketing promotes increased demand, consumption and consumer welfare by introducing new products, improving product quality, reducing consumer costs, making foods available on a more consistent basis and educating consumers on the merits and alternative uses of products. These tasks require the dissemination of information, the development and application of processing and logistics technologies, and efficient mechanisms for the exchange of goods.

The product gains value as its form is changed and it is graded, stored, packaged and transported in order to more closely match consumer demand.
Food marketing involves several essential activities. Some are physical activities as grading, handling, transporting, storing and numerous forms of processing. Others relate specifically to the transfer of ownership or possession (the exchange functions of buying and selling). Others facilitate the physical exchange that is financing, standardization of qualities, information collection, interpretation and dissemination.
Once we recognize that production and food marketing activities are interdependent, that those individuals and organizations performing these activities are themselves interdependent, and that all of these are linked through a network of exchange relations and additional coordinating mechanisms, it becomes useful to view them as elements of a comprehensive system.

Market development entails the development of exchange networks since it is within the context of (potential) trading relationships that individuals are stimulated to invest in specialized production and marketing activities. Exchange networks enable individuals to transfer needed information and resources and capture the benefits.

VOLUNTARY COOPERATION
Cooperative undertaking is formed by a group of members who agree to act collectively in order to further their joint/individual private interests. These may undertake joint investments, common practices, or collective self – regulation of competition. The members enter into a series of explicit and implicit contracts with one another and to agree to membership terms and standard operating procedures.
Voluntary Cooperation can support commodity system and investment and coordination because:
a. It can counter the problem of lumpy investments in marketing infrastructure and services since the fixed costs of such investments can be shared among the group members;
b. It can serve to internalize certain externalities – an example is in product promotion which can be very profitable for a group as costs are spread and benefits internalized. Quality and reliability can best be monitored and protected;
c. It can reduce or pool members risks – by guaranteeing commodity purchases and sales on behalf of members and by providing credit;
d. It can lower transaction costs for members and for non members trading with members by obtaining, interpreting and disseminating information about production, markets, and creditworthiness;
e. It can exercise or counter market power for its members through collective negotiations with suppliers or buyers, or by controlling/withholding member supply into the market, and by informing members about the prevailing terms of trade.

Future Markets and Prospects
The scale and scope of the global market for organic food looks impressive and set to continue at least for the foreseeable future for the established well – funded, organic farmer or processor.
The key driver of the organic market remain consumer concerns about the quality of food production and including issues such as Genetic Modification, (GM Products) and the continuing concerns about the residual impacts of previous food scares.
Perceived health benefits, still to be scientifically proven, continue to stimulate growth and interest in the organic market.
Quality, traceability and overall integrity of production is at the heart of the organic sector. It is the major marketing proposition.
In Uganda more than 75% or about 19million hectares of land is available for cultivation and pasture. Overall, agriculture accounts for around 40% of GDP and 90% of export earnings (mostly commodity based).
a. Majority of agricultural land is (still) not irrigated;
b. Yields are consistently too low;
c. Down – stream food processing is very modest in scale, and
d. The country is a net importer of value added products from neighbouring countries.

Uganda has an underdeveloped food chain and little or no food processing capacity and relies on exporting fresh produce.

Constraints to Agricultural Development in Uganda
1) Continued high input costs;
2) Poor transport infrastructure within the rural hinterland ;
3) Poor access to modern telecommunications networks;
4) Lack of consistent energy supply with frequent power cuts;
5) Uncompetitive interest rates, limited funding and poor financial infrastructure to encourage and underpin private sector investment in value - added food production;
6) Capacity utilization remains very low;
7) Low productivity;
8) High (post harvest) wastage;
9) Inconsistent quality (due to lack of monitoring and policing food standards);
10) Low tax base limits scope of government intervention in developing essential infrastructure such as a modern chill chain;
11) Continued (over) reliance on donor funding;
12) Low per capita GDP, hence an inadequate domestic market to encourage supplementary export activity in value added sub sectors.

Uganda’s Competitive Advantages
I. Traditional Agriculture is an ‘extensive’ natural operation free of pollutants;
II. Minimal use of fertilizers and pesticides and providing a natural farming environment;
III. Variety of novel fruits – pineapples, mangoes, bananas, peppers, spices, okra;
IV. Non traditional exports are increasing for example success in floriculture;
V. Agriculture recognized as engine of economic growth;
VI. Government has put in place the Plan for Modernisation of Agriculture (PMA) – a reform programme for the modernization of the agriculture industry;
VII. There are ‘development mechanisms’ – UIA, UEPB,
VIII. Some successful examples of commercial farming enterprises.

Essentials of Export Infrastructure
Advisors in agriculture development with the specific aim of enhancing export performance have emphasized the following as key constraints to further development of agri-exports from Uganda.
Production
a) Too small farm holdings - minimum size recommended as 10 hectares;
b) Production areas are (generally) located too far from Entebbe International Airport – minimum distance recommended as 100 km from airport;
c) Lack of consistent water supply and very limited irrigation.

Post Harvest
a. Lack of grading and packaging facilities – on farm and centralized regional consolidation facilities;
b. Limited or non – existent traceability systems;
c. Lack of chilled storage throughout the country;
d. Lack of modern, durable packaging materials – an expensive imported input cost;
e. Lack of large refrigeration transport.

Market/Distribution
i. Limited telecommunication outside of capital (though mobile phones have changed the landscape);
ii. Limited freight forwarding providers;
iii. Too many middlemen and lack of coordinated supply networks.

The above are significant gaps in the country’s farm and food infrastructure and if not addressed will similarly constrain organic food exports. However, it is clear that one significant aspect of the agriculture infrastructure is now clearly recognized as the issue that must be addressed if Uganda is to have any meaningful success in the export market – “Quality in the food chain.”
It is clearly understood by the export minded entrepreneurial farmers that quality and the need for traceability is an imperative and has to reflect internationally recognized standards. There is need for emphasis on healthy and safe production methods as ‘the selling proposition.’
The above will require that all production is accredited to international standards and that the sector has in place all the following:
1. In line management responsibility;
2. Accredited quality systems;
3. Contract and sub – contract due diligence procedures;
4. Clear and traceable quality systems and related document controls
5. Total quality management in all aspects of cultivation, processing and distribution;
6. Rigorous inspection and monitoring systems.

The major observation is that although the quality issue is and in some cases has been recognized, there remains a critical lack of technical infrastructure throughout Uganda, especially in terms of physical infrastructure, the availability of relevant technical skills and services and, a lack of internationally approved services and technical providers.

Organic farming in Uganda
Uganda is well placed to adopt organic agriculture and take advantage of the global upsurge in related markets.
Of the 2.5million holdings (covering 5million acres) it is estimated that only 30 – 40,000 hectares has been officially certified as ‘organic’.
Uganda’s organic farming is very much ‘emergent,’ currently it can be characterized as ‘small player’ in the global organic sector, already over 100 countries supply into organic markets of Europe.