Supporting Legume Seed Commercialization in Mozambique
This is the third of a three-part series exploring lessons learned on commercializing seed in smallholder markets in sub-Saharan Africa. The first installment looked at the factors that need to be considered for understanding seed markets. The second installment looked at lessons learned across six commercial partnerships.
Agriculture in Mozambique is almost entirely dominated by smallholder farmers, with more than 95 percent of total farming area cultivated by an estimated 3.8 million small-scale farmers. [1] Despite its importance, smallholder agriculture remains woefully inefficient, with little investment from the private sector and with gains that have mainly been achieved through expansion of land under cultivation rather than through productivity. It is estimated that only 20 percent of smallholders sell their crops on the market, which clearly reduces demand for improved inputs, evidenced by less than 10 percent of farmers utilizing improved seed. [2]
Partnering for Innovation collaborated with National Cooperative Business Association — Cooperative League of the USA (NCBA CLUSA) and two local commercial seed companies — Oruwera and Phoenix Seed — to expand the production, marketing and distribution of certified open-pollinated variety (OPV) legume seed including soybean, pigeon pea, sesame and cowpea. NCBA CLUSA coordinates the production, marketing and distribution efforts of local seed company partners and supports the development of three different distribution models: community based service providers, central hub distributors and direct sales through seed fairs. Oruwera and Phoenix Seed produce certified OPV legume seed through their own production facilities and smallholder outgrowers and expand seed distribution networks through independent retail and wholesale dealers and seed fairs.
The below tables illustrate some of the key challenges and potential solutions in production, farmer demand, rural distribution and enabling environment. Each point illustrates how other projects might design programming or troubleshoot ongoing programming for commercializing seed production and distribution in Feed the Future countries.
Please share your thoughts and experiences in the comments section. We’d love to keep the discussion going with implementing partners around the world!
Seed Production
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Challenges Faced by Partners |
Partner Solutions and Recommendations |
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Smallholder outgrower capacity: Most smallholder farmers in northern Mozambique are not commercially oriented and are very limited in terms of technical capacity to produce certified seed. |
Oruwera is increasing the number of technicians working with farmers to deliver technical training and also trying to foster relationships with larger, more commercially oriented farmers in the area, although there are not many. |
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Environmental threats: The outgrower catchment area is reliant on one growing season and prone to drought. Smallholder farmers do not have access to irrigation, causing significant losses and difficulty meeting supply projections. A single growing season dramatically limits the size of the market. |
Introducing small-scale drip irrigation to outgrowers (starting at 0.25 to 0.5 ha). Farmer understanding on how to operate, maintain and service the systems remains limited, and operating costs are high. |
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Outgrower side-selling: Competitive traders in the area convince smallholders to side-sell seed as grain outside their contract with the seed companies. There was one case cited of an outgrower side-selling three quarters of his harvest to an independent trader and only selling one quarter of his harvest to the seed company, despite the seed company providing inputs and training. |
Seed companies are increasingly diligent about screening to find credible farmers willing and interested to enter into long term mutually beneficial supply relationships. Lack of trust and weak contract laws remain a challenge. |
Farmer Demand
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Challenges Faced by Partners |
Partner Solutions and Recommendations |
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Recycled seed: Recycled seed remains significant competition for certified OPV legume seed. |
Promoting certified seed via radio, mobile ag fairs and demo plots with field schools. Uncertain output markets and poor quality seed in the market continue to constrain farmer willingness to invest in seed. |
Rural Distribution
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Challenges Faced by Partners |
Partner Solutions and Recommendations |
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Low margins working with agrodealers: Partners have realized that the margins of working through a dispersed network of small-scale rural agrodealers are just too thin. Covering a large area and distributing small quantities to each dealer presented an untenable cost structure. |
NCBA CLUSA had to subsidize seed distribution from seed companies to the community based service providers so this small rural agrodealer network model has basically been abandoned. They are now supporting more efficient distribution networks such as a seed fair model where agrodealers and farmers can buy seed directly, and a central hub model where seed companies sell to larger wholesalers who then deal to smaller agrodealers. |
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Working capital: Agrodealers have limited capital to finance their inventory purchases. Oruwera was providing seed on consignment to smaller agrodealers but found that repayment rates were too low. |
Oruwera is providing incentives for cash payments from dealers through price discounts. NCBA CLUSA is working with Banco Opportunidad de Mocambique to support agrodealer applications for working capital loans (though this appears only viable for large dealers with high turnover, and Banco Opportunidad is stretched thin as the only willing agriculture lender). Seed could be sold on consignment to larger agrodealers, although this presents a potentially unsustainable risk for seed companies. |
Enabling Environment
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Challenges Faced by Partners |
Partner Solutions and Recommendations |
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Seed distribution programs: Government and NGO seed distribution programs providing free seed dampen demand for seed. These programs are often driven by political patronage and undermine private distribution systems. Government buys seed from large companies via contract, stores seed in a central government warehouse in reportedly poor conditions then distributes too late for timely planting. Resulting poor yields reduce demand for improved seed. |
Stakeholders suggest that government and NGOs engage local seed companies and existing agrodealer networks in a voucher-based seed subsidy program rather than government-led handouts. The FAO is reported to have rolled out a seed voucher scheme in collaboration with private input companies and existing distribution networks that has been observed to work more effectively than free seed distribution programs. |
[1] World Bank, “Mozambique Agriculture Sector Risk Assessment, 2015
[2] Feed the Future, “Mozambique: FY2011-2015 Multi-year Strategy”, 2011