Emergency Seed Interventions, Subsidies and the Formal Seed Sector
This post is written by Kate Longley.
Free seed distribution — whether through emergency interventions or government subsidy schemes — has long been seen as a serious constraint to seed system development. A forthcoming literature review of large-scale seed interventions from Malawi, Uganda, Kenya and Mozambique by the Feed the Future Global Supporting Seed Systems for Development activity (S34D), explores the changing nature of free seed distribution through emergency interventions and subsidy programs. While there have been some positive shifts in the ways in which free seed is provided, emergency seed distribution continues to present serious challenges to efforts to develop sustainable market-based seed systems; the development of resilient and effective market-based seed systems is a long-term endeavor that can potentially be derailed by emergency seed interventions. This blog post explores the effects of free seed distribution on the formal seed sector and proposes alternative mechanisms for emergency seed provisioning that contribute to greater resilience and avoid creating market distortions and weakened seed systems.
Different rationales, same seed
The rationale for agricultural input subsidy schemes is to make improved inputs available at reduced cost to incentivize their adoption and thus increase productivity. According to documentation used to justify emergency seed interventions, the rationale for emergency seed provisioning is to restore livelihoods and food security. Despite these very different rationales, both types of interventions provide seed of improved varieties from formal sector seed sources.
Based on the rationale presented above, it can be argued that it is not necessary for emergency seed interventions to provide formal sector seed of improved varieties, particularly given that as much as 90 percent of seed that is normally planted by smallholder farmers comes from the informal seed sector.[1]
Case study countries
Across the four case study countries, free seed distributions have involved a shift from direct seed distribution to vouchers and distribution through agrodealers, though direct seed distribution still occurs in some instances. Electronic vouchers have been either piloted or implemented at scale in Uganda, Kenya and Mozambique, often involving a reducing subsidy level over multiple seasons, after which farmers are expected to be able to afford the full cost of the inputs.
A summary of subsidies and relief seed interventions in case study countries:
Malawi: Continuous series of large-scale subsidy programs since the 1990s. Quantities of seed and the number of beneficiaries have varied from 4,000 and 21,000 metric tons annually for up to 4.3 million farmers.
Uganda. Ongoing emergency interventions to Internally Displaced People, refugee and host communities since 1980’s. Large-scale subsidy program since 2014 recently replaced by smaller-scale program with sliding subsidy.
Kenya: Recurrent relief seed distributions of the 1990s and 2000s and targeted subsidy program have partly given way to long-term climate resilience program for disaster-prone areas.
Mozambique: Large-scale post-war emergency seed distributions have continued in response to recurring natural disasters, plus smaller, intermittent subsidy programs.
Effects of seed relief and subsidies on private sector growth
Both the establishment and expansion of the private seed sector is influenced by subsidy and relief programs. The level of influence varies according to the level of maturity of the seed sector as well as the scale of free seed provisioning. In both Uganda and Mozambique, the emergence of the formal seed sector was closely connected to large-scale post-war emergency seed programs. The Seed Company of Mozambique (SEMOC), for example, was established in 1988, the same year that the donor-funded Emergency Program for Seeds and Tools was initiated. SEMOC grew rapidly, and 90 percent of its seed was sold to the emergency program. This might be seen as a positive influence, but it tends to be the larger and multinational companies that have benefitted most from seed sales for relief and subsidy programs. In Malawi, for example, the number of seed companies has increased from five in 2005 to 24 in 2020, but 87 percent of maize seed for the subsidy program is supplied by just three large, multinational companies. Bigger companies tend to be able to respond faster to government or aid agency seed requests and to supply the large quantities required. They are also better able to deal with late payments and the late and often erratic planning processes that are common with large-scale subsidy schemes. Smaller seed companies simply cannot compete. In cases in which smaller, national companies have gotten involved in government contracts, some have been crippled by late payments.
Effects on seed supply
The dependence by seed companies on institutional purchases for subsidies has led to volatility in seed production. In Mozambique, for example, SEMOC’s annual seed sales increased to approximately 14,000 metric tons in 1993 and then decreased to just 3,000 metric tons in 1997 when the Emergency Seed Program phased out. In Uganda in 2015, up to 70 percent of all certified seed available from the formal seed sector (approximately 16,000 metric tons) was distributed for free through the national subsidy scheme, Operation Wealth Creation. A winding down of the scheme and a government reduction in seed purchases led to a drop in formal sector seed production from 22,000 metric tons in 2017 to 6,000 metric tons in 2018.
Subsidy schemes and emergency interventions can also scale up with very little warning, and in these circumstances, some of the larger seed companies divert their efforts towards big government contracts, interrupting the normal seed supply chain for new varieties, and creating long-lasting ripple effects. This has knock-on effects on other seed companies that are not involved in supplying seed to subsidy and emergency programs by tapping in to short supplies of early generation seed. Seed companies supplying seed for subsidy schemes are able to use their political connections to gain privileged access to early generation seed, sometimes depriving others.
Effects on seed retail networks and last-mile delivery
There is little incentive for seed companies to develop agrodealer networks or the retail and marketing strategies required to sell seed to farmers if they can sell the majority of their seed to institutional buyers for subsidy and relief programs. In Malawi, the level of reliance on the input subsidy programs accounts for between 50 to 70 percent of the income of participating seed companies and agrodealers. Retail networks lack alignment with customer satisfaction, repeat business, or farmer perceptions of value.
There is evidence from Malawi and Mozambique that the shift to voucher-based distribution can increase agrodealer retail networks, but whether these lead to sustainable improvements in last-mile delivery has yet to be seen. Research in Kenya questions whether the agrodealer model offers the best approach for delivering improved seeds to smallholder farmers.
Effects on seed quality
The problem of so-called “fake seed” in Uganda reportedly originated with the emergency seed aid programs that began in the late 1980s for internally displaced people in northern Uganda. At that time, the formal seed sector was still very young, emergency seed aid was poorly regulated and highly politicized, and the speed of delivery was emphasized over seed quality. Trading companies without experience in the seed sector were allowed to get involved in the relief seed business, and there was widespread use of grain instead of seed by these companies. This has had long-term negative effects on both the development of commercial seed systems in Uganda and on emergency seed aid programming at a regional level, because seed from Uganda has also been used to supply emergency interventions in South Sudan, the Democratic Republic of the Congo, Rwanda and Burundi.
In Malawi, over the many years of subsidy programs, there has been an increase in the number of government-trained (para-) seed inspectors as well as a proposal to accredit licensed private seed inspectors. Still, certification and quality control are considered to be weak. The supply of seed for subsidy programs is highly political; companies with political connections tend to capture the largest share of subsidy volume even though their varieties may not necessarily be appropriate and their seed quality may not be the best.
Farmer demand for improved varieties and ‘crowding out’
Poor quality seed of inappropriate varieties does little to create demand for formal sector seed among farmers, and neither does the limited range of crops and varieties that tend to be provided through subsidies and emergency seed provisioning. Theoretically, this could be addressed by e-vouchers. But there are still concerns that subsidies crowd out commercial seed purchases by smallholder farmers. A study in Malawi, for example, showed that the targeting of subsidized input distribution favors larger farmers who are also those who would be expected to purchase inputs on the market. The same study also found that each one kilogram increase in subsidized seed acquired by a smallholder farmer reduces commercial improved maize seed purchased by 0.56 kilograms (compared to 0.22 kilograms for fertilizer). In Mozambique, a detailed study of the effects of the 2009-2011 pilot subsidy program found no lasting effects on the use of improved seeds in the post-voucher period, unlike fertilizer, which did have lasting effects.
Innovative approaches: building resilience among farmers and seed systems
Emergency seed provisioning is most often provided in response to recurrent or ongoing crises rather than one-off shocks. In such situations, a long-term approach is seen to be more appropriate than repeated emergency interventions. Such an approach forms the basis of the Kenya Cereal Enhancement Program–Climate Resilient Agricultural Livelihoods program (2015-22), which is being implemented in the disaster-prone districts of Kenya’s arid and semi-arid lands. The seed-related components of the program emphasize crop diversification and climate resilient varieties, along with a value chain approach and training in agronomic practices and financial literacy, to encourage the adoption of new, appropriate varieties. Seed is provided though e-vouchers and private sector agrodealers. Seed demand by the project is more predictable due to the long-term approach. The use of e-vouchers allows for a sliding subsidy value, which — theoretically — overcomes the problem of crowding out.
A long-term approach was also taken by the Innovation for Agribusiness project (2011-21) in Mozambique, which aimed to develop inclusive, commercial, market-driven systems for agricultural input supply for smallholder farmers and create a conducive enabling environment for seed industry development. Its approach was informed by the distortionary market effects of earlier free seed programs and the lack of awareness among farmers about the value of certified seed. Available documentation suggests that the approach was largely successful up until the Cyclone Idai response of 2019-20. At that point, the demand for seed for the emergency response threatened to wipe out its years of progress in building seed markets by diverting large quantities of seed away from smallholder markets and into the emergency response.
These examples show that the development of resilient and effective market-based seed systems is a long-term endeavor that can potentially be derailed by emergency seed interventions. When seed is provided for free — whether through direct distribution or vouchers — farmers are unlikely to purchase formal sector seed, making it very difficult to create demand-led last-mile delivery solutions. Such challenges are common in humanitarian-development nexus contexts (e.g., in fragile states, post-conflict situations, situations of forced displacement and in response to natural disasters associated with climate change), where development programming and emergency programming are both needed at the same time. Nexus programming requires enhanced coherence between emergency and development efforts. For seed sector development to be successful, new ways of emergency seed provisioning are urgently needed, as proposed below.
Recommendations
- Building resilient farming and seed systems
Where there are chronic or recurrent crises, emergency seed interventions need to be replaced with long-term, resilience-oriented programming, as in the Kenya case described above (Kenya Cereal Enhancement Program–Climate Resilient Agricultural Livelihoods). Such interventions must invest in training and awareness-raising so that farmers have the knowledge about quality seed and improved varieties to decide whether to purchase these inputs. At a broader level, effective seed quality assurance is needed in the formal seed sector to protect the value of the farmers’ investments when they purchase seed — such efforts are already happening, but there are many challenges, not least from ongoing subsidy and emergency seed interventions. Rather than subsidizing the demand side, governments and donors could focus more on supporting the supply side through public-private partnerships and by providing investment credits or subsidized loans to seed companies so that they can lower their costs and reduce their risks (as in India).
- Cash transfers for food security and livelihoods in emergencies
None of the recommendations above is new. In the event of a crisis, however, S34D proposes that cash rather than vouchers or seed is provided prior to planting time to restore livelihoods and food security. Cash allows farmers to choose whether to invest in seed and/or other items according to their own priorities. If they choose to purchase seed, then they can also choose which crops and varieties they prefer, and whether to purchase from formal or informal seed sector markets. Where the formal sector seed is available, cash can support formal sector seed markets.
- Enhancing the quality of informal sector seed provided by informal traders
Within the informal seed sector, there is the potential to enhance the quality of informal sector seed available in local markets. S34D is not proposing the formalization of the informal seed sector by imposing certification standards, but simply the distinction of grain and seed by informal traders. This involves creating awareness among informal traders about how to determine which types of seed (i.e., which crops and varieties) are most in demand by farmers, how to identify farmers from whom to purchase seed, how to manage and store distinct varieties of seed, how to market informal sector seed, and how to calculate the price differential between seed and grain. Much can be learned from existing documentation and informal traders in various different countries who already make these distinctions.
[1] This finding is drawn from seed system security assessments in Malawi, Kenya, the Democratic Republic of the Congo, Haiti, South Sudan, and Zimbabwe, providing a uniquely comprehensive data set that includes 9,660 observations across 40 crops.
Related Resources
More S34D reports on the DEC