eMKambo has been in African food markets long enough to notice some invisible patterns that should be known to farmers, financiers, development agencies and policy makers. The new generation of consumers’ tastes and preferences are increasingly defining the extent to which a commodity remains a luxury or becomes a necessity. While tomatoes and leafy vegetables have always been necessities, soft drinks like Coke were a luxury. Mazoe orange crush was mainly for sick people so that they regain strengths. However, these are some of the commodities that have become necessities consumed together with fresh potato chips and chicken, almost daily.
The potato and how it has transitioned into a staple
In several African countries, the Irish potato has become a staple with many consumers now demanding consistent supply at affordable prices. Consumers are also demanding opportunities to taste different varieties. For instance, Zimbabwe now has diverse potato varieties such as BP1, Mondial, Valor, Mnandi, Amatheyst and others. The transition of potato from a luxury to a necessity has been driven first by consumer tastes and preferences. An increase in demand, mostly from the new generation of consumers who frequent fast food outlets, lured more farmers into producing the crop. The increase in demand also pushed up prices which became an incentive for more farmers to join the bandwagon. In the past five years, the price of a 15kg pocket of potatoes in Zimbabwe reached $13 with the lowest price being $6.
From special events to households
The potato has also moved from being a special events commodity to household consumption. As more farmers were attracted to potato as a lucrative commodity, the knowledge around potato production also increased. However, as with any other commodity, demand does not always continue to increase but reaches a ceiling before it starts to go down and eventually stabilize. For instance, over the past season in Zimbabwe, there have been signs of potato reaching a stagnant price (average of $3/pocket) while production has continued to increase. As a result there has been an outcry as farmers wanted to sell small grades at $5, medium grades $6 and large grades $7, prices which the market was resisting.
Since potato has become a staple necessity, consumers want to buy enough for a whole month and that means it has to have its own market where it can be found all the time. Farmers also expect prices to stabilize so that almost everyone can afford it. This is compelling farmers to think of making profit on volume and consistent supply as opposed to increasing prices. When the market sets demand and quantities required, farmers have to adjust and align their production and operational costs with demand trends. Unfortunately, having acquired knowledge and invested in the entire system, farmers struggle to quickly adjust their costs of production.
The main advantage when a commodity becoming a staple is that farmers are assured of a ready market that supports sustainable production. That means they have to focus on managing their costs and quality instead of continuing to chase high prices. It becomes easy to plan. For instance, a farmer can aim for $2 profit per 15kg pocket. To remain in the game, farmers have to maintain a certain level of production in line with demand. That is why data collection from the entire market is critical. Fortunately, potato is not highly perishable and requires less intensive levels of knowledge, attention and work load.
With the right support, sweet potato could go hand in hand with potato with which it has almost the same benefits. Unfortunately, its value addition options like chips, flour or drinks have not been developed. African countries have not invested in the science that would enable profitable value adding of sweet potato into a profitable commodity. African researchers have been trying to adopt chips making technology from the West. Lack of value addition prospects means sweet potato remains a seasonal commodity. A broader market for other uses that would trigger demand all year round is yet to be cultivated. When processed or value added, sweet potato can offer more value and create employment as well as ensure more income for the economy. Where there is no value addition, government does not get value added tax while raw consumption shortens the chain. A commodity should exhaust is full potential along the value chain unlike removing it before it passes through all stages of the chain.
Luxuries like peas, peppers, carrots and others
A luxury like peas has a niche market and tries to maximize its profit through high prices whereas a staple like maize grain or potato maximizes its profits through high volumes. On the other hand, price elasticity is very high for luxuries. When a box of peas is going for $10, a 50% price increase drives the price to $15/box which can trigger a 50% reduction in demand. However, for a pocket of potatoes costing $3, a 50% price increase pushes the cost to just $4/pocket which may not induce a high reduction in demand. Consumers may not mind a $1 increase. Farmers can also plan their production accordingly.
Most luxuries tend to be on the side plate because their main role is to add flavor to food whereas a staple like potato is a whole meal and can constitute 90% of the meal. Luxuries like cucumber, chilli pepper, ginger and garlic are additives bought in small quantities. That is why farmers cannot do a lucrative business growing chilli pepper. A family can spent more than three months consuming 50c worth of chilli pepper. In some households only the father or mother may consume ginger or garlic while the whole household consumes potatoes and tomatoes. Given available land and other resources in African countries, it is uneconomic to specialize on luxuries like carrots, beetroot and pepper. For sustainability, farmers have to consider green mealies, potatoes, cabbages, tomatoes, onions and other necessities that are demanded in large volumes.
Multipurpose use also influences the classification of commodities into luxuries or necessities. For instance potato has diverse by-products like crisps, fresh chips, mashed potatoes, potato salad and potato seed while high value crops like carrots and garlic have no meaningful by-products. While necessities are always in demand, consumers can shift away from luxuries when there are challenges like loss of income. Just as farmers prioritize household food security before thinking about surplus for the market, urban households prioritize necessities like cooking oil, salt, sugar, mealie meal or potatoes. Everything else is a luxury.
In a changing climate characterized by drought and unreliable rainfall patterns, luxury commodities tend to be pushed out. There is often more demand than supply of basic necessities like maize, triggering price increase and forcing households to forego luxuries. If maize prices increase, spaghetti is sacrificed for rice and other closer necessities. Some commodities will be pushed to luxuries due to pressure on the budget. For instance, meat consumption may become spaced, replaced by Kapenta, for instance.
The production of necessities tends to be negatively affected by high cost of inputs. Famers have to produce in large volumes in order to enjoy economies of scale. Ideally, smallholder farmers on small pieces of land ranging from 0.5 to 6ha should not produce potatoes but leave it to those with bigger pieces of land while they try a mix of some staples and high value crops like okra and others. However, when they produce potatoes for their own consumption, they help in controlling the price of potatoes on the market by becoming consumers. They can complement volumes produced by large farmers. The only reason some farmers are producing additives like cucumber is because production costs tend to be low.
This crop has not yet become a necessity but is somewhere in the middle. Its production knowledge is still slightly specialized and varieties are still fewer. It is not yet grown in all areas and has fewer uses. In the market, it can rarely be in gluts to a point of being sold at $5/60kg bag called a Sasseka in Zimbabwe. There are also times when butternut can be out-maneuvered by gourds and pumpkins which do not have high production costs and are not highly knowledge intensive. These commodities tend to keep butternuts on the periphery. Butternut is also more of an additive consumed with rice, usually at special events.
Meat and eggs
Most of the meats like beef and chicken have become necessities in many African countries. Initially prices were very high to the extent of luring more farmers into producing beef, chicken and piggery. In Zimbabwe, a broiler was at one time going for $10 but can now be found at $4 – $6 because producers have adjusted their production costs. This has stabilized and balanced demand and production at affordable prices. In addition, some farmers are now making their own feed and have devised other ways of managing costs. Producers have also realized that consistency in production and huge supply volumes guarantee benefits related to economies of scale. Another lesson is that farmers cannot pay the same salary to employees taking care of 200 chickens and 1000 chickens.
Eggs re still more of a luxury. Margarine, Jam or peanut butter can substitute eggs for breakfast. Eggs can also be used as additives in baking cakes. A whole family cannot boil eggs and consume them for dinner. They are more of ingredients in producing beggars and other foods. That means another commodity has to be bought first for eggs to be bought.
Yawning opportunity surrounding indigenous poultry
The African indigenous poultry industry is taking too long to develop to a point of enjoying economies of scale. Everyone knows numerous advantages of indigenous chickens but efforts to unlock opportunities seem to be facing many barriers. In a changing climate, small stock like indigenous chickens which do not consume a lot of resources are being promoted. But a major question is why is an indigenous bird whose costs of production are very low being sold for $10 when a broiler, which requires a lot of feed, water, energy and other resources is going for $4 to $6? It seems broilers have pushed indigenous chickens into luxury commodities for niche markets. When times are hard, urban households can afford to spare $5 for a broiler or broiler cutlets at $1/packet and forego expensive indigenous chickens. Why don’t we have cutlets of indigenous chickens in the majority of African supermarkets?
Indigenous chickens have several advantages like low production costs, resistance to diseases and self-reproduction (they can lay their eggs and produce chicks with minimum input). However, due to poor economies of scale, by producing smaller quantities, farmers demand high prices. For a bird with fewer inputs, $2.50 to $3/bird is not a bad price. When farmers maximize volume they can make more than be trapped in low volume high price business. From 100 chicken sold at $3, a 50c profit per bird is better than trying to sell 20 birds at $10 each.
Nothing stops African farmers from being innovative in using their resources and devoting whole farms to indigenous chickens. Indigenous poultry has been genderized and left to women who are struggling to commercialize it on their own. We now see many men getting into trading indigenous chicken, traditionally considered a women’s commodity. A luxury is often men’s business.
Same with small grains
Small grains have also been pushed into the luxury commodity class because farmers have failed to produce at scale. A related challenge is lack of investment in technologies that ensure good quality. Most consumers still complain about finding soil in rapoko and pearl millet. Why should a bucket of finger millet be sold at $10 when maize grain is at $4 a bucket? Rapoko should be $3/bucket. Production at scale will enable economies of scale. Small grains and indigenous chickens can complement each other in sustainable ways. They can present an opportunity for organic production where poultry manure can be used in horticulture, giving African horticulture an authentic indigenous face.
eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6
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