1Why Strong Farmers Groups are Ideal in the Marketing of Rice in Eastern Uganda Why Strong Farmer Groups are Ideal in the Marketing of Rice in Eastern Uganda Executive Statement Avenues for marketing rice in three districts of Butaleja, Tororo, and Bugiri in Eastern Uganda are studied based on data collected from a community and market survey. Survey results reveal that majority of farmers sell their rice to traders and middlemen, fol- lowed by processors and individual consumers. Consistently, relatively high prices are earned when rice marketing is undertaken in groups across all the three districts, and premium prices are realised from improved rice varieties like WITA9 grown by only 26 percent of the farmers. This demonstrates proof that there are income benefits from economies of scale in rice marketing that accrue to farmers that opt to market their rice as a group. However, the majority (over 79%) of farmers still operate as individuals. The study establishes that there are overriding considerations at community level (like urgent need to offset personal needs, lack of information, and limited group storage infrastructure) that weaken farmer groups for bulk marketing, hence sending farmers to operate as individuals. This leads to loss of farm income, and keeps farmers perpetually in poverty; and makes the case stron- ger to expedite the implementation of government projects such as the “produce storage facilities development project”, spelt out in the Second National Development Plan (NDP II) in the predominately rice growing Eastern Uganda. The findings further strengthen the case for reviving farmers’ cooperative societies in the country. Background The Ministry of Agriculture, Animal Industry and Fisheries (MA- AIF) identified rice as one of the strategic commodities with the potential to remarkably contribute to rural income1. Con- sequently, commercial rice farming has economic implications for people of eastern Uganda dependent on rice as one of the major economic activities2. So it is compelling and imperative that households that largely depend on rice as a source of in- come must market the crop in ways that maximise the ensuing proceeds. This brief focuses on marketing methods and uses part of the rice value chain community and market survey data that were collected by the Economic Policy Research Centre (EPRC) in May 2015. The brief provides an understanding of the marketing methods used by farmers and estimates the in- POLICY BRIEF Mildred Barungi, Tonny Odokonyero, and Swaibu Mbowa November 2012Issue No. 25 Issue No. 72 July 2016 Towards Sustainable Development come forgone by farmers when they sell their rice as individu- als rather than through a group marketing approach. Figure 1: Major Rice varieties grown in Eastern Uganda, % Source:Authors’ calculations based on the 2015 Focus Group Discussions with farmers in Butaleja and Tororo POLICY BRIEF NO. 72, JULY 2016 2 Why Strong Farmers Groups are Ideal in the Marketing of Rice in Eastern Uganda Rice Varieties Grown and Marketing Processes Farmers in eastern Uganda grow several rice varieties, how- ever the main varieties are Kaiso, Super, WITA9 (Figure 1). Seven out of every ten rice farmers (70%) grow Kaiso, followed by WITA9 (26%), and Super (21%). The purchase of rice from farmers is led by traders; who hap- pen to be retailers, wholesalers and middlemen (Table 1), whose role is categorized as follows: village collectors/middle men (66%); traders (58%); millers (53%); and individual consumers (16%). The dominance of traders in the marketing activities are critical but tend to encroach on likely potential incomes that could be earned by farmers. The opinions solicited from the selected representatives of the rice growing communities, overwhelmingly reveal that majority of farmers market rice as individuals rather than in groups (Figure 2). The fundamentals at community level that drive farmers to act discretely during rice marketing are brought about by factors like; the urgent need to offset personal needs, lack of information, and limited group storage infrastructure. Apparently the reasons advanced by the community to market rice on an individual basis tend to outweigh pros of group mar- keting approach (Figure 3). This implies that there is need to address the views expressed by farmers for shunning group marketing activities; as these are bound to weaken the promotion and development of farmer groups as a means to mobilize smallholder farmers into in- stitutions that can undertake bulk marketing. This result can be used to inform initiatives by government and development partners like the International Fertilizer Development Centre (IFDC) to develop agribusiness clusters for mobilizing farmers into groups at village and sub-regional (district level). Figure 2: Marketing methods practiced by rice farmers Source: 2015 Focus Group Discussions with rice farmers in Bugiri, Butaleja and Tororo Table 1: Buyers of rice Category of rice buyer Percent that sells to each buyer FGD participants (n = 366) Observed Community Occurrence Traders (retailers / wholesalers) 41 58 Processors / millers 33 53 Village collectors/middlemen 45 66 Individual consumers 8 16 Others 6 7 Source: 2015 Focus Group Discussions with rice farmers in Bugiri, Butaleja and Tororo POLICY BRIEF NO. 72, JULY 2016 3Why Strong Farmers Groups are Ideal in the Marketing of Rice in Eastern Uganda Benefits foregone when selling rice using individual approach Findings presented in Table 2 indicate that farmers who sell rice on an individual basis are disadvantaged because they receive lower prices per kilogram compared to their counter- parts who sell in groups. The magnitude of foregone income per kilogram of rice sold individually ranges from UGX 70 to 1,408 depending on the variety. For every kilogram of WITA9 sold on an individual basis, a farmer loses UGX 1,408. This translates to an income loss of UGX 140,800 per 100kg of WITA9 sold on an individual basis. The reported differences in prices associ- ated with the marketing methods are primarily explained by the fact that individual farmers have less bargaining power and are therefore more easily manipulated by traders and middle men when compared to farmers who sell their rice collectively as a group. Additionally, it is important to note that WITA9 is a high premium rice variety (Table 2), which needs to be pro- moted to bolster incomes earned by farmers. Figure 3: Reasons for choice of marketing methods used by farmers Source: 2015 Focus Group Discussions with rice farmers in Bugiri, Butaleja and Tororo Table 2: Variations in selling prices (Ugx/Kg) of major rice varieties by marketing method District Kaiso Super WITA9 Individual Group Difference Individual Group Difference Individual Group Difference Bugiri 2,250 2,333 83 2,933 - -  - -  - Tororo 2,220 2,350 130 2,920 3,000 80 1,600 5,000 3,400 Butaleja 2,100 2,350 250 2,833 - -  - - -  All districts 2,201 2,343 142 2,830 2,900 70 2,217 3,625 1,408 Source: 2015 Focus Group Discussions with rice farmers in Bugiri, Butaleja and Tororo Note: The study did not capture transaction costs POLICY BRIEF NO. 72, JULY 2016 4 Why Strong Farmers Groups are Ideal in the Marketing of Rice in Eastern Uganda Recent Policy Briefs “The Constraints to Irish Potato Value Chain Financing in Uganda” No. 69 June 2016 Francis Mwesigye and Swaibu Mbowa “Informality of actors and its implications for Potato Value Chain upgrading in Uganda” No. 68 June 2016 Francis Mwesigye and Swaibu Mbowa “Indicative Lost Income due to Limited Technology use in Irish Potato Production” No. 67 June 2016 Swaibu Mbowa and Francis Mwesigye About the Authors Mildred Barungi is a Research Fellow at the Economic Policy Research Centre (EPRC) Tonny Odokonyero is a Research Fellow at the Economic Policy Research Centre (EPRC) Swaibu Mbowa is a Senior Research Fellow at the Economic Policy Research Centre (EPRC) The views expressed in this publication are those of the authors and do not necessarily represent the views of the Economic Policy Research Centre (EPRC) or its management. Copyright © 2016 Economic Policy Research Centre The Economic Policy Research Centre (EPRC) is an autonomous not-for- profit organization established in 1993 with a mission to foster sustainable growth and development in Uganda through advancement of research – based knowledge and policy analysis. Address: Economic Policy Research Centre 51, Pool Road, Makerere University Campus, P. O. Box 7841 Kampala, Uganda Tel: +256414541023/4 Fax: +256414541022 Email: eprc@eprcug.org, Website: www. eprcug.org www.eprcug.org TWITTER:@EPRC_official www.facebook.com/EPRCUganda eprcug.org/blog Learn more at: Endnotes 1 MAAIF (2012). Proposed plan to operationalise the Non-ATAAS component of the Agriculture Sector Development Strategy and Investment Plan. 2 MAAIF (2009). Uganda National Rice Development Strategy (UNRDS). Second Draft. 3 NPA (2015). National Planning Authority. Second National Development Plan (NDPII) 2015/16 – 2019/20 Emerging policy implications The fundamentals at community level that cause farmers to shun group marketing need to be comprehensively dealt with for farmers to earn the relatively high revenues that ac- crue from group marketing of rice in the three districts of Eastern Uganda. This would be one of the pathways to accelerate poverty reduc- tion efforts among agricultural communities in the region. The following measures are sug- gested to strengthen farmer groups as institu- tions in this part of the country:  Widely educate and popularize the advan- tages of group marketing of rice and the associated benefits. This will automati- cally strengthen the ability of farmers to link and access rice markets within and outside their districts or region. This can be achieved, for example, by replicat- ing what IFDC has started - linking some farmer groups to markets, so Government and other non-state actors can leverage on such existing efforts.  Encourage all rice farmers to join groups and through education and training, re- move inefficiencies (such as poor mobili- sation and mistrust) from existing groups to encourage collective action/marketing. Capacities within these groups can be gradually developed into rice growing com- munity owned and managed Savings and Credit Cooperatives (SACCOs) that can ex- tend credit to off-set urgent family needs of farmers.  Encourage farmers to grow premium and high value rice varieties like WITA9. This can be achieved through creation of more awareness about such improved varieties and creating effective and efficient seed systems.  Individual marketing is partly blamed on the shortage of appropriate storage facili- ties. Thus, Government and NGOs should consider investment in storage facilities to enable farmer groups to store and market rice collectively and in bulk. Therefore, im- plementation of government led projects such as the “produce storage facilities development project’’3 that are still in the pipeline need to be expedited.