Study reviews market impacts on value chain actors and small-scale soybean producers in Zambia
25 June 2024
Agri-food value chains (AVCs) have experienced tremendous growth and transformation in the last two decades in developing regions. This transformation has created huge markets for farmers and employment opportunities in food processing, wholesale, and logistics.
Saweda Tasie, Visiting Scientist at IITA from Michigan State University and Market Economist, delivered research findings on market links between value chain actors and small-scale soybean producers in Zambia at the IITA Knowledge Café seminar on 11 June.
The AVC transformation has been facilitated by huge investments by millions of micro, small, and medium enterprises (MSMEs), substantial foreign direct investments, and domestic investments by large enterprises. MSMEs in the midstream of food supply chains improve smallholder welfare.
In Zambia, increasing domestic and regional demand for meat and edible oil has spurred growth in the demand for soybean—an input for meat and edible oil production. Tasie and colleagues, in their study, explored whether non-contract-based purchasing activities of soybean processing firms and traders (large buyers) affect smallholders’ welfare and livelihoods. They also examined if the benefits of selling to large buyers vary by the scale of smallholders. They also identified channels through which these welfare impacts occur.
They hypothesized that non-contract-based sales are likely to have significantly different implications for smallholders’ welfare than contract-based sales since incentives like the provision of inputs and guaranteed markets by the buyer may be unavailable to smallholders’ without purchasing contracts.
Through a protocol-driven scoping review, they found that soybean sales by smallholder farmers to large buyers are associated with higher crop income for the average Zambian smallholder. They found significant positive effects of selling to large buyers in non-contract arrangements on crop incomes for smallholder farmers in Zambia. However, the effects on gross income are mostly statistically and economically significant only for medium-scale smallholders and not for small-scale smallholders.
While the crop income effects of selling to large buyers did not translate to increased gross income and poverty reduction for small-scale households, the ability to sell to large buyers enables small-scale farmers to sell more output at a higher price. They found no significant impacts on total household income for small-scale smallholders as were found for medium-scale smallholders. Hence, smallholders need additional inputs to increase their soybean yield, and policies supporting their expansion will benefit them.
They proposed actors in the midstream and downstream of input and output supply chains as important mechanisms to support smallholder behavior and welfare. They cited the adoption technologies developed by IITA, such as the GoSeed model and the IITA youth programs, as examples to follow.
Contributed by Folake Oduntan
