Thursday, January 30, 2014

Groundnut buying season : Good news, bad news

It is rather early in the groundnut (peanut, to my American audience) buying season that started last month in a avalanche of confusion, to hail it a success or declare it a failure.  The confusion started with the announcement of the producer price that the farmer was being offered and the declaration of the season open on the 3rd of December by the Agribusiness Services and Producers Association (ASPA) only to be told by the Gambian dictator that they've been fired with immediate effect.  Agents of the ASPA were no longer empowered to buy the produce.

Instead, the Gambia Groundnut Corporation (GGC) will now be responsible not only for processing and exporting Gambia's primary foreign exchange earner, they will now be responsible for buying and transporting the crop to transit points and beyond, completing the vertical integration of the GGC by the single stroke of the dictator's pen without considering the implication of such action.  For a corporation whose financial viability is questionable at best, with limited managerial capacity, according GGC monopoly status is ill-advised.  Signs are already there, but time will tell as they say.

These limitations notwithstanding, the season started with the projection that GGC will buy 40,000 tons. Although it is too early to tell from our vantage point, it appears, as we have said in previous blogs, it will be a steep hill to climb because of the monopoly status of the GGC which, by definition, bars private buyers from participating.  Limiting the players, suppresses competition which, in turn, freezes the price that the farmer gets at the official price.  Private buyers, last year, offered the farmer higher price which forced other buyers to up their price.  For example, last year when the producer producer price was D 10,500 per ton, Chinese buyers were offering Gambian farmers D 19,000 per ton. Needless to say that higher price ultimately benefits not only the individual farmer but the rural farming and business communities. Unfortunately, this year, the Gambian dictator saw to it that private buyers have been banned from the market.

Brisk buying has been noticed in seccos (buying points) in Ballanghar, Lower Saloum partly because Senegalese are crossing the border to sell there nuts there.  This is a good sign because it means that there was little or no credit buying in this area, at least for now.  It is also possible that the price on offer in The Gambia, despite the lack of competition from private buyers, is higher than what's on offer across the border.

Illiassa is also reporting brisk buying, and as at this week, there was no credit buying.  However, other seccos in Farafenni are reporting some credit buying.  farmers are being asked to come back a day or two for their money.  Seccos have been running out of money to pay for the crop.  We hope this is a localized phenomenon and a temporary hiccup rather than a generalized one.  We will know as the season progresses whether credit buying has taken places, and if so, the extent of it and its impact on the tonnage purchased.

When we posed the question of credit to local farmers and businessmen in the Farafenni area, the responds was that it depends on the "demand for money".  If the traffic is high, the buying agent usually runs out of cash, but as long as the waiting period is a day or two, farmers don't mind the wait.  There's an air of apprehension in certain quarters about the ability of the GGC to continue paying for the produce they buy from farmers.  After all, government still owes some farmers huge sums of money from previous seasons which are still outstanding.

Some farmers are unhappy with the allowance for the weight of the bags that is deducted from the total weight of their produce at the weigh stations.  It ranges from 1kg - 1.5kg from secco to secco.  As one farmer opined, "a kilogram here, and a kilo gram there, add up to something big for someone in Banjul." We could not agree more with the sentiment of this farmer.

The final bad news is that in the Farafenni area, the volume is high but the nuts are small and underdeveloped which means the export volume premium HPS (hand picked selected) that brings in higher premium export price will not be as high as hoped.  This problem points to the quality of seed nuts available to farmers for planting. The regime has done an extremely poor job of multiplying high quality seeds, and making them available to farmers.  Other farm inputs like fertilizer and agricultural credit have been in short supply. Building a strong agricultural extension services to support the farming community has also been an abysmal failure, and agricultural research budget slashed in favor of funding celebrations and cultural festivities.  For the regime of Yaya Jammeh, pomp and pageantry trumps over the livelihood of the ordinary farmer, every time.

This is a first in a series of reports on the farming season which we will continue to monitor.