SUPPORT SERVICES TO AGRICULTURE

Introduction
• Government intervenes when the market fail to give an allocation of
resources deemed appropriate by society,
• Government can intervene by:
• Doing nothing to doing everything (government playing the role of a
spectator in the market).
• OR
• Taking an active role, either as a producer or buyer.
• Government could instead deal with imperfections in the markets.
This is known as support services.
• The intention is not to impose market fundamentals because of failed
markets, rather it is to support markets so as to remove the impact of
imperfections.
• In this unit we cover various market imperfections and look at
possible measures to support farmers facing these imperfections.
1. Storage
• In economics theory, we study production and supply jointly but
recognising the difference between the two.
• Production refers to factors influencing what and how much is
produced while supply looks at the availability of a commodity on the
market.
• The decision to produce should be delinked from the decision to
supply. Separating the two requires dealing with storage, as an
intermediate stage.
• Goods must be produced when it is optimal to
produce and supplied not when produced, but
when it is optimal to supply.
In Absence of Storage
• Supply always comes automatically after production. This is partly
responsible for seasonal swings in agricultural product prices.
• Since production is seasonal for most crops (this is true for rain fed
agriculture and most weather affected crops), supply also follows the same
fluctuation causing fluctuations in prices also.

• Most agricultural output is available on the market in one period and

absent in another. Even with a plunge in prices, farmers are obliged to sell
their output due to lack of storage facilities
• If storage facilities were available, farmers would be able to smoothen the
supply of output.
2. Access to Markets
• Especially for small scale farmers
• Agricultural producers are often denied access to market for the
agricultural produce due to either long distances to markets
• Or
• impassable roads during times of buying inputs or selling outputs.
• They also lack access to input markets and have to trade in these
markets through intermediaries.
A good transportation system would improve
this
3. Marketing Policies: Maize
• The maize market in the country is heavily dominated by the Food
Reserve Agency, an agency under the Ministry of Agriculture.
• The mandate of the agency includes providing a guaranteed market
for selected crops, particularly maize.
• The agency is able to buy maize right at community level.
• At the beginning of a marketing season, the Minister responsible for
agriculture announces the recommended price for the commodity.
This is the price at which FRA will buy the commodity
• In setting the recommended price, the ministry has to take into account
concerns from both the demand and the supply sides.
• If the commodity is priced high, consumers will suffer because food will be
relatively expensive.
• Too low price will force investment out of the maize subsector or out of the
agriculture sector as a whole. The long term effect is lower production and
higher prices.
• The recommended price, however, is not binding on other buyers in the
market.
• The FRA price provides a signal from which other players in the market can
base their decisions.
4. Credit
• Financial markets link those with a surplus of funds to those that do
not have funds.
• There are various forms of credit.
• Most common (for farmers) is a loan
• However, to access the loan there are requirements that a farmer
needs to meet such as having collateral.
Other sources of Credit
1. Credit may also be provided through provision of inputs on credit.
• Farmers often enter into contractual farming, where a potential buyer
also provides inputs. This is prominent in the cash-crop subsector.
2. Informal creditors.
• These are often not formally registered to operate as creditor but
nonetheless, take advantage of the absence of adequate credit
providers.
Challenges in accessing Credit
• In particular, the markets do not operate optimally in providing
finances to the special needs of the agricultural sector.
1. Input on credit which is available through contractual farming binds
the farmers to a limited number of output buyers
• The form of credit has a bearing on what is produced and the quantities
thereof.
2. The provision of loans from banks has conditions that most rural
households can seldom meet. For example most do not have assets that can be
used as collateral.
Most rural households and therefore the small
scale farming households hold land under the
customary lease system.
Leading to less than optimal production
5. Information
• One of the characteristics of an efficient market is information or
rather being well informed about the happenings in the market such
as
• Information about various variable in the market,
• Information about new technologies
• Information on new opportunities and threats to farming (outbreak of
diseases).
Limitations to Information
• Most Farmers are rural folks
1. The level of education is usually below average.
2. Access to media is also limited, due to poor communication
infrastructure and poor road networks.
3. Utility services such as electricity are also lacking which hinders
their adoption of technology
4. Cost of devices such as smartphones that can improve their access
to information is also a challenge.
• In order to bridge the gap, many governments provide information
specific to agriculture along with other extension services.
National Agriculture Information Service
(NAIS)
• To promote the adoption of proven agricultural technologies by small
scale farmers through the use of the mass media in order to enhance
the adoption of improved farming methods as a way of increasing
their production and productivity.
• The institution gathers and disseminates information targeted to the
farming communities.
• This will include information on :
✓ Potential market
✓ The spread of diseases affecting farming or pests that might affect
their crops.
✓ Information on new technologies from agriculture research
institution
✓ Success stories from other farmers is also disseminated to enhance
technological advancement.
6. Extension Services
• This refers to extending, usually government services closer to the
target population.
1. Trained and equipped extension officers or best performing farmers
are assigned to work with the community, to help the farming
community improve on the farming practices.

This is said to enhance the uptake of knowledge and technology from

agriculture research institutions as well as knowledge generated by doing from
best performing farmers.
2. Extension services can also involve training farmers on how to respond to
calamities such as outbreak of livestock diseases.

• Farmers are oriented on the best way to respond to the potential

calamity, both preventive and remedial

3. Extension services also helps improve the interactions between the

farming communities and the government.

• It’s a way of promoting government programmes and policies as well as

obtain feedback from the communities.
ACCELERATING AGRICULTURAL RESEARCH IN LDCs
• Replication of technology is difficult in the agriculture sector given its
nature.
• Owing to large areas involved, it is difficult to alter or change whether
to suit a given production process or not.
• Differences in weather or climate patterns affect the replication of
technology
❑ For instance, improved seed varieties, animal
breeds will do well in one region and fail in
another.
❑ It is for this reason that every nation must
thrive to create own technology, which is
suited to the prevailing weather conditions.
Technology as a Public Good
• Once generated,
• it lacks excludability- the producer cannot keep it away from those
he/she wishes to deprive, the non-payers.
• Non rivalry- it is not socially optimal to keep the good away from the
non-payers.
• Research in the sector requires a lot of money
COOPERATIVE INSTITUTIONS AND AGRICULTURAL
DEVELOPMENT
• Cooperative have become common and most farmers use it to access
government support programmes
• Cooperatives are mainly farmers associations or organisation meant
to bring farmers together.
Benefits of Cooperatives
1. Increased access to markets
• By pooling resources of many farmers, cooperatives are able to
increase their influence on the market.
• they can engage in bulk buying of inputs for members which reduces
the average cost per farmer. Bulk buying can incur some discounts
and reduce transportation cost for the individual farmer
2. The bargaining power of farmers is enhanced because they speak
with one voice.
• Cooperatives enhance collusion among farmers, reducing competition
when selling output. This gives farmers power to set or at least
influence market price for their produce.
• This increases incomes for the farmers
3. Cooperatives are a platform through which government can easily
spread its programmes to farmers.

4. Cooperatives also enhance social cohesion amongst farmers.

Social cohesion and cooperation among farmers can be of great help in
fostering information sharing and technology diffusion.
5. Cooperatives can provide a mechanism for provision of public goods.

• Cooperatives can nonetheless pool resources, by way of contributions,

towards the provision of goods of common benefit.
• It may also help eliminate externalities in agriculture. For instance, through
cooperatives, activities of one farmer having adverse effects on other farmers
can be controlled.
Cooperative leaders can easily bring farmers together to discuss and
resolve issues of common benefit or cost.
CHANGES IN RIGHTS TO THE USE OF LAND
• The right to the use of land focuses on the land holding system and
the entitlements granted under each system.
• In Zambia, two systems are prominent: the state and tradition
landholding system.
State system
• land is registered and a certificate of title is normally given.
• Under this landholding system, the holder enjoys long tenure and
transferability of the land.
• Because of the long tenure to land, the holder is more likely to engage
in activities that will prolong the good life of the land.
• This tends to promote sustainable land use.
• In addition, the certificate of title and transferability of land enable
farmers’ access to market credit or loan.
Tradition System
• Land is held as part of inheritance from past generations.
• It is not registered and often cannot be transferred with ease.
1. Land is not registered or documented. This does not enable farmers
to use land as collateral in the acquisition of credit.
2. Many farmers do not see the traditional landholding system as
secure enough for them to have a long term focus on the land.
The system is seen as allowing farmers to hold land at the pleasure of
traditional or cultural authorities.
This has contributed to short term focus in the use of land, often
resulting in environmentally unsustainable farming practices.
Land Reform
• Land reform, broadly defined, encompasses changes of rights to land
and well as the redistribution of land.
• In a narrow sense, we can look at land reform as involving a transition
from traditional landholding system to state system
• land reform will enhance the long term productivity of land,
contribute to higher income potential.
• May involve a shift from individual family farming to a collective farm
organization and is believed to enhance agriculture productivity.
Free riders may exist.