From subsistence to market production : Implications for rural household food security in Uganda

Food insecurity remains a significant and persistent challenge in sub-Saharan Africa. This has been partly attributed to low food availability associated with subsistence farming and limited access to nutritious foods. In response, most countries including Uganda have made effort to promote and support market-oriented crop production, in the hope that households will be food secure through the market other than self-sufficiency characteristic of subsistence production. This thesis aims to better understand how agricultural transition, from subsistence to market-oriented crop production, impacts rural household food security. The thesis investigates how market production correlates with four key interconnected aspects that drive the outcomes of market production. Specifically, we analyse market production effects on; household food consumption, women control and allocation of household income and productive resources, and technical efficiency of staple crops. Further, we investigate the role of the informal credit market and local traders in stabilizing seasonal grain prices. This empirical information is important as an input into the process of agricultural production reforms to guide policy decisions based on facts. The empirical analysis is based on survey data collected from farm households, informal financial institutions and grain traders from rural western Uganda. Uganda provides a relevant context to address the above objective because of its agricultural policy which aims to promote cash crops. In addition to survey data, we use a simple experiment to construct women empowerment indices which are used as proxies for women bargaining power in household income expenditure and resource allocation in assessing market production effects. The thesis employs various analytical methods including; propensity score matching approach and instrumental variable estimators to identify a causal link between market production and household food security. Our findings show that while market production is a good strategy for increasing rural household income, production income has not been reflected in household calorie consumption. However, there is evidence of improved dietary diversity which is a positive indicator for nutrition security. Still, we find that market oriented households are more vulnerable to food insecurity in terms of access. This research also shows that as households increasingly engage into market oriented production, women tend to be less involved in production decisions and this negatively impacts household food security. The analysis of productivity levels in terms of technical efficiency shows that a majority households operate below the potential for the biophysical environment for both the cash and staple crops implying that they can increase their output and ultimately improve their food security. The negative effects could be reversed if market oriented households increasingly involve women in production decisions and income allocation; and increase the share of production income on food purchases as well as on productivity enhancing technologies such as quality seed and labour saving technologies. To attain the goals of market production, there is need to strengthen linkages between farmers and production support services. Financial services in particularly are crucial to enable farmers smooth consumption and take advantage of intertemporal arbitrage opportunities. Investing in infrastructure especially the road network and rural markets, and organizing farmers into cooperatives/groups to bulk and store their produce will reduce transaction costs, promote competition between traders and improve the functioning of food markets.</p

SMALLHOLDER FOOD MARKETING BEHAVIOUR: EXPLORING THE ROLE OF INFORMAL CREDIT AND TRADERS IN STABILIZATION OF FOOD CROP PRICES

Many farmers in Africa sell their produce at low prices immediately after harvest because they need cash. They could solve temporary liquidity constraints by use of credit and store their produce to sell when prices are high. However, due to various reasons such many poor farmers have been excluded from formal financial services. In response, the informal financial market has expanded, but the question why informal credit has not facilitated storage to enable farmers benefit from intertemporal arbitrage opportunities remains largely unanswered. To answer this question, we investigate the role of informal credit markets and traders in stabilizing seasonal food crop prices. Our analysis is based on a household survey data, and in-depth interviews with key players in the informal credit market and grain traders in rural southwestern Uganda. We find that community-based self-help savings and credit associations provide credit for the majority (62%) of farmers. Informal credit still excludes the very poor and is not sufficient to enable farmers benefit from intertemporal arbitrage opportunities. Thus, poor farmers continue to ‘sell low and buy high’. The study also addresses a related fundamental aspect of food marketing: why is there no competition between traders bidding up prices after harvest and eliminating seasonal price fluctuations? We analyse traders’ costs and profit structure in the study area, and shed some light on imperfections in the grain market and the barriers that limit competition between traders. We find that grain trade is not highly competitive. High transaction costs and limited access to credit are the main barriers limiting competition. Supporting community-based self-help savings and credit associations to raise their portfolio can enable more farmers to borrow at the same time. Investing in infrastructure, organising and supporting small scale farmers to bulk their produce might lower transaction costs, promote competition and dampen price fluctuations

The Unintended Side-Effects of a Major Development Strategy : Commercialization of Smallholder Production and Women Empowerment in Uganda

As many African countries promote commercial agricultural production, it is important to understand how this strategy influences the intra-household balance of power. Commercial crops are traditionally considered the domain of men, and women empowerment may suffer. We use a quasi-experimental design to address the relation between commercial production and women’s voice within the household in rural Uganda. We compare empowerment in households in an area targeted by a large program stimulating rice as a non-traditional cash crop with similar households elsewhere using double robust regression methods. We conclude that the commercialisation program had a significant negative effect on women empowerment in production and women’s control over income, while men’s empowerment in those domains increased. We find only weak effects for social empowerment. Based on these results, we recommend that policies and programs to stimulate commercial agricultural production among smallholder include a strong gender component

Managing food security among the rural poor in uganda: recognising vulnerability and it's drivers

The presentation reviews drivers of vulnerability in poor rural households, including size of household, low participation in food production, low innovation adoption, and low ownership of livestock. There are few assets and distant extension services, supplies and markets

Effect of market production on rural household food consumption: evidence from Uganda

Food access is an important element of food security that has since long been a major concern of rural households. One intervention to improve food access has been increased promotion of market production in the hope that households will get increased income and access to food through the market rather than through self-sufficiency characteristic of subsistence production. We examine the effect of market production on household food consumption using a case of rice in western Uganda, where rice is largely a cash crop. Our analysis is based on propensity score matching and instrumental variable approach using survey data collected from 1137 rural households. We find evidence of negative significant effects of market production on calorie consumption; More commercialized households are more likely to consume less than the required calories per adult equivalent per day. This implies that the substitution effects due to higher shadow prices of food outweigh the income effects of additional crop sales. On the contrary, we find positive significant effects on household dietary diversity. We suggest a mixed approach combining policies targeted at market production as well as production for own consumption, and nutrition sensitization.</p

Effect of market production on rural household food consumption: evidence from Uganda

Food access is an important element of food security that has since long been a major concern of rural households. One intervention to improve food access has been increased promotion of market production in the hope that households will get increased income and access to food through the market rather than through self-sufficiency characteristic of subsistence production. We examine the effect of market production on household food consumption using a case of rice in western Uganda, where rice is largely a cash crop. Our analysis is based on propensity score matching and instrumental variable approach using survey data collected from 1137 rural households. We find evidence of negative significant effects of market production on calorie consumption; More commercialized households are more likely to consume less than the required calories per adult equivalent per day. This implies that the substitution effects due to higher shadow prices of food outweigh the income effects of additional crop sales. On the contrary, we find positive significant effects on household dietary diversity. We suggest a mixed approach combining policies targeted at market production as well as production for own consumption, and nutrition sensitization.</p

Smallholder Food Marketing Behaviour: Exploring the Role of Informal Credit and Traders in Stabilization of Food Crop Prices

Many farmers in Africa sell their produce at low prices immediately after harvest because they need cash. They could solve temporary liquidity constraints by use of credit and store their produce to sell when prices are high. However, due to various reasons such many poor farmers have been excluded from formal financial services. In response, the informal financial market has expanded, but the question why informal credit has not facilitated storage to enable farmers benefit from intertemporal arbitrage opportunities remains largely unanswered. To answer this question, we investigate the role of informal credit markets and traders in stabilizing seasonal food crop prices. Our analysis is based on a household survey data, and in-depth interviews with key players in the informal credit market and grain traders in rural southwestern Uganda. We find that community-based self-help savings and credit associations provide credit for the majority (62%) of farmers. Informal credit still excludes the very poor and is not sufficient to enable farmers benefit from intertemporal arbitrage opportunities. Thus, poor farmers continue to ‘sell low and buy high’. The study also addresses a related fundamental aspect of food marketing: why is there no competition between traders bidding up prices after harvest and eliminating seasonal price fluctuations? We analyse traders’ costs and profit structure in the study area, and shed some light on imperfections in the grain market and the barriers that limit competition between traders. We find that grain trade is not highly competitive. High transaction costs and limited access to credit are the main barriers limiting competition. Supporting community-based self-help savings and credit associations to raise their portfolio can enable more farmers to borrow at the same time. Investing in infrastructure, organising and supporting small scale farmers to bulk their produce might lower transaction costs, promote competition and dampen price fluctuations. JEL Classification: D53, O13, O16, Q12, Q1

Smallholder food marketing behaviour: exploring the role of informal credit and traders in stabilization of food crop prices

Many farmers in Africa sell their produce at low prices immediately after harvest because they need cash. They could solve temporary liquidity constraints by use of credit and store their produce to sell when prices are high. However, due to various reasons such many poor farmers have been excluded from formal financial services. In response, the informal financial market has expanded, but the question why informal credit has not facilitated storage to enable farmers benefit from intertemporal arbitrage opportunities remains largely unanswered. To answer this question, we investigate the role of informal credit markets and traders in stabilizing seasonal food crop prices. Our analysis is based on a household survey data, and in-depth interviews with key players in the informal credit market and grain traders in rural southwestern Uganda. We find that community-based self-help savings and credit associations provide credit for the majority (62%) of farmers. Informal credit still excludes the very poor and is not sufficient to enable farmers benefit from intertemporal arbitrage opportunities. Thus, poor farmers continue to ‘sell low and buy high’. The study also addresses a related fundamental aspect of food marketing: why is there no competition between traders bidding up prices after harvest and eliminating seasonal price fluctuations? We analyse traders’ costs and profit structure in the study area, and shed some light on imperfections in the grain market and the barriers that limit competition between traders. We find that grain trade is not highly competitive. High transaction costs and limited access to credit are the main barriers limiting competition. Supporting community-based self-help savings and credit associations to raise their portfolio can enable more farmers to borrow at the same time. Investing in infrastructure, organising and supporting small scale farmers to bulk their produce might lower transaction costs, promote competition and dampen price fluctuation

Managing food security among the rural poor in uganda: recognising vulnerability and it's drivers

This paper analyzes food insecurity vulnerability in rural poor households in Uganda, based on a study conducted in three districts with different food situations. Findings of the study show drivers of vulnerability are large household sizes; lack of alternative cash sources; small land holdings; low application of productivity innovations; neglect of Indigenous minor crops; and limited assets that include lack of livestock, weak social capital, distant extension services, supply and market centres