Policy options for improving market participation and sales of smallholder crop producers: A case study of the Free State Province of South Africa

Abstract

The paper identifies underlying factors behind farmers' market participation decisions and level of commercialisation of South African small scale farmers with a particular emphasis on transaction costs. The two-step decision making process is analyzed based on Agricultural Household Model that incorporates transaction costs using a Heckman selectivity procedure. The key importance of non price factors such as transaction costs over price factors come out clearly. Marginal effects are calculated and decomposed into market entry and intensity. The result showed that while both transaction costs and output prices are important for market entry and intensity; transactions costs have significant negative effects and have induced institutional innovations-such as belonging to farmers group and cooperating with white commercial farmers; and owning transport facilities are emerging to mitigate the costs of accessing markets. Consequently, price interventions to promote market access are likely to solicit a greater volume of additional supply from peasants entering the market for the first time. Overall, the findings clearly highlight the importance of non price policies to address explicitly the conditions of low productivity and low capital endowments of resources of poor farmers in order to promote surplus market supply and alleviate poverty.

Selling on Farm or on the Market: What Kind of Arbitrage for Smallholders’ Farmers in South-Kivu, Democratic Republic of Congo?

“…The households who exploit larger pieces of land have the capacity to produce and sell more on the market than those endowed with a small plot size. This result confirms that of Bahta and Bauer (2012); Jagwe (2011) and Ouma et al (2010).…”

“…Household localized near a road increases the net gains from their sales on the market by 32 per cent. The same result was confirmed by the study of Bahta and Bauer (2012) in South Africa who found that having the access to a road increases the sales of 58 per cent. This result shows the advantage of the location near the agricultural access roads.…”

Adoption of ICT-Based Information Sources and Market Participation among Smallholder Livestock Farmers in South Africa

“…Cooperatives have been found [55] to provide farmers with requisite platforms for exchanging information, and to serve as a link to buyers at a lower cost. These leads to improvements in their collective bargaining power and production capabilities [56,57], while invariably lowering the transaction costs due to market participation. A similar finding of the positive influence exerted by membership of farmer's cooperative or association has also been reported in [58,59].…”

Analysis of the Factors Influencing Market Participation among Smallholder Rice Farmers in Magway Region, Central Dry Zone of Myanmar

“…This variable was included as a dummy variable if any of the household members had a membership in the farmers' organization. Membership of the farmers' organization has been found to increase market participation of households because it improves the capabilities of farmer production and marketing [31]. In this study, we assumed that membership of a farmer organization positively influenced both the probability of market participation and the quantity of rice sold among smallholder farmers in Myanmar.…”