Agriculture Reference
In-Depth Information
5. Influence of institutional factors on smallholder farmers'
marketing channel choices
Bridget Jari, Gavin Fraser and Ajuruchukwu Obi
Abstract
Smallholder farmers are faced with a range of institutional challenges in produce marketing.
In turn, these challenges influence their selection of marketing channels. In this chapter, a
multinomial logistic regression model was used to test the significance of institutional factors
in marketing. The results are based on a case study for smallholder farmers in the Kat River
Valley, in South Africa. It is shown that the statistically significant variables are access to
market information, expertise on grades and standards, availability of contractual agreements,
existence of extensive social capital, group participation and reliance on traditions.
5.1 Introduction
Markets often do not serve the interest of smallholder farmers because these farmers
face difficulties in accessing markets. Factors such as poor infrastructure, lack of market
transport, dearth of market information, insufficient expertise on, and use of grades and
standards, inability to conclude contractual agreements and poor organisational support
have led to inefficient use of markets, hence, results in commercialisation bottlenecks.
Furthermore, smallholder farmers lack vertical linkages in the marketing channels, which
result in their exclusion from the use of formal markets (Fenwick and Lyne, 1999; Delgado,
1999; Makhura, 2001; Wynne and Lyne, 2003). Smallholder farmers have weak financial
and social capital and limited access to legal recourse, implying that it is difficult to change
these negative market factors individually (FAO, 2004; Fenwick and Lyne, 1999). As a
result, they are trapped and continue to operate within the given market constraints and
they do not receive rewarding incomes from their agricultural activities.
This chapter tests the significance of institutional factors in choosing marketing channels.
The chapter starts by explaining the multinomial logistic regression model which was
used for analysis, which is followed by the definition of the variables. The results are then
presented and conclusions drawn.
5.2 The project area
The Kat River Valley is situated northeast of Grahamstown, in the foothills of the
Winterberg and the Amatole Mountains (Magni, 1999). It forms part of the Nkonkobe
Local Municipality, which falls, under Amatole District Municipality. Before the change of
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