Farmers strengthening their market power: three case studies in Eastern Africa

Market power refers to the ability of a seller (or a buyer) to impact the price and the marketing conditions of a product. In a free market economy, as is the case of most agricultural-based economies in East Africa, prices are normally determined by the free forces of demand and supply (and the marketing conditions are determined by other factors).

For most commodities, there are many producers who are too small to have, normally, an impact on the price or the marketing conditions of a commodity. However, this situation is different when the farmers join together in a group to sell their product or they negotiate with a specific buyer to produce and sell to that buyer.

In order for the producers to increase their market power so as to increase their bargaining power, and therefore their power to affect the price they receive or the marketing conditions, they need to change their marketing strategies and/or benefit from adapted policies. For example, farmers may benefit from supply management policies or organize supply management by themselves, organize collective marketing for their products, enter into a contract with buyers or involve themselves more in the supply chain through the setting up of cooperatives.

The Eastern Africa Farmers Federation prepared a report containing three interesting cases of farmers and farmer groups who utilize various instruments to strengthen their market power.

The first case of Muki Dairy Cooperative Society illustrates how farmers collectively market their milk, under a cooperative arrangement. The second case illustrates how farmers multiply seed under a contractual arrangement with a local seed company, Freshco Seeds. The third case shows how a farmers’ group, Nyabyumba United Farmers Group has successfully built capacity of its members to supply potatoes to a fast food restaurant located in Kampala, the capital city of Uganda. In all cases, the farmers are realizing higher prices and larger profits than previously. 

To learn more, please download the report below.

Document type: Case and country studies
Thematic Areas: Access to Services, Markets and Value chains
Region: East Africa
Year of Publication: 2010