Smallerholder Agriculture in Sierra Leone: Results so far Rachel Glennerster (JPAL)
Agriculture in Sierra Leone • Mainly small holder farming. Land abundant, labor scarce • Rice is the main staple, 87% of farmers grow rice • Cash crops include cocoa (9% of exports) and palm oil • Rice yields 484 kg/ha vs 800 kg/ha in Ghana, 1500 kg/ha for Uganda and 2200 kg/ha for the Philippines (ATHS 2010): • 2.6% use improved seeds • 7% use fertilizer • 7% irrigation • 2% mechanization • 25% crop failure (Nerica baseline) 2
Pronounced seasonality 3
Recent ag research in Sierra Leone • Cocoa: Interlinked transactions (Casaburi and Reed, 2014) • Palm oil: Inventory credit (Casaburi, 2013) • Rice: High yield short duration Nerica rice (Glennerster and Suri, ongoing) • Rural road rehabilitation (Casaburi, Glennerster, and Suri, 2014) 4
Interlinked transactions • Very little access to formal financial sector • Traders provide loans before and during harvest • Cocoa: Baseline 65% of farmers had received loans in past 12 months (Casaburi and Reed, 2014) • Traders also use loans to “lock-in” supply 70% provide loans to farmers
Cocoa experiment • Random traders given Le 150 per pound bonus for grade A cocoa (60% of average baseline margin) • No pass through of price to farmers • 14ppt more likely to get credit from traders • Treatment traders did not go into new villages but invested more in farmers in same village
Cocoa experiment: implications • Cocoa quality can be improved with more investment • Let crop ripen fully and dry for longer • Working through traders allows policy maker to reach many farmers • Trader/farmer relationships double edged sword • Value of relationship provides some enforceability of informal contract, allows traders to invest even with threat of side selling • But also reduces competition between traders, potentially causing inefficiency eg lower price • Judging trader profits and competition on price margin misleading
Seasonal price difference puzzle • Around the world farmers sell low and buy high • Hypotheses: • Limited supply/monopoly on storage • High rate of product deterioration in storage • Lack access to credit/monopoly supply of credit • High (exponential?) discount rate • Casaburi studies credit and storage for palm oil • No deterioration in product over time • Seasonal price difference 30-60% depending on year • Very limited (non-existent) previous exposure to banks
Inventory Credit and Storage 1850 Farmers 120 Communities 3 Community Banks Credit using Palm Oil Storage Support Control as Collateral - Rehabilitated Community Storage - Sensitization - Sensitization - Double Locks - Free Containers Banks – Community - Rehabilitated - 70% advance on Community Storage Palm oil stored - 22% Interest rate
Inventory credit results: Sierra Leone • Both storage and credit+storage increased use of community storage at the expense of individual storage • Farmer profitability analysis • Revenue increase: per extra batta stored: 24.7% (storage) and 10.2% (Banks) • Profit: Over 40% increase per extra batta within IV program • Bank Profitability Analysis • Relatively low take-up and limited number of communities served in first year product not profitable for banks • Was low take up from suspicion of banks? Hard to break existing relationships with traders? High interest rates?
Inventory credit for maize, Kenya • Loan for 100% of harvest price (vs 70% in SL) • Interest rate 10% (vs 22% in SL) • Many farmers had borrowed from bank previously • Loan for High Take up > 70% • Farmers offered the loans sold less at harvest season and more in later months • Prices rose much less than expected that year • But even then, farmers’ revenues increased by 20% after interest payment • Burke et al 2014
New Rice for Africa and nutrition • Nerica is high yield short duration cross between African and Asian rice • Low levels of food consumption and uneven food consumption • Children: 22% underweight, 44% stunted, 8% wasting (UNICEF, 2010) • 35% undernourished i.e. eat less than 1809 kcal/day (FAO, 2010) • Little evidence on link between ag and nutrition
Research Project Design • Study the yield of two upland rice varieties: • NERICA3 – early maturation (90 days vs 120), high yielding • ROK16 – pest resistant, regular maturity, high yielding • Study NERICA demand through random variation in the price and complementarities with training • Full price, half price and free treatments; • cross randomized with training • Impacts on yields and nutrition
Take Up
Nerica preliminary results • Nerica free group: • Earlier onset of harvest by about a month • Reduction in imported rice purchased • Higher yields (16%), but only with training (possibly negative without training) • Also 17% higher yields for ROK with training • Possible training is helping even on nonNerica farms • Training very expensive, next step testing cheap training
Child health
Feeder road rehabilitation Casaburi, Glennerster, and Suri, 2013
Feeder road rehabilitation • Major part of government expenditure on agriculture • 4 districts selected roads, scored by external expert and ranked, cut off number of miles to be funded by district • Assessed whether jump at cutoff • Improved roads saw reduced transport cost and shorter transport time • On average staple prices fell in local markets • Far from town, market prices fell • Close to town, market prices rose as lower transport cost means more demand from town • Results compatible with search costs for traders • only 10% farmers sell any rice so cant look at farmer outcomes
Combined implications • Enormous potential to improve output (quality and quantity) • 40% GDP and 60% labor force, could significantly impact growth, and would be equitable growth • Pronounced seasonality and lack of mechanisms to smooth • Markets are thin and simple competitive model may not apply • Those who can provide credit in lean season have considerable leverage/market power • Do we build on this or seek to weaken it? • Relationships along supply chain are strong making it hard to introduce innovations
International Growth Centre London School of Economics and Political Science Houghton Street London WC2 2AE www.theigc.org
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