Introduction to Market Development

Markets Supply chain management is clearly defined with procedures and processes to be followed in most of their business operations. Business markets demand is primarily derived from the intended final consumer demand. Formal buyers engage in trading for various businesses / value addition purposes including processing, packaging, and re-selling the commodities and can either be private or public entities.

The informal markets present an enormous market opportunity for both downstream and upstream linkages and is a formidable force in agro-trade as they are key suppliers to formal markets, institutions as well as regional buyers thereby acting as a key distribution hub along varied commodity value chains.

For the majority of smallholder farmers in developing countries, the most accessible markets are informal markets. They are termed informal because they exist beyond the tax system and are off record. Informal markets trade upwards of 80-90% of the agricultural goods in most developing countries and include all transactions at the farm gate, roadside sales, village markets, rural assembly markets, and sales in the main urban wholesale and retail markets. The informal markets are particularly important for trading all products produced by smallholder farmers, including the high-volume, lower value grain and pulse crops, as well as the higher-value fruits, vegetables, and meat products.

Helping farmers improve their market access and performance will require building business relationships in formal and informal markets. While formal markets offer the best returns, they are not open to all comers so these types of linkages should initially focus on the more endowed smallholders— that is, farmers with more than 2 ha of land and the best proximity to the markets. To help farmers with less than 2 ha of land and poor proximity to urban markets, it may be best to focus on strengthening their links in informal markets where product specifications are less stringent and buying arrangements are more flexible. Linking smallholders of all sizes to structured procurement markets is a growing opportunity that can be a lucrative option for many farmers who are located in areas that have operating procurement markets.

This module will therefore be used for training of trainers (ToTs) to equip them with knowledge and skills required by communities to engage in effective business and trading with the formal and informal segments of the agro-commodity market. The module is intended to guide the ToTs through a participatory process of capacity building targeting smallholder farmers and helping them gain the necessary understanding on market dynamics involved in dealing with the formal buyers.