Does Price Negotiation Process Affect Profit of Smallholder Farmers?

Abstract

This paper examines how price negotiation process affects the profit of smallholder vegetable farmers. The data was collected through focus group discussion, and key-informant interviews. The market chain analysis revealed that market actors such as wholesaler governed the price determination process because (i) farmers couldn’t produce stable large volume of vegetable (ii) the perishable nature of the vegetables coerced farmers to sell product instantly after harvest and (iii) wholesaler could buy and sell vegetable in bulk and transfer risk to other market actors. As a result, farmers were left behind with the lowest profit of 25.3% as compared to other actors who had profit greater than 150% (wholesaler and retailer even had profit as high as 439.5% and 448.9%). This explained reason behind smallholder farmers failing to experience significant improvement in income and livelihood as profit never get transmitted to farmers despite consumer paying higher prices. The findings from this study call for a need to identify appropriate strategies to decentralize both market power and profit back to farmers in order to alleviate poverty and food insecurity in the real sense.

Keywords: Smallholder Farmers, Price Negotiation Process, Market Actors, Profit Cost Ratio