Hill et al MIFIRA Uganda Draft Report 2011.doc

Moving up the chain to the brokers even within the

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Moving up the chain to the brokers, even within the same market, the story is different. Brokers are relatively few in number compared to the aggregators who come in from the rural areas, and collusion (in light of their cultural affiliations and associations) is not unimaginable. 2 This conclusion is consistent with Barrett (1997) findings from Madagascar. Page 21
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In turn, competition seems to suffer the most in markets that are more remote and closest to farmers. This is the location at which the margins are highest, don’t correlate necessarily with costs such as payment for transport, and are reported to change the most with fluctuations in prices. For example, in Chwagere, traders, referred to either as “stores” or “purchasing agents”, rent, possess, or simply man for larger traders small stores to which farmers in the immediate vicinity bring their maize to sell. When the quantities gathered are sufficient, the larger traders come or send trucks from market centers to pick up the maize. There were only 4 “stores” in Sawagere, in a zone which they reported has several thousand farmers. As such, it would seem that these small aggregators have significant control over prices offered to farmers, since farmers, even with adequate price information, have limited options as to where and to whom to sell their maize (particularly in such small quantities). Several aspects of our findings point to the asymmetry of information between farmers and traders. For example, an issue of interest is the lack of scales in rural markets and widespread use of the cup measure. While farmers commonly do not know how many cups make a kilogram, traders who travel back and forth to markets do; they also know how the number of cups per kilogram changes as the grain dries. This could work to the advantage of the trader, which while only representing tiny amounts per kilogram could on the aggregate make a significant difference in the value farmers receive. The integrity of the scale is another issue mentioned. Even where a trader has a scale, if it is the only one in a broad region there is nothing to keep him from weighting or altering it in some way so that it understates (overstates) quantities purchased (sold). Some traders reported that this is occasionally an issue; they are sometimes cheated by faulty scales when only the other trader possesses one, and listed scales as a key constraint in dealing in larger quantities. Farmers are likely to have even less access to verification than traders and so to be cheated. An aggregator in Buwenge, a small source market in the Jinja district, revealed a different information asymmetry in the market. When asked when he made the most profit, he reported that it occurs when there are region-specific shortages that cause prices to increase somewhere in Uganda or a neighboring country. For a time, farmers remain uninformed about the price increase, and traders like him are able to make significant profits until the prices gradually equalize. This kind of arbitrage is more likely undertaken by traders with their own funds, while Page 22
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