Department of Agricultural, Food, and Resource Economics Feed the Future Innovation Lab for Food Security Policy

Nicholas J. Sitko, William J. Burke, and Thomas S. Jayne. 2017. Food System Transformation and Market Evolutions: An Analysis of the Rise of Large-scale Grain Trading in Sub-Saharan Africa, March 2017, Feed the Future Innovation Lab for Food Security Policy Research Paper 48. East Lansing: Michigan State University

EXECUTIVE SUMMARY
Ongoing transformations of agri-food systems in Sub-Saharan Africa (SSA) are garnering considerable attention from policy-makers, researchers, and development partners. While a growing body of literature has examined transformations occurring within the farm production, processing and retail segments of the food systems, there has been surprisingly little attention to the so-called middle segments—trading and wholesaling. Beneficial changes in African grain markets hold considerable potential to improve livelihoods in the region, because grain-marketing costs typically account for 50-60% of the price paid for staple foods by African consumers (Jayne et al. 2010). This lack of empirical attention, particularly for staple cereals, is an important blind spot in our knowledge of recent transformations of these food systems.

The exceptional pace of transformation in the region’s food systems suggests that the evidence generated about grain market performance ten or fifteen years ago is losing relevance for guiding beneficial investments and policies today. In particular, grain market policies and development interventions in the region typically presuppose a dysfunctional grain market structure, dominated by small, poorly capitalized, and often geographically isolated market actors, which limits market efficiency, imposes major transactions costs on market participants, and impedes supply chain coordination and risk management (Poulton, Kydd, and Dorward 2006; Fafchamps 2001; Barrett 2008). While this image of an incoherent and jumbled commodity aggregation market certainly still holds in many areas, recent survey data suggests major changes are underway that require fundamental reassessment of development policy and programmatic options.

Using data from nationwide farm surveys over time and from surveys of the population of large-scale traders operating in Zambia and Kenya, this article explores how grain markets in SSA are evolving by examining the rise of large-scale grain trading firms in smallholder grain markets. Nationally representative rural household survey data shows that in Zambia between 2012 and 2015 farmer maize sales to large-scale traders (LSTs) increased from 3% to 12% of total maize sales volume, or from approximately 40,000 metric tons (mt) to over 240,000 mt. In Kenya, we find virtually no sales to LSTs in 2004, increasing to 21% of all maize sales by volume in 2007, and expanding further to 37% in 2014.