Framework Session: Increasing agricultural productivity in Africa

Low-quality, low-trust and low-adoption: Agriculture in Sub-Saharan Africa

The rate of return of using authentic agriculture inputs like fertilizer and hybrid seed is large. However as poor quality inputs appear to be the norm in the Ugandan local retail markets, adoption of modern inputs with average retail quality is not profitable. These results suggest that one reason smallholder farmers do not adopt fertilizer and hybrid seeds is that the technologies available in local markets are simply not profitable, and this ultimately hampers agricultural productivity.

In this session, Professor Jakob Svensson’s (IIES, Stockholm University) presentation ‘Low-quality, low-trust and low-adoption: Agriculture in Sub-Saharan Africa’ is based on a study which investigates if agriculture input market failure – low quality inputs in the local market due to some combination of adulteration, poor storage and inappropriate handling procedures, is the reason why smallholder farmers refrain from adopting basic agriculture technologies.

This large-scale empirical study investigates the quality of a popular high-yield variety (HYV) maize seed in the Ugandan market and generic nitrogen-based fertilizer (urea).To measure the quality of the technologies in the market, the study combines data on the nitrogen content of fertilizer (measured in a laboratory) from retail shops and hybrid seed purchased from retail shops to generate experimental yield data by conducting agricultural trials.

The study finds modern technologies available in local retail markets are of poor quality. Farmers believe the quality of agricultural inputs in local markets are low and they do not expect adoption of such inputs to be profitable, on average.

The market is partly characterized by a low-quality, low-trust, low-adoption equilibrium. Fertilizer and hybrid seed are experience goods and in markets for such goods a seller’s incentive to provide high-quality products crucially hinges on consumers’ ability to learn about quality.  The study finds that for a given quality, there exists a large variation in yields and this uncertainty may affect farmers’ ability to learn about quality. The difficulty in learning about quality, in turn, can help explain why retailers sell low quality inputs and why farmers’ do not use them.

In order to understand low adoption, further research is needed to understand the underlying reasons for low quality and the factors which contribute towards farmers’ ability to learn about the technology when the quality of the technology is uncertain. Policies to facilitate the entry of a larger firm or a market chain may be able to address the trust issue facing the current weakly regulated and unmonitored markets. It can also tap into small farmer’s ability to learn about and pay for higher-quality inputs.

The Policymaker Discussant for the session (Agricultural Transformation Agency, Ethiopia) commented that although modern technology adoption rates among small holder farmers have increased in the last decade, improving the adaptation of fertilizer and HYV seeds remains a policy concern in Ethiopia as well. In Ethiopia, inputs are not marketed by the private sector but through a distribution system which operates through cooperatives. The policy in place is to slowly open up the market for inputs and the findings of the study should be taken into account to ensure the market is regulated and quality inputs are available at an affordable price.

Comments were received on adverse environmental impact of overuse of chemical fertilizers which can in turn lower yield. Farmers in India are now encouraged to use traditional technology and organic fertilizers to minimize the harmful effect of fertilizers on soil and water quality.

Summary written by Farria Naeem, Country Economist, IGC Bangladesh