THE ROLES OF MIDDLEMEN IN THE MARKETING OF PADDY RICE

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THE ROLES OF MIDDLEMEN IN THE MARKETING OF PADDY RICE

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Equitable and sustainable economic development cannot ignore basic food commodities particularly in developing countries such as Nigeria. Basic food commodities play important roles in economic development as their availability and costs impinge on food security, expenditures and incomes of households, particularly among poor segments of the population in both rural and urban areas. Of all the basic food commodities, rice is particularly important (Akpokodje, et al, 2001). This is because in Asia, rice constitutes the staple food. In America and Europe, it is frequently taken. In Africa, rice is more important in the urban centres where evidence of rising level of income is more prominent (Lang, 1979; Fulani, 1980). Nigeria is one of the largest rice producers in West Africa (WARDA, 1981). In Nigeria, also, it is one of the important cereal grains replacing some of the grains and tuber crops. Rice used to be the “white mans” food meant only for the elites and high-class individuals in the society. The middle class and the peasants, who constitute a higher percentage of the population, only ate rice at Christmas and other major festive periods. Many of them had the belief that rice symbolized Christmas and vice-versa (Ogbuakanne, 1998). However, combinations of various factors seem to have triggered the structural increase in rice consumption. According to Akanji (1995), rising demand was partly the result of increasing population growth. Also, increased income levels, following the discovery of crude oil, led to the rise in the demand for the commodity. The most important factor contributing to the shift in consumer preferences away from traditional staples and towards rice is rapid urbanization and associated changes in family occupational structures. As women enter the workforce, the opportunity cost of their time increases and convenience foods such as rice, which can be prepared quickly, rise in importance. Similarly, as men work at great distances from their homes in the urban setting, more meals are consumed away from home where the ease of rice preparation has given it a distinct advantage. The average Nigerian consumes 24.8kg of rice per year, representing 9% of total caloric intake (Rice Web, 2002).

Olufowole and Joshua (1979) reported that, of the 25 varieties of rice recommended to Nigerian farmers, only five were upland varieties while the remaining 20 were for swamp production. The popular variety of upland rice in the study area is FARO 1I while the most popular variety of swamp rice is IRRI 14/16. This is considered to be the highest yielding rice variety, while FARO 25 ranked second.

According to WARDA (1981), IRRI (1990), and Maclean (2002), Nigeria’s rice production made some remarkable gains from 1980 to 1989. The area under cultivation grew from about 400,000 hectares in 1980 to 900,000 hectares in 1989. Paddy rice production increased from about 600,000 tonnes in 1980 to about 1,422,000 tonnes in 1989 and 3.189.833 metric tonnes from 1990 -1999. Prior to the World Bank Rice Project and River Basin Development Authorities in Nigeria, domestic rice production depended mainly on natural rainfall which was very erratic in nature. Farmers under this system (rain fed) employed traditional practices and inputs resulting in low yields. This was sufficient in meeting the increasing demand for rice (Onwuchekwa, 1988). The inability of the farmers to meet rice demand coupled with the fact that production capacity was far below the national requirements for rice, forced the Federal Government to import rice to supplement local production and to bridge the gap between domestic demand and supply (Wudiri and Fatoba, 1992). Rice imports did not decline until 1981 as a result of some policy measures put in place to check the importation of the commodity. Even then, the quantity imported on an annual basis was over 300,000 tonnes. Imports dropped significantly from 1985 when the ban was placed on rice. Although, rice importation began to rise again in 1991, major importation did not begin until after lifting the ban in 1995 (Ladebo, 1999). The problems of rice farmers include land tenure system, inefficient labour utilization and lack of finance, capital and credit (Agara, 1979; Okorie, 1987). Also, the rice gall midge infestation in Abakaliki in 1988 and Uzo-

Uwani in 1989 are examples of constraint to rice production (Emeribe, 1990). For efficiency and stability of rice production in West Africa, some countries have embarked on new technological strategies to improve land and labour productivity as well as marketing potentials of small-holder rice farmers and middlemen while preserving the resource base on which their future livelihoods depended (WARDA, 1988). These strategies included modernized rice production systems through the provision of machinery and equipment, seeds and agro-chemicals, improved access to technologies and credit. In October, about seven billion naira (US $54 million) was reported to have been distributed through the Agricultural Co-operative and Rural Development Bank (NACRDB) to small scale farmers to expand rice production. Based on this, Nigeria launched the Presidential Rice Initiative in August 2002 to improve rice production and processing by enhancing farmers access to subsidized farm inputs and suitable rice varieties coupled with border protection. Against the backdrop of the celebration of international year of rice in 2004, government also reiterated its intention to bolster the sector to reach self- sufficiency in 2005, through the diffusion of Nerica varieties and the launching of a “Nucleus Estate Initiative” (NEI).

Marketing, according to Dixie (1999), is the series of services involved in moving a product (or commodity) from the point of production to point of consumption. Agricultural marketing, according to Kohls and Downey (1998), is the performance of all business activities involved in the flow of agricultural goods and services from the point of initial agricultural production until they are in the hands of ultimate consumers Arene (1998) defined agricultural marketing as all those legal, physical and economic services that make it possible for products from producers to get to consumers, at the place desired by consumers, and at the price agreeable to producers and consumers for effecting a change of ownership/possession.

Olukosi and Isito (1990) defined agricultural marketing from the micro and macro viewpoints. From the micro-perspective, agricultural marketing is the performance of all business activities which direct the forward flow of goods and services to the consumers in order to accomplish the producer’s objective. The macro view-point of agricultural marketing, examines the total system of economic activities concerned with the flow of agricultural products from the producer to the final consumer. It is obvious that groups with different interests will view marketing differently. This is because consumers are interested in getting what they want at the lowest possible cost. Farmers are interested in obtaining the highest possible returns from the sale of their products. The various firms engaged in doing the various marketing functions are interested in the profitability of their particular business operations (Olukos and Isito 1990). In view of the divergent interests, conflicts of interest can and do arise among the various groups seeking these goals. The process of beginning and trying to solve these problems is what gives marketing its essential dynamic character. The marketing of locally produced rice is essentially the same all over Nigeria. This involves the performance of all business activities in the flow of paddy and milled rice, from the point of initial rice production until they are in the hands of the ultimate consumers at the right time, in the right place and as convenient as possible, at profit margin so as to keep the farmer in his farming operations (Ihere, 1996). Aderibigbe (1997) divided the marketing of local rice into four stages with a change of produce ownership occurring between each pair of stages. The first stage is production through harvesting. Stage two includes movement from the farms to processing centres while stage three consists of moving the milled rice from processing areas to urban consumption centres. The fourth stage encompasses wholesaling and retailing in the urban centres. The marketing of this rice was until 1976 handled entirely by private entrepreneurs. From 1977, the establishment of the Nigerian Grains Board introduced a limited form of governmental participation in production, processing and marketing of rice and other cereals. The Board purchased milled and paddy rice directly from farmers and provided storage such that rice could be available in the market during non-harvest periods. In the third phase commencing in 1986, private individuals were in full charge of the marketing of locally produced rice. (Aderibigbe,1997).

1.2 Statement of the Problem

Neglect of agricultural activities has been a very serious problem affecting both producers and marketers of agricultural produce in the country. This situation appears to be aggravated by government and policy makers who have not considered production and marketing of food crops as serious problems to the economic development of the nation (Osuji, 1980; Nwokolo, 1991). Some experts and researchers have carried out studies/research on rice production and marketing differently, example, Okereke (1991) compared the economics of rice production from traditional farmers. Nwoye (1997) investigated the economics of rice production by small-holder farmers. Okorji and Onwuka (1994) estimated the profitability of rice production at Uzo-uwani area of Enugu State while Ogbuakanne (1998) studied the economics of rice marketing in Orumba Local Government Area of Anambra State of all these, none compared the profits of the producers and marketers (middlemen)in the same study. There are two basic enterprises in rice business; those involved in the production of rice (farmers) and the people involved in buying paddy, processing and selling to retailers, consumers, or even the farmers. The class of people that make up the latter enterprise are the wholesalers. Often, people believe that middlemen are making the profit while farmers suffer. This may or may not be correct. Studies have not tried to relate the producer’s margin with marketer’s margin in the same environment and season. This has led to spatially separated conclusions at different points in time. The consequence may be poor policy formulation due to wrong signal.

1.3 Objectives of the Study

The main objective of this study is to determine the roles of middlemen in the marketing of paddy rice. Specific objectives include;

i. To describe the socio-economic characteristics of rice producers and marketers/processors.

ii. To analyze the effects of socioeconomic characteristics on the net income of producers and marketers.

iii. To describe the systems of rice production and marketing in the study area.

1.4 Research Questions

i. What are the socio-economic characteristics of rice producers and marketers/processors?

ii. What are the effects of socioeconomic characteristics on the net income of producers and marketers?

iii. What are the systems of rice production and marketing in the study area?

1.5 Research Hypotheses

Hypothesis I

H0: There is no significant impact of the socio-economic characteristics of rice producers and marketers/processors.

Hi: There is a significant impact of the socio-economic characteristics of rice producers and marketers/processors.

Hypothesis II

H0: There is no significant impact of socioeconomic characteristics on the net income of producers and marketers.

Hi: There is a significant impact of socioeconomic characteristics on the net income of producers and marketers.

Hypothesis III

H0: There is no significant impact of systems of rice production and marketing in the study area.

Hi: There is a significant impact of systems of rice production and marketing in the study area.

1.6 Significance of the Study

There is a consensus on the assertion that the economic survival of any nation depends largely on her ability to feed the citizenry and also export the surpluses to earn foreign exchange (Nwokolo, 1991). It is also hoped that the findings of this study will help to further highlight the activities and roles of producers and marketers in production, processing, distribution and sale of rice. Moreover, the study will make the Nigerian government to appreciate the contributions of producers and marketers in the rice industry and hence seek ways of encouraging them in their various activities. It is finally hoped that information from the study will form a source of reference to students, institutions and researchers and provide a basis for future studies on related issues.

1.7 Limitations of the study

The demanding schedule of respondents made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaires in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all research under this study but is restricted to the selected respondents used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided. Other limitations include;

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

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