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Texting TradeNet: What's the price of soya beans?

By Edward Kutsoati and Sarah Bartlett

Ever wondered how farmers in the Northern Region town of Salaga determine what price to set for their crops? The short answer is that, for the most part, they are price takers in a predominantly buyers' market, where prices are usually dictated by traders and middlemen. Armed with a much richer set of information about both demand and supply conditions, the traders are able to squeeze farmers into accepting a very small fraction of the trade surplus. The resulting low farm incomes means that the rural farmer has no ability to save, little access to credit, and has very little money set aside for discretionary spending on health care, education or home improvement.

But for a group of co-operative farmers working with the Social Enterprise Development Foundation (SEND) in the Northern Region, all that is changing. As part of its innovative Eastern Corridor Agricultural Information Center (ECAMIC) project, SEND Foundation facilitated the acquisition of mobile phones for 200 of the farmers they work with in Salaga, Kpandai and Chamba. Next, SEND signed on as a customer of TradeNet, an agricultural market software developed by an Accra-based company called BusyLab, to provide farmers with accurate and up-to-date crop market information via mobile text messaging (SMS). SEND then registered the farmers on the TradeNet website , and set them up for automatic SMS alerts on prices for relevant crops in markets across Ghana.

As a group on TradeNet, SEND is able to subsidize the cost of the incoming SMS messages for its members. For those without mobile phones, SEND is providing community notice boards so that any farmer with access to the latest market information can make it available for everyone in the co-operative.

With some training, farmers will be able to text-in offers to sell their products, and these offers, together with the farmer's contact number, are disseminated to other TradeNet subscribers via SMS alerts. They'll also be able to use a set of codes to compose a text message requesting price information, send it to TradeNet, and receive a response in the form of a text message. In other words, access to timely market information is, for the first time, at their fingertips.

The effect of deploying such information and communication technology to farmers is enormous. Mr. Mohammed Mumuni, the ECAMIC project officer in Tamale, says that "prior to the establishment of the ECAMIC project, the buyer was in control of the vital market information about what they were coming to buy. The intervention of ECAMIC is gradually giving way to the seller also being able to refer the buyer to what they know about the previous day's price from the various market centers, thereby taking control of pricing decisions. The provision of accurate and timely market information to farmers in the Eastern Corridor has enhanced their negotiations and marketing decisions concerning the sale of their produce."

We couldn't agree more with Mr. Mumuni, but we are also not surprised to learn of the preliminary impact of this intervention. Studies have shown that bridging market information gaps leads to a lower dispersion of market prices, and raises welfare levels, as traders and consumers search for the best prices on more markets. For example, Jenny Aker, an economist at the University of California at Berkeley[*], found that with the introduction of mobile phones in Niger, grain traders were able to learn of markets with the higher prices (which often tend to be the distant ones) and were willing to sell their goods there for a larger profit. Over time, the increased supply to distant markets lowers prices, and the consumer benefits. Robert Jensen at Harvard University[†] also found a similar result when mobile phones were introduced in the Indian state of Kerala, which has a larger fishing industry. Mobile phone adoption by fishermen and traders led to a huge reduction in price dispersion, a complete elimination of waste, and an increase in both producer and consumer welfare.

Our visit to the farmer groups in Salaga and Chamba also revealed the impact of mobile phones in general – that they are connecting these farmers both to each other and to their agricultural extension officers, and this connectivity is enhancing productivity. Farmers can easily reach an extension officer to discuss a crop-related problem, and those officers in turn rely on mobile phones to schedule visits to the farms, reducing time spent and energy exerted.

To be sure, many challenges remain. Airtime is not cheap, and it costs farmers a lot of money, relative to their incomes, to make such calls. Among the farmers' main concerns is the perpetual lack of infrastructure needed to complement the benefits that mobile phones can bring to them; a decent road network to execute trades and electricity to charge their phones are a necessity. The latter concern was aptly phrased by one of the farmers in Chamba: "What use is the mobile phone if we have no electricity to charge our batteries?"

In spite of these challenges, there is no doubt in our minds that mobile phones hold one of the keys to unlocking the potential for farming communities to escape poverty. Over 60% of Ghana's labor force earns their living, directly or indirectly, from farming. A large fraction of them live below the poverty line. Ghana has little, or no, chance of meeting the Millennium Development Goals without addressing the needs of our farmers, and TradeNet leverages on the power of ICT to meet some of these challenges. With networks covering more and more small farming communities each day, such an opportunity should not be wasted.

Kutsoati is an Associate Professor of Economics at Tufts University, USA and a columnist of www.AfricanLiberty.org ; Bartlett is the Communications Director of BusyLab in Accra, Ghana.