Middleman: A link you cannot eliminate from the value chain

Tomatoes being packed on farm for the market. The middleman is very much part of the link between the production side and access to the market. PHOTO BY FRED MUZAALE

As smallholder famers in Uganda continue to grapple with the dilemma of lack of markets for their products, it is worthwhile to bring back in focus what role the middleman plays in the agricultural commodity trade.
There is continuous maligning of the middleman or attempts to water down or reduce his or her role. But amid all that, we continue to witness their growing role because it may not be possible to eliminate them.

Who is the middleman?
A middleman is the person who gathers various quantities of produce from different producers and sells them to large-scale traders, processors, retailers, processors or even exporters.
He or she is often referred to as a “cheat” or an “outsider” who comes in at the time of trading, exploits farmers, makes money and exits the market.
The reality is, however, different. This “evil man” is very much part of the agricultural production process or the “value chain”.
Usually, marketing a product for many producers is an uphill task. Many times, the market is too far away or there are no means to transport the product. Sometimes, the smallholder farmers do not have enough time, interest or knowledge to sell the products themselves.
It is therefore not a coincidence that many smallholder farmers sell their produce to the middleman. Their role can never be under-estimated.

The middleman is specialised in marketing a product and can therefore negotiate a higher selling price. This helps the small-holder farmer to concentrate his or her energies on production.
Marketing requires one to do some research and ask questions, that is: Which buyers are trustworthy? Who pays the best price? At what time of the day is the seller likely to get the best price? What is the best place to sell a product? et cetera.

Facilitates production
All this information is important if one is to get a good price for the product. Middlemen, over the years, have mastered this art. They will know where they can get the best price for the commodity.
Many times, the middleman provides money to the smallholder farmer to facilitate the production.
The smallholder farmers usually need money to buy seed, hire or purchase machinery or tools for production. A middleman can be of great help in such a situation. He or she can grant credit to producers in the form of money, seed, farm materials, among others.
Another important role that a middleman plays has been that of improving quality of agricultural produce.
The middleman often works with large quantities of a product. This gives him or her an opportunity to sort the products according to size or grade. Those sorted according to quality often sell for a higher price.

Quality issues
When you find that the middlemen are trained in export and domestic quality issues, for example, grading, packing and traceability, they can more easily persuade the farmers into quality compliance.
By making these middlemen quality conscious and linking them to exporters, their places can be turned into trading platforms for quality produce. These middlemen often turn into trainers of trainers to educate the farmers.
The middleman has increasingly been turned into an effective vehicle of technology transfer. He or she is by far the biggest investor, so farmers tend to listen to him more than the extension workers who can only advise but have no financial clout.

Market awareness
Middlemen are also increasingly playing a key role as sources of market information. They have regular contact with buyers and consumers. They are aware of supply and demand levels and this information is usually passed on to the producers by them. He/she will tend to give the producers a good idea of what products are in demand and what best quality to be produced.
Transportation is another key role that they play in the commodity cycle. It is difficult for many smallholder producers to transport their products to the market themselves.
It would be very costly for the producers to transport their own products. Transporting these small loads to the market cost money and time.

Realities on the ground
By the middleman coming in to play this role, the transportation costs per unit of product are much less hence helping the farmer to fetch a good income for their products.
It is, however, without a doubt that there are disadvantages that accrue with working with a middleman. These middlemen are tempted to set prices for the producers that are lower than those prevailing in the market.
Producers are encouraged to keep a keen eye on the market so that the middlemen do not take advantage of them to misuse this knowledge by paying lower market prices.
That said, no player from the formal sector has dared to venture where the middleman routinely does. That is how realities on the ground define the role of the middleman and make him or her an integral and essential part of the agricultural commodity cycle.

The writer is Senior Technical Advisor-Business Development Services, FIT Uganda


You're all set to enjoy unlimited Prime content.