Growth and Transformation in Off-Farm Segments of the Maize Value Chain in Shan State

The supply of agricultural inputs, including maize seed and fertilizer, has increased rapidly, with the average quantity of maize seed sold by individual trading and input supply businesses growing by around 50% since 2013. Fertilizer sales have also increased sharply, and the number of agricultural input suppliers selling pesticides and herbicides has grown quickly since the mid-2000s. The maize seed market is diversifying as it grows, with CP dominating supply but its market share shrinking. Input providers are not restricted to selling inputs supplied by any single company, and the number of brands and varieties of seed stocked is increasing. The market for fertilizer is relatively mature, with suppliers stocking more brands and types of fertilizer than maize seed. Less than 40% of maize seed and fertilizer is supplied in the form of in-kind credit, with 61% of maize seed and 63% of fertilizer paid for in cash. Traders and input suppliers receive most of their information about agriculture via word of mouth and private sector marketing activities. Facebook and government extension agents are also important sources of information for traders and input suppliers, respectively. NGOs and traditional media provide very little business information to these enterprises. The number of enterprises in the maize value chain has grown quickly since 2013, with the estimated number of maize traders operating in surveyed townships growing 71% and numbers of agricultural input suppliers growing 69%. Ownership of business assets has increased dramatically since 2013, with the vast majority of traders owning mobile phones, motorbikes, bagging machines, and manual scales. Around half of traders owned generators, electronic scales, or 4 to 6-wheel trucks. The volume of maize procured by traders in the sample nearly doubled in the past five years, with the total volume of maize purchased annually jumping from 486,364 t to 943,530 t (94%). The degree of concentration among traders decreased from 0.72 in 2013 to 0.62 in 2018, apparently driven by growing sales from medium-sized traders. Traders procure most maize directly from farmers, with farmer sales contributing 78% of the maize procured, indicating relatively low levels of intermediation and low dependence on small village-level collectors. Three-quarters of maize traders are wholesalers, obtaining profit from arbitrage, and the average markup earned by wholesalers after deducting operating costs is 4.3% of the purchase price. Traders are taking increasing measures to improve the quality of maize traded, with the share of traders drying maize in the open air or using a machine increasing from 69% to 73% and from 5% to 11%, respectively. Most traders utilize formal financial institutions, with over two-thirds of traders receiving payment from buyers by bank transfer. Banks are an increasingly important source of credit for traders, with one-third of traders reporting having borrowed working capital in the past year. Of these, almost half took bank loans, with Yoma Bank being the most popular source of credit. The average value of loans taken by traders within the past 12 months was MMK 110 million ($73,600). The average size of vehicles used to transport maize has increased over the past five years, with the share of deliveries made using 22 to 24-wheel trucks growing from 9% to 36% of all deliveries. These have taken the place of deliveries by 10 to 18-wheel trucks. There is very little loss of maize between the time of procurement and the time of sale, with losses of maize during trading amounting to just 0.18% of the total volume procured. CP factories procure twice as much maize as all other feed factories combined, with sales of maize to CP accounting for 13% of total sales by traders, while other factories only account for 7%. The share of maize sold to feed factories is higher in South Shan (29%) than North Shan (3%), with CP factories having higher quality standards than other buyers. The closure of the China border to maize exports impacted 82% of traders, with nearly all overland trade in maize from North Shan to China being informal and subject to periodic closure due to anti-smuggling campaigns.