PULSE & OILSEED TRADERS IN CENTRAL MYANMAR: VALUE CHAIN STRUCTURE AND CONDUCT

The country's Central Dry Zone is a major agro-ecological zone for pulse and oilseed production, with pulses being some of Myanmar's most important agricultural exports and oilseeds being among its most important domestically consumed crops. Trading businesses in the pulse and oilseed sector are well established, with the majority of trading businesses established between 1993 and 2007. This timing corresponds with the expansion of pulses cultivation for export following the relaxation of socialist-era crop production planning rules. The costs of market entry and participation are high, with pulse/oilseed trading requiring substantial fixed assets and working capital. The value of fixed assets owned by traders varies widely with scale of operations, but averaged $25,457. The size of weekly working capital averaged $32,561. One-third of traders have access to formal sources of credit, with 31% reporting having borrowed money from a bank for use as working capital at some time. The distribution of volumes traded is very concentrated, with the smallest 40% of traders accounting for just 4% of total volumes traded, whereas the largest 20% of traders account for 73% of all trade. The average quantity of pulse/oilseeds traded annually by the largest 20% of traders is 106 times greater than the mean quantity the smallest 20% of traders. Most pulse/oilseed traders specialize in trading only, with little vertical integration with related activities up- or downstream. For example, only 3% of traders source pulse/oilseeds from own farms, and only 6% of traders operate oil mills. Most traders are brokers, earning commissions from brokering transactions between buyers and sellers. Around one-quarter of traders act as wholesalers who buy and sell grain for profit. Most traders trade multiple crops, with a total of 20 crops traded by traders in the sample in 2017. There has been some diversification in the crops traded in the past 5 years, with traders diversifying their portfolio of traded crops from a median of four to five. The average volume of each crop traded fell slightly per trader, but the total volume of crops traded by all traders changed little. Several minor pulses recorded large (in percentage terms) increases in traded volume, notably kidney bean, garden pea, rice bean, and lablab bean. It is possible that this trend is indicative of some incipient diversification of agricultural production away from bulk pulses for export toward niche pulses for domestic consumption. Traders are not a major source of rural credit, with only 30% of all traders extending credit to any of their suppliers, and traders reported providing credit directly to only 14% of farmers who supplied them. Few traders received advances from other traders. This runs counter to the common perception that traders play an important role in supplying rural finance, often on exploitative terms. Traders provide little of their own transport, with suppliers and buyers providing most of the transport (and incurred the transport costs) for delivering crops to and from traders. The findings of this study have several implications for policy and programming. Firstly, pulse/oilseed traders trade a wide variety of crops, both as individuals and in aggregate, and appear highly adaptable in adjusting to shifting conditions of supply. Trade in several minor pulses increased from 2012 to 2017, while average traded volumes of several major crops declined. This suggests that some incipient diversification may be taking place among Dry Zone farmers, toward 'niche' products for the domestic market, as an alternative to bulk commodities for export. Secondly, the limited role played by rural traders in collecting crops from farmers shows that farmers are not dependent on rural traders for crop collection, or the potential for exploitative relations that might entail. The low incidence of credit provision by traders to farmers and other traders indicates that "output-tied" credit arrangements are uncommon. Thirdly, efforts by traders to increase the value of products traded by grading, cleaning, labelling, or branding are rather limited. This reflects the predominance of brokerage as the main mode of trade, with the majority of traders earning a fee for coordinating transactions between buyers and sellers. This means that there is little incentive for most traders to engage in any form of value addition. Any efforts to support upgrading should therefore differentiate between wholesalers and brokers and initially target the former, while recognizing that scope for value addition may be limited by the nature of demand from terminal markets. Finally, pulse and oilseed traders form a vital link in the value chain, connecting tens of thousands of farmers to domestic consumers and exporters. As substantial SMEs, they have high capital requirements. Consistent with expectations, a minority of traders access bank loans on occasion for use as working capital, with larger traders more likely to obtain bank loans.