Rice marketing in Guinea-Bissau : a study to develop information for policy makers

One is centered around Catio and markets rice grown by farmers using traditional, human-powered production systems. The second, a relatively new phenomenon, is centered around Bafata and markets rice grown primarily by using mechanized production techniques. In the area around Catio, the assembly of rice from farmers is handled by approximately 100 merchants who are coordinated by two or three wholesalers. Mechanized farmers near Bafata by-pass the assembly merchant and sell directly to wholesalers, rice millers, or consumers. The major conclusion of this study is that the assembly stage of the rice marketing industry is the least efficient portion of the rice marketing channel; the transportation and milling resources of the system are more than adequate for marketing current and anticipated domestic production, and while policies that are incompatible with marketing efficiency remain (e.g., pricing guidelines and marketing regulations), the policy environment in which rice marketing takes place has improved significantly during recent years. Improvements in the efficiency of the assembly process can significantly enhance the ability of domestic rice to compete with imported rice. Further, increased efficiency at the assembly stage can result in higher prices at the farm level. The major constraint hindering the assembly process, and the development of private, competitive assembly operations (e.g., storage facilities), is a general lack of credit to finance assembly operations. A secondary constraint on assembly level efficiency is the existence and enforcement of marketing regulations which require that millers purchase grain through assembly merchants. The government should implement policies which will enhance the level of competition within the assembly stage of the rice marketing industry. In a liberalized market this can best be accomplished by facilitating the ease of entry into the assembly business. As credit is the major constraint faced by assembly merchants, encouraging independent assembly agents can be addressed through policies that allow the development of institutions that can economically provide credit to any merchant capable of pledging the required collateral. Such an institution is a bonded warehouse, a warehouse which accepts deposits of rice in return for warehouse receipts that can either be sold or assigned as collateral for a loan. Increased competition and market efficiency can also be enhanced by policies that allow marketers the flexibility to develop alternative marketing methods. This implies that government should abolish the current regulation requiring millers to buy from assembly merchants. The government should also discontinue the practice of setting minimum farm-level prices, primarily because it place marketing firms in an uncertain legal standing and exposes them to the possibility of selective enforcement. A preferred method of assuring that producers receive the highest economically feasible price is to encourage competition among buyers of farm products. (Author abstract)