Due to their small farm sizes, price sensitivity, and limited uptake of improved seeds and inputs, the smallholder market segment has been largely ignored in recent years, with seed companies preferring to focus on the large until recently relatively stable NGO and government contracts who purchase seed for aid and development programs.
In recent years, however, policy changes have meant that these NGO and government markets are drying up while, alternatively, donors like USAID have promoted agricultural development in Mozambique through encouraging smallholders’ direct purchase of certified seeds and inputs as well as other improved technologies, which increases agricultural production. The result is that smallholders are not only buying more seeds themselves now but are also becoming increasingly demanding in terms of quality, price, and availability.
Considering that Mozambique has some 36 million hectares of arable land and 2.5 million smallholder farmers, whose land accounts for 99% of total farms or 90% of the cultivated area, the smallholder segment is substantial in terms of client numbers and potential for growth. Indeed, it is probably the market segment for any seed company wishing to secure its long-term foothold in the seed market in Mozambique.
Perhaps the single greatest challenge for seed companies wishing to gain a foothold in this market is the lack of cost-effective rural distribution systems. Given the country’s sheer size (approx. 801,000 square km) and poor transport network, distributing any product is hard work. Add to that mix a high value product which needs to reach the remotest of rural communities and you have a recipe for logistical difficulties and high distribution costs. This can make certified seed too expensive for many smallholders’ limited budgets and it puts seed companies off targeting rural consumers.
Despite these challenges, Phoenix Seeds is one of the first seed companies to take advantage of this market opportunity and tackle the distribution problem head on. This was made possible by the SEEDS project buying down the risk for Phoenix to engage with this segment. Previously, Phoenix limited its seed sales to areas immediately within range of its commercial farm in the Vanduzi district of Manica province, but with USAID-funded Feed the Future Partnering for Innovation (P4I) support of the SEEDS Project implemented by NCBA CLUSA, this firm expanded out of Manica and gained a foothold in the Nampula and Zambézia provinces, establishing long term business relationships with a network of over 250 agrodealers. These agrodealers vary in terms of size and sales capacity - ranging from smallholder farmer seed promoters with demonstration plots and small rural stores to larger, established agrodealers who serve as distribution hubs that receive and store Phoenix product before distributing it to smaller agrodealer retailers, agribusinesses, and other clients.
Nampula city-based agrodealer Amilcar Dalton is owner of AgroDalton, one of three agrodealer hubs in Nampula province. SEEDS coordinated the initial contact between Phoenix and Dalton, arranging for Phoenix staff to visit his store and begin business negotiations in terms of products, price, quantities, and delivery/payment terms. From there, SEEDS staff supported Dalton in placing his seed orders and assisting in coordinating the delivery process from Phoenix farm to AgroDalton. With recommendation from NCBA CLUSA and regular technical assistance from the SEEDS project, Phoenix has felt confident enough to provide stock on consignment basis, increasing AgroDaltons’s sales volumes.
During the 2016/17 seed sales season, Amilcar Dalton received 2.7 tons of maize and sugar bean from Phoenix on consignment basis for a commercial value of over $3,500. He sold this for a little under $6,000, representing a gross margin of around $2,500, which he invested in the purchase of further stock for his store. This relationship was a win-win situation, with Dalton benefitting from increased income from seed sales and Phoenix benefitting from the fact that AgroDalton served as the its Nampula storage and distribution point - an invaluable resource for Phoenix since it lacks its own storage facilities, physical presence, or staff in Nampula province. AgroDalton has played a pivotal role in receiving trucks carrying Phoenix product from the farm in Manica, overseeing its unloading and transport to his own warehouse for temporary storage, and coordinating the receipt and dispatch of 110 tons of Phoenix seed to other buyers such as other agrodealers, individuals, and commercial farms in Nampula province during the 2016/17 campaign. That represents 113 tons of seed (enough to sow around 5,500 ha of land) that wouldn’t have reached Nampula province if it hadn’t been for SEEDS’ intervention.
Amilcar Dalton is just one of 282 SEEDS supported Phoenix/Oruwera agrodealers who have realized seed sales are a lucrative source of income, amounting to over 142.5 tons of pigeon pea, soya been, sugar bean, cowpea, sesame, and peanut seed and sales to 15,683 smallholder farmers during SEEDS’ duration. This has brought economic benefits not only to Phoenix and its agrodealers but also to those smallholder farmer clients—farming around 7,100 ha of land—who expect to see higher yields and improved livelihoods from using certified seed in their agricultural production.
The SEEDS project (Smallholder Effective Extension-Driven Success) is an NCBA CLUSA managed program supported by Feed the Future Partnering for Innovation, with funding from USAID, which works in partnership with two Mozambican seed companies—Oruwera and Phoenix Seeds—to increase smallholder farmers’ access to certified, improved seed.