By Anton Mais
Crops such as kaukau are an important source of income for many farmers. This means when producers bring in their kaukau from rural areas to urban areas, they feel that they can make better money by selling in Lae or Port Moresby.
Through a few kaukau marketing projects, supported by the Australian Centre for International Agricultural Research, a large number of farmers and traders were seen involved in the intricate kaukau trade which starts in the Highlands, down to the port city of Lae, and across to Port Moresby.
Marketing impacts agricultural growth because it determines farm gate price, build farmer confidence, and allows farmers to diversify to higher-value products.
However smallholders in rural communities are challenged with poor infrastructure, inadequate support services, and weak institutional linkages; thus pushing up transport costs and price volatility.
Under such conditions, farmers are faced with higher transport costs, product wastage and losses, wide marketing margins, poor market integration, limited access to trade finance, and weak regulatory arrangements. And with limited resources and capacity constraints, it takes courage and patience to bring kaukau to the long distance market.
To be profitable, farmers need to change their traditional market practices. They need to develop a good understanding of what the market requirement are (quality, price and consistent in supply), rather than their own preferences. An important consideration is not to change the way of doing things, but to look at alternatives.
Farmers bring kaukau to the markets to make quick money because of high prices. Among these commercial varieties, Wahgi Besta from Jiwaka, Koro West from Hagen Central, and Marasonda from Goroka are most popular mainly because of their taste. So it is worth promoting those varieties vigorously.
Studies indicated that of the kaukau sold, only 12 per cent is marketed by traders. The majority of the kaukau is sold by bags, without accounting for quality.
Studies show that the problems of selling kaukau in long distance markets (highlands to Port Moresby are:
- Cost of transportation (96 per cent),
- lack of finance/funds (37 per cent),
- lack of labour (19 per cent),
- lack of volume (30 per cent),
- risk – accident and stealing (19 per cent); and,
- Product loss (22 per cent).
It is also noted that farmers lack market planning, i.e. what type of quality and price that the market wants. There is no integration and coordination from farm activities to market. Price signal and price scheme have to work together to develop quality/packaging standards, contract enforcement, law and order, and also give incentives to the private sector.
What can farmers do?
Farmers need to improve on marketing practices to sell kaukau to the markets. To achieve this, they may need to develop marketing plans. They should plan from planting the right variety and harvesting at the right time, to take advantage of high demand and price.
They should not go to Lae, Port Moresby or other markets themselves unless they have sufficient numbers of bags. Farmers should consolidate kaukau bags with their neighbours or wantoks to reduce the cost of marketing. It is advisable to sell to local buyers to avoid the cost of marketing and the risk of hitting low price.
Moreover, they should plan their marketing trips in advance to avoid transport and shipping delays. It is worth moving kaukau from highlands to Port Moresby within 7-10 days, because in less time loss can be reduced, say 90-99 per cent of good quality kaukau can reach Port Moresby in dry containers.
Furthermore, it is important to know whether kaukau is still of good quality when it reaches the markets. If the quality has deteriorated, then farmers will be paid a lower price. When the market price is higher than the break-even price, farmers will make a profit.
Break-even price per bag for selling 20 bags of kaukau from Goroka to Lae is around K60, and for Port Moreby it is around K130. The cost of production ranges between K10-20/bag, depending on whether and how much family or hired labour is used.
Also, they should try to compare the cost and profit of selling at different markets, as well as in bag to traders verse selling in heaps by themselves because institutional buyers and supermarkets buy and pay in kilograms, rather than by bags.
Farmers should focus more on lowering the cost of production and marketing (which is more under their control), rather than the price (which is determined by demand and demand conditions, out of their control). They can increase profit by lowering the cost of production or the cost of marketing, or both.
They could also increase profit by going to the market at the right time, i.e when the market price is high. With a full container load, the break-even price can be as low as K90/bag from Hagen to POM. The market price in Lae is between K60-80/bag, while the market price in POM can vary between K90-150/bag. In the local market in Hagen, it is likely to be K30-40/bag.
In doing so, better markets for kaukau can be developed from the highlands to Port Moresby. There is a need to change from traditional market practices to meet new nature and pace of fresh markets. Kaukau remains a mainstay for a majority of average wage earners and rural households. We now need to make an effort to move it forward.
Nari has taken further steps to link up past work with two new related projects on commercialisation and development of kaukau value chain. The Institute is also collaborating with partners to distribute pathogen tested planting materials to kaukau growing provinces in the Highlands region for the commercialisation of this important crop. – Nari