Working towards greater community control over land, forests and natural resources

Farmers can get higher prices by forming groups: study

Vientiane Times, Sept 24, 2012.

Farmers should form groups if they want to gain more power to negotiate the sale price of their products, a case study has revealed. A study on vegetable markets in Khoun district, Xieng Khuang province, undertaken by the National Agriculture and Forestry Institute found that vegetable growers in Nhoun village were able to sell their crops for higher prices after forming groups.

These growers were able to get 10 percent more than people who acted individually, noted the case study, which took place in cooperation with the National Agriculture and Forestry Extension Service, CIAT and the Swiss Agency for Development. Sometimes, the vegetable price margin between villages that had farmers’ groups and those that did not could reach 25 to 30 percent.

Groups are able to obtain a higher price for their produce because they can share information and change their production methods to improve quality and meet the needs of traders and consumers. With better vegetables for sale, growers can ask distributors to put up the price, while middlemen are happy to pay more for better quality produce. Growers’ groups also found it easier to get information about what kinds of vegetable are in demand because group representatives can source this information from middlemen, the study showed.

Officials at the Ministry of Industry and Commerce said it was government policy to encourage farmers to set up production groups, and the government has issued a prime ministerial decree on the establishment of cooperatives. They said the cooperative structure would be different from the model that the government abolished in 1986 when it switched from a centrally planned to a market oriented economy, thus allowing the private sector to play a greater role in economic development.

The decree on cooperatives makes it clear that the authorities would not be involved in the selection of a group’s committee and president as in the past, meaning group members have the right to elect their own representatives. Group members can also draw up their own production plan in line with market demand. Bankers said they too favoured farmers’ production groups because it made the repayment of loans for business expansion more certain. Farmers could use the group to guarantee credit instead of relying on their assets.

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