2

TableofContents

Acronyms&Abbreviations………………………………………………………………………………………………………3ExecutiveSummary......................................................................................................................4Introduction:…………………………………………………………………………………………………………………………..5

BackgroundObjectivesofthestudyMethodology

1.Chapter(1):SorghumInContext............................................................................................8

1.1ThedrivetowardmodernizationinSudaneseagriculture(2000-2017)……..………….81.2ThepoliticaleconomyofagricultureandsorghuminSudan:privatization,agribusinessandsorghumasapoliticalresource……………………………………………………….91.3Sorghuminthe“breadbasketofSudan”:Kassala,ElGedarifandSennarstates…..12

2.Chapter(2):ValueChainActors………………………………………………………………………………………..14

2.1Verticalsupplychainactors………………………………………………………………………………….142.2Horizontalsupportenvironmentactors………………………………………………………………..172.3Poweranalysis………………………………………………………………………………………………………18

3.Chapter(3):Analysisofvaluechaindistortions………………………………………………………………..22 3.1Distortionsinproduction………………………………………………………………………………………22 3.2Distortionsinfinance…………………………………………………………………………………………….24 3.3DistortionsinMarketing………………………………………………………………………………………..27 3.4Distortionscausedbymacro-economicpolicyandtenuresystems……………………...30 3.5Linkingthechaintoglobalmarketsandinfluence:exportingsorghum………………...324.Chapter(4):Considerationsandrecommendationsforvaluechaindevelopment..............35 4.1Recommendationsforpolicyformulationanddiplomacy………………………………………35 4.2Recommendationsforprogramdevelopment...…………………………………………………….375.Annexes………………………………………………………………………………………………………………………………42 5.1Revenueshares……………………………………………………………………………………………………..42

5.2Mapofvaluechainactors……………………………………………………………………………………...43

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Acronyms&Abbreviations(AAC)AfricaAgricultureCompany(ABS)AgriculturalBankofSudan(CBoS)CentralBankofSudan(CPA)ComprehensivePeaceAgreement(GoS)GovernmentofSudan(EU)EuropeanUnion(FAO)FoodandAgricultureOrganization(INGO)InternationalNon-GovernmentalOrganization(NCP)NationalCongressParty(MFNE)FederalMinistryofFinanceandNationalEconomy(NAIP)NationalAgriculturalInvestmentPlan(OFAC)OfficeofForeignAssetControl(SRC)StrategicReservesCorporation(SSMO)SudaneseStandardsandMetrologyOrganization(WFP)WorldFoodProgramme(MAF)MinistryofAgricultureandForestry(SMEs)SmallandMediumEnterprises

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ExecutiveSummarySorghumisastaplefoodgrainconsumedwidelyinSudan.TheGovernmentofSudan(GoS),likemanyothergovernments,pursuesaninterventionistpolicyinstaplegrainmarketsaimedatstabilizingfoodpricesandimprovingfoodsecurity.Yet,4.6millionpeopleinSudanremainfoodinsecureandlocalsorghumpricesaremarkedbyconstantvolatility(EuropeanCommission2017).Itisoftenarguedthatinterventionisteconomicpolicyinevitablycreatesdistortivemarketoutcomes.ThisresearchlooksatthedegreetowhichactorswithinSudan’ssorghumvaluechaincontributeto,andareimpactedby,adistortedmarketenvironment.Theanalysisrevealsdistortionsrelatedtoproduction,marketing,finance,exportsandpolicydrivenmainlybypracticesofahandfulofpowerfuldownstreamandupstreamactors.Thesedistortions,directlyandindirectly,impactthecompetitivenessofsmallholderfarmers.TheGovernmentofSudan(GoS)remainsatremendouslyinfluentialactorinthesorghumvaluechain.Throughstate-institutionsliketheAgriculturalBankofSudan(ABS),theMinistryofFinanceandNationalEconomy(MFNE)andtheStrategicReserveCorporation(SRC),theGoSfinancesthelargestsorghumfarmingoperationsinthecountryandexertscontroloverpricing,tradeandexports.Theseinstitutionsderivetheirpowerfromlegislation,mostnotablythecountry’sStrategicFoodReservesPolicy,whichalsogivestheseintuitionsaframeworkforcoordinationandorganizing.Othermajornon-stateactorsinthechain,althoughalsoinfluential,tendtolackcoherentcoordinationwithintheirindividualgroupsincluding,largefarmers,agribusinessesandlarge-scalegrainmills.Arelationsofpatronagelinkgovernmentinstitutionsandrulingeliteswithsomemajorplayersinthevaluechain.Asapoliticalresource,sorghumhashelpedmaintainrelativestabilityinSudanandenabledthecountrytoformstrategicalliancesinternationally,namelywiththeArabianGulfregion.Analysisofrevenuemarginsshowsaskewedvaluedistributionwithactorsinprocessingandretailaccumulatingthelargestshareoftheend-marketprice,whileactorsinvolvedinproductionactivitiesreceivethelowerincomeshares.Hence,theresearcherrecommends5policyandprogrammeresponsestoimproveeconomicviabilityforproductionactorswithfocusonsmallholderproducers,highlightingthepotentialroleforprivatesectorresponses:

§ Pursueaconditionalengagementapproachwithselectagribusinessesandhigh-performanceSMEstocapitalizeonsynergiesandmutualinterestsbetweenthemandsmallholderfarmerswhileexercisingdiligencetoreducerisksofsupportingbusinessesinpatronagenetworks.

§ Lobbyforimprovedlandtenurerightsforsmallholderproducerstopreventlanddispossessionandencroachmentsfromdomesticandforeigninvestors.

§ Enhanceproductivitythroughcontractfarmingwheresmallholderproducerscanenterpartnershipswithlargefarmersandagribusinesseswhocanprovidesustainedmarketingoutletsandfacilitateknowledgeandtechnologytransfers.

§ Developandstrengthenalocalsupplychaintoofferfarmershermeticstorageoptionswhichwoulddecreasepost-harvestlossesandimproveincomesandfoodsecurityofsmallholders.

§ Supportfarmers’associationstostimulatelocalmarketsystemsandtoempowerfarmersthroughcollectivemarketingandresourcemobilization.

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Introduction:Background

Valuechaindevelopmentisincreasinglyrecognizedasaneffectivetoolingeneratingemploymentandpromotingsocio-economicdevelopmentincontextsmarkedbyeconomicfragility.Avaluechainreferstotheinterconnectedprocessesandactivitiesthatjointlycontributetodeliveringafinalproductorservicetotheendcustomer.Centraltotheconceptofvaluechainsisthenotionofvalueaddition,whichassumesthatproductsorservicesaretransformedandmorevalueisaddedateverystagefrominceptiontofinaldelivery.Valuechaindevelopmenteffortstypicallyaimatimprovingthefunctioningofvaluechainsandenablingvaluechainactorstogenerateaddedvalue(Altuna2014).Sorghumisacerealgrainthathasavarietyofspecieswithdomesticandglobalappealanddemand.ItisamainfoodstapleinSudanlinkedcloselytofoodsecurityinthecountry.Sorghumisusedasfood,baseingredientinsyrupmanufacturing,groundintoflour,andusedasanimalfeed.Internationally,sorghumisusedintheproductionofethanolandalcoholicbeverages(Altuna2014).ThereareseveralvarietiesofsorghumcultivatedinSudan.VarietieswhicharetypicallyavailableineasternSudanincludeTetron,Feterita,Dabar,Tabat,Mugud,WadAkar,andWadBako.Sudanisalargeproducerofsorghumalthoughproductioninthecountrytendstobeextensiveratherthanintensive.Between2011and2015Sudanproducedanannualaverageof3,465,000metrictonsofsorghumfordomesticandinternationalmarkets,withtheFAOsuggestingthatthe2016harvestwasaboveaveragelevels(FAO2016).Asignificantpartofsorghumcultivationtakesplaceintheeasternregionofthecountry,alsoknownasSudan’sbreadbasket,inthestatesofKassala,ElGedarif,SennarandBlueNile.ThesestatesarealsohometocommunitiesofrefugeesandmigrantsfromneighboringcountriessuchasSouthSudan,EthiopiaandEritrea.Acomprehensivevaluechainanalysiswassoughttohelpilluminateandguideanincreasingfocusonagriculturewiththeviewtoenhancelivelihoodsincommunitiesandamongrefugeesandmigrants,andbyimprovingeconomicviabilityforsmallholderproducersandSmallandMediumEnterprises(SMEs)intheregion.SeveralstudieshaveaddressedthevariousconstraintssmallholderfarmersfaceinSudan.Thefocusoftheseanalyses,however,hasmostlybeentheproductionlevelofagriculturalcommoditychainsandtheroleofupstreamactorssuchasproducers,fieldlaborersandinputproviders.Thus,thereisapaucityofanalysisondownstreamactors,networksandactivitiesinagriculturalvaluechainsinSudan.Itiswell-recognizedthatdistortionsatonelevelofthevaluechainarelikelytoimpactviabilityatanotherlevelofthechainsinceactorsandactivitieswithinagivenvaluechainareinterdependent.Itis,therefore,importanttoshedfurtherlightontheroleandactivitiesofdownstreamnetworksandtoidentifyanypossibledistortionstheymightbecausingandwhichdirectlyorindirectlyimpacteconomicviabilityforsmallholderfarmers.

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ObjectivesofthestudyThisstudyexaminesthesorghumvaluechaininSudanwithfocusonthestatesofKassala,GedarifandSennar,aspartofwiderefforttoimproveeconomicviabilityforsmallholderfarmersandSMEsineasternSudan.Thestudyfocusesontheroles,functions,interestsandincentivesofdownstreamvaluechainactorsandmarketplayersandthoroughlyinvestigatesthewaysthattheseactorsimpactandinfluenceupstreamplayersincludingsmallholderfarmers.Furthermore,thestudyaimstouncoverlinkagesbetweenlocalandglobalactorswithinandacrossthevaluechain.Thisreportprovidesanin-depthanalysisofthelocal,regional,nationalandinternationalactorsinvolvedinSudan’ssorghumvaluechain.Usingapoliticaleconomyapproach,itidentifiespossibledistortionswithinthechainthathindereconomicviabilityforsmallholderproducersandpreventthemfrommovingbeyondsubsistenceagriculturetomarket-orientedfarming.Drawingonprimaryandsecondaryresearch,thisreportexaminesthepowerdynamicswithinthischainandtheopportunitiesandrisksassociatedwithpotentialdevelopmentresponses.

MethodologyToachievetheresearchobjectives,theconsultantusedamixedmethodsresearchapproachcombiningatraditionalvaluechainanalysiswithapoliticaleconomyapproach,usingbothqualitativeandquantitativedatacollectionmethods.Ratherthanapproachingvaluechainanalysisasapurelytechnicalexercise,theconsultantincorporatesapoliticaleconomylenstherebyacknowledgingthatvaluechainsdonotexistinvacuumandarerathershapedby,andthemselvesshape,aparticularsocio-economiccontext.Primarydatawascollectedthroughsemi-structuredfield-basedinterviewsandfocusgroupdiscussionsduringvisitstothestatesofKassala,GedarifandKhartoum.ResearchwascarriedoutbetweenMarchandMay2017.ThestudyutilizedinterviewswithrepresentativesfromrelevantSudanesegovernmentinstitutions,small1andlargesorghumproducersineasternSudan,traders,exporters,retailers,financialinstitutions,relevantinternationalorganizationsandembassies.Secondarydatawascollectedfromrelevantjournals,mediaarticles,studyreports,governmentreportsandgreyliterature.ThestudyidentifiesopportunitiesforupgradingthesorghumvaluechainandusesaStrengthWeaknessesOpportunitiesandConstraints(SWOC)frameworktoassesstheviabilityofrecommendationsmadeinthestudy.Itisimportanttonotethelimitationsinvolvedinthe

1ItisimportanttonotethatlandallocationvariesbetweenSudan’seasternstatesandbetweentherain-fedandirrigatedsectorswithatendencyoffarmersinGedariftoownrelativelylargerplotsoflandcomparedwithfarmersinKassala.Therefore,andforthepurposesofthisanalysis,anyfarmerwith50feddans1orlessisconsideredasmallholderproducer.FeddanisaunitofagriculturallandmeasurementusedinSudan.1feddan=1.038acre(AC).

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researchprocessduetotimeandaccessconstraintsinthefieldsites.Whilethereportendeavoredtocapturethevoicesofavarietyofstakeholdersinthesorghumvaluechain,therearesomenotableabsences,includinglocalandinternationaldistributors.Whileinsightsfromtheseactorswouldhavebeenvaluable,theconsultantdoesnotbelievethattheirabsencedetractsfromtheoverallvalueofthereport.

Red Sea

AsmaraKhartoum

Addis-Ababa

Renk

Buram

Abyei

Kosti

Kurmuk

Shendi

Atbara

Suakin

El Rahad

Abu Hamad

Umm Durman

Wadi Halfa

Abu Jibaiha

Shangil Tobay

Edd El Fursan

Khartoum North

Rokoro

Adilla

SCAN ME!

Nyala

SingaRabak

Kadugli

Gedaref

Kassala

Dongola

El Obeid

Ed Damer

El Fashir

Ed Damazin

El Geneina

Wad Medani

Ed Daein

Zalingei

Port Sudan

NORTHERN

RIVER NILE

RED SEA

NORTH DARFUR

NORTH KORDOFAN

SOUTH DARFUR SOUTH KORDOFAN

GEDAREF

KASSALA

SENNAR

WEST DARFUR

BLUE NILE

WHITE NILE

EL GEZIRA

KHARTOUM

HALA'IB TRIANGLE

CENTRAL DARFUR

ABYEI AREA

EAST DARFUR

CHAD

ETHIOPIA

LIBYA

EGYPT

ERITREA

SAUDI ARABIA

CENTRAL AFRICAN REPUBLIC

SOUTH SUDAN

SUDAN: Administrative Map (May 2012)

Creation date: 06 May 2012 Sources: Boundary(IMWG), Settlement(OCHA).

Feedback: ochasudan_feedback@un.org www.unocha.org/sudan www.reliefweb.intThe boundaries and names shown and the designations used on this map do not imply official endorsement or acceptance by the United Nations.

Final boundary between the Repblic of Sudan and the Republic of South Sudan has not yet been determined. Final status of the Abyei area is not yet determined.

100 km

International boundary

Undetermined boundary

Abyei region

Capital

State capitalTown

State boundary

LEGEND

River

Figure1:SudanAdministrativeMap.SourceUNOCHA

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ChapterOne

1.SorghumInContext1.1ThedrivetowardmodernizationinSudaneseagriculture(2000-2017)

ThesecessionofSouthSudanin2011andtheconsequentlossofmorethan70%ofthecountry’soilwealthhasmadethefocusonagricultureinSudananeconomicimperative(IRIN2012).Agricultureiscurrentlyseenasanimportantresourcesectorforovercomingeconomicdistress.Aspirationsofagro-leddevelopmentinSudantypicallyinvoketheabundanceofwaterresourcesandavailabilityofarablelandestimatedat200millionfeddans,ofwhichonlyanestimated30millionfeddanshavebeenputtouse.Sudan’sarablelandresourcesamounttoabout45%oftotalarablelandareaintheentireArabregion,comprisingNorthAfricaandlargepartsoftheMiddleEast(Almalah2017).Despiteavailabilityofarablelandandwaterresources,Sudanremainsstructurallydeficitinstaplefoodproductionposingconstantriskstofoodsecurityinthecountry.AgriculturaldevelopmentinSudanthereforehasimplicationsforfoodsecurityinSudanandacrosstheentireregion.Atpresent,Sudan’sagriculturalsectorisdefinedbydependencyonfavorableclimaticfactors,notablyamplerainfall.Themaincropsproducedaresorghum,millet,sesame,groundnut,cottonandvarietiesofvegetablesandfruits.Foodimportshaveincreasedasaresultofacutepricevolatilitieslocally.WhileSudaneseagriculturehaswitnessedtheentryofnewagri-businessplayersinrecentyears,muchproductionisstillatthesubsistencelevelcarriedoutbysmallholderfarmers.ThecalltomodernizeSudan’sagriculturalsectordatestothetimeofindependencefromBritishcolonialrule,albeitinterruptedbyperiodsofgeneralneglect,especiallyduringtheoilboomoftheearly2000s.ThiscallhasbeenrenewedinrecentyearsasseveralinitiativesandplanshavebeenputforwardbytheSudanesegovernment,internationalpartnersandtheprivatesector.ThemodernizationofSudan’sagriculturalsectorcentersaroundincreasingagriculturalinvestment,mechanization,irrigatedfarming,andfacilitatingknowledgeandtechnologytransfers.Torealizetheseobjectives,SudanhasturnedtodevelopmentandbusinesspartnersintheEastandWest.Forexample,inMarch2017andfollowingtheprobationaryliftingofU.SeconomicsanctionsonSudanimposedinthe1990s,theSudaneseMinisterofAgricultureMr.IbrahimElDikherypaidavisittotheUnitedStatesandsignedframeworkagreementswithReinkeIrrigationandThompsonPumpandIrrigationInc.(Toum2017).Thetwocompaniesareleadersintheirrigationfieldandsolar-poweredagriculturaltechnologies.Inaddition,Mr.ElDikheryalsometwithU.Sbankstodiscussagriculturalfinancingandinternationalbanktransfers,twoareasthatwerelargelycrippledduringalmosttwodecadesofU.S.sanctions.Despitethesanctions,SudanhasbeenanattractivemarketforU.S-manufacturedtractors,pivotirrigationsystems,and

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combineswhichwereimportedunderspecialOFAC2licenses(BureauofEconomicandBusinessAffairs2016).In2013SudanalsosignedanagriculturalcooperationagreementwithChinaallowingChinesebusinessestoinvestdirectlyinSudan,engagedirectlywithSudanesepartners,andfundagroprocessingandfoodproductionprojects(SudanTribune2013).Inthesameyear,SudanlaunchedtheArabFoodSecurityInitiativeaimingtoattractintra-regionalagriculturalinvestment.Sudanhasreportedlyattractedover$28billion(USD)ininvestment,mostofwhichcomesfromGulfcountries(Almalah2017).SudanhasalsoworkedcloselywiththeFoodandAgricultureOrganization(FAO)onthecountry’sNationalAgriculturalInvestmentPlan(NAIP),whichoutlinespolicyprioritiesandinvestmentareasforthesector,including,butnotlimited,toinstitutionalreformsandcreatinganenablingenvironmentforproducers,valuechaindevelopment,industrializationandmodernizationofagriculturalsystemsincludinginformationsystems(EmeryandElnaiem2016).Inthiscontext,increasingfocusonagro-developmentinSudanseemstoalignwellwiththestrategicgoalsandaspirationsofSudan.Furthermore,strategicsupportbyinternationalactorswouldbevaluableandcanhelpfacilitatethesuccessofagro-developmentinitiativesandprovidesupportforsmall-holderfarmers.

1.2PeekingthepoliticaleconomyofagricultureinSudan:Privatization,agribusinessandsorghumasapoliticalresource

TheeraofTheNationalCongressParty(NCP)3inSudanhasbeenmarkedbysteadygravitationtowardtheprivatizationofnationalagriculturalschemesandthepromotionofprivateagri-business.Nationalagricultureschemeswereestablishedunderpreviousgovernmentstocontributetowardeconomicdevelopmentusingagricultureasastrategicsector.Despiteitsappetiteforlaissez-faireeconomicrestructuring,thegovernmentofSudanstillmaintainsconsiderablecontroloverthefinancing,productionandmarketingofsorghum.Thegovernment,throughitsvariousinstitutionsandstatecorporations,setstheprevailingpriceforthecommodityandfinancesthelargestproductionoperationsofsorghuminthecountry.By2005,ofthe81largestprivatizedenterprisesinSudan,26%wereagriculturalschemes(HamadandSalih2014).Thefourlargestnationalagriculturalschemes,whichoncemadeupover60%ofthetotalirrgiatedareainthecountry,haveallbeenexposedtoprivatizationattempts.TheseschemesincludeGezira,Rahad,SinkatandNewHalfa,whichproducecropssuchassorghum,sugarcane,groundnutsandcotton(Wallin2014).Theimpactoftheseprivatizationprogramsonsmallholderfarmersandthesorghumvaluechainisdiscussedinmoredetailinsection3.4.2U.SOfficeofForeignAssetsControlwasresponsibleforissuinglicensesandmonitoringthecompliancewithUSsanctionlawsimposedonSudan.3TheNCPisSudan’sgoverningpartywhichhasbeeninpowerforover27years.

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TheexpansionoftheprivatizationprograminSudanhasinvolvedtheentryofnewandoldcapitalaswellastheformationofalliancesbetweencapitalandpoliticalactors.CollusionbetweenbusinessandpoliticalelitesinSudaniswell-documented.ThesurvivalofthepoliticalclassinSudaninmanywayshingesonaccesstomaterialresourcesfrombusinesspatrons(Waal2015).TobecomearulingpartyofficialinSudanoftenmeanstoexerteconomiccontrol.Largeagro-industrialcompaniesaredominatedbyhigh-levelofficialsoftherulingparty.4Intervieweesalsoconfirmedthatmembersofthepoliticalandsecurityelitesoftentargetpromisingbusinessventureswiththedemandtobecomeshareholders.Theseallianceshavehadamarkedimpactonthesorghumvaluechain.Forinstance,intervieweesconfirmedthattheMahgoubSonsGroup,oneofthelargestplayersintheagriculturalsectorinSudanandwhosechairmanMr.WagdiMirghanireceivedthePresidentialOrderforExemplaryContributionin2014,replenishesthetreasurywithhardcurrencyinexchangeforsubsidizedpurchaseslocallyandfacilitiestoexportsorghum5.IthasalsobeenreportedthatSaygaFlourMillsoftheDALGrouphasbeengrantedastandingcertificatetoimportsorghumforitssorghumretailpackages.Saygacitedhighcostsofdomesticsorghumasmotivationforseekingtheimportcertificate(EmeryandElnaiem2016).ItisnoteworthythatsorghumisgenerallynotimportedintoSudan.FamiliessuchasElBerierfamily,whichhashistoricallybeenactiveinthecountry’sindustrialsector,havemorerecentlyventuredintoagriculture.SaudElBerierhasestablishedprivatesorghumsilosinElGedarifaspartofhisThagibGroup,andasMuawiyaElBeriersventuresintowheatproduction(Awad08).ItisoftenarguedthatthetopplingofElNumairiregimeinthemid1980sthroughapopularuprisingwaspromptedbyrisingfoodpricesduetothedroughtthatstruckSudanatthetime.ThiseventledsubsequentgovernmentsinSudantopursueinterventionistpoliciesinthegrainsmarketheavilyregulatingthemarketsforsorghum,wheatandmillet.TheNationalCongressParty(NCP),whichtookpowerin1989,implementedvariationsofinterventionistpolicyingrainmarketswithabriefperiodofafreemarketreversalinthemid1990s(Ahmed,AbdulsalamandSiddique2012).Today,itappearsthattheNCPhaslearnedfromlessonsofthepastandwouldnotriskthecompletederegulationofthegrainsmarket,assevereshockscouldtranslateintopoliticalinstability.Infact,theregulationofgrainpricesinordertoensurefoodsecurityisenshrinedinthecountry’sStrategicFoodReservesPolicy,whichwillbediscussedingreaterdetailinsection3.3.Inadditiontoitsimportanceforfoodsecurityandpoliticalstability,sorghumhasalsobeenusedasaresourcetogainpoliticalleverageandinfluenceoutsideofSudan.SudanrecentlydonatedsorghumtoSouthSudanfromitsnationalreservesasthelatterexperiencedseverefoodshortagesleadingtoadeclarationoffamineinearly2017.TheSudanesehumanitarian4Verhoeven,H.2011,p.697.5Seelinkonnoteofpresidentialorderaward:http://www.sudaress.com/akhirlahza/136415

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gestureplayedwellintoSudan’spoliticalgoalsofnormalizingandimprovingrelationswiththeWest,aswellasaddressingatrustdeficitwithSouthSudan’sgovernment.Indeed,theUnitedStates,NorwayandtheUnitedKingdomissuedajointstatementcommendingSudanontheopeningofahumanitariancorridortoSouthSudanandspecificallypraisedSudanfordonatingitsfoodreserves(U.SDepartmentofState,OfficeoftheSpokesperson2017).ItisnotonlythegovernmentofSudanrepresentedintheNCPthathasusedsorghumasapoliticalresource;somenotablepowerbrokersineasternSudanhavealsodonethesame.TheDemocraticUnionistParty(theorigin)launchedAlMirghaniInitiativeforSouthSudan(Ali2017).FarmersinGedarifstatealliedwiththepartydonatedaround3000sorghumsackstotheinitiativetobesentaspartoffoodaidtoSouthSudan.AlMirghanifamilywhoisleadingthehumanitarianinitiativeisoneofthemostinfluentialhousesinthecountryandwhosememberthelateAhmedAlMirghaniwastheHeadofStatebeforeSudan’sdemocraticallyelectedgovernmentwasoustedinthemilitarycoupthatbroughtAlBashirtopowerin1989.AlMirghanifamilyandtheDUPhaveastrongsupportbaseineasternSudancomprisedofmanylargesorghumfarmerswhoseallegiancetotheDUPextendsthroughthesectarianandpoliticaldivides.ThepowerandinfluenceoftheDUPanditsabilitytotranslateitsinfluenceoversorghumfarmersinGedarifintoeffectivepoliticaloutcomeshas,nonetheless,beencontestedbytheStategovernmentrepresentedbytheGovernorofthestate.Forinstance,thegovernoroftheGedarifstatepreventedthetransportofsuppliescollectedunderAlMirghaniInitiativeforSouthSudancitingtheneedfortheAlMirghaniInitiativetobepartoftheGoSongoinginitiativetoprovidefoodaidtoSouthSudan.Finally,easternSudanhadbeenthetheatreofalow-levelinsurgencythatledarmedgroupsfromtheregionintoconfrontationwithKhartoumamidgrievancesofeconomicandpoliticalmarginilization.ApeacedealborkeredbyEritreawassignedin2006.However,by2013,only12%ofthe$600milliondevelopmentfundspromisedunderthepeacedealwereallocatedtotheregion(ThomsonReuters2013).WithmostpopulationineasternSudanlivinginruralareas,investmentinagriculturaldevelopmentintheregionisessentialinaddressinggrievancesthatarefundamentallyeconomicinnature.DirectlinksbetweenthesorghumvaluechainandconflictlinesineasternSudanwerenotimmediatelyidentifiable;andsuchexercisewouldhavebeenbeyondthescopeofthisconsultancy.Nevertheless,itisacknowledgedthatthesorghumvaluechainineasternSudanexistsinacontextofpoliticalandeconomicfragilitycharacteristicoftheentirecountry.

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1.3Sorghumproductionin‘Sudan’sbreadbasket’:Kassala,GedarifandSennarstates

Thereareanestimated1.35millionpeoplewholiveineasternSudanandabout80%ofthemearntheirlivingfromsubsistencefarming(UnitedNations2016).TheeasternstatesofGedarif,Kassala,andSennarareoftenreferredtoas‘Sudan’sbreadbasket,’underscoringtheirimportanceforfoodsecurity.InadditiontoBlueNile,WhiteNileandSouthKordofanstates,Kassala,GedarifandSennararesorghumsurplusproducingstates.Thedominantsystemsofsorghumproductionintheeasternregionarethetraditional,mechanizedandsemi-mechanizedrain-fedfarmingsystemswithafewirrigatedschemessuchastheNewHalfascheme.Therehasbeenanotableincreasein2016inthetotalareausedforsorghumproductioninSudaningeneralcomparedwith2015.Totalareacultivatedin2015was15,990814feddanswhilein2016thetotalareareached21,839,351feddanswhichamountstoanincreaseofabout37%.Therain-fedsectoraccountedformostoftheincreasesincultivatedareasamountingto20,697,922feddansin2016comparedwith14,769,640feddansin2015.EasternSudanaccountsforover60%ofthetotalareacultivatedwithsorghuminSudan(MinistryofAgricultureandForestry2016).Table1:Totalareacultivatedwithsorghumperfeddaninseason2016

IrrigatedSector Rain-fedSectorSchemeName Sorghumarea State Sorghumarea

Gezirascheme 639,194 Gedarif 6,123,552Rahadscheme 116,931 Sennar 3,957,939NewHalfascheme 115,116 Kassala 1,192,755Sukischeme 48,425 BlueNile 2,051,907OtherschemesinGezira 5,563 RedSea 22,057OtherschemesinSennar

113,230 SouthKordofan 2,376,701

OtherschemesinWhiteNile

93,704 NorthDarfur 195,073

OtherschemesinGedarif

9,216 Khartoum 0

Source:(MinistryofAgricultureandForestry2016)*blueshadingindicatesstatesineasternSudanSorghumyieldsdependheavilyonclimaticfactors,rainfallinparticular.EstimatesofaverageannualsorghumproductioninSudanrangebetween3.5-5.4million6MT.Theyear2016sawnotablyhigherproductionfiguresestimatedat7,971,759MTduetoanaboveaveragerainyseasoncomparedwithproductionyieldsofaround4,040,345MTin2015inSudan.Average

6MT=MetrictoninU.S.measurementsystem

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yieldsperfeddanhavealsorisenfrom252Kg/feddanin2015to365kg/feddanin2016(MinistryofAgricultureandForestry2016).Thegrowingappetiteforanduptakeofmechanizationandimprovedseedscoupledwithabundantrainfallareresponsiblefortheefficiencygainsrealizedin2016.Table2:Totalyieldsofsorghumpermetricton(MT)inseason2016

IrrigatedSector Rain-fedSectorSchemeName Sorghum(MT) State Sorghum(MT)

Gezirascheme 634,888 Gedarif 2,334,778Rahadscheme 125,640 Sennar 1,206,004NewHalfascheme 105,835 Kassala 482,995Sukischeme 50,689 BlueNile 884,030OtherschemesinGezira 5,504 SouthDarfur 321,306OtherschemesinSennar

110,168 SouthKordofan 728,559

OtherschemesinWhiteNile

77,077 NorthDarfur 17,873

OtherschemesinGedarif

8,875 WhiteNile 516,363

Source:(MinistryofAgricultureandForestry2016)

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Chapter(2)

2.ValueChainActorsThischapteridentifiesthemainactorsinthesorghumvaluechaininSudanandcategorizesthemasverticalandhorizontalactorsthatfulfilldifferentfunctionsinthevaluechainincludingproduction,trade,retail,policy,financing,distributionandsoon.Furthermore,thechapterrevealsthesourcesofmarketpowerandinfluenceforactorswithinandacrossdifferentgroupsinthevaluechain.

2.1VerticalSupplyChainActors

Theseactorsareinvolveddirectlyingeneratingmonetaryvaluethrougheitherproduction,trade,distribution,brokeringorsalesofsorghumorproductscontainingsorghum.ProductionInputsuppliers:provideagriculturalinputsnecessaryforplanting,cultivatingandharvestingsorghumincludingmachinery,fertilizers,pesticides,herbicidesandseeds.Manyinputsuppliersworkthroughadistributionmodelwithcertifieddistributorsandagentsdealingdirectlywithfarmers(Abdulatif2017).LargeinputssuppliersincludeCTCAgrochemicals,acompanyundertheCentralTradingCompany(CTC)Group,DALEngineeringCompanypartoftheDALGroupandArabSudaneseSeedCo.Medium-SizeinputsuppliersincludeAlDomaandAlNilaincompanies.Inadditiontoprovidingthephysicalagriculturalinputs,theseactorsmayprovidelimitedtrainingtocustomersonapplyingandusinginputs.AgriculturalinputsaregenerallyimportedintoSudanwithsomeseedlingsgrownlocally.Farmers:sorghumiscultivatedbylarge,mediumandsmallscalefarmers.Largerfarmersmayrunfarmslargerthan30,000feddansandsmallholderfarmersmaycultivateplotsassmallas5feddans.Anoverwhelmingmajorityoffarmersrelyonrainfallandcaneitherincorporatemachineryorusetraditionalfarmingmethods.Farmersmaybeorganizedunderfarmers’associations,whichassistgroupsoffarmersinaccessinginputsupplies,credit,trainingandmarketingchannels.Manysmallholderfarmersholdlandundercustomarytenurearrangements.Agribusinesses:enterprisessetupforagriculturalproductionandtrading.Agribusinessesdonotnecessarilyproducesorghumexclusivelyandmayproduceothercropssimultaneouslyincludingcottonandsunflowerseeds.Someagribusinesses,suchastheAfricaAgriculturalCompanyCo.oftheMahgoubSonsGroup,haveintegratedbusinessmodels.Asoftensubsidiariesoflargerconglomerates,agribusinessesmaybelinkedtoagriculture-relatedbusinesseswithintheirbusinessgroupsandthusmaybenefitfrombetteraccesstoagriculturalinputsandmarketingchannels.

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HiredLabour:mayworkforlargefarmers,smallholderfarmers,oragribusinessesusuallythroughseasonalcontracts.Hiredlabourassistfarmerswithplanting,cultivatingandharvestingsorghumandundertakeactivitiessuchasweedingandmanualthreshing.AnoverwhelmingnumberofhiredlaborersineasternSudanarefromneighboringcountriessuchasSouthSudan,EritreaandEthiopiaandmaybebothrefugeesormigrantsseekingseasonalwork.TradeandDistributionBrokers:oftenofferthefirstmarketingchannelforsmallholderproducers.Brokerspurchasesorghumfromfarmersatthefarmgate,inavillage,orinlocalizedmarketsforresellinginthecity.Cityandlocalitymarketsaretypicallylocatedatconsiderabledistancesfromproductionareas.Somelargerfarmersactasbrokersaggregatingtheirsorghumstocksfromsmallholderfarmerstoselltotradersincropsmarkets.Agents:representativesoffarmers(sellingagents)orrepresentativesofexportersandlargemills(buyingagents).Theyareincentralcropmarketsandaregenerallycompensatedthroughcommission.Inadditiontoorganizingtransportsfortheirrespectiveclients,agentsmayalsodealwiththeadministrativestepsassociatedwithtransactionssuchaspayingtaxesandmarketfees.Agentsalsoprovidedailymarketintelligencetoprospectivebuyersandsellers.Traders:purchasesorghumincentralcropmarketsandresellinretail,wholesaleandprocessingchannels.Tradersmayalsoselltoexporters.Tradersusetheirowncapitaltofinancetransactionsoraccessloansthroughcommercialbanks.Manylargefarmersalsoactastradersoftheirownsorghumincropmarkets.ThelargestcropmarketintheeasternregionisinGedarifcity,thecapitalofGedarifstate.Gedarifisalsohometothelargestgrainsilointhecountry.Wholesalers:financialinstitutionsinSudanareconsideredtradingactorssinceloanrepaymenttotheseinstitutionsareoftenin-kind.Financialinstitutionsarewholesalechannelsthatreceivecrops,asin-kindloanrepayment,andreselltoretailers,processorsandtraders.TheAgriculturalBankofSudan(ABS)financesfarmerstoproducesorghumandcollectsrepaymentinwholegrainsorghum.TheABSconsidersitselfthelargestdevelopmentbankinSudansupportingfamersandagricultureingeneral.TheABSalsofinancespurchasesofsorghumbytheStrategicReservesCorporation(SRC),whichoperatesasanautonomouscorporationoftheABS.BoththeABSandtheSRCaregovernmentinstitutions.TheSRCoperatesthelargestsilosinSudan,andbyactingasmarketplayerthatbuysandsellssorghum,theSRCaimstostabilizepricesofgrainsasamatteroffoodsecuritypolicyenshrinedinSudaneselegislation.ProcessingandRetailProcessors:processsorghumforconsumptionbyhumansorfortheproductionofanimalfeed.Largeandsmallgrainmillsprocesssorghumintoflourthatisusedasaningredientinfoodpreparationathouseholdlevelorinfoodproductioninbakeriesandrestaurantsthatselltraditionalbreadknownas‘Kissra’.Processingsorghumintoanimalfeedisundertakenbyfeed

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millsandaggregatorsincludingElStagbilFeedMillinKassalawhichservicesboththedairyandpoultryindustriesandover10feedaggregatorsinGedarif(EmeryandElnaiem2016).LargeflourmillsincludeSaygaMills,asubsidiaryoftheDALGroupwhichproducesaretail-focusedmixedflourproductknownasZadna,whichincludes60%sorghum.ZadnaisdistributedacrossSudanthroughanetworkofagentsanddistributors(Yousif2017).Inaddition,therearesmallandmediumsizedtraditionalmillsincities,townsandlocalmarketsacrosseasternSudanwhichalsosellretailpackagesofbothwhole-grainsorghumandsorghumflour.Distributors&ConsumerRetailers:largemillssuchasSaygacontracttheirdistributionofZadnaandbreadflourcontainingsorghumtoanetworkofdistributorswhocanmarkettoretailoutlets.Distributorshavethelogisticsinfrastructurenecessarytostoreandshipsorghumflourandoftenfocusonspecificsalesterritories.Distributorsworkcloselywithretailersandextendcredittothematrequest.Retailersincludesupermarkets,groceryshops,selectrestaurantsthatproduceKissraandbakeries.ConsumersHomeconsumers,commercialpoultryanddairyfarms:sorghumisastaplecropinSudanandespeciallyintheeasternpartofthecountry.However,consumptionhabitsarechangingwithgrowingpreferenceforwheatparticularlyaroundurbancenters.Thisisclearthroughtheincreasinglevelofwheatandwheatflourimportsinrecentyears(OEC2017).Commercialandlargepoultryanddairyfarmspurchaseprocessedfeedcontainingsorghumfromfeedmillseitherdirectlyorthroughproxydistributorswhichsupplythesefarmswithotherinputs.Smallpoultryanddairyfarmsaccesssorghumthroughlocalmarketaggregatorsthatalsoseemtoadvisethemonappropriatefeedmixes.Exporters:SurplussorghumissoldmostlyintheArabianGulfregiontobeusedaslivestockandpoultryfeed.Theabilitytoexportissubjecttoavailabilityofnationalstockswhenthereisanoverallproductionsurplusinthecountry.Exportersprocuresorghumeitherdirectlyorthroughagents,fromlargefarmers,formtradersorfromtheSRC.NotableexportersincludetheMahgoubSonsGroup,whichhasitsownsorghumfarmingoperationsandalsobolstersitsownstocksbypurchasinginthemarketincludingfromtheSRC.InternationalDistributors:locatedoutsideSudanandininternationalfreetradezonessuchasDubai.InternationalcommoditybrokersareincludedwithinthisgroupwhopurchasesorghumfromSudanbasedonordersfromtheirclients.InternationaldistributorsdealdirectlywithSudaneseexportersorthroughbrokers.

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2.2HorizontalSupportEnvironmentActors

Theseactorsworkwithverticalactorstohelpgenerateaconduciveproductionandcommercialenvironmentthroughregulation,businessdevelopmentservices,lobbying,advisory,andtraining.MinistryofFinanceandNationalEconomy(MFNE):ProvidestheliquidityneededfortheSRCandtheABStoundertaketheirmandatesofsupportingfarmersandensuringfoodsecurity.IncollaborationwithotherministriessuchastheMinistryofAgricultureandForestry(MAF)andABS,theMFNEdeterminestheprevailingpriceofsorghuminthecountrythroughitspivotpricingtool7.TheMFNEalsoplaysacrucialroleindeterminingwhetherexportingsorghumshouldbeallowedduringagivenyear.MinistryofAgricultureandForestry(MAF):mandatedwithagriculturalplanning,policyformulationandensuringfoodsecuritynationally.TheMinistryofAgricultureconductsannualcropproductionsurveyswhichareusedtodetermineviabilityofpermittingexportsofsorghum.Theministryalsofacilitatestheprovisionofextensionservicestosorghumfarmers.SudaneseStandardsandMetrologyOrganization(SSMO):setsthequalityandsafetystandardsforlocalsorghumproduction,consumptionandexportinadditiontoahostofotherproductssoldacrossdifferentsectors.SSMOoperatesthroughspecializedtechnicalcommitteesinvolvingexpertsindifferentsectors.CropInsurance:insurancecompaniesthatinsureloansissuedtofarmersbybanks.Cropsinsuranceformicrofinanceloaniscompulsory.NotablecropinsurersincludeSheikanInsuranceCompany,AlsalmaandIslamicinsurancecompany.GeneralAdministrationofCropMarkets:undertheMFNE,theadministrationoperatescropmarketsincitiessuchasGedarifandSennar.Theauthoritycollectsfeesfromparticipantsincropmarketsandmayprovideservicessuchaswarehousingandofficesforagentsandtraders.INGOsandDonors:InternationaldonorssuchastheEU,INGOssuchasZOAandUNorganizationssuchastheWFPareinvolvedinimprovingthesorghumvaluechaineitherthroughprovisionoffundsorthroughfacilitationandimplementationoftrainingandbusinessdevelopmentprogramswithoverwhelmingfocusonsmallholderproducers.Actors,suchastheFAO,workcloselywithGovernmentofSudan(GoS)indevelopingmacro-agriculturalpolicyandcontributetoperiodicfoodsecurityrisksassessments.7Pivotpricingisapricecontroltool.Itisfurtherexplainedinsection3.3

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2.3PowerAnalysisofVerticalandHorizontalActorsintheSorghumValueChainSorghumproductionandtradeinSudanisshapedbytherelationaldynamicsbetweenlocal,regional,nationalandinternationalactors,someofwhichpossessagreaterorlesserdegreeofleverageinshapingpolicyandtradedecisionsandoutcomes.ProductionActors:LargefarmersderivetheirpowerfromtheirabilitytoreplenishthestrategicfoodreservesofSudan.TheyareimportantplayersintheSorghumsupplychaininSudan,especiallyfarmersinGedarif.However,largefarmers’power,asagroupofactorsinthevaluechain,tendstobediffuseasthereiscurrentlynoformalandcohesivebodythatorganizesandrepresentsthemcollectivelyfollowingthedissolutionoftheFarmers’Union.Accesstoland,whichisoftenpasseddownthroughlineage,giveslargefarmersanadvantagethatlargeagribusinessesdonotnecessarilyhave.Thoughendowedwithinvestmentcapital,agribusinessesmustleaseorpurchaselandandthisisoftenasensitiveanddelicateissueforcommunitiesnearfertileagriculturalland(seesection3.4).Comparedwithagribusinessesandlargerfarmers,smallholderproducersaredevoidofeffectivepowerasproductionactorsmainlyduetothepervasivelackofformaltitletolandamongsmall-scalefarmerswhichincreaseslandinsecurity.Smallholderfarmerstypicallyhaverighttouseoflandguaranteedbycustomarylawonly.Tradeanddistributionactors:Havingadequatesocialcapitaldeterminesthebroker’seffectivenessandactsasasourceofinfluenceforbrokersinthevaluechain.Brokers’knowledgeofproductionareasandpeopleinproductionareasfacilitatestrustbetweenfarmersandbrokers.Thedegreeoftrustinthisrelationshipisfluidandmightbeimpactedbyseveralfactorsincludingpricesofferedbybrokerstofarmersorperceptionsthatfarmersform.Forexample,whenfarmersfeeltherearecollusivealliancesbetweenafewbrokersinagivenproductionarea,theytypicallyrefrainfromdealingwiththesebrokers(FocusGroupDiscussion2017).Riskofexploitationoffarmersbybrokersemanatefromfarmers’lackofmarketingknowledgeincludingdailypricesandfromfarmer’slimitednetworkofpotentialcustomers.Agentsderivetheirmarketpowerfromtheirabilitytoprovidemarketintelligencesuchascommunicatingdailypricesandquantitiesavailableinmarkettoprospectivebuyersandsellers.Thus,beingphysicallypresentinthecropmarketiskeyforagents.TradersandwholesalerssuchastheABSandSRC,ontheotherhand,derivetheirmarketpowerfromhavingaccesstostoragecapacityandtoliquidity.Storagecapacityallowstraderstobuysorghumatthebeginningoftheseasonwhenpricesarelow,storeitandsellitwhenpricesarehigher.Tradersprefertousestoragefacilitiesnearcropmarketsforeasyaccesstodailysales.TheSRC’spricestabilitymandateenablesittooffset,althoughnoteradicate,forwardbuying8practicestypical8Forwardbuyingentailspurchasinglargequantitiesofmerchandisewhenpricesarediscountedandstoringmerchandiseinanticipationofhigherpricesinthefuture.

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oftraders.WhileboththeSRCandtradersinfluencethesupplyofsorghuminthemarketatagivenpoint,theirincentivesareatodds.TradersstoregraintorealizehigherpriceswhiletheSRCstoresgraintoreleaseintothemarketwhenpricesbecomeunaffordable.TheSRCisestablishedbypresidentialdecreeanditsmandateofpromotingfoodsecuritythroughpricestabilizationisenshrinedinSudaneselaw,givingthecorporationtremendouspowerinthevaluechain.Processingandretailactors:SaygaMillsisakeyplayerintheflourmarketinSudan,which,untilrecently,focusedonmillingwheatandsupplyingbakeriesacrossSudanwithbreadflour.Saygaisestimatedtocover70%ofSudan’sconsumptionofwheatflourwhichisthemaintypeofflourusedtomakebreadinSudan’surbancenters(SudanTribune2015).However,wheatfloursoldtomakebreadisoftenmixedwithsorghumflouruptoanallowedmaximumof10%oftotalcontent,whichhighlightsthelinkbetweensorghumandwheatastwostrategiccommodities(Abulsaid2016).CompetitorsofSaygaincludeWetaMillsownedbybusinessmanIbrahimMalik,GenaMills,andSeenFlourMillswhichisownedbySudan’sNationalIntelligenceandSecurityService(NISS)9.SeenMillsistheonlymillreportedtomillsorghumandproducearetailpackageonlyduringtheseasonofRamadan(Abulsaid2016).SaygaandSeenFlourMills’possessionofalargemarketshareofprocessedsorghumflourandtheexistenceofonlyafewmodernprocessorssuggestsanoligopolisticstructureintheprocessingstageinthevaluechain.Sayga’sventureintothesorghumretailmarketusingabranddevelopmentapproachisdrivenbytherealizationofamarketopportunity(Yousif2017).Sayga’sZadnasorghumflourbrandtargetshouseholdconsumptionwhichuntilrecentlydependedonsorghumflourmilledinindependentsmallandmediumsizedflourmills.OfferingapremiumsorghumflourproductatacompetitiveretailpriceofSDG8-10(approximately$0.50–0.6USD)perkilomakesitincreasinglydifficultforsmallandmediumsizedmillstocompete.Sayga’sabilitytocapitalizeoneconomiesofscaleandutilizeitsestablishedmarketingapparatusgivesitaclearadvantageoverothermillsmillingsorghumflour.SaygasentshockwavesacrosstheSudaneseeconomywhenithalteditsproductionin2015citingunfavorablehardcurrencyexchangeratesfromthegovernment.FlourshortagesresultinginbreadshortagessawSudaneseliningupforhourstopurchasebread.Saygareliesonhardcurrencyforitswheatimports,asSudanimportsaround2milliontonsofwheatannuallycostingnearlyaUSDbillion.In2016,Sudanimported1,952,179MTatacostofUSD736,334,000(CentralBankofSudan2017).HaltingproductionwasusedasameanstopressurethegovernmenttoofferSaygasubsidizedhardcurrencyrates,whichthegovernmentreportedlydid.Thus,Sayga’spowerasasorghumprocessingactortranscendsmarketboundariesintotherealmofpoliticalinfluence.9See:http://reliefweb.int/report/sudan/flour-and-cooking-gas-shortages-sudan-continue

“Thedistributorwantedtotakehalfofmybusiness.Itoldhimovermydeadbody”abakerinOmdurman

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SomedistributorsofSayga’sbreadflour,whichcontainssorghum,havereportedlydrovebakersoutofbusinessinanattempttocontrolquotasassignedtothem.Saygaallocatesadesignateddistributortoeachbakeryandissuesthemspecificquotasofflour.Somedistributorshavebeenknowntowithheldflourquotas,partiallyortotally,frombakersandreselltheflourintheparallelmarketforhigherprices.Somedistributorshaveevenventuredintothebakerybusinessasownersandshareholderstakingadvantageoftheiraccesstofavorableflourpricesfromlargeflourmills.AbakerinOmduramnreportedlyclosingdownhisbakeryafterhisdistributorstoppeddeliveringhisquotaofflourandproposedtopartnerwiththebaker(Abulsaid2016).Afterrefusingtopartnerwiththedistributor,thebakerreachedouttoSaygatocomplainandSaygapromisedtolaunchaninvestigation.Thisincidentillustratesthedegreeofpowerthatdistributorsexerciseoverretailers. Table3:PowerBoxExportersExportersderivetheirpowerfromtheiraccesstohardcurrency.AccesstohardcurrencyisadistinctadvantagetobusinessesinSudanconsideringU.S.economicsanctionsandthesecessionofSouthSudan,whichusedtoreplenishthenationalcofferswithhardcurrencythroughinternationalsalesofoil.HardcurrencyshortagesinSudantookatollontheSudaneseeconomy.Agrainexporterreportedthathissoleinterestisgettingaccesstoforeigncurrency,whichheusestoimportmorelucrativeproducts(Eltahir2017).Supportenvironmentactors:TheMFNEfinancesboththeABSandtheSRC,andplaysanimportantroleindeterminingthepivotpriceandallowingexports.Asasupportenvironmentactor,theMFNEiscertainlyanactorthatwieldstremendousinfluenceinthesorghumvaluechain.ItderivesthatinfluencefromitspositionasthecustodianofliquidityneededtofinancethelargestoperationsofsorghumproductionandtradeundertakenbytheABSandtheSRC.

Production• Influentialactors:ABS,large-scalefarmers,agribusinesses• Powerstructures:landtenuresystem,seasonalcontracts

withlaborer,SalamloansTradeandDistribution

• InfluentialActors:SRC,MFNE,ABS• Powerstructures:pivotprice,StrategicFoodReservePolicy

ProcessingandRetail• Influentialactors:processors(Sayga),retaildistributors• Powerstructures:oligopolyinprocessing,retaildistribution

asmodelExports

• InfluentialActors:integratedagribusinesses(MahgoubSons),government-affiliatedexporters,GoS

• Powerstructures:subsidizedsalestoselectexporters,

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Internationaldonors,UNandINGOsinjectmuch-neededresourcesintothevaluechainintheformofprojectfunding,capacitybuildingandpolicyadvice.WFPandFAOinparticularplayamajorroleinimplementingfoodsecuritystrategiestherebyalsoindirectlyinfluencingpoliticalstability,asgrainpriceshocksandfoodinsecurityaredriversofturmoil.

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Chapter(3)

3.AnalysisofvaluechaindistortionsThischapteridentifiesandanalyzesdistortionstakingplaceinthevaluechainwithfocusondownstreamactors.Inotherwords,thechapteraddressesthedirectandindirectimpactsthatmajorplayersinthechainhaveonsmallholderproducersandonthestructureofthechainingeneral.Thechapterisstructuredtohighlightdistortionsasrelatedtofunction(i.eproduction,financing,marketing,etc.).Itshouldberecognizedthoughthatfunctionsinthevaluechainareinevitablylinked.

3.1DistortionsinproductionLabour:Labourisarguablythemostimportantproductioninput.AfocusgroupdiscussionwithsmallholderfarmersinKassalastaterevealedtheneedofmanysmall-scalefarmersforlabouroutsidetheirimmediatehouseholds.Smallfarmersoftencompeteforlaborwithlargefarmers,andthelattergroupistypicallymoresuccessfulinattractinglabor,aslargefarmersofferlongercontractsguaranteeinglongerperiodsofemploymentforlaborers(FocusGroupDiscussion2017).Thisissueismorepronouncedduringtheharvestingseasonandlessconsequentialforsmallfarmersduringplantingandcultivation,aslargefarmersprefertousemechanizedploughswhichreducestheirdemandforlabour.Thelackofsufficientharvestlabouroftenmeansthatsorghumwhichcouldhavebeeneithermarketedorconsumedwouldgounharvested.Itisalsonotunusualforsmallfarmerswhocultivatebetween5-10feddanstosometimesworkaslaborersonlargerfarms.Contractualarrangementsbetweenlaborersandlargefarmersrevealaclearasymmetryofpower.TherearetypicallytwotypesofcontractualarrangementsbetweenfarmersandharvestlaborerswhichmostlyhailfromEritreaandEthiopia.Laborersarepaidonapiece-ratesystem,basedoneithertheamountofsorghumtheyareabletoharvestorbytheplantedareatheycancover(Issa2017).Itisclearlyintheinterestofthelargefarmertocontractlabourbasedonareaharvestedwhenproductivityperfeddanseemslowandtopegpaymenttotheamountofsorghumharvestedwhentheproductivityperfeddanishigh.Manyfarmersreportedlypressurelaborerstoacceptpaymentarrangementsthataregearedtowardloweringtheirimmediatecostsirrespectiveofthewishesoflaborers.Alargefarmerreportedpaying25/SDGperoneharvestedsackofsorghum(Issa2017).ThesupplyoflabourinthesorghumvaluechainineasternSudanvariesgreatlydependingonthestateinquestion.Theyear2016didnotseeasmuchpressureonlaboursupplyasdidpreviousyears.TheintensifiedconflictinSouthSudandisplacedmanySouthernSudanesewhonowworkinsorghumfieldsinSennarstates.EritreanmigrantlabouriswidelyaccessibleinKassalastate.Inthiscontext,itisworthwhileforinternationaldevelopmentactorstoworkwith

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stategovernmentsonrelaxingtheprocessofabsorbingtemporarylabourfromSudan’sneighbors.ManyintervieweesreportedthatSudaneselaborersareincreasinglybeingreplacedbyEritreantransitionalmigrants,refugeesandtemporarylaborers.ThisismainlyduetothefactthatSudaneselaborersarechoosingtoworkingoldminingoperationsorjoinrebelgroupswheretherateofpaycanbeashigh500SDG/day(Imam2017).Itisworthnotingthatlaborersinthesorghumfields,whetherSudaneseorEritreans,thinkoftheirworkasseasonal,temporaryandtransitionalandnotnecessarilyasareliableorpermanentformofemployment.Thedifficultworkconditionstheyarefacedwithandthelowwagestheyreceivefeeddirectlyintothisperception.ThiscallsintoquestionsargumentswhichsuggestthatofferingmoreopportunitiesasfieldlaborerscouldbepartofaviableresettlementstrategyformigrantsandrefugeesorasourceoffulfillingworkforSudanese.Inordertohavelaboursettlenearsorghumproductionareas,incentivesmustbecreated.Improvingaccesstohealthcare,educationandsocialservicesinproductionareasisanecessarycondition.Providing these essential services would likely encourage labor inflows in production areas and create a steady supply of labour leading to stabilized wages. One factor affecting the volatility of wages in the sorghum value chain is the fluctuation of labour supply. Serviceinputs:Smallandlargefarmersfacenumerouschallengesrelatedtosecuringagriculturalinputs,suchastractors,seeds,insecticides,pesticides,andploughs.Inmanycases,largefarmersworkasserviceprovidersforsmallfarmerswhocultivateadjacentlandcreatingarelationofdependencyinsomeinstances(EmeryandElnaiem2016).Forexample,large-scalefarmersmayrenttheirequipmenttosmallholderfarmersforploughing.Thus,inaccessibilityofserviceinputsbylargefarmersalsoimpactsmallfarmers.Thesearrangementarealsofrequentlyinformalandtemporary,astheyoftentaketheformofverbalcontractsthatarenotlegallyenforceable.Thisapproachleavessmallfarmersvulnerable.EmeryandElnaiem(2016)reportthatsomelargefarmersremovedtheirequipmentfromfieldsofsmallfarmersinthemiddleofploughing,astheyneededtheequipmentfortheirownfarms.Suchpracticesimpacttheabilityofsmallfarmerstotimelycultivatetheircrops.Thedifficultyinaccessingagriculturalserviceinputsismultilayered,havingtodoontheonehandwiththesanctionsthatwereimposedonSudan,whichmadeimportingagriculturalinputsdifficultandcostly,andontheotherwithcurrentgovernmenttariffsthatcanreachupto10%(EmeryandElnaiem2016).Timelyandaffordableaccesstoagriculturalinputsatthefieldlevelalsohasanelementofnepotism,asbusinessconnectionsandnextofkinrelationshavebeenreportedtofacilitatespeedyaccesstotheseservicesofferedbyinputssuppliers.Accesstoagriculturalinputsincludingmachinerybylargeandsmallholderfarmersisoftenhinderedbythepracticesofinputsupplierswhichdecreasefinancialinstitutions’confidenceinclients.Forexample,FanarCompany,asupplierofagriculturalinputs,hadbeenmiredinallegationsofimportingdefectedagriculturalmachinerywhichhadanegativeimpacton

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farmerswhopurchasedthemachineryfromthecompany.TheABS,whichapparentlyfinancedthecompany,launchedaninvestigationintothematter(SudanTribune2015).Acknowledgingtheimportanceofaccesstoagriculturalinputsasitrelatestoavailability,affordabilityandtimeliness,bothSudaneseactorsandinternationalpartnershavesoughttoaddresstheissuethroughstrategicinitiatives.TheMAFadoptedanintegratedsolutionsmodelandprogramthatlinkprovisionofphysicalagriculturalinputswithprovisionofextensionservicesforsmall-scalesorghumproducersinSudan(Eltayeb2017).InternationalandlocalNGOssuchasZOAandZainabarealsoimplementingprojectsineasternSudanwithcomponentsthatseektoofferpre-andpost-harvestinputpackagestosmallfarmers.ThetwoNGOshavepartneredwiththeprivatesectorandtheirexperience(describedbelow)isworthnoting.TheNGOscontractedtheprovisionofagriculturalinputsupportpackagestoanAustraliancompanynamedGlobe.Officersfromthetwoorganizationscitedthelackofcapacityoflocalserviceproviders,asthereasonforengaginganAustraliancompany(MohamedandOmer2017).Itbecameclear,however,duringprojectimplementationthatGlobedidnothaveenoughmachinesandequipmentandwasalsounabletodeliverservicestosmallfarmersinatimelymanner.Officersfromthetwoorganizationsalsomentionedthatfarmersdidn’tmaketheirlandimmediatelyavailableforserviceprovisionasagreedupon.ThisexperiencerepresentsamissedopportunityfortheSudaneseprivatesectortoengageinpartnershipswithlocalandINGOsthatcouldpotentiallystimulatelocalprivatesectordevelopment.DuringtheAnnualFairforAgriculturalTechnology2017inGedarif,representativesofCTCandDALGroup,twoleadingserviceprovidersandinputsuppliersinSudan,expressedwillingnessandreadinesstoengageinpartnershipswiththeINGOsector.LocalserviceandinputsprovidersaremoretunedtotheintricaciesoffarmingcultureinSudanandcanbeavaluableknowledgeresource.

3.2DistortionsinfinanceAdequateandaccessiblefinancingarerecognizedascrucialconditionsforachievingsustainableagriculturaldevelopment.ThebulkoffinanceforsorghumproductionandmarketingineasternSudanisdirectedtowardtheirrigatedandmechanizedrain-fedsectors(FEWSN2015).SomebankssuchastheBankofKhartoumonlyextendcredittofarmersintheirrigatedsector10.Mostsmallholderfarmersaretypicallyfoundoutsideofirrigatedandmechanizedsectors.TheABSandahandfulofcommercialfinancialinstitutionsincludingspecializedbankssuchastheFarmer’sBankaretheleadingfinancersofagricultureinSudan.Yet,accesstofinancethroughtheABSandcommercialbanksislargelyoutofreachforsmallholderfarmers.TheCentralBankofSudan(CBoS)requirescommercialbankstoallocateatleast12%ofallbanklendingtomicrofinanceloanswhich,wouldideallyoffersmallfarmerstheopportunitytoaccessfinance.ThisCBoSrule,however,isnoteffectivelyenforcedandmanybanksdonot10LinktomicrofinanceloanissuanceconditionbyBankofKhartoum:http://bankofkhartoum.com/arabic/sme-banking/

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reachthe12%minimumthreshold(H.A.Hamad2017).Manybanksassertthatmicrofinancingiscostlyandcollectingloansfromsmallfarmersisratheraverydifficultexercise.MicrofinancelendingceilingsarecurrentlyatSDG30,000withongoingeffortstoreachSDG50,000.IntheabsenceofeffectivemonitoringandenforcementmechanismsbytheCBoSforitsmicrofinancequota,itislikelythatcommercialbank’sapprehensiontowardsextendingmicrofinancetosmallfarmerswillcontinue.Thedifficultyofaccessingfinancebysmallholderfarmersgoesbeyondthereluctanceofbankstoextendcredittothem.ThereisastructuralelementtothisdifficultywhichhastodowithlendingrequirementsandcriteriasetbytheCBoSandenforcedbyotherbanks,asamatterofcompliancewithpolicy(seetable3).Thecriteriaandrequirementsformicrofinancearenotrealizableformanysmallholderfarmersandmanyofthemviewtheserequirementsasunrealistic(Discussion2017).Forexample,therequirementtoproduceafeasibilitystudythatmeetsthebank’sstandardsisimpracticalformanysmallholderfarmerswhohavemodestlevelsofeducationandcannotaffordpayingaprofessionaltoundertakethestudy.Consideringtheseconstraints,supportingtraditionalruralmicrofinancemodelschampionedbylocalandINGOsisimportant.Inmanycasesthefatesofsmallholderandlarge-scalefarmersareintertwinedandoftenthesuccessofthelargefarmeropensopportunitiesforthesmallholderfarmer.Largefarmersoftenbolstertheirsorghumstocksbypurchasingfromsmallfarmersprovidingadefactomarketingoutletforsmallfarmers.Thus,accessibilityoffinancetolargefarmerscouldalsobehelpfultosmallfarmerswhenthereisawindowofcommercialexchangebetweenthem.However,largerfarmers,too,havehadtheirfairshareofdifficultieswithcommercialfinancing.Farmersexperienceextensivedelaysinreceivingfinance,whichsometimesisnotavailableuntilJulybywhichtimetherainyseasonhasalreadycommenced.Itiscrucialforlargefarmersintherain-fedsectortoaccessfinancewellbeforethebeginningoftherainyseasoninordertopurchaserequiredinputsandpreparetheirplotsofland.Largefarmersalsoreportthatinterestratesforequipmentfinancingcanexceed4%withasizabledownpaymentof10%coupledwithshortrepaymentcyclesmakingitdifficulttorepayloans.ManyfarmersinGedarifhavebeenjailed,asaresultofdefaultingontheirloans(Issa2017).Increasingthedurationsofrepaymentperiodsforfarmerswouldbeawelcomestepinimprovingtheconditionsunderwhichtheyaccessfinance.SomeABSpracticeshavebeendecriedbyresearchers,suchasthebank’spreferencetofinancewhitesorghumvarietyonlywhichisconsideredmoremarketable(EmeryandElnaiem2016).ThispreferencediscouragesfarmersfromgrowingTabatsorghumvarietywhichcouldofferalucrativeopportunityforthelocalpackagedconsumermarketintheGashareainKassala.Thisbiastowardwhitesorghumisratherasymptomofthelargerchallengeofsynchronizingagriculturalfinanceallocationsandpolicieswiththeindividualneedsandmarketdemandsineachgeographicalregioninthecountry.

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Table4:Criteriaandrequireddocumentsforfinancingindividualsandgroups(Microfinance)Individual GroupsandAssociations

Proofofidentity(NationalIDcard,Licenseetc)

Proofofidentityfor3officers

Certificateofresidency CertificateofregistrationCommercialorprofessionallicense DocumentsofcollateralFeasibilitystudy Proformainvoiceincaseoffinancing

equipmentCertificatefromagriculturalauthoritiesconfirmingownershipofproject,landandthecultivatedareaandabsenceofdisputesinthecaseoftraditionalfarming

Certificatefromagriculturalauthoritiesconfirmingownershipofproject,landandthecultivatedareaandabsenceofdisputesinthecaseoftraditionalfarming

Clientsdeclaration Source:Farmer’sCommercialBank(2017)Sincethebulkoffinancinggoestowardpurchasinginputsandservicesincludingmachinery,seeds,pesticidesandfertilizers,itisonlysensibletoconsideramoreinvolvedroleforserviceandinputprovidersinsecuringfinanceforfarmers.Thedominantapproachcurrentlyisthatserviceprovidersarepaidupfrontfortheirservicesandproductsbythefinancingbankandfarmersareliabledirectlytothebank.Nevertheless,ithasbeenreportedthatlargeserviceproviderslikeCTCsometimesextenddirectcredittolargefarmerswhomtheyknowareverylikelytorepaypromptlyandsuccessfully.Asextendingcreditisalwaysaquestionofriskmanagement,itisnotrealistictoexpectserviceproviderstoofferdirectcredittosmallandmediumfarmers.However,withtherightincentivestructureinplace,onewhichwouldreduceserviceproviders’risk,itcouldbepossibletopersuadethemtoofferdirectcredittosmallfarmers.Furthermore,serviceproviders’proximitytofarmersandtheirtechnicalknowledgeinagriculturecanbeusefulinloanriskreductionstrategies.Thecurrentapproachdoesnottakeadvantageofthispossibility.Solongasserviceprovidersarepaidinadvancebythebank,theywillalwayshaveanincentivetoselltofarmersregardlessofthefeasibilityoffarmers’farmingoperations.Theonusofassessingfeasibilityandtherebyriskcurrentlyfallsprimarilyonthebank.Envisioningviablefinanceoptionsforsmall-scalefarmersoutsidethetraditionalmicrofinanceframeworkschampionedbylocalandINGOsandbyspecializedmicrofinanceinstitutionsseemsratherchallenging.Itis,therefore,intriguingtonotethatduringtheGroupDiscussioninKassala,agroupofsmallholderfarmersreminiscedanoldfinancingmodelthattheyclaimworkedforsmallholderfarmerswithintheNewHalfascheme.SmallholderfarmersinNewHalfausedtoaccessfinancethroughacommonaccountheldattheMinistryofFinanceandadministeredbythemanagementofthescheme.Farmersattributetheviabilityofthismodeltothefactthatthemanagementoftheschemeknewthefarmersandtheirchallengesanddidnotapplyarigidlendingcriteriaasdocommercialbanksnow.

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3.3DistortionsinmarketingPricing:Settingtherightpriceisanimportantelementofthemarketabilityofgoodsandservices.ThegovernmentofSudanthroughadeliberativeprocessinvolvingtheMoA,MFNE,MinistryofTradeandCommerceandtheABSsetstheprevailingpriceofsorghuminthecountrywhichiscommonlyreferredtoasthe‘Tarkeezprice’orpivotprice.Thepivotpriceisimportantbecauseitbecomesareferenceforfinanceandtrade.Forexample,in-kindrepaymentsofcreditextendedtofarmersthroughwhatisknownas“Salam”loansarepeggedtothepivotpricesetbythegovernmentinstitutionsmentionedabove.Salamloansarecreditsextendedtofarmerstypicallybeforeharvestandcollectedbythebanksintheformofcropsattheendoftheseason.In-kindrepaymentsarepeggedtothepivotprice.AsignificantshareofsorghumproductioninSudanisfinancedthroughSalamloansunderscoringtheimportanceofthepivotpricewhichiscurrentlysetatSDG250/sack.ItisimportanttonotethatsorghuminSudanmaybesoldaboveorbelowthisprice.Theideaisthatpricesinthemarketshouldgravitatetowardthepivotprice.Ifpricesinthemarketsignificantlyincreaseabovethepivotprice,itisasignthatsorghum(food)pricesarebecomingunaffordablewhichimpactsfoodsecurity.Ontheotherhand,whenpricesinthemarketdropsignificantlybelowthepivotprice,farmerslosetheincentivetocultivatewhichalsoimpactfoodsecurity.Thus,thepivotpricingtoolisanimportantpillarofSudan’sStrategicFoodReservesPolicyaimedatstabilizingstaplefoodpriceswiththeviewtoensurefoodsecurity.Asageneralreferencefortrade,pricespaidtosmallholderfarmersbytradersandbrokersfortheirsorghumcouldbemeasuredagainstthepivotpricewhichfurtherhighlightstherelevanceofthepivotpricetosmallholderfarmers.ThepivotpriceisalsohighlyrelevanttolargescalefarmerswhoaccessSalamloans.Asmentionedearlier,manylarge-scalefarmersprovidemarketingoutletsforsmallscalefarmersbypurchasingtheircrops.Thisisanotherwaythepivotpriceindirectlyimpactsthemarketabilityofsmallholderproducers,aslargefarmersarelikelytobolsterstocksfromsmallholderfarmerswhenthepivotpriceisfeasible.TheviabilityofSDG250asapivotpriceforsorghumhas,however,beencontestedbyfarmersandtheissuehasledthemintodirectconfrontationwithotheractors.Inmarch2017,forexample,agroupoffarmersfromGedarifproducedacoststudyandsubmittedittothePresidencyoftheRepublicandtoParliamenttoprotestwhattheybelievedwasanunfeasiblepivotprice.Inthecoststudy,farmersarguedthattherealcostofproducingasackofsorghumisSDG325,andthattheSDG250pivotpricemeansthattheyproduceataloss.ThefarmersalsodecriedthelackofofficialrepresentationforthemwhenitcametosettingthepivotpriceandaddedthatthepriceofSDG250hadbeensetfiveyearsagoanddoesn’treflectincreasesinthepricesofagriculturalinputsandgeneralinflation(K.M.Issa2017).AfarmerinGedarifexpressedfrustrationattherecentdissolutionoftheFarmer’sUnionwhichhebelievedwouldhavegavefarmersaloudervoiceandimprovedtheirprospectsinnegotiatingforapriceincrease.TheissueofthepivotpricewasbroughtupbeforeParliamentinmid-March2017inaheatedsessionoftheagricultureandeconomicsparliamentarycommittees,whererepresentativesof

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farmersraisedtheirgrievancesbeforemembersofthecommitteesandinpresenceofrepresentativesfromtheCBoS,MFNE,theMinisterofAgricultureandtheGeneralManageroftheABS(Elsid2017).Despitethreateningtohaltproductionofsorghuminthecomingseasons,farmersreceivedaresoundingrejectionbytheMinisterofAgriculturefortheirwishtoadjustthepivotprice(AlSudani2017).Thegovernment’sinterestinmaintainingthecurrentpriceislikelyduetoconcernsaroundfoodinflationandthereforemaintainingpoliticalstability.Thesurplusofsorghumsupplythisyearmeansthatthereislessurgencytorespondtofarmers’pressureandthreatstostopproductionnextseason.TheMFNEwhichfinancessorghumproductionthroughtheABShaslittleinterestinraisingthesorghumbillamidgrowingbudgetarydeficitsinrecentyears.RaisingpivotpriceswouldalsointroduceanadministrativeburdenontheABSwhichwouldhavetoadjustitsaccountstoreflectthenewprices.ExportershavelongcomplainedoftheirinabilitytocompeteinternationallyduetohighpricesinsideSudan.Hence,atthemoment,itseemsonlyfarmershaveanincentivetoraisethepivotpriceandwiththedisbandingoftheFarmersUnionthatgavethemcollectivenegotiationpower,theprospectsofhigherpricesforfarmerslookdim.PracticesoftheSRCalsogeneratepricedistortionsinthesorghumvaluechain.Inanidealscenario,theSRCwouldpurchasesorghumfromfarmerswhenthereisasurplusinthemarketpreventingpricesfromdroppingsignificantlyandshieldingfarmersfromlosses.However,theSRCentersthemarketlateandwellintotheseason(Ahmed,AbdulsalamandSiddique2012).Farmersreportedsellingsorghumatlossesimmediatelyaftertheharvesteitherbecauseloanrepaymentwasdueorbecausetheydidnothavestoragetokeepthesorghumuntilpricesimprove(Imam2017).FarmerssellsorghumtotradersandbrokersatlowpricesimmediatelyatharvestandtradersandbrokersthenstorethesorghumuntiltheSRCstartspurchasing.BrokersandtradersthenresellsorghumtoSRCthroughproxyfarmerssincetheSRC’spolicyistobuyfromfarmersfirst.TheSRCtypicallybuysatthepivotpricewhichisveryoftenhigherthanthepriceintheGedarifmarket.TheSRCalsogenerallypurchasesorghumfromfarmersthathavebeenfinancedbyitspatron,namelytheABS.Therefore,byenteringthemarketlateandshowingpreferencetowardfarmersthatwerefinancedbytheABS,theSRCunderminesitsownpricestabilizationmandate.DuringfieldworktheconsultantaskedafarmerinGedarifwhyhekeepscultivatingsorghumeveryyearwhenpricesarenotfeasibleandwhenthepivotpriceisoftenlowerthanthecostofproduction.Thefarmerimmediatelyrespondedbysaying:“cultivatingsorghumisallweknow”(O.M.Issa2017).Thefarmer’sfirmresponseindicatesanattachmenttosorghumcultivationthatmightbeexplainedbytherelativeeaseoffindingbuyerscomparedwithothercrops.Chancesoffindingabrokerortraderthatdealsinsorghumarefargreatercomparedwithothercrops.Humanitarianactorshaveoftencontributedtothevolatilityofthesorghummarketalbeitunintentionally.Theagriculturalseasonof2013–2014wascharacterizedbysevereproduction

“Cultivatingsorghumisallweknow”afarmerinGedarif

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shortfalls.WFP’scashandvoucherprogramsatthetimeaggravatedlocalmarketingsystemsbycreatinghigheffectivedemandwhichresultedinincreasedandvolatileprices(FEWSN2015).Cashandvoucherprogramscanhavepositiveimpactsonlocalmarketingsystems.However,cashandvoucherprogramsneedtobedesignedwellandinsynchwiththelocalmarketingcontextfortheirpositivespillovereffectstoberealized.Workers’foodprogramsinsomestatesinSudan,throughwhichstateemployeescanpurchasegrainsfromtheSRCorfromfinancialinstitutionsatreducedrates,alsocontributetopricevolatility.EmployeesreportedlyresellsorghumpurchasedatadiscountingrainmarketssuchasinGedarifandfloodthemarketwithmoresupplyofgrainsandconsequentlydepresspricesbelowtheiroptimallevel(allAfrica2017).Storage:Asmentionedearlier,manyfarmersselltheirsorghumatlossoratextremelylowpricesbecausetheylackadequatestoragecapacity.Therefore,havingadequatestoragecouldmeanthedifferencebetweenmakingaprofitoraloss.Storageisachallengeforactorsbothinthedownstreamandupstreamlevelsofthevaluechain.SmallholderfarmersarelargelyexcludedfromthecommercialstoragemarketandfrompublicsilosrunbytheSRC.Small-scalefarmersmayrelyonundergroundtraditionalstoragesknownas‘mutameers’.MutameersareconventionalstoragemethodsinSudanandusedwidelyinthecountrythoughtheyalsoinvolveseveralrisksincludingsanitaryrisksandrisksofexposuretoinsects,whichcouldmultiplypost-harvestlosses.ExportersandlargefarmerswishingtoreselltotheSRCmustcomplywithfoodsafetystandardssetbytheSSMO.Theyareunlikelytofavorsorghumstoredinmutameersofsmallholderfarmers.

Figure2:sacksofsorghumstoredoutsideGedarifsiloTheminimumquantityacceptedbyGedarifSiloforcommercialclientsis150tons(GabartAllah2017).TheGedarifSilo,undertheSRC,isoneofthelargestgrainsilosin

thecountrywithacapacityof100,000tonsbuiltinthe1960sbytheSovietUnion.OfficialsintheGedarifSiloindicatedthatinadequatecapacityhasbeenachallengeleadingthemtorejectclientsorstoregrainsinopenareasinthevicinity(seefigure2).ForcommercialsilossuchastheoneownedbyThagibGroupintheoutskirtsofGedarif,theminimumquantityacceptedis2000sackswhichisalmost200tons.CostisSDG300/tonforThagib’ssiloincludingloading,offloading,sievingandpackagingofsorghumwhileintheGedarifSilothecostisaroundSDG200/tonannually(Awad2017).Thehighminimumquantityadmissionrequirementsandfeesarebeyondtheaffordabilityofanaveragesmallholderfarmerthuseffectivelyexcludingthisgroupfromastorageoptionmostconduciveto

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improvedmarketability,sincesilosmaintainthehighqualityofproduceandofferfumigationsservices.ThagibGroup’ssilo,locatedontheoutskirtofGedarif,isaprivatesectorresponsetoshortagesinstoragecapacityineasternSudan.Thegroup,underthebrandnameSiloBagsInternational11,claimstohaveintroducedastoragesolutionthatoffersoptionsforinandoff-farmstoragesellingstoragespaceinlargedurableinsulatedbagsmadefromUVprotectedlayeredfilm.Theideaisforcustomerstostoreinsidethefacilityrunbythegroup.Thagibadmitsthatdemandhasnotbeenashighastheyhadhopedpointingoutthattheystartedtheirbusinessesonly2yearsago.Itistruethatinnovationtakestimetobeadoptedbutthechoiceoflocationofthebusinessmayalsohavetodowiththelevelofdemand.Locatedabout10kilometersoutsideofGedarifcity,Thagib’ssiloisfarfromsorghumfarmsandalsofarfromtheGedarifcropmarketusedbytraderswhopreferstoragenearthemarketwhichmakesdailysaleseasier.Actorsoutsideoftheprivatesectorhavealsoacknowledgedtheneedforstoragesolutionsforsmallholderfarmers.TheWorldFoodProgram(WFP)ispilotingaprojectaimedatreducingpost-harvestlossesintheHamashkoraibareanorthofKassalastate(Nelson,ConlanandTefera2017).TheWFPissupplyingfarmerswithsilosbasedonacost-sharingarrangement.TheportablesilosareimportedbyaSudanesefirm,accordingtoWFP.WFP’sapproachisastepforwardinencouragingpartnershipswiththelocalprivatesectorandhopefullypavingthewayforalignmentbetweenprocurementandprogram.ItishopedthatWFPcanhelpstimulatelocalentrepreneurialincentivetomanufacturethesilosinsideofSudan(Seesection4.2)b).WFPofficersinKhartoumalsoacknowledgetheneedtopurchasemoresorghumlocallyinSudanfortheirfooddistributionprograms(Nelson,ConlanandTefera2017).Currently,WFPprocuressignificantamountsofsorghumfromtheUnitedStatesforlocaldistributioninSudan.Theinternationalagencymightbeconstrainedbytherequirementsofitsdonorsdemandinginternationalprocurement.BuyingmoresorghumlocallycouldopenmoremarketingchannelsforSudanesefarmers,althoughthisneedstobeinsynchwithlocalmarketingsystemsasemphasizedearlier. 3.4Distortionscausedbymacro-economicpolicyandtenuresystemPrivatization:ThemotivationsbehindSudan’sprivatizationprogramarecomplex.Efficiencygainsandpublicfinanceimperativesareusuallycitedasrationalesforpromotingprivatization.Furthermore,publicreformpackagesprescribedbytheWorldBank(WB)andtheInternationalMonetaryFund(IMF)gaveSudanlittlechoiceinchartingitsownsolutionsfortheeconomy.AssessmentsofSudan’sprivatizationprogramrevealthatthecountryoverlookedtheprerequisitesofsuccessfulprivatizationincludingestablishingconduciveregulatoryandcompetitive

11Formoreinformationsee:http://www.silobagsinternational.com/home/mail.php

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frameworksandtheweavingofsocialsafetynet(Elbeely2015).Theimpactsoftheprivatizationprocesshasbeenfeltmostacutelybysmallholderproducers.PrivatizationinSudanoftenmeantthatirrigatedlandandgovernmentextensionservicesshiftedfromsmallholderfarmerstoprivateagribusinessesinprivatizedagriculturalschemesthathousedsmallholderproducers.AcaseinpointisthatofsmallholdersorghumfarmersinKhashmElGhirbahlocalityinKassalastate,partoftheNewHalfascheme,whichwasallocatedtoaprivatecompanybackedbyEmiratiinvestorsknownasArabInvestmentCompanyInc.(FocusGroupDiscussion2017).Smallholderproducersintheareacomplainedthatagribusinesseswiththeirconsiderableresourcesalwaysseekdealsinwhichtheytrytodictatetermsthatfavorthembutarenotnecessarilyfairforthefarmers.Theyaddedthatagribusinessisafteragriculturallandthatisclosetotransportationroutesandthathasgoodaccesstoirrigationandextensionservices.Thishasintensifiedcompetitionwithsmall-scalefarmersoverscarceaccesstoagriculturalservicesandresources.IntheabsenceofaFarmersUnionandundevelopedfarmers’associationsinthearea,smallholderfarmersareincreasinglyvulnerabletounfaircompetitionatbestandtodispossessionfromtheirlandatworst.LargeagribusinessesinSudanareintensifyingtheirlobbyingformoreprivatesectorinvolvementinagriculture.TheS24SudaniaTVchannel,ownedbyMr.WagdiMirghani,chairmanoftheMahgoubSonsGroup,hasbeenusedasaplatformtoshowcasesuccessfulexperiencesofbigagribusinessesandadvocateforgovernment’sassistanceinestablishingamoreenablingregulatoryframeworksandmakingmoreinvestmentcapitalavailable(Toum2017).ThismomentofacceleratedmomentumforlargeagribusinessinSudandemandsthatinternationalactorsmaketacticalshiftstotheirapproaches.SmallholderproducersandSMEsare,rightlyso,thetargetsofmanyprogramsandpolicieschampionedbyinternationalplayersinSudan.Nonetheless,anapproachofneardisengagementfromlargeagribusinesseswhoactivelyattempttoco-optpoliticalelitesrisksintensifyingofpoweralliancesthatexcludesmallholderproducersfromthebenefitsofagriculture.Anapproachofconditionalengagementandconditionaltransferofresourcestolargeagribusinessgivesinternationalactorsleveragethatcanbeusedtoassistsmallholderfarmersinacontextwheretheyhavelittlepower(seesection4.2)LandTenureSystem:Underformallaw,allunregisteredlandbelongstothegovernmentofSudan.Unregisteredlandmakesuparound90%ofalllandinSudan(USAID'sE3/LandOffice2013).FormallawdoesnotrecognizecustomarylandsystemsalthoughcustomarylandlawsareappliedinmanycommunitiesinSudanespeciallyinruralareas.ReformsofthelandtenuresystemwasoneofthemajorstipulationsoftheComprehensivePeaceAgreement(CPA)of2005.

Anapproachofneardisengagementbyinternationalactorsfromlargeagribusinessesthatactivelyattempttoco-optpoliticalelitesrisksintensifyingpoweralliancesthatexcludesmallholderfarmersfromthebenefitsofagriculture.

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TheabsenceofasociallylegitimateandfunctioningsystemtoenforceformalandcustomarylandrightshasincreasedtenureinsecurityinthefaceofpressuretodevelopagribusinessinSudan(USAID'sE3/Landoffice2013).Underformallaw,theGovernmentofSudancanissuelong-termleasestounregisteredlandwithoutconsultationswithlocalcommunities.Asaresult,smallholdershavebeenevictedfromlandanddeniedaccesstonaturalresourcesinfavorofprivateinvestors,landspeculators,militarypersonnelandelites.SmallholderfarmersinKhashmElGhirbahcomplainedofdispossessionfromtheirlandintheNewHalfaschemeasthelandwasreallocatedtotheArabInvestmentCompany(GroupDiscussion2017).Thesefarmers’lackedofficialtitledeedswhichmadeiteasiertodisplacethem.Infocusgroupdiscussions,theyexplainedthatitiscommonforsmallholderfarmerstonothaveformaltitletotheirland.TheconsultantvisitedthesitewithintheNewHalfaschemethatfarmersclaimedwasallocatedtotheprivatecompanybutnoonewasavailabletoverifyfarmers’reports.TenureinsecurityseemstobeanissueimpactingsmallholderfarmersinSennarstateaswell.ItwasrelayedbyafarmerfromSennarwhowasinterviewedinKahrtoumthatWali(governor)ofSennarthreatenedtoputupsomeagriculturallandutilizedbysmallfarmersforSaudiinvestment.FarmersrespondedbylaunchingasuccessfulcampaignonsocialmediawiththeobjectiveofdiscouragingSaudiinvestorsforminvestinginSennar(Eid2017).Underlaw,thegovernmentcanissueleasestounregisteredlandwhichhasencouragedmanylargefarmers,tradersandagribusinessestoseeklong-termleasesandkeepagriculturalland,withoutnecessarilycultivatingitinanticipationoffutureprofitableoffersofinvestmentsorpartnerships12.Thispracticehaseffectivelyturnedsomefarmersintolandspeculators.Theleasingmodelandthecheapness(sometimesaslowasSDG6perfeddan)andrelativeeasetoacquirenewleaseshasalsoencouragedlargefarmerstoabandonlandthattheyhavedepletedandseeknewfertileland(Eid2017).Thisisariskforsmallholderproducersasthequestforfertilelandcouldleadtoencroachmentsontosmallholder’sland. 3.5Linkingthevaluechaintoglobalmarketsandinfluence:thechallengeofexportingsorghumTheunderlyingassumptionofthissectionisthatathrivingexportmarketcouldopenmarketingopportunitiesforsmallholderproducersthrough,forexample,contractfarmingwithlargeragribusinessesandtraderswhoarebetterpositionedtoreachexportersandinternationalmarkets.Hence,distortionsrelatedtotheexportfunctioninthevaluechainindirectlyimpactsmallholderproducersbylimitingavailablemarketingchannelsandoveralldemandforsorghum.Exportfiguresvaryandrangefrom0–240,000MTin2013(EmeryandElnaiem2016).In2015Sudanexported107,341MTforavalueofUSD28,169millionandexportswentupslightlyin2016reaching108,191MTforatotalvalueofUSD28,180million(CentralBankofSudan12ThegovernmentthroughtheMinistryofInvestmentisreportedlytakingstepstocurbthepracticeofleasinginvestmentlandwithoututilizingit

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2017).SorghumproducedinSudanhaslimitedinternationalmarketingopportunitiesduetotherelativelyhighcostofproductioninSudanandduetotheimpositionofexportcontrolsbythebankofSudanandMFNEintheformofauthorizingexportsbasedonnationalstocksavailability.MostofSudan’ssorghumexportsgototheArabianGulfregionandTurkey(Eltahir2017).PrimarydestinationsintheGulfincludeSaudiArabia,Qatar,EmiratesandKuwaitandmostexportstothesecountriesaresourcedfromGedarif.Sudanesesorghumexportedtothesecountriesismainlyusedinanimalfeedandfodder.SudanprioritizesimportstothesecountiresasamatterofgeopoliticalstrategyunderpinnedbyastrategicallianceaimedatensuringfoodsecurityinSudanandtheGulf.AswaterresourcesbecomeeverdeplatedintheGulfregion,GulfcountiresareincreasinglylookingtoSudantosecurefeedfortheirlivestockindustriesinsteadofgrowinganimalfeedathome.Sudan’sAlfalafaexportstotheGulf,forexample,continuetoincreaseeveryyear(Toum2017).EstimatesputSaudiagriculturalinvestmentsinSudanat11billiondollars(Toum2017).SudanwelcomesthehardcurrencyitreceivesfromtheGulfandusesittofinanceitswheatimportswhichcontinuetoriseeveryyeardespiteSudan’seffortstogrowmorewheat.ThisexchangehighlightsanotherlinkagebetweenwheatandsorghumasstrategiccommoditiesandastheprimarycommoditiesinSudan’sfoodsecuritypolicy.AsaresultofthisstrategicalliancebetweengulfcountriesandSudan,theGulftriestoalwaysensurethatthestocksoftheSRCarefullduringproductionshortages(FEWSN2015).Uncertaintyregardingexportsduringeveryagriculturalseasonservesasadefactoexportcontrolanddissuadesproducersfromproducingforexportmarkets.ExportcontrolsaretoolsusedtoenforcetheStrategicFoodReservesPolicyandtostabilizepricesthroughmanageableinternationaldemand.Nonetheless,SRCofferssubsidizedsalestoselectexporterswhichcreatesunfaircompetitionamongexporters.AnexporternotedthatgettingaccesstosubsidizedSRCsalesrequires‘politicalconnections’andthatseveralexportingcompaniesarealliedwiththerulingparty.DiscountedsalesfromtheSRCcanbeaslowasSDG190/sackcomparedwithSDG230–250inthemarket(K.M.Issa2017).ProcuringfromtheSRCforexportisanadvantagealsobecauseitmakesiteasiertocomplywithSSMOstandards.PlayersliketheMahgoubSonsGroupreportedlypaytheSRCinforeigncurrencyforsorghumthatthecompanyexports.ReplenishingthenationalcofferswithhardcurrencyautomaticallygrantstheMahgoubSonsGrouparemarkablypowerfulpositioninthevaluechain.ItisnoteworthythatthechairmanofthegroupisalsothePresidentoftheExportChamberofSudan.Foreigncurrencyreceivedfromthegroupissaidtobeusedtosubsidizemedicineandfinanceitsimports.Whileensuringadequatesupplyofmedicineisanecessity,itshouldalsoberecognizedthattheexportofkeygrainstockstofinancenon-foodrelatedactivitiesposesarisktooverallfoodsecurity.Mid-sizeexportersdecryCBoSexportrelatedpoliciesanddescribethemasunpredictableandunstable.TherequirementtoconverthardcurrencyintoSudanesepoundsusinganexchange

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ratethatisgenerallyundertherateintheparallelmarketisadisincentivetoexport.Mid-sizeexportersalsocomplainthattheassignmentofexporttaxesisratherarbitrarymakingitdifficultforthemtopredictandmanagecosts(Eltahir2017)Numericalestimatesofinformalcross-bordertradingwerenotimmediatelyavailable.Asignificantamountofsorghum,however,isreportedtobesmuggledacrosstheborderswithEthiopiaandEritrea(FEWSN2015).Keycross-borderinformaltradepointsincludeLaffaandHamadiyatinKassalaandGalabatandKurmukinGedarif.TheseareasarealsoimportantwholesalemarketsandtransitpointsintoneighboringEthiopiaandEritrea.TradeflowstoEthiopia,nonetheless,arelimitedandrestrictedtosmallscaleflowsbetweencommunitiesonbothsidesoftheborder.

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Chapter(4)

4.RecommendationsandconsiderationsforvaluechaindevelopmentThischapterprovidesrecommendationsforvaluechainupgradingaimedatimprovingeconomicviabilityforsmallholderfarmersthroughpolicyandprogram-orientedresponses.Withafocusonlong-termsustainability,thechapterenvisionsanimportantrolefortheprivatesectorinintroducingmarket-ledsolutionstoaddressdistortionsidentifiedinthevaluechain.Moreover,thischapteralsohighlightsplacesinthechainwheredevelopmentandhumanitarianorganizationscouldrespondeffectively.SomerecommendationsaregeneralizablebeyondthesorghumvaluechainandgenerallycontributetowardstrengtheningthepositionofsmallholderfarmersinagriculturalcommoditychainsinSudan.

4.1RecommendationsforPolicyFormulationandDiplomacya)PursueapolicyofconditionalengagementwithlargeagriculturalfirmsandSMEs:internationaldevelopmentassistancetargetingagricultureshouldenablelargeagribusinessesandthrivingSMEstobecomeconduitsfortransferringbenefitstosmallholderfarmers.Suchapproachcangeneratefavorabledevelopmentoutcomesforbothprivatesectorcompaniesinagricultureandsmallholderfarmers.TransferoffinancialandtechnicalresourcesfrominternationalactorstolargeagriculturalfirmsandSMEs,shouldbeconditionaluponthecommitmentofthelattertoforgingsustainedpartnershipswithsmallholderfarmersbasedonclearlyidentifiablesynergiesandmutualinterests.TheideaistocapitalizeontheresourcebaseandentrenchedmarketpositionoflargeagribusinessesandSMEswithstrongmarketperformanceandtodissuadethemfromadoptingpracticesthataredetrimentaltosmall-scaleproducers.Thegoalhereisalsoforinternationalactorstousetheirposition,asprogrammefundersandimplementers,asaleveragenecessaryincontainingdistortivepracticesbylargeragribusinesses.Specificconditionsforengagementwithagribusinessesbyinternationalactorsneedtobedevelopedandnegotiatedandmustbeinformedbythedynamicspertinenttoeachagriculturalcommoditymarket.Asageneralguidingprinciple,however;internationalactorsshouldengagelargeagribusinessesthathavethewillingness, ability and commitment to repatriating benefits to the smaller players. The creation of and transfer of development benefits at all levels should be enshrined in strong legally enforceable contracts between respective actors. In addition to being an efficient approach that creates cooperation among different players in the value chain, engaging agribusinesses for the benefits of stmallholder farmers also has strategic benefit. One risks contempt, co-option and potential sabotage when one completely excludes the larger players and try to empower others at the expense of their market share.

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Itisalsoimportantthatinternationalactorsrefrainfromengagingbusinessesthatareinpatronagenetworks.Tomitigatesuchrisks,mappingagribusinessesinSudanandprofilingcompaniesintheagriculturalsectorshouldbeagoodstartingpoint.Mappingtheprivatesectorinagricultureisalsoinstrumentaltocreatinganincentiveframeworkandidentifyingbusinessesthatareinagoodpositiontoengagewithsmallholderfarmers.Ideally,theincentiveframeworkwouldcombineregulatoryandfinancialincentives.RegulatoryincentivesdemandengagingrelevantSudaneseauthoritiesandinternationalagencieswithspecializedtechnicalexpertise.b)Lobbyforimprovedlandtenureforsmallholderproducers:improvingpropertyrightsforsmallholdersorghumfarmerspromisesmultiplebenefits,includingprotectionagainstlanddispossession.Italsooffersabetternegotiatingpositionindealingwithlargescalefarmers,andcanpotentiallyallowaccesstocreditandliquidityaslandcanbeusedastransferablecollateralifownedoutright.Furthermore,strongpropertyrightsingeneralhelpsincreaseinvestorconfidence.EffortstostrengthenSudan’slandtenuresysteminordertoensurefavorableoutcomesforsmallholderfarmersshouldfocusonlegalframeworksandtheirapplicationwithaviewtowardformalrecognitionofcustomarylandrights.HistoricallandcontestationandensuingviolentconflictsinSudanmakediscussionofland-tenureadelicatematter,particularlyforinternationalactors.Thus,theissueofimprovingtenuresecurityandlandrightsforsmallholderfarmersmustbeframedasanimperativeforruralagriculturaldevelopmentratherthanaconflict-mitigationstrategy.Forexample,internationalactorscouldstresstotheSudanesegovernmenttheimportanceofclearandsecurelandtenurerightswhenmobilizinginvestmentsfordevelopmentofirrigationsystemsinthecountry.Investorsneedtobereassuredthattheirinvestmentsinirrigationsystemsarenotsubjecttorisksofpropertyrightsdisputesinareasandlocationwhereprojectswouldbesetup.Drawingattentiontothelinkbetweenbettertenurerightsandimprovedirrigationsystemshasthedualbenefitoflobbyingfortwodevelopmentgoalssimultaneously.SupportforthedevelopmentofSudan’sirrigationsystemsisnecessaryinordertotakeadvantageofthevastwaterresourcesinthecountry.LandreformpolicyinitiativeswerepreviouslyplannedinBlueNilestateandaimedatestablishinglocalandstatelandreformcommissions.Theseattempts,perhaps,signalawillingnessonthepartofthegovernmenttoconsiderlandreformpolicies.Ifthecurrentpoliticalclimatedoesnotallowinternationalactorstoproposeorengageinsystem-widelandreforminitiatives,collectinganddocumentinginformationoncustomaryrightssystemsmaybealesscontroversialapproach.Stronglandrightsforsmallholderproducershelpcementbenefitsofagrodevelopmentaslandiscurrentlythemainresourceforfarmers.

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4.2RecommendationsforProgrammeDevelopment

a)Enhanceproductivityperfeddanthroughcontractfarming:Enhancingyieldsperfeddanthroughtechnologytransfersandsustainableagronomypracticescanbenefitsmall-scalefarmersiftwinnedwithbetteraccesstomarkets.Infact,increasingyieldsandimprovingefficiencymaybecounterproductiveiftherearenotmarketingoutletsavailableforsmallholderfarmers—thisrisksdepressingpricesfutherforsmallholderfarmersduetosaturationinsupply.Thus,programsaimedatimprovingefficiencythroughmechanizationandimprovedinputsmusthave,asanintegralpillaroftheseprograms,aclearandrealisticapproachtomarketingtheaugmentedproduction.Assumingthatimprovedproductionefficiencyandqualitywillguaranteebuyersisratherariskyapproach.Contractfarming13offersopportunitiesforenhancedproductivityandguaranteesmarketingchannelsforsmallholderproducers.UseofcontractfarmingasmeansoftransferringbenefitsofresourcesandopeningmarketingchannelsforsmallholderproducersisexpandinginmuchofAfrica.InSudan,largefarmersandagribusinessesshouldbepersuadedtoenterintopartnershipswithsmallerfarmersthatprovidethelatterwithmarketoutlets.Forlarge-scalefarmers,thecontractfarmingmodelgivesthemaccesstofertilelandandasupplyoflabour,whichleavesthemtimetofocusonmarketingandprocessingactivities.Inreturnsmallholderfarmersgainaccesstosustainedmarketingchannels.Largefarmersandagribusinessesarealsobetterpositionedthansmallerfarmerstoacquireinputsthatcanenhanceproductivitysuchasmachinery,improvedseedsandagriculturalextensionknowledge.Theanalysis(section3.2)revealedthatfinancialinstitutionsarelesslikelytofinancesmallholderfarmerstoacquiremuch-neededmachinery.Evidencesuggeststhatmechanizationhasresultedinmuchhighersorghumyields.TheMahgoubSonsGroup,forexample,hasachievedaproductivityratioof15sacks/feddanforsorghum,whichisalmostfive-timeshigherthanthenationalaverage,primarilythroughintroducingmechanization,improvedseedsandextensionservicestotheirfarmingoperations.ThechairmanoftheGroupalsopioneeredasuccessfulexperienceincottoncontractfarmingwithsmallholdersinKhorAbuHabil.TheGroupofferedfarmersinputs,finance,andextensionservicesandanadjustablepredeterminedpricefortheproduce.Mr.MuawiyaElBerier,anagribusinessleaderexpressedwillingnesstoexplorewithcontractfarmingmodels(Toum2017).Thispositivegesturesignalswillingnessonpartofsomeagribusinessestoengagewithsmallholderfarmers.SmallholderfarmersinKhasmelGirbainKassalastatealsoindictedtheirwillingnesstoworkwithagribusinessesandlargefarmerswhileemphasizingthatsuchpartnershipsneedtobefair(FocusGroupDiscussion2017).Indeed,consideringthepowerdifferentialbetweensmallholderfarmersandagribusinessesneedstobethefoundationforfaircontractsbetweentheseactors.

13Contractfarmingisagriculturalproductioncarriedoutaccordingtoanagreementbetweenfarmersandabuyingentity,whichplacesconditionsontheproductionandmarketingofthecommodity.

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Table5:SWOCEnhanceproductivityperfeddanthroughcontractfarmingSTRENGTHS

• Establishednetworkofimportersthatcouldprovidemachineryandgeneralagriculturalinputsneededforenhancedproductivity.

• Commercialbanksalreadyfinanceagribusinessesandlargefarmerstobuymachineryandimprovedinputs(seeds,pesticides,etc.).

WEAKNESSES• Contractfarmingcanbecomecostlyif

smallholderfarmersarenotlocatednearbyoperationsoflargerfarmersandagribusinesses.

• Noregulatoryincentiveforagribusinessestoworkwithsmall-scaleproducersorviceversa.

• ItisnotclearhowmanyagribusinessesandlargerfarmershavesuccessfullyadoptednewtechnologiesandachievedhigherproductivityineasternSudan.

OPPORTUNITIES

• Somefarmersandagribusinessesarewillingtoengageincontractfarming.

• Preventlargeagriculturalbusinessesfromdispossessingsmallholderfarmers.

CONSTRAINTS• Creatingincentiveforactorsthrough

governmentpolicyanddevelopmentprogrammingtoundertakecontractfarmingisalengthyprocess.

• Repaymentperiodsofloansusedtofinancepurchaseofequipmentarerelativelyshort,whichmeanspotentiallyhighinitialcostsforlargefarmersandagribusiness.

b)Strengthensmallholders’storagecapacitythroughdevelopmentofhermeticstoragesupplychain:Evidenceincreasinglyshowsthatimprovedstoragecapacityhaspositiveimpactsonsmallholderfarmers’livelihoods,incomeandfoodsecurity(Brenann2017).OurresearchshowsthatsmallholderfarmersinKassalaarecompelledtosellsorghumimmediatelyafterharvestforextremelylowpricesduetotheirlackofpost-harveststoragecapacity.Ourfindingsalsoshowthatmediumandoftenlarge-scalefarmersfacethesamechallenge,althoughtoalesserdegree.Hence,adequatestorageisanimportantcomponentofsuccessfulmarketing,helpingsmallholderfarmersrealizeoptimalpricesandreducepost-harvestcroplosses.Providingfarmerswithadequatestoragecapacityalsotiltsmarketdynamicsintheirfavorastheyarenotcompelledtoacceptthefirstoffertheyreceivefrombrokersandtraders.Acknowledgingtheimportanceofpost-harveststoragecapacity,WFPSudanhasstartedpilotingaprojecttoprovidefarmersinEasternSudanwithportablesmall-scalesilos.Thisisawelcomedstepthatcouldprovideopportunitiesforthedevelopmentofstoragesupplychains.

Figure3:MITresearchersinspectportablegrainsilos

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Inordertoimprovetheoverallmarketpotentialofsmallfarmers,itisessentialthatasupplychainforhermeticstoragetechnologies,whichhaveshownstrongpromiseinUganda14,bebuiltandstrengthened.Hermeticstoragecontainersprovideabarrierbetweenthegrainandtheoutsideatmosphere,whichcontrolsgrainmoisturecontentandinsectactivitywithouttheuseofpesticides.Alocalentrepreneurialincentiveshouldbecreatedthroughaprivatesectordevelopmentprogramtostimulatemarketentrybypotentialsuppliers.Whileimportinghermeticstoragetechnologiesmayberequiredinitially,buildingalocalsupplychainwouldprovidemultipleincome-generationspilloversinsideSudan.TheprovisionofhermeticstorageoptionstofarmersineasternSudanshouldbeinformedbyafeasibilitystudythatidentifiestheprofitmarginsthatarelikelytoattractlocalinvestors.So–called‘willingnesstopay’studiesthatdetermineoptimalcostsforfarmersarealsokey.ActorslikeWFPSudancanplayakeyroleinthesestudiesastheyhaveanestablishedlogisticsapparatusinsideSudanwhichcanbebothagatewaytocrucialmarketinformationandproductdistributionintheearlyphasesofhermeticstorageadoptionbyfarmers.Ultimately,transportingthesestorageoptionstofarmersandfromfarmerstomarketswouldrequireadistributionnetworkindependentofnon-profitactorstoimproveprobabilityofsuccessfulscale-upinthelong-term.Table6:SWOCStrengthenstoragecapacitythroughlocalsupplychaindevelopmentSTRENGTHS

• AlocalsupplierofportablesilosinSudanhasalreadybeenidentifiedbyWFP.

• Investmentfinancingstructureexiststhroughlocalbanksthatcanbeutilizedbyprospectivesuppliers.

WEAKNESSES• Industrialmanufacturingcapacityisgenerally

poorinthecountrywhichmeansscaling-upsolutionsmayrequirelargeinvestmentcapital.

OPPORTUNITIES• INGOsandUNagencieshaveestablished

logisticsapparatusthatcanhelpfacilitatedistributionandtransportationofstorageoptionsduringearlyadoptionphase.

• Farmersdemonstratedwillingnesstopayforagriculturalinputs(bothZOAandWFPworkwithsmallholderundercost-sharingplans).

CONSTRAINTS• Potentialskills-gaptomanufactureportable

storageoptionsineasternSudanmayincreaserelianceonKhartoumforskilledlabor

• Transportingstoredyieldstomarketmayrequiredevelopmentofaseparatebusinessmodel

14ArecentevaluationstudyundertakenbyWFPandMassachusettsInstituteofTechnologydemonstratedastrongpromiseforadoptingandscaling-upofhermeticstoragetechnologiesbysmallholderfarmersinUganda.

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c)Developfarmers’associationstostimulatelocalmarket-systems:Farmers’associationscanimprovesmallholderfarmers’accesstofinanceandmarketstremendouslyandcangeneratemultipleeconomicandsocialbenefitsformembers.Associationsarecommerciallyeffectivebecausetheycanmakedecisionsquicker,haveloweradmincostsandtendtobecomposedofmemberswhoarefamiliarwitheachother,inadditiontoleveragingeconomiesofscale,ofcourse.Theseadvantagestranslateintotheefficiencygainsthatacommercialenterpriseneedsandwhichgivesitcompetitiveadvantageinthemarket.Competitiveadvantagealsomeanscompetitivepricing.Efficientandwell-organizedassociationscangreatlyenhancetheirmembers’bargainingpowerandhelpthemsecurebetterprices.Yet,itisnotthatsmallholderfarmersonlyneedtoincreasethepricetheychargetohavebetteroutcomes,theycouldalsoimprovetheirmarginsandpositionthroughareductionoftheircosts,whichshouldbetheaiminaregulatedvaluechainlikethesorghumvaluechainwherepricescanonlyincreasesomuch.

SmallholderfarmersinKassalaindicatedastrongdesiretoorganizeascollectivesandassociations.Theyalsopointedoutthattheideaofworkingcollectivelyisnewtothem,andarguedthatthistendstobethecaseinmanyplacesinthecountry(FocusGroupDiscussion2017).Organizing farmers based on geographical locations, as opposed to size, would be an appropriate choice. When organized according to geographical location, it would be easier to get smallholder farmers to benefit from opportunities that large ones may provide, assuming of course, that each geographical location chosen has a mixture of both small and large farmers. Both larger and small farmers would also be able to benefit from any advantage that their geography may offer such as faster access to main roads, better soil, rainfall and so on. Segregating farmers based on size may run the risk of creating unfair competition between large and small farmers when the goal should be to get the two groups to cooperate.

FarmersassociationsineasternSudanshouldbepromotedasmeansofstimulatingtheprivatesectorandshouldnotbeviewedasreplacingordeterringexpandingagriculturalSMEs.InthecontextofeasternSudan,organizingthroughcollectiveassociationscouldfacilitatetheuptakeofcontractfarming,asworkingwithacollectiveincreasesefficiencygainsandreducescostsforagribusinesses.Therealsoexisttestedassociationdevelopmentmethodologiesthatcancontributetowardcompetitiveandvibrantmarketsystemsinruralcontexts.AnexampleofsuchmethodologiesisACDI-VOCA’sSellMoreforMoreApproach.ThereseemstobecommonchallengesfornascentfarmerassociationsineasternSudanwhichwereechoedbythesmall-scalefarmersinterviewed,aswellasbyprogramimplementersfromZOAandZainab.Thesechallengesincludepersistentadministrativeandmanagementcapacitygaps,aswellaschallengesrelatedtolegalregistrationandopeningbankaccounts.Thesecommonchallengescreateatendencytodevelopone-size-fits-allapproacheswithinassociationcapacity-buildingprograms.Thisrisksignoringthechallengesandopportunitiesthatmightbespecifictoeachgeographicallocation.Associationdevelopmentapproachesandactivitiesshouldbetailoredtotakeadvantageofthestrengthsandcircumstancesofindividualcommunitiesandlocations.

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Table7:Developfarmers’associationstostimulatelocalmarketsystemsSTRENGTHS

• TheAgriculturalAssociationsActsetsparametersfordevelopmentofassociations.

• Financialinstitutionshavedevelopedrulesandframeworksforworkingwithassociations.

• SeveralassociationdevelopmentprogramsareimplementedbyINGOsandlocalNGOs.

WEAKNESSES• Conceptofassociationsisrelativelynewin

easternSudanandoftenmetbysuspicion.

OPPORTUNITIES• Awealthofknowledgeandevidenceon

cooperatives,associationsandcollectivesinAfricaincontextssimilartoSudanisavailable.

• StrongdesireexpressedbysmallholderfarmerstoworkcollectivelyineasternSudan.

CONSTRAINTS• Whilenecessary,communitysensitizationis

lengthyanddelaystherealizationofbenefitsbyassociationmembers.

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AnnexesAnnex1:Revenuesharesofdifferentactorsinthesorghumvaluechain

1.Valuedistributionisexpressedasapercentageoftheend-user(retail)priceandindicatesanestimateofvalueaddedateachstage.Forexample,85.60%ofthevalueisaddedattheprocessingstagewhileonly32.40%ofthevalueisaddedattheproductionstage.Accordingtothetable,processingactorsaddthemostvalue,85.60%forlargemillsand87.40%fordistributorsandagentsofthesemills.Essentially,processingmillscollectalmostalloftherevenuefromtheiragentsanddistributorsminus2-3%commissionwhichrepresentsthemarginofagentsanddistributors.2.Retailersshowavalueadditionof100%becausetheirrevenueisusedasthebasepricetocalculatepercentagesofvaluedistribution.Thisisnottobeinterpretedasshowingretailerstoholdthelionshareofvalue.Retailors’mark-up15,however,isapproximately14-15%calculatedfromthedistributor’spriceundertheassumptionthatallretailersaresuppliedbydistributors.3.Valueadditionanddistributiondonotnecessarilycorrelatewiththedegreeofpoweranactorenjoys.Thisisnotsurprisinginaregulatedmarket.Forexample,wholesalersaddonly34.60%ofthetotalcommercialvalue,yetwholesalersenjoymuchpowerandastrongpositioninthechainsincetheyarekeyplayersinsector’sfinanceandregulation.Thus,theseactorsdonotderivetheirpower/influencefromcommercialactivitiesasmuchastheydofromtheirabilitytoregulateandfinancethesector.

15*NotesonAnnex1-ExchangerateusedistheparallelmarketrateofSDG16/1USD-1metricton(MT)=11.1Sudanesesacks.1sack=90kg-AnyactorthatsellstotheSRCorABSreceivesasrevenueSDG250/sack.ABSresellsforsamemargin.-Revenuesharesdonotaccountforvariouscostsbornebyactorsandonlyreflectmonetaryvaluetheyreceiveinsalestransactions.-PriceswerecollectedinMarchthroughApril2017inGedarifandelsewhereandfromdifferentsupplychainactorsconsideringthatpricefluctuationsarehallmarkofcommoditymarkets.

EstimateRevenueSharesSorghumfeteritaVariety

ValueChainActor USDRevenu/MT SDGRevenue/MT Valuedistribution

SmallFarmer-VillageSales $104 SDG1,665 20.80%LargeFarmer-Cropmarketsales $162 SDG2,598 32.40%Traders-Cropmarket $166 SDG2,664 33.10%Wholesalers(ABS+SRC) $173 SDG2,775 34.60%LargerMills(Sayga) $428 SDG6,850 85.60%RetailDistributors@2.15%commission. $437 SDG7,000 87.40%Retailers(largesupermarkets) $500 SDG8,000 100.00%Exporters $230-260 SDG3,680-4,160 52.00%InternationalDistributors $138-400 SDG2,208-6,400 80.00%

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Annex2:Sorghumvaluechainactormap

ACTORSINSUDAN’SSORGHUMVALUECHAIN

FUNCTIONS SUPPORTACTORS

ProductManufacturing-------------------------------------------------------------------------------------- ---------------------Int’l

Distribution

International------------- ----------------------------------------------------------------------------------

EndConsumers(Sudan)------------- --------------- ------------------------------------- -----------------------

Processing&Retail ------------- ----------------- ---------------------------------------------------------------

Trade&Distribution

------------------------------------------- ------------------------------ --------------------------

Production

Brokers&Agents

Producers,inputsuppliers,producers’associations,agribusiness,seasonalworkers

CropInsurance

Exporters InternationalDistributors

FeedManufactures

MFNE,MAF,SSMO

Dairy&PoultryFarms

HomeConsumers&Bakeries

Processors Distributors&Retailers

Wholesalers&Traders

NationalandINGOs,UN,Donors

GeneralAdminofcropsmarket