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Marketing

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Why is marketing important?

    Obtaining a good price for farm products is the third leg of the structure that supports farm incomes.

Farmers need good levels of production, low levels of farm costs and good prices.

A great deal of effort has been put into the technology of production but not nearly as much effort or resources have been devoted to the other two legs.
 

Where do small in WANA farmers stand?

    For livestock particularly sheep meat the market has been free throughout most of the WANA region.

Farmers have sold their surplus sheep to local butchers, in markets or to traders.

In general the price for fresh meat in the WANA region has increased over the last decades faster than the rate of inflation.

For cereals there have been state organisations to purchase cereals from the farmer at fixed prices.

Cereal prices world wide have declined in real terms over the last two centuries.

The state organisations often moderated the decline by subsidising prices.

Most of these state organisations are in decline as the World Trade Organisation gradually forces countries to open their markets to private traders and international competition.

Farmers will need to seek out the best price for their cereals in a much more complex market.
 

What is marketing?

    Marketing has become a huge pressure group.

It consists of marketing experts, marketing managers, marketing consultants, marketing companies, marketing faculties at universities and many more people besides.

All these groups live by marketing and have a vested interest in telling the rest of the economy that marketing makes the world go round.
 

Marketing philosophy

    Thousands of books and millions of words have been written on marketing but at its simplest and most benign marketing is described as a link between the producer and consumer.

As society has become more urban and the old links of seller and buyer have been broken by long transport and processing chains it is claimed that the science of marketing ensures that producers know and produce to fulfil consumer demands.

Without these long chains marketing is redundant.

The marketing pressure group claims that consumers are happy because they have the products they want.

Farmers have better prices because they are meeting these demands.

It is a win win situation for both the consumer and the farmer all provided by the expertise of the marketing experts.

The alternative vision is that marketing has gone well beyond a more efficient link between consumers and farmer.

It has become a costly set of intermediaries that waste resources on advertising and other promotions.

It is a parasitic activity on the real economy  and a redundant cost.
 

Where did marketing come from?

    In a sense marketing has been with human society for as long as there have been markets but in the sense of a professional marketing class (separate from merchants who actually trade) it is a product of the last two centuries of rapid urbanisation.

Urbanisation meant that farmers could not sell directly to consumers as they had in the past.

Marketing chains became longer with transport, processing, storage and more transport coming between the farmer and the consumer.

The longer marketing chains and greater number of intermediaries provided greater opportunities for adulteration and contamination.

The adulteration of food has been with us as long as there have been markets. The Romans complained a great deal about the adulteration of wine 2000 years ago but adulteration expanded greatly in the 19th century as the direct links between city and country were weakened.
 

Reducing adulteration and contamination

    There were two separate reactions to the adulteration and contamination of food and other agricultural products.

Governments during the 19th century became increasingly involved in regulating, inspecting and analysing food and other products to ensure minimum standards of hygiene and quality.

As well as government action some entrepreneurs decided they could develop a premium market for unadulterated food or other products and this would be branded with the makers name.

Consumers would have faith in the branded product as being superior and safer than the unbranded commodity grades.
   

This was fundamental divide in philosophy.

The public regulation approach was that all food should reach certain minimum standards while the brand approach was to leave it to the market and let brands develop at different levels of safety/contamination.

During the 19th and first half of the 20th century the public safety approach through increased regulation and inspection increased.

In the second half of the 20th century the brand philosophy became more dominant in the USA.

From the USA the brand approach has spread or been forced on other countries.

Public regulation was reduced and consumers hoped that companies would seek to develop valuable brands for the long term rather than seeking short term profits through reduced standards.

As with most market activities there have been some companies that have established excellent standards well above those required by law while others have used the relaxation of inspection to cut costs and reduces standards.

Unfortunately for consumers it is difficult to tell one from the other until it is too late.

Developing a brand

    Brands have developed well beyond the rather simple description I have given above.

They have acquired a whole culture of their own which is only vaguely linked to a particular product.

They have become an image of trust (the original concept), of youth, of luxury, of thousand of other things that are then linked to a product that may have nothing to do with the brand owner.

Supermarkets are a good example.

Their research showed that many consumers trusted the supermarket more than they trusted the manufacturer or processor.

The supermarkets decided to develop their "own brand." Products, often from exactly the same source, were labelled with the supermarket's name rather than the processor.

The supermarket then took the brand profits rather than the manufacturer.

Other brand values

    Brands are normally associated with commercial interests.

Brands such as Coca Cola and Macdonalds are huge and are recognised around the world.

Other brands are organised by non government organisation.

There are a number of organic brands for exactly the same reasons as the original brands.

Consumers in cities cannot talk to organic producers in the country and require a brand that they trust.

There are similar brands for animal welfare and for fair trading with developing countries.

The number of these brands has proliferated as each pressure group wishes to provide its supporters with a particular product that follows its philosophy.

The result is often confusion as logo after logo are put onto products.

Commercial brands are bad for small farmers

    Brands are bad for small farmers in many ways.

There are large economies of scale in brand marketing.

Larger brands have greater recognition and greater strength.

Their whole purpose is to build consumer faith in the brand itself rather than the actual product.

The power relationships in the market place are radically altered by the success of big brands.

The brand acquires a market of its own without any relation to the source of the product.

For example a Macdonald's hamburger is a branded product.

Consumers do not know the source of the meat, the country of origin, the breed of the animal, its age or any other factor that might influence quality.

Complete faith is placed in the hands of the Macdonald company.

The supplier of meat to Macdonalds is in a weak position as they have nothing to bargain with.

The Macdonald company can source its supplies from any producer anywhere in the world without fear of a consumer backlash.

Millions of producers compete to supply a single brand.

Brands also lead to uniformity.

The Macdonald brand is a good example.

Their stated aim is to produce a standard hamburger throughout the world.

Small farmers find it difficult to supply these mass production lines.

Marketing alternatives

State marketing boards

   The state marketing organisations came in many forms.

In Australia they were called simply the Australian Wheat Board, the Australian Wool Board etc. Their functions varied according to the commodity concerned.

In Britain and in many other former British colonies they were called Marketing Boards.

The marketing boards have usually dealt with commodity such as cereals and wool that are not perishable although in New Zealand they have dealt in meat, dairy products and fruit. Britain had a Milk Marketing Board.

In North Africa they were called Office.

They had a number of functions from marketing to imposing government policy on prices.

At their best they provided farmers with a united and powerful place in the market.

They provided an assured price after harvest and a further schedule of payments.

They were of particular benefit to small farmers who are, through lack of credit, forced to sell immediately after harvest.

They also allowed all farmers to participate equally.

Large farmers usually have better storage, more credit and more information and can benefit from marketing in a way that is impossible for small farmers.

At their worse they became bloated bureaucracies used by politicians as a form of patronage.

Rather than assisting farmers they became a severe tax on their returns.

In most cases the state marketing boards were compulsory monopolies.

That is all the commodity had to be sold through them or with their permission.

They gained marketing strength from the fact they handled the whole of the national production.

This led to the abuse of power in some instances and lazy marketing.

For example the Australian Wheat Board continued to grade the Australian wheat crop on bread standards even when China became its largest customer and used the Australian wheat for noodles.

The size of the board's decisions also meant that their mistakes could affect an industry for decades.

The Australian Wool Board set their reserve price for wool too high. They found themselves purchasing most of the output. That stockpiles took a decade to sell and caused prices to be depressed for that period.

Governments were forced to support these bad marketing decisions as the consequences of letting the Board collapse were too severe for the farming community.

This was simply a fact of their size as governments have also supported private companies such as hedge funds or industries if they believe they are large enough to affect the economy through their collapse.

The state marketing boards are very much in decline throughout the world because of World Trade Organisation philosophies that see these organisation as a disguised form of subsidy to farmers.

The WTO only reflects the general rise of the anti-government philosophy.

In the past in Communist countries any private organisation was seen as evil by its very nature and without rational discussion or debate.

Now the reverse applies and state organisations are branded as inefficient, corrupt and a burden on the taxpayer and farmers without any analysis or debate.

The old state marketing boards can be abolished or reformed.

Either way small farmers need some support.

It should be a very different form of support to the old universal boards.

There should not be any direct subsidy of the price.

The new marketing boards should be one outlet among many for farmers and should have a charter to provide marketing services to small farmers.

This is similar to state support for credit.

It is difficult, if not impossible, to provide small farmers with small loans at reasonable interest rates unless there is some form of subsidy for the administrative costs.

The simple economies of scale make large loans more profitable to banks and other credit institutions.

To provide small loans requires a large distribution network and a small turnover - the opposite of a profitable commercial enterprise.

Governments also support technology for small farmers as they realise that they are not in the position to fund their own research and development.

Government support for marketing should follow the same lines. That is provide assistance to small farmers to try and overcome some of their disadvantages caused by a lack of scale.

    A new charter for the marketing boards.

    The new marketing boards should have a different charter.

Their major break with the past should be a low priority to the actual handling the product.

The boards of the past gave a high priority to the actual handling and storage of the product. They confused marketing with handling and storage.

The new boards should try and avoid this activity and all its associated bureaucracy and costs.

Instead they should place considerable emphasis on the provision of independent market information to small farmers.

This is true market information not just information about their own activities.

This information should then be broadcast every day on local radio and provided through the internet.

Farmers would know what the price of sheep was in the market on the previous day at the local town and others nearby.

They would also know how many sheep were offered for sale and how many were sold.

All this information is readily available to traders but is normally difficult for farmers to obtain.

Another radical break with the past is that the boards should be organised on a regional or farming system basis.

In the past each commodity was treated separately on a national basis.

A small farmer might sell his grain to the cereal board, his hay on the private market, his sheep to the local butcher and his olive oil to another marketing board.

Once the board changes to market information rather than actual handling the commodity they should be able to provide information on all his output.

Finally they should act as a reserve or floor in the market either directly or through farmer groups or cooperatives.

This market intervention would have to be flexible and market oriented not a government set minimum price.

If for example there is an excellent cereal harvest and prices immediately after the harvest fall to below world parity because traders cannot cope and small farmers cannot hold their grain the board should intervene knowing that can always sell (and having made suitable futures contracts) at that price. Without such an organisation many of the other policies to support small farmers will fail.

More production and lower costs will certainly help small farmers but those programs can be undermined by poor prices.

Joining a brand

    The advice given to small farmers from the marketing class is to join a brand as a humble supplier under contract.

They see no alternative.

Their whole training and culture revolves around the dominance of the commercial brand and they find it impossible to think outside that loop.

The small farmers position under these contracts is weak.

They are expected to supply the brand owners with specified products as required but rarely is there an obligation on the purchaser to take what is produced.

Production risks are shifted from the processor, trader or supermarket to the farmer.

Of course there are always production risks in farming but these contracts usually make the situation worse.

Other marketing outlets have greater flexibility.

Damaged products can be sold at a lower price.

Increased production can be sold at a reduced price or reduced production might result in a price increase in the open market but brand owners want a steady supply of uniform product at a contract price which is difficult to achieve in most farming operations.

Cooperatives.

    Farmers can form a cooperative to give themselves more strength in the market place and a share of the profits from further processing and storage.
   

There are millions of cooperatives throughout the world and it is therefore difficult to generalise on their activities.

    Marketing Groups or cooperatives.

    The first stage of cooperation in marketing is usually a marketing group.

That is a group of farmers who come together for the purpose of marketing their product and nothing else.

These groups can be quite small and informal, just a few farmers - perhaps as many as twenty - joining together to take their sheep to market in the same truck.

They act essentially as a point for information (one member of the group has responsibility for listening to the market reports) and leave the individual farmers to make their own sales based on this improved information. 

Alternatively they can be larger and more formal cooperatives that may sign a contract with a local butcher to supply two sheep a day throughout the year.

Their distinguishing feature is that the organisation has minimal effect on the product.

These groups are as near as possible to pure marketing organisations.

They try not to be involved in storage, transport or processing.

They have a small staffs that is focussed on marketing.

    Further processing

    The majority of cooperatives are involved in further storage or processing.

Farmers realise that part of their weakness in the market is due to their need to dispose of a perishable product quickly.

Even commodities like cereals can only be stored for a limited time on farms because of a lack of good facilities and credit.

Cooperatives have frequently become involved in the storage, processing and provision of credit.

The objective is worthy but it is not marketing in spite of the fact that many are called marketing cooperatives.

In South Australia farmers formed a cooperative to store and handle grain.

That is all it did.

It never owned any grain.

It was an example of separation of marketing which was handled by the Australian Wheat Board, the Australian Barley Board and private traders for oats and grain legumes.

Farmers own the cooperative and the profits if any are returned to the farmers not to the private shareholders.

Against this ideal cooperatives are often undercapitalised and their finance costs are therefore high.

Farmers do not have the time or the skills to manage the cooperative as efficiently as a private owner.

Cooperatives can become over staffed and inefficient.

There are also some fundamental conflicts between production and processing.

These are illustrated by the example of a peach cannery in South Australia. In simple terms there were two markets. The local market produced good returns.

The overseas market was poor as European producers dumped their products on world markets at low prices with European Union financial support.

After processing costs were taken into account farmers received little on overseas sales.

The cannery management disguised this fact and paid an average price to the farmers.

They felt that if the true price signals were passed on and farmers received nothing for a part of their peach crop they would stop producing for the overseas market. The cannery throughput would fall.

The staff numbers would be reduced or the cannery might become uneconomic and close.

They were able to impose the interests of the staff on the farmers who theoretically controlled the cooperative.

Another problem for the cooperative is a lack of investment in a brand.

This can be attributed to a number of factors.

Firstly the cooperative often lacks capital as farmers contribute only a small amount and the rest comes from loans or retained profits.

Farmers give a higher priority to investing in real assets such as machinery and building or faster payments to their farmer members rather than the image provided by a brand.

Farmers have often failed to capture increased margins from their investment in processing as the additional profits have gone into the hands of the brand owners.

This is particularly true in recent years as marketing power has moved from the middle of the marketing chain to the end.

Until the rise and rise of the supermarkets in the second half of the 20th century the greatest market concentration and power was in the hands of the processors and manufacturers.

They purchased from many small unorganised farmers and sold to many unorganised small shops.

Brands such as Heinz had enormous power. Now supermarkets are more than a match for the processors. Cooperative processors without their own brands are in a weaker position than other processors with brands.

Why do cooperatives fail?

 Cooperatives fail through failure and through success.

    Failure through failure.

    Thousands of commercial enterprises fail all the time.

Whether cooperatives fail more or less I do not know but they do have a more difficult management task.

They need to balance equality with quality.

Cooperatives (or at least the farmer cooperatives I am talking about in this chapter) usually have equal voting rights for their members. There may be some provision for major decisions being agreed by a majority of members and of shares together but unlike commercial companies decisions are not taken on the basis of share holding alone.

While the ideal of equality is good it needs to be balanced against commercial reality.

For example a cooperative will probably pay the same price per qx. for wheat whether a member delivers 5 qx., 50 qx. or 500 qx. In fact there are cost saving in handling large consignments. They are probably not very great and this level of equality will not serious damage the commercial viability of the cooperative but if they are considerable then the larger farmers will market their produce elsewhere because they receive a better price.

The cooperative will be left with a large number of small farmers and a higher cost structure than commercial merchants.

The problem of equality versus quality goes much further.

Cooperatives have a tradition of being more lax on quality.

They find it more difficult to discipline their members and impose penalties on poor quality.

Cooperative members can protest through meeting and can remove the board members if they are angry enough.

The effect is the same.

Farmers with better quality grain or other produce go elsewhere as they can obtain a better price.

The cooperative is left as a dumping ground for low quality produce that is unsaleable elsewhere. Higher costs and lower quality are not a good formula for competition in the market place.

    Failure through success.

    The 20th century saw a huge expansion of property rights.

Property rights are at the core of the capitalist system that took off in Europe three hundred years ago.

During the 20th century property rights were expanded into plants, animals, genes, music, ideas, brands and much else besides.

There was also a trend to turn community property into private property.

The most obvious examples are water resources, fisheries, forests and rangeland. They were all community or common property resources that were open to all. They have been transformed into privately owned rather than community owned resources that belong to individual title holders.

Cooperatives are community property.

This may sound strange as legally they are not.

They are the property of their members who hold the title on their assets.

This is the legal position but not reality.

The reality is that a cooperative is started by a group of farmers. Over the years it develops and invests. The investment comes from bank loans and the retained profits.

The profits of the cooperative are usually paid out in part through better prices or dividends on the produce supplied and in part retained to invest in the cooperative.

The part invested is issued to the members in the form of shares. The shares may or may not pay interest.

They cannot be traded except among the members.

They do not carry voting rights or if the do they are limited.

The cooperative remains open to new members. New members do not have to buy out an existing member.

They do not have to contribute a sum equal to the average capital value per member of the cooperatives assets.

They are allowed to benefit from the community asset by making a minimal payment in the form of the purchase of a few shares.

The original members of the cooperative have built up an asset which they allow others in the community to use and benefit from.

This situation of the cooperative performing as a community asset has continued for decade after decade. Members seemed to be content to benefit from the cooperative during their own life as an active farmer and then pass on the assets to the next generation without any payment.

During the 1970s and 1980s the situation changed.

A new wave of private property or private greed swept the world.

In Britain, cooperative or mutual banks that had operated successfully for more than 100 years were sold off to commercial banks in order to allow the present generation of members to receive a windfall profit. This represent the accumulated capital assets that had been built through retained profits over generations. The cooperative banks or building societies as they were more generally called were sold.

The current members received the cash or tradable shares.

The next generation has nothing.

At the other end of the world the same thing was happening.

The cooperative winery in my part of Australia was founded in the 1930s and operated successfully until the 1980s earning large profits and paying higher prices to its members than other commercial wine companies.

In the 1980s it joined the world trend and sold itself to a commercial winery. Existing member obtained a large pay out but the community lost a successful cooperative.

Some members have started again but they have a long way to go to achieve the level of success that was sold off.

Cooperatives seem to be caught in a trap.

If they are not successful they are dissolved.

If they are successful they are sold to private commercial interests.

I do not know the answer to the problem. One partial solution is to develop means of buying out retired members.

They have shares and membership but no longer supply any produce. They receive no benefit from the community asset. They have a greater interest in receiving a high price for their shares.

If cooperatives could buy the retired members shares there would be less incentive to sell out. This is not easy as cooperative are usually under funded.
 

Terroir

    A standard commercial brand has no substance.

It is merely an image in the consumers mind.

This is ideal from the point of view of the brand owner.

The owner is free to purchase the ingredients for the product cheaply on the world markets and process them in his own factories or under contract and then sell them at a premium because of the brand.

The consumer is usually not aware of the origin of the ingredients or where they were processed or by whom.

Coca Cola is one of the most recognised brands in the world and keeps most of its ingredients completely secret.

Even those that are well known like sugar and water can be supplied from the cheapest and most competitive source.

In Europe the terroir schemes provide an alternative that gives a little more marketing power to the farmer.

"Terroir" means "territory" and the philosophy of the terroir is that food products have a unique character and flavour based on the soil, the climate, the plant and the animals and the processing methods.

The terroir philosophy says that the products are more than a collection of chemicals and commodities assembled at the cheapest possible price from around the world and labelled with a famous brand.

The terroirs started in France during the 19th century with the famous wine growing areas of Burgundy, Bordeaux and Champagne but have expanded to an enormous range of products from cheese to vinegar.

They are common in all European countries except Britain.

The European Union has negotiated their recognition on most countries and the WTO. They are part of the European cultural tradition and do not exist in USA or Britain (there may be one or two).

WANA countries could establish their own terroir schemes to market products as diverse as Syrian lentils, Tunisian sheep meat and Algerian dates.

The terroir schemes are not easy to pin down.

They impose certain production quality rules on the farmers and processors within the boundaries of the terroir.

These boundaries and rules have the support of state law.

The terroir associations are usually run by joint committees of farmers, processors and state officials.

They also promote the name of the terroir.

They are not cooperatives of farmers or processors.

They do not handle or market any product.

The people within the terroir promote and sell their own product but also use the terroir name and work to promote it.

Within these general description the actual terroir structure differs according to tradition.

In Champagne the area is dominated by very large multinational companies producing millions of bottles.

In Burgundy the growers make their own wine and produce a few thousand or perhaps ten thousand bottles.

Even where the terroir is dominated by big brands the farmer has some market strength as the brand owners cannot purchase outside the terroir and keep their terroir label.

Non-brand marketing

    The most successful non-brand in recent decades has been organic or biological food.

The market is still small but over the last few decades it has grown at an incredible rate.

In some sectors such as baby food it has 100% of the market.

Organic food is not a brand in the usual commercial sense.

It is not promoted or advertised as a brand.

It is simply a certification scheme with a logo run by a number of NGOs.

Organic food is a recent non brand success story but in the WANA region there is still a considerable non-brand market that exists from the pre-brand era.

Unlike Europe or USA it does not need to be recreated but simply protected from the activities of the large brand owners and supermarkets.

Of course the marketing class with its professional marketing consultants claims that non-brand marketing is an interesting fossil that has been swept away by the large marketing organisations.

It is important to keep clearly in focus the reason brands were developed.

They were there because of long food chains and fraud.

If farmers and consumers can meet, if consumers can taste, see and smell then there is no need for a brand to tell them what they are buying.
 

    Farmers' markets

    Farmers' or small traders' markets are the most basic form of marketing.

During the 19th and early 20th century many municipal authorities built covered farmers' markets or other facilities.

Most of the major WANA cities have farmers' markets in their city centres.

They can be markets that sell direct to the consumer or to wholesalers and shopkeepers.

In the last 50 years many of these markets have fallen into disrepair.

In some cases they have been sold to supermarkets.

In almost all cases the provision of farmers' markets has failed to expand with the development of new residential suburbs.

Supermarkets and other large shopping complexes dominate the new housing developments.

Supermarkets are usually supported by the state or municipal authorities so there is no reason why farmers' markets should not be helped.

The supermarkets receive help in the form of car parks, roads and other facilities built at public expense as well as special planning permission.

Farmers' markets need support in two ways.

They need the physical infrastructure and they need management.

It may be possible to transfer the management to a farmers' cooperative but often that is impossible as the farmers come from too wide an area to have a mutual interest.

The management must firstly plan the market in relation to the demographics of the market catchment area just as the supermarkets do.

They must try to achieve a balance between the potential customers and the number of farmers.

Farmers' markets can become an expensive means of selling for farmers if they spend long hours at the market and have a limited turnover.

The market management usually limits the hours and the number of stalls to increase selling efficiency.
 

    Home delivery and farm shops

    Farmers can also take their produce direct to the consumer by truck.

They stop at intervals on street corners and sell to the local householders.

Alternatively they can establish a permanent shop.

Both these alternatives are beyond the reach of most small farmers.

Some small farmers may become small traders and sell in this way.

Alternatively a group of small farmers can form a cooperative to sell in this way.

Such a cooperative has many features that are completely different from the usual cooperative.

Most cooperatives are formed from a group of similar producers.

Milk producers form a cheese cooperative.

Grape growers a cooperative winery and so on.

These home delivery or farm shop cooperatives should consist of a wide range of products. Cheese should join with other products to provide a range to meet consumer needs.

There is little point in having a shop that sells only potatoes or only flour. Producers need to cross over a range of products.

These cooperatives are different in another sense. Most cooperatives are classified as producer cooperatives consisting of farmers or crafts people, services cooperatives consisting of workers providing a service or consumer cooperatives which supply goods to consumers.

These cooperatives should cross these boundaries. Either the cooperative can cross them within its own organisation or often it is better to create links with other cooperatives.

Rather than trying to run a shop in a residential suburb farmers would probably be better off trying to create a link with a local group who form their own consumer cooperative and run the shop end of the food chain.

Farmers involved in direct selling need to examine the costs and benefits in the context of their total farming activities.

Direct selling often takes a considerable amount of time.

If there is surplus of family labour that is not being used on the farm it is worth selling directly. If there is no surplus and all family labour is committed the farmer would be better selling through wholesale markets and other sources where larger amounts can be sold more quickly even if the price is lower.

    Tourism

    For flockowners in the rangeland and some other areas there are considerable opportunities in selling their sheep through tourism. The meal of roasted lamb in a tent in the rangeland is part of the tourist experience. It provides the flockowner with a considerable greater price.

    Internet.

    Many WANA countries can leap-frog developments in the developed world.

Instead of developing large scale physical markets to handle farm products it may be possible to create virtual markets on the internet.

These markets are being developed elsewhere for a whole range of products.

For the direct sale of food products to consumers it is unlikely to have an impact for a number of decades.

If farmers want to avoid brands and other large commercial organisations, the consumer will need to see, taste and smell the product to see it described on the internet.

Where the internet could play a part is at the wholesale level.

Small farmers would not take part directly in internet sales but through marketing groups.

The internet would allow them to contact a wide range of potential buyers from consumer cooperatives to wholesalers and tourist hotels.

The marketing boards could develop such internet platforms firstly as a simple information source and then as a means of making contact.

Limitations of direct selling

    The most obvious limitation for dryland farmers in the WANA region is that so many of their products do not have a direct market.

Unless the farmer is in a tourist area and involved in tourism his sheep are sold mainly to butchers and rarely to consumers.

Cereals are not sold to consumers.

Even as flour the market is limited compared to the amount sold to bakers.

Olive oil, milk products such as cheese and yoghurt, and vegetables are the most obvious products that can be sold directly.

Direct selling will increase the returns but the costs in terms of time can be considerable. If there is surplus of family labour that time may have a low opportunity cost but it is not always easy to work attendance at a farmers' market in with all the other farm tasks.

Government limitations on small producers

    The most obvious area of restriction is meat and milk hygiene.

The trend over the last two hundred years has been stricter and stricter regulation to prevent the transmission of diseases as far as possible.

Costs of inspection have risen and the costs have been passed on to the processors.

There are considerable economies of scale in inspection and the higher costs have driven out small processors.

Theoretical economists have seen the opening of markets through better inspection as a confirmation of their dream of an increased number of market players and more opportunities for exchange but it is also possible to see it as an unnecessary cost that is borne by the consumer.

Let us take the case of the BSE outbreak in the USA.

It seems that a single cow was involved and it is claimed it came from Canada.

That is a processor had a huge collection area not just outside that state but in another country.

All the possible diseases of this vast area are collected together by the one processor.

The cow was killed and deboned. The meat was then ground into mince for hamburgers. It was mixed with perhaps 100 other cows to form a batch of 200 qx. of ground meat.

This batch was then split into various smaller consignments that were dispatched all over the USA.

If one was asked to design a system that would spread contamination as far as possible it would be hard to think of one as good as this.

It is no wonder that inspection has become tighter over the years (although in the USA it has been relaxed in the last decade or so) to try and reduce the risk to consumers.

The other way to reduce the risk is to restrict the market freedom and the dreams of economists.

If supply and demand is kept local the risks are considerably reduce.

The problem WANA countries face is whether they can resist the pressure from the USA and Europe to follow the same path and if they do whether they can still operate a parallel system for local sales.