For many years FAO and other organizations involved with the development of agricultural marketing have advocated the establishment of Market Information Services (MIS) as a means of increasing the efficiency of marketing systems and promoting improved price formation. Improved information, it has been argued, enables farmers to plan their production more in line with market demand, schedule their harvests at the most profitable times, decide to which markets they should send their produce and negotiate on a more even footing with traders. Other benefits have been seen for traders. Improved information should enable traders to move produce profitably from a surplus to a deficit market and to make decisions about the viability of carrying out storage, where technically possible. With few dissenting voices[1] these arguments are generally accepted and a large number of countries in the developing world and, increasingly, Eastern Europe and the former Soviet Union have established or are establishing Market Information Services.
Unfortunately, the track record of such services around the world has not, on the whole, been very satisfactory. Prior to the preparation of this publication, FAO conducted a survey of all FAO member countries. This indicated that, while a large number of countries do operate some type of MIS, the vast majority of services cannot be considered to provide commercially useful information for farmers and traders. A large percentage of MIS are primarily data-gathering exercises, and even this is done inadequately. MIS suffer because they are frequently operated by government officials who lack a commercial approach. More importantly, the majority face significant resource constraints. Often set up by donors, they have proven to be unsustainable once donor support has been withdrawn. MIS planners have tended to “overdesign” services, paying little attention to the capacity of the organisation providing the service to continue to do so on a reliable basis.
A re-evaluation of Market Information Services would thus appear to be necessary. While there can be little dispute of the need for market information, the way in which MIS have been planned and operated in the past raises doubts about the standard approach to information provision and new approaches clearly need to be explored. In designing a service, sustainability and commercial utility should be the prime considerations. This implies detailed research into the needs of those involved in the marketing system. It also implies tailoring the service to meet the resources available and only expanding operations when additional funds can be obtained on a long-term basis.
The remainder of this Introduction sets out FAO’s definition of a Market Information Service and briefly reviews the main arguments in favour of having such services. Chapter 2 reviews in more depth the potential benefits of Market Information Services. On the basis of the FAO survey and other sources, Chapter 3 evaluates experiences with market information provision in FAO member countries. Chapter 4 then considers the issues involved in setting up a sustainable, accurate and effective MIS. Chapter 5 presents brief concluding remarks.
The emphasis here is on market information for both grain and fruit and vegetable markets.[2] This publication should be viewed primarily as a discussion document. While some advice is provided on the technical aspects of market information collection, processing and dissemination, this is not intended to be a manual on setting up and operating an MIS. This is, to a certain extent, covered by earlier GTZ[3] and FAO[4] publications. Detailed advice on the collection and use of grain market information for Early Warning purposes is provided in a manual prepared for SADC by two FAO field projects.[5]
In a 1995 publication on the Indonesian MIS,[6] FAO developed a working definition of a Market Information Service which, in a slightly amended form, is reproduced below:
A service, usually operated by the public sector, which involves the collection on a regular basis of information on prices and, in some cases, quantities of widely traded agricultural products from rural assembly markets, wholesale and retail markets, as appropriate, and dissemination of this information on a timely and regular basis through various media to farmers, traders, government officials, policymakers and others, including consumers.There are varying names given to activities that broadly fit in with the above definition. FAO has settled on the use of “Market Information Services” in order to differentiate “market” information from “marketing” information, the latter being a much wider concept which is likely to include details on potential market channels, payment requirements, packaging, quality and a whole host of information required by a producer to make a successful sale, including market information. We have also avoided the word “system” as this conveys a rather abstract data gathering exercise which is not necessarily oriented to providing a “service” to farmers and traders.
A Market Information Service is seen as providing “transparency,” i.e. a full awareness of all parties of prevailing market prices and other relevant information. This, in turn, can contribute to “arbitrage,” i.e. the act of buying at a lower price and selling at a higher price. In theory, when a marketing system functions efficiently prices at different markets are influenced by arbitrage activities of traders, i.e. “spatial arbitrage.” takes place. Traders take advantage of price differences until these differences decrease to the level of transaction costs. “Temporal arbitrage” is the storing of products in order to take advantage of expected higher prices later in the season or, in some cases, in subsequent years.
As is discussed in Chapter 2, in addition to the promotion of arbitrage, Market Information Services can have the following impact:
