The last mile(s) in modern input distribution: Pricing, profitability, and adoption

Abstract

Increasing adoption of modern inputs remains one of the best hopes for greater agricultural production in developing countries. Based on unique data from northwestern Ethiopia, this study examines the "last mile(s)"-from the input distribution center to the farmer-in the chemical fertilizer and improved seed distribution system. We find that increasing transaction and transportation costs over a 35 km distance, along a route mainly accessible to only foot traffic, lead to a 50% increase of the price of chemical fertilizer and to a 75% reduction in its use. Farmers who live about 10 km from the distribution center face per unit transaction and transportation costs as high as the costs needed to bring the fertilizer from the international port to the input distribution center (about 1,000 km). Tackling the "last mile(s)" costs should thus be a priority to improve modern input adoption and use in these settings.JEL classifications: O13, Q13, Q18

Cities and agricultural transformation in Africa: Evidence from Ethiopia

“…Minten et al (2013) show a significant increase of distance to Addis Ababa on the time it takes to acquire inputs. If we interpret r as the opportunity cost of acquiring fertilizer and seeds (i.e.…”

“…This cost does not only include the travel time to buy fertilizers at agricultural cooperatives, but also the time spent on trips in which farmers failed to buy fertilizer. As shown by Minten et al (2013), farmers in remote areas in Ethiopia often need to make additional trips to buy fertilizer because of lack of supply by distributing cooperatives and because of more administrative hurdles.…”

Economic performance of community based bean seed production and marketing in the central rift valley of Ethiopia

“…As expected, farmers who were far from the district (woreda) town were less likely to use formal seed sources due to limited accessibility. Most agro-input dealers, including Ethiopian Seed enterprise, were located in the main towns; meaning that rural based farmers who were far from district Likelihood ratio test of rho21 = rho31 = rho32 = 0: chi2(3) = 42.99 Prob> chi2 = 0.00; ^HH=Household head *, ** and *** denote significant variables at 10, 5 and 1 percent level respectively; Parenthesis are standard errors (woreda) towns incurred higher transport costs to access seed (Minten et al, 2013). On the other hand, distance from town to the village exerted a positive influence on the probability that a farmer would choose from CBSME.…”

Market concentration and pricing behavior in the fertilizer industry: a global approach

“…5 Certainly, cost shares may differ largely across and within countries due to varying transportation and transaction costs between distribution centers and farms. Minten et al (2013) find, for example, that these transportation and transaction costs alone may result in up to an additional 50% of the prices paid at the wholesale collection point. 6 For example, natural gas represents 72-85% of the costs of ammonia production (Huang, 2007), while raw materials' costs constitute 90% of the production costs of DAP in the United States.…”