CASE STUDY:

Modern Market Information System boosts incomes of Ukraine’s

small & medium sized growers

Abstract:

The Market Information System (MIS) created by the

Agricultural Marketing Project (AMP) jointly with its Ukrainian
subcontractor APK-Inform helped boost sales and profits of
small and medium sized growers, and attracted significant
investments. It resulted in about $20 in additional benefits to
farmers for each $ spent and became self sufficient in 3 years
from its launch.

Although 95% of farmers did not have access to the

Internet, thanks to AMP experts they managed to sale most of
their produce with higher profits through publications and web-
portal created by AMP. The portal itself quickly became the
largest virtual wholesale market in the Eastern Europe,
significantly (by 100-200 times) reducing transaction costs for
all market players: growers, traders, processors, input suppliers
and supermarkets.

Based on the market information received through the

numerous contacts with market players as well as official
statistics, AMP analysts have created a flow of analytical
information, making horticultural market of the country more
transparent and predictable. It, in turn, has lead to the increased
amount of investments into the industry, helped create
additional production, trade and processing opportunities,
create new jobs and increase incomes of rural population.
Problem statement

When the AMP team started working in Ukraine in 2003, it

determined that further development of the horticultural sector
of Ukraine’s agribusiness sector, which was based on many
small and medium sized growers, provided nearly 35% of all
revenues to rural inhabitants were hampered by the lack of
market infrastructure. Growers did not know where and how to
sell fruits & vegetables and consumers paid relatively high
prices for these products due to a large number of very small
intermediaries and completely chaotic marketing and complete
lack of market transparency.

The AMP team only had 3 years to resolve this problem

and the quickest way to do it, according to AMP professionals’
was to develop a system, which would allow all market players
to receive easy and fast access, to information about market
prices in various regions of Ukraine; buyers and sellers of key
products and their offers & bids, market news, market reports
and market forecasts. Lack of widely recognized standards for
the fruits & vegetables was another significant challenge as the
fruits & vegetables have a great variability of sizes, colors,
shapes, varieties, etc. Yes another problem we faced was a large
number of different types of fruits & vegetables, which we had to
monitor, as this sector of agribusiness has a significant number
of products, all of which are very important.

As we proceeded with our idea, we discovered several

other problems on our way. To understand the markets our
analysts had to consider the interests of many market
participants, including different types of growers, processors,
wholesale traders, input and Equipment supplier, retail chains,
etc. On the other hand we realized that if we succeed in helping
this industry become more efficient, we would be able to help
create many new job and improve incomes of people involved in
these industries as well as living standards of rural population
overall.

One of the major challenges for us was in trying to get the

information flowing, as most farmers (more than 95%) did not
have Internet connection and a major part of them did not have
cell phones, while landlines were of poor quality and one could
only reach them trough the landline very early in the morning or
late in the evening. Creation of a web-site in this situation
sounded as a completely useless exercise at first but only if the
web-site was created for farmers. Instead, we created a web-
portal for buyers, to support
Farmers and it worked.

From the very first steps of creating our own MIS, we

thought about its sustainability. This was a great tool by itself as
it guided us in our decisions, helping choose only options that
would generate a real interest of our clients. If we created
something people were ready to pay money for, it meant that
this was a really useful thing for them.

Creating MIS step by step

We started creating the MIS from several brainstorming

sessions, where we discussed what’s really essential to know
about the markets to be successful based on the opinion of
various market players. Pooling it all together, we have
discovered that most market players had many things in
common. Therefore, we decided to focus our first efforts at the
most important things.

It was also a very simple decision to determine where to

start implementing the MIS, as successful information system is
impossible without a good database. Since we had 8 offices and
we planned to create a web-portal, we needed a modern on-line
database that would allow many people to access it at the same
time. Thus, we chose Oracle to create the database and our
subcontractors’ programmers did all of the work based on our
vision of what this system should be able to do. The database
allowed us to track the markets and also monitor overall
Project’s activities. It is also true that we have been improving
the database ever since we created it. As I type, we are trying to
implement some more improvements.
 Still, the structure of the database itself is not enough to
make it successful, the next step was to fill it our with industry
contacts. We trained the Project Staff to use it and explained
why it is important to keep all of the contacts in this common
database. The first few months our people spent in meetings
with clients, searching for industry contacts and entering them
into the database. Since we had all the database statistics
online, it was easy to see the progress of contacts collection
and determine who of the employees needed additional help
with this process.

In the meanwhile we have polled many clients to determine

their problems and this information helped us develop efficient
ways to resolve them. First of all, complete lack of information
about market prices and trends motivated us to start market
monitoring. We started monitoring retail markets in most
regions of Ukraine by sending our enumerators there or
collecting price information from the markets’ administrations
over the phone.

During the numerous meetings with farmers we explained

them our intentions and convinced them to purchase cell
phones. We explained that otherwise they would not be able to
improve sales of their produce because buyers will have no way
of reaching them. After the wave of the seminars most farmers
did buy mobile phones as they were becoming really
inexpensive.

At that point we started collecting weekly farm-gate prices

for the key products from farmers included in our database via
the phone. Prior to that, we have trained our Market Information
Specialists in how to determine prices. To motivate farmers
provide this information we gave them free of charge advertising
in our publications and web-site as we placed products they
wanted to sell in the offers & bids section. Farmers were happy
to provide the information and, in most cases, they determined
offer price when talking to our MI specialists, who also provided
consultation and advice. All of the valuable comments provided
by farmers were included in special internal section of the
database.
 At this point in time we have received many phone calls
from potential buyers (processors, traders and supermarket
chains) who wanted to find suppliers of fruits & vegetables.
They shared their market information with us and we, in
exchange, provided them with the free advertisement as well
and provided contacts of farmers who had products of their
interest for sale. Farmers who previously had very few
opportunities to sell suddenly started getting several phone
calls per day, were able to look evaluate various options, had a
possibility to call and consult with us and thus, have been able
to sell their produce quickly and the highest price offered. After
many years of receiving no attention from the government or
anybody else, farmers really appreciated the support they were
getting from us.

There were many things we did simultaneously at this

point: we created a webportal, started publishing weekly
magazine and sending it to all market players who expressed
their interest and we continued to build and improve our
database and train our clients. Once the farmers got their first
weekly magazines, we came around and explained how to use
them. Usually we did 5-6 hour trainings for 20-40 farmers were
they were able to try all of the options available. Most active
farmers who came to such seminars later on transferred the
knowledge they gained to their colleagues.

When our MI specialists talked to a client, they entered

information directly into the on-line database linked directly to a
web-portal. Many clients received phone calls from potential
buyers or suppliers few minutes after their conversations with
the MI specialists, as offers & bids appeared on-line on the web-
portal as they spoke.

From the very beginning of the project we kept telling

farmers to grow what’s in the demand instead of trying to sell
what they have grown. We did a lot of work explaining all market
participants the importance of contract growing for further
industry development. We also invited buyers (processors,
traders, supermarkets) to all of our seminars and let them tell
farmers what kind of product do they need, when, how much,
how should it be packaged and delivered, etc. We also published
numerous articles on these issues in our magazines. Our
production and price forecast for all key fruits & vegetables
published every spring and updated two or three times per year
have helped many farmers who read it make very profitable
planting decisions.

Share of contract farming in this sector has started

growing but most of the production was still sold on spot
market. Processing slowly was becoming a major market for
fruits & vegetables and we decided to create a system that
allows farmers to offer their produce to processors. We
collected, processed, structured and shared information about
what key processors are ready on a weekly basis, which helped
both: processors and growers.

At this point we were getting more than 5,000 hits on our

web-site every day and many market players said that a weekly
price is not enough as they would like to be able to track prices
on a daily basis. To do this we identified the key wholesale
markets in Ukraine, which were used as a price reference among
market participants and started collecting daily information from
these markets. We explained farmers that they now needed to
think about Internet access if they wanted to access daily prices
and many

Farmers did get computers and Internet. Others, whenever

approached by potential buyers, called us on the phone and we
told them what the price at certain market was today and
explained them price trends.

To make sure farmers are able to grow what’s demanded

by the markets, we have held many field days and demonstrated
modern production, post harvest handling, storage and packing
technologies. We published this information in various manuals,
in our publications and on the web site. Thus, our MIS was more
than just market information system; it became a system for
collection, processing and distribution of technological, legal,
market and other useful information for farmers.
 It is very difficult to create a good system without letting
users of this system impact it. At one point when we needed to
grow the system further we decided to let users does part of our
job. We allowed companies to place offers & bids by themselves
as well as register in our database. We have trained them to do
this and this allowed us to expend the system and improve the
quality of our information. Our role was limited to moderation.
This made our web-portal the largest virtual marketplace in the
region as every week we had registered around 1,500 entries for
around $10mn and this helped attract even more users to the
system.

Three other donor projects, which had to create their own

MIS, decided to join ours instead. We have trained their
specialists and granted them access to the system, which
increased its value significantly. One of the projects that joined
forces with us was from the country Georgia. Our cooperation
has boosted the horticultural trade between the two countries.

Although we did a lot of trainings and seminars, there was

a need for a nationwide or international meeting of all key
industry participants to discuss the strategic industry
perspectives and opportunities. AMP jointly with APK-Inform
has initiated, organized and held the First International
Conference: “Fruits & Vegetables of Ukraine 2004: Market of
New Opportunities”, which has later grown into a large
international event. It now includes a specialized international
exhibition and is the largest industry meeting in the Eastern
Europe. Moreover, past year we were asked to help organize the
first such event in Russia and we did with a success.

Our MIS has played a very significant role in promoting

investments into the industry. This was in large achieved
through our PR activities. Since we generate a lot of interesting
information and made it publicly available through our web
portal and other sources, we have attracted many journalists
who talked to us and wrote news and stories about the sector.
We never paid a penny to publish such articles but they got re-
printed and re-quoted a lot and our specialists gave many
interviews to press. Every three months there have tracked at
least 1mn copies of newspapers and magazines that have
published or re-printed our information or interviews. We
estimated that we only captured only around 20% of the
quotations. And this does not include Internet outreach. During
the years of MIS operation we had many potential investors that
came to our office through the information they found in the
press and on the web-portal. Several of them are now among the
largest and most important industry players doing really well.

Although our Project is nearly closed now, we have plans

to further development of the MIS for the next two years. Among
the planned products we would like to establish a weekly report
on Russian and Ukrainian horticultural markets in English to
allow further development of international trade in Fruits &
Vegetables. We have also recently added mushrooms to our
monitoring system and are working on the first international
conference for the mushroom industry in Ukraine. Shortly we
are planning to make price data available to our clients through
an SMS services.

How AMP’s MIS is used in practice

We have determined that MIS cannot be created one time

and forever – it has to be a living, learning and developing
system because the market is changing very rapidly. There are
many ways to use our MIS to farmers and other market
participants’ advantage. Let me describe several most frequent
ways to demonstrate how much farmers and others gained from
this.

A farmer, who was very pessimistic about MIS and did not
want to get any offers placed in our system, came to one of our
regional offices to complain about lack of interest for his
cabbage. He had around 100 tons in stock and the wholesaler
who told him he would buy it from him has disappeared. We
recommended placing an offer in our system, which he
reluctantly did. We also gave him one of our latest magazines
with a list of buyers interested in cabbage and he started calling
this list from our office. 20 minutes later he had identified two
buyers interested in purchasing most of his cabbage and just
when he was about the leave the office he received a phone call
from another potential buyer who found his offer on the Internet.
As a result the farmer has sold all of his cabbage during 2-3
weeks for $10,000.

One of the top processing companies was searching for a

large amount of good quality carrots but in the area where it
usually procured carrots a serous shortage of this vegetable
was observed. Managers have found our web portal through the
Internet and discovered around 30 farmers offering carrots
during this week. They were not sure this was true and called us
on the phone. When we confirmed this information and told
them that in the western part of Ukraine there was a significant
over-production of carrots, they started calling the farmers. In
one week they have reportedly included contracts to supply
enough carrots to satisfy their processing plans. Farmers were
very happy with the price and processors were very happy to be
able to fulfill their contracts.

One of our farmers decided to expend planting area under

onions motivated by high prices for this crop in the past season.
When he was about to buy the seeds, he read our production
and price forecast, which suggested a high probability of very
low prices for onions. He consulted with us and changed his
mind. We also suggested that prices for eggplants, cucumbers
and early cabbage may be higher and told him that it would be
better to focus on early onions if he wanted to plant any. He
made the planting decisions based on our recommendations
and got very high prices for the products he planted (including
early onions) while these who did plant late onions had serious
difficulties selling it.

Another example continues the previous story. Since onion

prices were really low due to over-production, we have started
searching for way to effectively help our growers. Ukraine has
never exported onions but we found out that during this very
year there was a significant shortage of this production in
Poland, Holland and several other EU countries. We published
several articles providing information about this opportunity to
all market players along with export requirements. We received
several phone calls from wholesalers who got interested and
four weeks later several farmers reported improving demand for
the onions. It turned out that wholesalers have started shipping
onions to Poland and other countries, which supported prices
and helped farmers avoid losses. Three months later the number
of counties buying onions from Ukraine has increased to around
15 and Ukraine became one of the largest exporters of onions on
the region.

Many farmers have used the information we provided in

our publications about new crops, niche products and new
technologies to their advantage. One of the examples could be
lettuce. While not popular or almost unknown in Ukraine just 5
years ago, lettuce has become a significant cash crop for many
farmers in various regions Ukraine as we helped one of our
clients establish a pre-processing, packing and distribution of
various types of salads. Our farmers supplied salads to
McDonalds in Ukraine and Russia as well as to hundreds of
supermarkets in many regions of Ukraine through the client
company.

It was also interesting to learn that most nationwide

supermarket chains fresh produce managers start their day from
checking our daily wholesale prices. Moreover, most key
supermarkets, wholesalers and processors assign specialists to
check offers & bids, catalogue, analytics, prices and other parts
of our web-portal on a regular basis.

Impact

Presently we estimate that our system has resulted in

about $20 in additional benefits to farmers for each $ spent. We
also expect it to be fully self-sufficient and profitable to all
market participants in the future.

The web-portal presently attracts around 30,000 unique

visitors every month and a significant share of Ukraine’s fruits &
vegetables gets sold through our portal. We are now trying to
include Russia in our monitoring and presently around 30% of
the MIS users are from this country. We also have visitors from
all of the countries in the region, including: Poland, Holland,
Hungary, Moldova, Georgia, Belarus, UK and many others.

The MIS helped lower the transaction costs to farmers. If

an average farmer had to take a trip to the closest large
wholesale market, he or she would spend from $0.02 to $0.10/kg
of produce brought to the market, excluding costs of his or her
time. The same transaction through AMP’s MIS would be equal
to the cost of the phone call, which frequently, was initiated by
AMP. Thus, transaction costs for farmers were reduced by 100-
200 times.

Farmers were also provided with a weekly magazine, which

included key market news, market prices (wholesale and retail)
in all major regions of Ukraine, offers & bids, produce
production, PHH, packing, storage and marketing
recommendations and many other useful features. This allowed
farmers to improve their technologies and develop a stronger
negotiating position when talking to buyers. Thanks to the bids
published in the weekly magazine farmers could use several
alternative marketing channels, making their sales more
profitable. Price information from various regions within the
country helped them improve their marketing decisions and sell
products to regions where highest margins were observed.

By having information about alternative input suppliers

farmers saved money and managed to lower production costs,
while boosting yields and quality of the final product produced.
Price and production forecasts provided each spring and
updated 2 times per year helped farmers plan production of
crops that were in strong demand on the market and thus, for
higher prices and greater revenues.

Information about investment opportunities in the fruit and

vegetable sector published freely on the web-portal attracted
many foreign and domestic investors to Ukraine’s horticultural
sector. The number of fruit & vegetable processors increased
from 15 in 2003 to about 125 in 2006. The number of full-service
wholesale companies has increased from virtually zero to
around 30 and many mid-size companies were created. The
farmers, who used AMP’s MIS, have more than doubled the area
under fruit & vegetable production and many millions of dollars
have been invested into production, storage and, PHH. At the
same time that growers’ incomes at least doubled, consumers
received lower prices for higher quality fresh produce. Also,
thousands of on-farm and off-farm seasonal and permanent jobs
were created.

Ukraine, which prior to AMP’s interventions imported fruits

& vegetables from Poland and other neighboring countries, in
2006 became a net exporter of many of these products.

Thus, we learned that even if farmers do not have access

to the Internet, it is enough for them to have access to a phone
to have the benefits of modern market technologies work for
them. Yes, we had to train farmers but they learned quickly
realizing that these technologies can create a major difference in
their lives and those of their families.