Market Prospects for Groundnut in West Africa COMMON FUND ...

The sub-regional market is constrained by high transaction costs, of
which the highest is clearly transport accounting for more than half of
transaction costs: 55% for regional or cross-border trade, and over 70% of
domestically-traded groundnut. These estimates are consistent with Camara
1992, Gaye 1992, Savadogo et al. 1992 and Gabre-Mahdin et al. 1992, as
cited in Barry et al.: “Transportation costs represent more than half of total
transfer costs of agricultural products in West Africa.”
Transport costs for the Dosso region of Niger were also calculated in a
previous study to be between 6 and 20 fCFA/dt*km (Abele 2000). Though
most respondents expressed a strong desire to avoid storage for anything more
than the required minimum (due to moisture content and related product
quality considerations), storage costs were not found to be significant as
compared to transport and related costs.
The cost of trading groundnut nationally and regionally was considered in
Niger, where the most detailed market information was obtained and
corroborated. A model was established on the basis of interviews with traders
on the national markets. A mid-level trader of Niamey moves 5,000 sacks of
groundnut (in shell) each year, at an average value of fCFA 9,500. Based on the
costs of transportation, storage, market dues and other costs, the transaction
costs of a domestically-procured bag of groundnut total fCFA 615 above the
farm-gate price, whereas the transaction costs of a sack obtained across the
border rise to fCFA 2,615, a factor of more than 4.
Transaction costs and their estimates, as both an element of total
transaction costs, and as a percentage of total product value, is provided in
Table 2.
On the whole, transaction costs comprised roughly 7% of the value of a
sack of groundnut (in-shell). However, on the regional market (with a single
border crossing), this figure rises to more than 27%.
It is important to note that these figures represent aggregate transaction
costs and not necessarily those borne by a single party (ie, the trader himself).
While national market transport costs are commonly borne by sellers (ie, by
primary buyers, or by the producers themselves), regional trade is undertaken
by specialists who hold strong preferences based on their consumers; for
instance, in Ivory Coast variety 47-10, known for its high oil content is much
preferred.
A lack of reliable information on price and supply (as well as exchange
rates) compounds risk and adds to transaction costs for both producers
and traders.
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