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REIIEI IIIII IIEVIIOPIIIIII: . , '
IIIIII 3355;: MARKETS IN HONSURAS AFTER. ‘
. HURRESIIANE MITCH

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MICHIGAN STATE UNIVERSITY _ I
_ DENIs-IMIAINVIILE ..
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6/01 c;/CIRC/DaIeDue.p65-p. 15

RELIEF AND DEVELOPMENT:
BEAN SEED MARKETS IN HONDURAS AFTER HURRICANE IVflTCH

By

Denise Y. Mainville

MASTER’S PLAN B RESEARCH PAPER
Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Agricultural Economics

2000

Acknowledgments

I would like to thank the members of my guidance committee for their
contributions to and support of my research project. Thomas Reardon my Major Professor
and Richard Bernsten my Research Supervisor were very helpful in guiding my research so
that it would have both theoretical and practical relevance. Eric Crawford’s advising
throughout the research process is gratefully acknowledged, as is David Schweikhardt’s
willingness to come on board and assist during the later stages of the project.

In Honduras, my thanks go to the personnel of the Bean Research Program at the
Escuela Agricola Pan-Americana. Specifically, the support and assistance of Dr. Juan
Carlos Rosas, Head of the Agronomy Department, and Aracely Castro, Edwin Flores, and
Luwbia Laranda, Research Assistants, contributed greatly to my research progress. Dr.
Raul Espinal receives my gratitude for sharing his knowledge of Honduras’s bean seed
system. The many people that I interviewed during my research also deserve my thanks,
including personnel at projects PROLESUR, IPCA and PRODERCO whose assistance
and hospitality during my case studies was greatly appreciated.

Abelardo Viana Ruano and Pedro Martel receive my thanks for their willing
assistance from afar, and I also thank my fiiends and colleagues at the Department of
Agriculture Economics for their support, input, and interest as I conducted my research.

Finally, the financial and logistical support of the Bean/Cowpea CRSP (fimded

through USAID grant # DAN-G-SS-86-OOOO8-OO) is gratefully acknowledged.

Table of Contents

Introduction .................................................... l
1.1 Problem statement and research questions ....................... 1
1.2 Outline of the paper ........................................ 4
1.3 Methods and data sources .................................... 4
Background-Beans and bean seed in Honduras ......................... 6
2.1 Bean production in a dualistic context ........................... 6
2.2 Bean seed in Honduras ..................................... 7
2.2.1 Importance of seed ................................... 7

2.2.2 Demand for bean varieties .............................. 9

2.2.3 Supply of bean seed ................................. 11

2.2.3.1 Certified seed suppliers ......................... 12

2.2.3.2 Agricultural development projects ................. 13

2.2.3.3 Informal sources .......................... I . . . 13

2.2.4 Status of bean seed markets ........................... 14
Conceptual framework ........................................... 16
3.] Stages of seed market development ........................... 16
3.1.1 Absent seed market .................................. 16

3.1.2 Emerging seed market ................................ 17

3.1.3 Growth seed market ................................. 18

3.2 Model of bean output and seed markets ........................ 19
3 .3 Hypotheses .............................................. 21
3.3.1 Efi‘ects of a shock on supply and demand in bean markets ..... 21

3.3.2 Farmers’ options and responses in different market contexts . . . 23

3 .3 .3 Effects of interventions in different market environments ...... 24

Bean seed markets after Hurricane Mitch ............................. 26
4.1 Hurricane Mitch and the bean seed market at the national level ....... 26
4.1.1 Effects on seed supply ................................ 26

4.1.2 Effects on seed demand ............................... 27

4.1.3 Effects on seed distribution and marketing ................ 28

4.1.4 Effects on seed prices ................................ 28

4.1.5 Post-Mitch seed interventions at the national level ........... 29

4.2 Description of case study areas ............................... 32
4.2.1 Lempira Sur—Absent seed market ....................... 33

4.2.2 Yorito—Emerging seed market .......................... 34

4.2.3 Danli-Growth seed market ............................ 35

4.3 Effects of Mitch and description of relief interventions ............. 36
4.3.1 Absent market ...................................... 36

4.3.2 Emerging market ................................... 38

ii

4.3.3 Growth market ..................................... 39

5 Results of hypothesis testing ...................................... 42
5.1 Effects of the Hurricane on seed market ........................ 42

5 .2 Farmers’ responses in different market environments .............. 43

5.3 Efi‘ects of interventions in different market environments ........... 44

6 Conclusions and implications ...................................... 47
6.1 Summary of key lessons from the case studies ................... 47

6.2 Implications for policy and future seed programs ................. 48

6.3 Issues requiring further research and limitations of the study ......... 51
References .......................................................... 54
Appendix A ......................................................... 56
. Appendix B ......................................................... 57

List of Figures

Figure 1 Real profitability of maize and beans .................................................................. 7
Figure 2 Distribution of bean production in Honduras, 1993 ........................................ 8
Figure 3 Supply and demand for bean in output markets ................................................. 20
Figure 4 Markets for certified and local bean seed .......................................................... 22
Figure 5 Weekly bean prices .......................................................................................... 29
Figure 6 Case study locations ........................................................................................ 32

iii

1 Introduction
1.1 Problem statement and research questions

In October 1998, Hurricane Mitch hit Honduras, bringing high winds, heavy rain,
and floods that caused‘horrendous human losses and devastated the country’s civil and
economic sectors. The agricultural sector suffered the heaviest damage with large scale
destruction of crops, livestock, land and infrastructure. The heavy losses to maize and
bean harvests were a special cause for concern as these crops are central to domestic food
security due to their role as income generators and food for producers and consumers in
the country. In response to the threat of food insecurity in the rural areas immediately
following Mitch, the government released strategic grain reserves and solicited food aid
imports, while non-profit and relief organizations established food-for-work programs and
food distribution camps. Recognizing the impact that lost harvests had on the supply of
seed, measures were also taken to ensure that farmers would have seed to plant in the
coming primera season. The seed relief programs focused heavily on bean seed, as the late
season (posh-era) bean crops had suffered losses of 50%, and it was feared that shortages
of planting material would delay the recovery of bean production (Global Information and
Early Warning System, 1999).

Many of the emergency seed provision programs also attempted to address
underlying weaknesses in the seed system that were felt to have exacerbated the problem
of seed shortages following the hurricane. These weaknesses included the limited difi‘usion
of improved varieties, deficient systems for seed production and marketing, and the

generally degraded quality of bean seed in many areas.

The arguments for linking relief and development strategies are well documented
in the literature (see for example Cuny, 1983; Anderson and Woodrow, 1991; and
Buchanan-Smith, 1994). Building on this literature, approaches have emerged for creating
programs that address institutional, political, technological, and economic aspects of
populations’ vulnerability to disasters, that recognize the role of shocks in exacerbating
vulnerability, and that encourage the utilization of local capabilities in relief programs as a
means of improving the effectiveness and efi'rciency of relief efforts. There is insumcient
analysis, however, of how disasters afi‘ect rural economies, and how relief strategies in
these economies should vary in terms of their requirements and strategies by which they
can be efl’ectively carried out, especially in communities showing difl‘ering levels of market
development. This gap means that there is insufficient information for use in the
development of a framework for integrating the design of relief strategies into the
processes of economic development so that they integrate with and bolster the larger
developmental process that is occurring in the economy.

Agriculture is an appropriate focus for the development of such a framework as it
is typically characterized by a wide divergence between subsistence-oriented producers
and more commercially-oriented producers, and so manifests a heterogeneity of market
types which are representative of stages in the market development process. Theories on
the development of agricultural markets provide a perspective fi'om which we can consider
relief interventions as an integral part of the larger environment in which market

development takes place.

This paper addresses this research need through the development and application
of a conceptual fiamework for analyzing the effects of a major shock—Hurricane Mitch, on
Honduras’s agricultural sector. While both output and input markets provide appropriate
material for consideration, the problems of relief interventions for input markets have been
little examined and merit attention. Seed markets in particular provide an interesting case
for study as the development of seed markets generally entails a shift in reliance on seed
fi'om local sources to externally-obtained seed, while local systems for seed production
and distribution retain an important role at all stages of development.

Using the case of bean seed markets in Honduras, the paper addresses three

research questions:

- What efl‘ects can we expect, on the basis of economic theory, that a shock
will have on seed supply and demand, and what empirical evidence of these

effects can be found?

0 Does the developmental status of a seed market condition farmers’
responses to a shock’s effects? What do theoretical expectations and
empirical evidence indicate regarding farmers’ options and responses in

seed markets that show differing degrees of development?

- How does the performance of different approaches to seed relief vary

across stages of market development?

1.2 Outline of the paper

The paper first establishes the context for Honduras’s bean seed markets and
characterizes them prior to Honduras Mitch. Next, it presents a conceptual model which
identifies the developmental stages of seed markets, analyzes the determinants of supply
and demand in markets for bean for consumption and seed, and presents hypotheses that
respond to the research questions. In the following section, the hypotheses are tested
using case studies of bean seed markets in Honduras, then results are discussed. The paper
concludes with a summary of the key lessons from the research, implications of the
research results for the design of seed relief interventions in different seed market
environments, and issues requiring further research and limitations of the study are

identified.

1.3 Methods and data sources

The paper draws on literature on post-emergency relief operations and agricultural
market development to develop the theoretical framework and hypotheses. Hypotheses
are addressed through empirical research which was conducted in Honduras during the
summer of 1999, nine months after Hurricane Mitch. The timing of the field research
(which followed the relief seed distribution and primera planting but was before the
primera harvest or subsequent postrera season) did not permit first-hand research to
quantify the results of the distribution in facilitating recovery of bean area and yields.
However the study was appropriately timed to assess the specific research questions

addressed in this paper as the disaster and initial relief activities were past permitting

research on their initial effects, but little enough time had passed for the issues and
information to still be fresh in the minds and experiences of the key informants.

The hypotheses were addressed using a rapid appraisal and case studies which relied
on the collection and analysis of both primary and secondary information. Key informant
interviews were conducted with national level agents in government, the non-
governmental community, and agents in the seed industry; and a survey of the seed
activities of eighteen major agricultural development projects was conducted. The case
studies were implemented in three bean production areas, each of which represented seed
markets at different levels of development. Field research in the case study areas focused
on the collection of data to assess: 1) the status of the local seed market prior to Hurricane
Mitch, 2) the effects of Hurricane Mitch on the seed system, 3) the scope and nature of
seed relief activities, 4) the performance of these relief activities in alleviating the
immediate seed insecurity resulting from Mitch, and 5) the relief activities’ effects on local
seed markets. Qualitative data was collected in each case market area using key informant
interviews of project personnel, community leaders, farmers, organizations that provided
seed in the wake of Mitch, and local input suppliers. A roster of persons interviewed is

provided in Appendix A.

2 Background-Beans and bean seed in Honduras
2.1 Bean production in a dualistic context

According to CADESCA’s Characterization of Honduras ’s Basic Grain Producers
(1990), and consistent with general theory on agricultural development, Honduras’s bean
producers can be characterized as following either a “campesino” or “commercial”
rationale for their production. Campesino production is oriented to the reproduction of the
production unit and household, with the production of basic grains for household
consumption being a primary activity. These farmers tend to be identified with traditional
production practices and limited access to and integration with markets that could catalyze
the transition to a more commercial orientation. Commercial producers, on the other hand,
exhibit strong linkages between the farm and the market for inputs, output, and labor, and
a predominantly commercial orientation to production (CADESCA, 1990). In Honduras,
bean is primarily a smallholder crop, and 70% of Honduras’s bean farms operate under
“traditional” production systems, with less than 0.87 hectares of bean area cultivated each
year, while the average bean area farmed is only 1.06 hectares nationally (Departamento
de Informacion Agricola, 1998).

The expansion of output markets is a crucial catalyst to the development of a
commercial orientation to farming. In Honduras, where demand for beans grew by an
average of 3.4% per year during the 1990s, the profitability of bean production has
increased rapidly and has overtaken other major crops such as maize, as seen in Figure 1.
Expanding output markets create incentives for farmers to invest in productivity-

enhancing inputs and technologies which, in turn, creates linkages with upstream suppliers

of inputs and ancillary services such as credit and farm machinery services. This shift from
more subsistence-oriented production to a commercial focus does not, however, occur
evenly throughout the country, as farmers’ access to these markets is dependent on the
presence of infrastructure and proximity to market areas. Thus, while the profitability of
bean production has been increasing, different regions have responded to varying degrees
to these new market opportunities, with regions that are closer to wholesale markets
showing greater increases in production and productivity compared to areas that are more
isolated. For illustration, the map of Honduras in Figure 2 shows the distribution of
production across Honduras, with marketed-oriented production concentrated in higher
potential areas that are close and well-connected (i.e. by all-season roads) to the major

cities of Tegucigalpa and San Pedro Sula.

2.2 Bean seed in Honduras
2.2.1 Importance of seed

Agricultural intensification through the use of improved varieties is a primary means of

 

Figure 1 Real profitability of maize and beans
(Lempira/hectare)
Source: UPEG, Honduras Secretary of Agriculture and Livestock

 

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increasing the productivity and incomes of small farmers in a sustainable and economically
competitive manner (Cromwell, Friis-Hansen et al., 1992). In Honduras, improved bean
varieties such as T io Condo and Dorado offer high yields and resistance to major diseases
such as the Bean Golden Mosaic Virus, and perform well in the low-input production
systems that are typical of Honduras’s bean producers (Rosas, Castro et al., undated).
Because of their scale-neutrality, potential to increase the yield frontier, and on-farm
reproducibility, improved varieties are considered one of the best means available to
increase the productivity and incomes of small bean farmers, as well as aggregate bean

production in Honduras (Martel, 1998).

2.2.2 Demand for bean’varieties

Demand for bean varieties is influenced by the varieties’ genetic properties (e. g. yield
potential, disease resistance and maturation time) and the presence of characteristics
sought by processors and consumers. There are marked difi‘erences in the performance of
indigenous/local varieties and existing improved varieties with respect to these issues. In
general, improved varieties tend to have advantages in terms of their production
characteristics in many areas of Honduras, with the exception of some specific agro-
ecological niches where they perform poorly relative to local varieties that are specialized
to these niches. Improved varieties can also be preferred by processors, as increasingly
sophisticated urban markets and agri-business processors look for a homogeneous product

which facilitates grading, processing, and marketing. Such demand is not met by bean

produced with most local seed sources that tend not to keep heterogeneous local varieties
separate, leading to considerable variation in appearance within individual bean shipments.

In some cases several of the improved varieties that have been produced in Honduras
have faced price discounts when marketed direct to consumers (i.e. not to processors)
because their color is darker than consumers prefer. However, a 1995 survey showed that,
because the increased yield that these varieties ofl‘ered more than compensated for any
price discounts that existed at that time, farmers’ revenue was not hurt. Accordingly, the
survey found that the use of improved varieties in commercial areas was high (Martel-
Lagos, 1995).

Among subsistence producers, however, the local orientation of production
encourages farmers to grow local varieties that are preferred for their color and cooking
characteristics (Martel, 1998). Potential demand for improved varieties among subsistence
producers in some areas is also limited by the unavailability of improved varieties that are
appropriate to specific agro-ecological environments. This is seen, for example, in some
parts of the Department of Lempira where the mountainous terrain creates agro-ecological
niches in which currently-available improved varieties perform poorly (PROLESUR,
undated).

These factors, along with the curtailed distribution of certified seed of improved
varieties and heavy reliance on informal systems that have limited scope for genetic
improvement, are reflected in the limited use of improved bean varieties in many areas of

Honduras. In some areas, increasing market integration can be a means to increase

10

demand for newer bean varieties that offer a more standard product and ofl‘er yield and
productivity advantages (Almekinders, Louwaars et al., 1994).

The use of improved seed is heavily concentrated in regions with a commercial
orientation to bean production (Martel, 1998). For example, in the Mid-eastern region
which accounts for about 30% of Honduras’s annual bean production, 71% of bean
farmers planted recently released improved varieties. Even within the region, however,
adoption rates are found to be positively correlated with farmers’ proximity to market
centers (Viana et. al, 1997). In contrast to the high use of improved varieties in more
commercial bean production areas, in Lempira Department, where farmers have weak
links to bean markets and limited access to improved seed, only 5% of producers are
estimated to be using improved varieties (PROLESUR, undated). Consistent with the
tendency for larger producers to have a commercial orientation, the use of improved seed
is concentrated among medium (10-50 hectares) and large farmers (>50 hectares),
representing 24% and 46.5% of the area that these farmers cultivate annually. In contrast,
small farmers (less than 10 hectares) sow less than 5% of their bean area with improved

seed (CADESCA 1990 p.70).

2.2.3 Supply of bean seed

Two organizations are involved with developing improved bean varieties in Honduras.
These are the Escuela Agricola Pan-Americana (a.k.a. Zamorano), an agricultural
university with a mandate in bean breeding, and the Secretary of Agriculture’s National

Bean Program. The seed of promising new varieties is distributed by these organizations,

11

commercial seed suppliers, and governmental and non-governmental agriculture
development projects. The slow diffusion of improved bean varieties and other
productivity-enhancing technologies has been cited as a major constraint to improvements
in bean production in Honduras (Martel and Bemsten, 1994; Bemsten and Mainville,
1998).

Farmers acquire seed through three main channels: Suppliers of certified seed,
public and non-governmental (N GO) agricultural development projects, and informal

sources such as local grain merchants and seed saved from harvests.

2.2.3.1 Certified seed suppliers

The two major commercial producers of certified bean seed are Zamorano which
multiplies seed of the varieties it has developed, and Hondugenet, a private company that
produces and markets seed of basic grains and bean. These two organizations produce
approximately 70% and 30% respectively of the 200 tons of bean seed that is marketed
annually, utilizing both their own land and contract farmers to grow seed. This seed is sold
to individual farmers and agricultural development projects from Zamorano and
Hondugenet’s processing facilities at prices approximately double the market price of
beans for consumption. Hondugenet also distributes through a limited number of input
retailers. Prior to Hurricane Mitch, seed was only marketed in 50 lb. bags, although the
post-Mitch relief effort, which was targeted to small farmers via distribution through
agricultural development projects, led to seed being packaged in 10 lb. bags, a change

which is expected to persist. The limited commercial distribution of certified seed, its

12

price, and until recently the large packages, are issues on the supply side that have severely

hampered the use of certified seed by small farmers.

2.2.3.2 Agricultural development projects

In addition to the two large marketers of certified seed, non-governmental and public
agricultural development projects provide seed to farmers by purchasing and then
redistributing certified seed, by multiplying their own seed, or by promoting local artesanal
seed projects. These seed provision initiatives are generally not based on cash sales due to
farmers’ economic constraints. Instead they utilize credit agreements (cash or in-kind), or
introduce seed into rotating funds that require farmers to return an equal or double

amount of the seed received after harvest for subsequent redistribution.

2.2.3.3 Informal sources .

Informal sources, including farmer-saved seed, seed from neighbors, and the grain
market, are the most important source of seed for farmers (in terms of the bean area
sown). When farmers seek seed fi'om local sources beyond their farm, exchange is
generally made on the basis of social relations or at prices at par with beans marketed for
consumption, making it an affordable source of seed. However the yield potential of seed
obtained from local informal sources is typically low due to varietal mixing and
degradation and the transmission of seed borne diseases. In agricultural zones for which

appropriate improved varieties have been developed, limited difi‘usion and the continued

13

prevalence of traditional varieties that are low-yielding and vulnerable to local pests

severely constrain improvements to bean productivity.

2.2.4 Status of bean seed markets

Honduras’s bean seed markets generally shows low levels of development due to
constraints in supply, demand, and marketing and distribution.

Prior to Hurricane Mitch, the distribution of certified bean seed was concentrated in
the areas of more commercial bean production, and its marketing was oriented to larger,
commercial farmers. The lack of competition in the provision of certified bean seed is
reflected in a heavily concentrated and centralized bean seed supply.

Recent analyses have identified deficiencies in the production and
marketing/distribution components of the bean seed system as among the key factors
limiting the diffusion of improved varieties to Honduran farmers (Bemsten, 1998; Martel,
1998). Current low demand for improved seed and high risk in seed marketing constrain
private incentives to market seed commercially or otherwise invest in developing markets
that show weak demand. These disincentives arise in part due to the structure of the bean
subsector in which the bulk of production is carried out by large numbers of
geographically-dispersed small farmers who have limited access to commercial seed
suppliers, while also lacking information about new varieties and the benefits of improved
seed.

In some areas of the country, demand for certified seed is firrther limited by farmers’

preferences for seed fi'om local sources which they prefer because they are able to observe

14

the performance of the source crop in the field, and because the social, non-profit nature
of local exchange minimizes the risk of opportunistic behavior on the part of the seed
provider.

In recognition of the constraints to seed markets, many agricultural development
projects have undertaken their own activities to multiply and distribute seed to beneficiary
farmers. Generally these projects have the objective of improving bean productivity by
upgrading degraded seed stocks and increasing the difl’usion of improved varieties (V iana
Ruano, 1998). A survey of major agricultural development organizations with bean seed
projects indicates that these activities most commonly involve either revolving seed firnds

or artesanal projects, although projects with commercial focuses have recently gained

popularity.

15

3 Conceptual fi’amework
3.] Stages of seed market development

Seed system development is addressed extensively in the literature (see for example,
Douglas, 1980; Pray and Ramaswami, 1991; Jafl‘ee and Srivastava, 1992; Rusike and
Eicher, 1997; Morris, Rusike et al., 1998; Maredia et al. 1999). This section draws from
the literature to build a three stage model of seed market development and link the

developmental stages to the status of output markets for beans.

3.1.1 Absent seed market

The earliest stage of seed system development is commonly referred to as the
traditional stage in seed system literature, and is characterized by an absent seed market.
Here, farmers mainly produce crops for subsistence, although they may market their
incidental surpluses. In addition, infrastructure and input and output markets are
underdeveloped. Farmers have little familiarity with improved varieties or external sources
of seed and rely almost exclusively on the informal seed system for their planting needs.
Furthermore, the lack of an expanding output market inhibits investment into productivity-
boosting inputs such as improved seed, leaving little incentive for commercial firms to
market seed in these areas. Projects to strengthen seed security in an absent market
environment ofien rely on non-market solutions such as injecting seed of new varieties
into the informal system (Thiele, 1999) and improving local capacities for seed selection
and storage, while strengthening linkages to the formal sector for inputs such as new

varieties and technical assistance (Almekinders, Louwaars et al., 1994).

16

In areas where incentives for investment into commercial bean production have
increased due to growth in market demand, productivity increases may be constrained by
the limited adoption of improved varieties. Here, the failure for a seed market to emerge
may be a result of the low exposure of farmers to the benefits of improved seed. In such
instances, market development efforts should focus on increasing farmer exposure to the
benefits of improved seed, while simultaneously strengthening local capacity to multiply
and distribute new varieties. By expanding the awareness of the benefits of improved seed,
these efforts can lay the foundation for a willingness to pay for seed. This in turn, if
combined with expanding derived demand for bean seed due to a dynamic output market,
will help to induce commercial investment and allow a more dynamic seed market to

emerge.

3.1.2 Emerging seed market

The second stage of seed market development is characterized by an emerging seed
market. This stage is observed in areas where market opportunities motivate the
production of bean in excess of local needs, thereby inducing farmers to use productivity-
enhancing inputs including improved seed. The availability of a profitable output market is
crucial to the development of dynamic commercial input markets as it determines both the
volume and types of seed that farmers demand, and thus the incentive to supply seed
commercially (Rusike and Eicher, 1997; Tripp, 1997). At this stage, however, the
expansion of the seed market may be impeded by farmers’ unfamiliarity with the benefits

of improved seed. In addition, farmers’ unfamiliarity with commercial seed sources may

17

make them reluctant to abandon customary local informal sources which are more familiar
and trusted. In contrast to commercial seed sources, local, socially-delineated exchange
relationships minimize the risk of opportunistic behavior on the part of the seed provider.
Strategies to promote the expansion of emerging stage seed markets emphasize
developing. institutions, such as quality certification programs, that reduce the transactions
costs1 of commercial seed exchange (Tripp, 1997), and increasing farmers’ exposure to
the benefits of improved seed, for example through community-level demonstration plots.
On the supply side, the low level of market demand continues to inhibit commercial
investment in seed provision which serves to perpetuate the cycle of low exposure and low
demand among the farmers. Thus, it is necessary to increase the availability of quality seed
locally to increase farmers’ exposure to and willingness to pay for the seed, and stimulate

the development of the seed market.

3.1.3 Growth seed market

The third stage of seed market development is referred to as the growth stage. At this
stage, farming systems characteristically have a predominantly commercial orientation, and
farmers commonly use packages of purchased inputs including certified seed of high-

yielding varieties. Farmers are therefore familiar with a variety of seed sources, including

 

‘ Transactions costs include the costs of searching for alternative seed sources, obtaining
information on their product, negotiating a contract with the seller and seeking
recompense if the product is faulty. Iffarrners incur very high transaction costs in
acquiring seed fi'om unfamiliar sources (i.e. commercial sources of certified seed), then
these costs can overcome the productivity benefits of using improved seed, making it
more economical to continue using less productive, local seed, whose acquisition
involves lower transaction costs (Rusike and Eicher, 1997).

18

commercial input suppliers as well as the local sources that they have customarily used.
Because non-profit organizations often take a role in promoting development at the earlier
stages, the transition to the growth stage and a larger role for the private sector can
potentially be inhibited by the failure of the non-profit sector to adapt their role to one of
facilitation of the market rather than direct provision. At the same time, however, there
may be a lack of competition in the seed industry as new firms haven’t yet had a chance to
enter and compete. Strategies to relax these constraints involve encouraging competition
and promoting commercial investment in input supply, and include a role for non-profit
(public and non-governmental) organizations in ensuring that institutions are in place (e. g.
certification, labeling guidelines) that decrease the transactions costs in exchanges between

farmers and seed dealers.

3.2 Model of bean output and seed markets

This section presents a simple conceptual framework of supply and demand in bean
seed and output markets, and the linkages between these markets. Figure 3 shows supply
and demand in markets where beans are marketed for consumption. Here, bean demand
(Db) is a firnction of a vector of prices (P) for beans as well as complementary and
substitute goods, consumers’ incomes (Y), and other demand shifters (N) such as
consumer preferences and population. Bean supply (S) is a function of a vector of output
and input (production and marketing) prices (P) and other exogenous supply shifters such

as weather and quasi-fixed capital (X).

19

Bean demand: D = f (P, Y, N)

Bean supply: S = f ( P, X)

 

Figure 3 Supply and demand for bean in output markets
P S
D

 

 

 

 

 

Supply and demand in the market for bean seed is directly influenced by the output
market. Given the possibility of acquiring seed fiom either local sources, including grain
markets, or commercial sources, the supply of bean seed (S) is a firnction of a vector of
prices (P) that includes the bean market price (for local seed) and the commercial seed
price and costs of seed production, inputs, and marketing, as well as exogenous supply
shifiers (X) such as quasi-fixed inputs and weather. Demand for seed (D) can be
differentiated between demand for commercial (D,) or local CD.) seed, and is a function of

the vector of bean output and input prices (P) which determine the profitability of bean

20

production and include the relative costs of acquiring seed fi'om competing sources (local
markets or conunercial), the ability to demand seed (Y) which is determined by farmers’
incomes or access to working capital, and exogenous shifters (N) including farmers’
perceptions of the quality of the seed and its appropriateness to their production systems.
i As shown in Figure 4, the demand curve for commercial seed shows a kink at the
point where commercial seed prices rise above the price of its main substitute, local bean
(Wiggins and Cromwell, 1995). At this point, because certified seed must compete on
quality attributes alone rather than price and quality, the demand curve becomes more
elastic. On the other hand, The demand for local seed is quite inelastic as the volume of
commercial seed that is marketed is small relative to the total quantity of seed planted.
Thus substitutes are limited and higher prices in the output markets do not push down
bean demand because they increase the incentive to cultivate bean for home consumption

or sale.

3 .3 Hypotheses
3.3.1 Effects of a shock on supply and demand in bean markets

A disaster like Hurricane Mitch, which has pervasive effects on the resource base,
economy, and civil structure, will affect seed and output markets for beans in numerous
ways. These effects will be manifested through shifts in the supply and demand curves for
bean seed and bean for consumption. Together, the effects of a shock on supply and
demand will alter the quantities and prices of bean and seed that are traded and the ability

of farmers to purchase seed to replenish their own planting stock.

21

 

 

 

 

Figure 4 Markets for certified and local bean seed
3
1 sc
\ 8]
Dc
Dr

 

 

 

Shocks to harvests, food markets, and infi'astructure will shift the supply curve for
commercial and local bean seed inward. Farmers, accustomed to saving seed from their
harvests or acquiring it from neighbors or local grain markets, will be forced to respond by
acquiring seed fi'om alternative sources (such as commercial input suppliers that sell
certified seed), paying more for seed fi'om their customary sources, and/or by reducing
their consumption of bean seed by decreasing the area they plant or their seeding rates.

A disaster will also generally cause a demand-side shock by reducing farmers’ effective
demand for seed thereby shifting the demand curve inward. Farmers’ efi‘ective demand is

reduced due to losses to income that result from the disaster, for example lost revenue due

22

to the loss of a crop or a job, or the need to make emergency expenditures after the
disaster, such as for housing repairs, food purchases, etc. (Hammerton, Calixte et al.,
1984). The effects of a shock on consumers’ and producers’ incomes will also afi‘ect
demand for seed, by affecting derived demand for bean seed and by affecting farmers’
ability to afford seed purchases. These effects will be observed as inward shifts in demand

for seed from both local and commercial sources.

3 .3 .2 Farmers’ options and responses in different market contexts

Farmers options and decisions on how to respond to a supply or demand shock will be
influenced by the developmental status of the seed market (Almekinders, Louwaars et al.,
1994). In markets that are more advanced in their development, so that farmers have
stronger market linkages, farmers are expected to have greater access to and capacity to
use alternative seed sources when their customary local sources fail. At lesser levels of
market development, farmers are expected to have decreasing access to and awareness of
alternative seed sources, and less capacity to accommodate demand shocks by transferring
their demand for seed to alternative sources.

For example, given a supply shock in a growth stage market, the unavailability of local
seed will cause an increase in demand for seed fiom commercial or other formal sources.
In contrast, in the emerging stage seed market environment, given the lack of familiarity
with alternative sources of seed, farmers are likely to reduce their bean area as a result of a
shock despite the possibility that seed is physically available and accessible fi'om other

sources. Likewise, farmers in an absent stage seed market will have the least familiarity

23

with and access to alternative sources of seed. Lacking effective interventions to mitigate
these efi‘ects, they are most likely to reduce their use of bean seed after a shock until
stocks recover locally.

Similarly, the implications of a demand shock will differ among markets that are at
different stages of development. In a growth stage market, it is expected that linkages to
outside markets and the presence of markets for credit, as well as the likely greater
financial'security of farmers in such markets, will help farmers recover from demand
shocks by allowing them to borrow or tap into savings or other wealth stores to make
necessary purchases of seed.

In the emerging and absent seed market environments, however, it is expected that
farmers’ strategies to recover fi'om a demand shock will necessarily be more reliant on
local systems. The use of local networks based on social relations to lessen the effects of a
seed shortage may be adequate if not all households in a community suffer losses, but may

be insufficient if the shock affects the entire community severely.

3 .3 .3 Effects of interventions in different market environments

Relief seed interventions attempt to reverse the effects of supply and demand shocks
to the seed system by a variety of methods. Specific interventions can be characterized as
lying along a spectrum of relief activities ranging fiom those that act directly to mitigate
the supply or demand shocks to those that rely on less direct, more market-based
activities. Different approaches will have differing effects on the seed market. For

example, on the supply side, distribution of bean for consumption as part of a food aid

24

package is a non-market intervention. Yet, it afi’ects the local price of bean in the market
even if the bean that is distributed itself can’t be planted because of uncertainty about its
variety or quality. Alternatively, strategies that release bean seed can rely on the market to
varying degrees depending on whether the seed is distributed direct to farmers or through
seed dealers. On the demand side, in-kind vouchers that permit farmers to acquire seed
fi'om local dealers or the provision of credit for agricultural inputs, including seed, also
have varying degrees of reliance on the market versus direct intervention.

The appropriate intervention will depend in large part on the developmental status of
the market. In general, it is hypothesized that farmers in markets that are more developed
(i.e. the growth market) will be aided most and see the least disruption in their existing
systems through market-oriented interventions. In contrast, farmers in progressively less-
developed seed market contexts will have their needs met most efficiently and effectively

through more direct, non-market strategies such as provision of seed direct to farmers.

25

4 Bean seed markets after Hurricane Mitch

Hurricane Mitch, which passed over Honduras between the 28" and 31" of October
1998 devastated the country’s productive sector, infrastructure, and civil sector. The
heaviest damage, in terms of the value of damages and cost of reconstruction, fell to the
productive sector, which sustained 70% of the Hurricane’s damage. Within the productive
sector, agriculture was the worst affected as the heavy rains, high winds, and floods
destroyed crops, killed livestock, and severely afl’ected the'land base and production and

marketing infiastructure.

4.1 Hurricane Mitch and the bean seed market at the national level
4.1.1 Effects on seed supply

The bean crop sufi‘ered heavily as the catastrophe occurred just prior to the postrera
(August to November) harvest, which normally accounts for 65% of the country’s annual
bean production. Approximately 50% of the season’s production was lost, with regional
losses reaching 80% in the Southern, Atlantic Coastal, and Northern regions. The
accumulated impact has been estimated at a 35% reduction in bean output for the 1998/99
crop year (Global Information and Early Warning System, 1999).

Interviews with key informants at the national level indicated that the bean crop losses
severely reduced the availability of seed for farmers to plant. The availability of seed fi'om
farmers’ harvests was decimated, and the beans that were harvested tended to be of very
poor quality due to excessive humidity. F armers’ most common alternative to their own

saved seed, the grain market, was also severely afi‘ected by the crop losses. The

26

importance of the postrera harvest to national bean production and the loss of the crop
meant that there was a bean shortage in the market, resulting in increases in wholesale
bean prices in the period immediately following Mitch. These high prices persisted until
the government was able to take ameliorative action through the release of strategic
reserves and imports. Though this helped to relax the shortage of bean on the consumer
market, it did little for the seed situation as the bean that entered the market through grain
reserves was not necessarily fresh enough for planting, and the imports were frequently of
types or varieties unknown to farmers. For example pinto beans were distributed for
consumption as a substitute to the red beans that are customarily cultivated and consumed
in the country.

Apart from the losses to harvests and shortages in grain markets, production of
certified seed was also affected by Mitch. Although figures are not available to estimate
losses to commercial bean seed growers, it is anticipated that they likely matched those of
other bean growers in the areas where they were produced, and resulted in a severe

economic loss for bean seed growers.

4.1.2 Effects on seed demand

At the national level, the efi‘ect of Mitch on seed demand was manifested by a shift
away from dependence on grain and local seed markets (which were suffering seed
shortages) to greater reliance on national grain and commercial seed markets. For the
most part, this shift in demand was not accounted for by individual farmers. Instead, it was

the result of the actions of the NGOs and other rural and agricultural development

27

projects that attempted to acquire seed for their constituent farmers, resulting in a
cumulative surge in demand. Though the economic losses that Mitch occasioned
throughout the country were severe, the organizations’ ability to buy seed was not itself
compromised due in large part to an influx of relief funds that were in many cases

earmarked specifically for emergency seed provision.

4.1.3 Efl’ects on seed distribution and marketing

The shift in seed demand meant a change in the distribution channels for bean seed.
The large scale efi‘ort to acquire bean seed on the part of agricultural projects meant that
seed was diverted from the commercial distribution channels, and thus no longer available
to individual commercial farmers from their customary outlets. This was the case for seed
produced by both Zamorano and Hondugenet (Martinez, 1999; Moncado, 1999). A
firrther change that was seen due to the shift in distribution from larger commercial
farmers to smallholders was that the seed quantities that were packaged in individual bags
were reduced fi'om 50 pounds to 10 pounds (by Zamorano) or 25 pounds (by other
organizations such as the International Center for Tropical Agriculture (CIAT)) in order

to more closely match seed quantities with smallholders’ bean seed needs.

4.1.4 Effects on seed prices
Significant fluctuations in bean prices were seen in wholesale markets, due first to the
crop loss and subsequently due to the release of reserves and food aid. This is shown in

Figure 5 which compares bean prices in 1998 to average prices in 1996-97, and shows a

28

sharp increase in prices in November, at a point when the postrera harvest would normally

be causing prices to decline. Despite the price fluctuations, and despite the large increases

 

 

Figure 5 Weekly bean prices (lempirallb)

 

 

 

-e— 1 99617-199718 Arerage
—e— 1998/9

 

 

 

 

 

 

 

 

 

 

 

 

may,» @§:& §&@3}ff;f§

 

 

in demand for certified seed, prices for certified bean seed did not change significantly in
the aftermath of Mitch. This was because of an unspoken commitment of the major
producers, Zamorano and Hondugenet, to maintain stable prices in order to avoid
speculation and to facilitate the accessibility of seed to farmers who had been adversely

affected by Mitch.

4.1.5 Post-Mitch seed interventions at the national level
Following Mitch, the response of development organizations undertaking relief
activities and the major seed producers was largely oriented towards increasing the

accessability of bean seed to farmers to speed their recovery, and also involved longer

29

term investments to mitigate the seed system weaknesses that were perceived to have
caused the initial vulnerability to the seed crisis.

Both Hondugenet and Zamorano, as well as several NGO and public development
organizations that had their own seed projects, increased their production of improved
seed so that quality bean seed would be available to farmers for the primera (May to
August) planting. Zamorano and CIAT provided seed to agricultural development
organizations for distribution to farmers in their constituent communities throughout
Honduras. Immediately after Mitch, many projects also bought beans from local markets
in order to retain local varieties for use as planting material rather than consumption. The
Secretary of Agriculture also responded by temporarily loosening marketing requirements
for seed, allowing the sale of seed that had only undergone laboratory tests for
germination rather than requiring that seed producers comply with the entire certification
process as is normally required.

The acute seed crisis that Mitch caused also brought to the forefront the issue of the
underlying weaknesses in the seed system, namely the reliance on two major producers
and chronic under-supply of seed, matched by poor a capacity to produce and market bean
seed at the local levels. A widespread response on the part of the development projects in
rural areas, as well as some of the larger organizations such as Zamorano and CIAT was
to support the creation of local seed enterprises and/or rotating seed firnds. In order to
decentralize the seed supply and increase local self-reliance in seed. Nascent seed
enterprises and rotating seed funds have benefitted from the distribution of certified seed

that took place after Mitch, as this distribution has served as an initial injection of capital

30

into the projects. The new projects have likewise increased the impact of the post-Mitch
distribution by requiring redistribution of second generation seed among farmers who did
not benefit fi'om the initial distribution.

At the national level, three benefits of the relief seed distribution are popularly
recognized, though not yet formally quantified. The first benefit was the alleviation of seed
shortages—an estimated 25,000 Honduran smallholders, representing more than 20% of
Honduras’s bean farmers received seed in the initial distribution? Typically organizations
distributing the seed stipulated that farmers must return seed (an amount equal or doublt
to what they received) for redistribution to other farmers, thus increasing the coverage
significantly for the postrera planting.

The second benefit has been the increased diffirsion of improved varieties, especially
Tia Canela which was the target of the certified seed distribution. While a formal study of
adoption has not yet been carried out, key informant interviews with agencies distributing
seed indicated that many were using the distribution as an opportunity to increase
difi‘usion of the variety, and that it was well accepted by farmers at the time of the
interview (partway through the primera planting season). Third, the genetic and
physiological quality of farmers’ seed stocks were boosted by the infusion of fresh seed of

improved varieties.

 

2 This estimate is based on estimates by Zamorano and CIAT of their initial seed
distribution. Zamorano distributed 10 pound bags of seed through projects to
approximately 20,000 farmers, while CIAT estimates that their distribution in the
primera season benefitted approximately 7,700 farmers (Ignacio Sanz, 1999). The
estimate is scaled down slightly, based on the fact that some NGOs were unable to
distribute seed in time for the primera planting due to the vagaries of local planting
seasons among their constituent communities and some production delays that set back
distributions fi'om Zamorano.

31

Despite the general enthusiasm over the results of the post-Mitch seed distribution, an
analysis of how these relief activities interfaced with existing seed markets at the sub-
regional level and at different stages of development as outlined in the research questions
is lacking. The paper now turns to this question beginning with an introduction to the case

study areas that were the subject of the empirical research.

4.2 Description of case study areas

The location of each case study area is indicated on the map in Figure 6.

 

Figure 6 Case study locations Lempira Sur, Yorito,

Aflénfida
Grades

Olancho

 

‘ " 3““!- _": ' .
g"; s'
"fiat: r535“:

s. .-' ,. ,4,

. I};

 

 

 

 

32

 

‘0‘

4.2.1 Lempira Sur—Absent seed market

Southern Lempira (Lempira Sur) is a mountainous region in the Southwest of the
country whose economy is heavily dependent on subsistence agriculture as well as the
commercial production of cattle, coffee, and basic grains (maize, beans, sorghum). As the
region with the highest incidence of poverty, malnutrition and illiteracy, Lempira Sur has
been the focus of activities of a number of development organizations including the Food
and Agriculture Organization’s Proyecto Lempira Sur (PROLESUR).

Lempira Sur is characteristic of the absent seed market. Bean production in the
mountainous region is dominated by traditional production systems and small bean parcel
sizes (averaging 0.55 ha.). Production is largely oriented to home consumption, with an
average of 46% of bean output sold (Martel-Lagos, 1995). Although there is a lucrative
bean market in neighboring El Salvador, access to this market is constrained by the lack of
a road to the border. Farmers wishing to sell beans must use pack animals for transport,
requiring several hours to reach the market and limiting the volume that can be marketed.
For farmers in this area, wholesale markets elsewhere in Honduras are likewise dificult to
access, due to the mountainous terrain and rough, unpaved road linking Lempira Sur to
these markets.

Farmer adoption of improved seed in Lempira Sur has been very low, with less than
5% of bean area planted to improved varieties (PROLESUR, undated). While, low
adoption is largely attributed to the stagnant demand in bean markets, in some of the
higher elevation agro-ecological niches, low adoption is also attributed to the

unavailability of improved varieties with short maturation periods. A further disincentive

33

to the adoption of existing improved varieties is that some of the available improved
variety beans (e. g. Dorado) are discounted in the El Salvador market due to their color
which is slightly darker than traditional varieties which consumers prefer. Due to these
limitations, farmers acquire bean seed almost exclusively fi'om their harvest or the local
grain market. Furthermore, productivity has been constrained by seed stock degradation

and varietal mixing (PROLESUR, undated).

4.2.2 Yorito—Emerging seed market -

Yorito, Yoro, is characteristic of the emerging market. Located in the Northern
region of the country, Yoro accounts for ahnost 10% of Honduras’s yearly bean output,
with production on bean plots that average 0.9 hectares. While a dynamic output market
exists in Yoro, (wholesalers from San Pedro Sula travel to the area to purchase beans at
harvest time), improvements to bean productivity have historically been limited due to
agro-ecological constraints which limit the productivity of local varieties and the seasons
in which beans can be sown. Farmers in the area plant local varieties almost exclusively,
and rely almost solely on local seedsources. Farmers prefer these sources because they are
familiar with the varieties that are available through them, have an opportunity to see the
quality of the crop that produces the seed, and prefer the terms of exchange (i.e. exchange
at local market prices or loan of seed) that neighboring farmers ofi‘er.

' In areas where they have been introduced, new varieties such as T to Canela have been
widely accepted. However, farmers’ limited awareness of these varieties has slowed

diffusion, and has inhibited the grth of demand for the varieties despite their potential

34

benefits. At the same time, despite some use of commercial inputs by farmers and the
presence of local input retailers, farmers report that they are reluctant to utilize alternative
seed sources such as commercial input dealers because of concerns over the risk of
acquiring varieties whose performance they have not seen and whose genetic and

physiological quality is unknown.

4.2.3 Danli—Growth seed market

Danli, El Paraiso, located in the Mid-Eastern region of Honduras, is representative of
the growth market environment. Together with the Department of Francisco Morazan, El
Paraiso accounts for approximately 30% of Honduras’s annual bean output. In this area,
approximately two-thirds of the bean area is cultivated under production systems that use
a combination of commercial inputs, improved seed, and mechanized land preparation
(Departamento de Informacion Agricola, 1998).

In the Mid-Eastern region, beans are grown in both the valleys and on hillsides and on
relatively large acreage (average 1.25 hectares relative to a national average of only 0.86
ha.) (Martel-Lagos, 1995). Most farmers utilize modern, capital intensive production
systems, characterized by high rates of commercial input use, mechanized land preparation
(when parcel size and terrain pemrit), and the use of improved varieties. In 1995, an
estimated 71% of farmers in the Department of El Paraiso planted improved varieties
(Viana, et al, 1997).

Concordant with the commercial orientation of the area, Danli is well attended by

agricultural services. Besides being the headquarters of the National Bean Program which

35

breeds, multiplies and distributes bean varieties, the commercial orientation of production
supports a competitive input industry which provides farmers easy access to machinery
services, chemical inputs, and improved seed. .

While the primary source of seed planted in Danli comes from local harvests, farmer
appreciation of the benefits of improved seed is high. Farmers report that they are willing
to pay for commercial seed to meet their demand for fresh seed stock and to purchase
seed when it is notavailable locally due to local shortages. Although the actual number of
farmers who purchase certified seed is low, input suppliers in Danli are still an important
seed source. This is because it is common for farmers who purchase from commercial
dealers to supply second generation seed to other farmers in the community, allowing

them to freshen their seed stocks without paying commercial prices.

4.3 Efl‘ects of Mitch and description of relief interventions
4.3.1 Absent market—Lempira Sur

The Western region, which includes Lempira Sur, lost approximately 50% of the
postrera bean crop due to Mitch (Global Information and Early Warning System, 1999).
In the Lempira Sur area specifically, however, Mitch losses were estimated at only 20%,
largely due to the soil conservation methods that farmers use which reduced the impact of
the rains (PROLESUR, 1998). Because of the relatively minor extent of crop losses due to
Mitch, efl‘ects on farmers’ and consumers’ efl'ective demand was minimal and localized.
Thus there was no generalized seed insecurity crisis after Mitch in Southern Lempira

(Alvarez Welchez, 1999).

36

In the period following Mitch, the primary relief interventions for grain consumption
markets involved facilitating private purchases and the shipment of grain to deficit areas
elsewhere in the country, and to ensuring that localized grain and seed deficits were met.
After an assessment of area crop losses and food and seed needs, PROLESUR assisted
local merchants in arranging the transport of maize and bean to the northern region of the
country (which was facing shortages) for use as seed and food, as well as distributing to
deficit areas locally. While leaving the transport and marketing of the grain to private
agents, PROLESUR also purchased some maize and bean which they classified for use as
seed. Through the competitive prices they ofl‘ered on these transactions, PROLESUR
ofl‘ered competition to the nriddlemen and helped ensure that farmers would receive some
of the benefits of the higher prices that were being ofi‘ered in wholesale markets.

At the same time, PROLESUR distributed the seed that they had classified to local
communities that were facing deficits. Though deficits weren’t pervasive, the project’s
distribution of seed among the communities at this point was used not only to address
short term seed needs, but also to capitalize rotating seed and input fimds in many of these
communities in order to enhance longer-term local seed security. The increased solidarity
that emergencies can stimulate in communities'was cited by PROLESUR as being

instrumental in their decision to invest in such long term measures at this particular point.

37

4.3.2 Emerging market—Yorito

In the Yorito area, Mitch caused bean crop losses of greater than 80%, and the little
been that was harvested was of very poor quality and would not germinate (Global
Information and Early Warning System, 1999). There was also extensive damage to the
maize crop and cofl‘ee harvest, and severe destruction of housing and roads. The loss of
much of the bean crop directly reduced the supply of beans for consumption and seed.
Furthermore, farmers and project personnel in the area reported that the crop losses,
economic losses and immediate rehabilitation and emergency expenditures on housing
repairs, food, etc. incurred by area households lefi them with neither the resources nor the
opportunity to save or acquire bean seed for the primera planting.

The main bean seed intervention following Mitch was the provision of seed (provided
by Zamorano and CIAT) to several local agricultural projects. This seed was distributed to
organizations that then distributed the seed to their constituents via community-level
agricultural research committees. The seed was distributed with the stipulation that
farmers return equal or double the amount they received to the committees for
redistribution to other farmers for the postrera planting. The extent of coverage within
each community varied widely, as did the farmers’ familiarity with Tia CaneIa, the main
variety that was distributed. For example, in one community where improved bean
varieties had never been used, Tia CaneIa was supplied to every family in the community.
In another, roughly l/6 of the farmers received seed.

Apart from the seed that was distributed directly to farmers for planting, a portion of

the relief seed was also used to capitalize new seed production enterprises in two

38

communities, with the intention that these enterprises would be a continued source for the
improved seed and the specific variety that was being introduced to farmers through the
relief distribution, as well as a channel for the diffusion of new varieties in the firture.
Farmers reported that besides helping to ease the supply constraint and compensate for
their lack of finance to purchase seed, the post-Mitch distribution also provided an
alternative source of seed that they could look to in the fiiture when they might face seed
shortages or need to freshen their seed stock. Here, given their almost complete reliance
on local, informal seed sources and unfamiliarity with commercial seed sources and seed
coming fi'om outside the locality, transaction costs were a very significant barrier to
farmers in seeking out alternative sources of seed. Thus, the local enterprises were
regarded with optimism as it was felt that they might fill an important market niche by
being able to supply competitively-priced, commercial-quality seed while having the
advantage of being local which would help them to gain the confidence of area farmers

who were potential clients.

4.3.3 Growth market—Danli

In El Paraiso, approximately 50% of the bean crop was lost (Global Information and
Early Warning System, 1999), and farmers reported losses of up to 80% in Danli, the case
study area chosen as representative of the grth market for seed. These losses afi‘ected
both the hillsides and valleys, and were accompanied by soil losses as a result of erosion

and flooding brought on by the heavy rains.

39

After Mitch, improved bean seed was distributed through local NGOs, extension
services, and the National Bean Program to farmers for the primera planting, with the
intention that it be multiplied and redistributed for the main bean season, the postrera.
There was also a credit program. ofl'ering short term loans at a rate of 15% for the season
(or 30% per year) to help finance farmers’ primera planting expenditures (e. g. land
preparation and input packages, including the restocking of bean seed). However, the
availability of credit through this program was quite limited and, according to farmers,
there was not suflicient finance available for all farmers who sought it.

In Danli, the commercial orientation of bean farmers meant that the loss of the bean
crop represented not only the loss of a food and seed source, but that it was also a severe
financial set back which significantly afiected their ability to finance cropping activities in
the primera, Farmers’ reflections on the destruction of the bean harvest and subsequent
loss of revenue fiom bean sales centered around their dependence on it as a source of
finance for their planting in the primera, not only so that they could replenish their seed
stock, but also for hiring machinery services and purchasing chemical inputs which play an
important role in their production systems.

From the viewpoint of Danli’s farmers, the loss of the seed source was a secondary
issue relative to the financial crisis caused by the loss of the bean harvest. While farmers
generally use seed that they save from a previous harvest or acquire it from neighboring
farmers, the widespread local losses curtailed both these options. Demand then shifted to
commercial markets for seed, increasing demand for certified seed for those who could

afl‘ord it. The markets, however, had little seed to offer at this point due to the diversion of

40

commercial-quality seed to the relief agencies which were active in seed relief activities
elsewhere in Honduras.

Locally, the relief activities of the agricultural development projects that distributed
seed to farmers helped to mitigate the shock to seed availability. Apart fi'om serving to
reduce the threat of seed insecurity, it also altered the channels of seed distribution, away
fiom the market to distribution through non-profits. These channels were also altered at
the community level, shifting the flow of seed fiom the farmers who were known to
purchase commercial seed and provide second generation commercial seed to other local
farmers, to farmers who were clients or otherwise connected to the development projects.
It was not clear, however, that these farmers were not in many cases one and the same, or
that the overall distributive impact differed significantly as a result of this change.

Other effects of Mitch in Danli included the temporary loss of local and improved
varieties. Some farmers reported that they were unable to obtain the local varieties that
they would have planted in the primera though they anticipated that by the postrera these
would again be available locally. While the availability of Darada and Arbalita, the most
common varieties planted in the area was not curtailed (as a variety—the quantity available
was of course affected), the newest variety to have been officially released, Tia Canela,
had just been making in-roads in the region and was lost among some farmers’ fields.
Again farmers anticipated that by the postrera this variety would once again be available in

the area.

41

5 Results of hypothesis testing
5.1 Effects of the Hurricane on seed markets

In Seetion 3, it was hypothesized that a disaster such as Hurricane Mitch would afl’ect
seed markets by shifting supply and demand, thus altering the availability of bean seed, the
prices at which it is available, and the ability of farmers to acquire it in the marketplace.
This result was evidenced both nationally and in the case study areas, as indicated by post-
Mitch damage assessments and key informant interviews during the field research period.
Both the supply and demand predictions were generally observed, though in national
markets predictions of increased prices for commercial seed and seed shortages were not
borne out due to the efforts of Zamorano and Hondugenet to administer prices and hold
them constant after the Hurricane. In addition, Zamorano initiated a large-scale dry season
planting of seed under irrigation to increase the supply of commercial-quality bean seed
for distribution for the primera planting. Finally, while the expected increase in demand
for commercial quality seed at the national level did occur, it was less a result of farmers
shifling their demand to commercial markets than it was of development agencies which
sought quality seed on behalf of their constituent farmers.

In the absent market, Lempira Sur, the damage to the bean crop was relatively minor,
so that shocks to the seed supply were very localized, i.e. at the household level rather
than community-level or region-wide. Likewise, effects of the Hurricane on demand were
also relatively minor. In the emerging market, however, the damage was much more
severe. In Yorito, reductions in seed supply and demand were both evidenced as farmers

lost not only their own bean crops, but also could not access seed fi'om neighbors given

42

the extensive damage that was brought about by the Hurricane. Demand was likewise
affected as farmers faced not just the destruction of their crops (important sources of
income and food), but also damage to their houses and other productive assets.

In the grth market, Danli, seed supply was severely affected by the loss of both
hillside and valley bean crops. Farmers’ ability to acquire replacement seed was perhaps
the most severely hurt due to the importance of the bean crop as a source of finance for
the purchase of replacement seed, and because they also faced other income losses as a
result of the Hurricane—i.e. damage to housing, agricultural land and productive assets,

and other revenue-generating crops.

5.2 Farmers" responses in different market environments

Observations on farmers’ responses to the shock supported the second hypothesis that
markets at increasing levels of seed market development would show a greater tendency
to acquire seed from sources beyond the local saved-seed that farmers customarily rely on.
The lack of a generalized community or regional seed shortage in Lempira, the absent
market case study area, made it diflicult to evaluate the responses in this area, however the
responses that were observed—of farmers meeting their seed needs through local sources
do not contradict the responses that were hypothesized.

In Yorito’s emerging market, the prediction that a local shortage would not drive
farmers to seek seed fi'om external sources were largely home out. Here the key concern
with the outside sources was their unfamiliarity to farmers, so that not only did they not

come to mind as possibilities when there was a local shortage, but also the sources were

43

not trusted so that even if farmers had known of their existence, their lack of experience
with them made farmers unwilling to source seed from them for the first time during the
crisis situation. Farmer concern about the reputability of unfamiliar seed suppliers was
reinforced by their unwillingness to obtain seed or varieties that were not produced
locally, as this increased the risk that they would be inappropriate for the local agro-
ecosystem. The response on the part of farmers who were not served by the development
projects’ relief seed interventions was to reduce their bean areas while they waited for
local seed 'stocks to recover in subsequent seasons.

In Danli’s grth market, the commercial orientation of farmers, their established
relationships with commercial input dealers, and their familiarity with commercial seed
from these dealers meant that farmers were willing to look beyond their local, informal
seed-sharing networks when faced with a seed shortage. Two major factors inhibiting this
response were the short supply of seed fi'om commercial outlets given its diversion to
relief programs elsewhere in the country, and the lack of finance to acquire the seed given

the demand shock that farmers had suffered as a result of their Mitch-induced losses.

5 .3 Effects of interventions in different market environments

The expectation that relief interventions that make use of market forces would be
more appropriate in seed markets at more advanced stages of development, and that direct
activities that relied on local networks and direct (non-market) interventions would be
most appropriate in less-advanced seed markets, was supported through the case study

research.

44

In Lempira Sur’s absent seed market, there was little opportunity to use market forces
to deal with a seed shortage or shock to seed demand because commercial seed markets
do not exist in the area and are costly and difficult to access outside of the region. While
PROLESUR’s efl‘orts to ease localized seed shortages did make effective use of direct _
provision of seed, it also demonstrated the attendant possibility that such activity
contribute to seed system development by using seed to capitalize local seed banks that
would enhance farmers’ local seed security, improve seed quality, and reduce vulnerability
to future shortages.

In Yorito, the direct provision of seed through local development agencies with which
farmers had established and positive relationships was a direct and efl‘ective method of
reaching farmers and alleviating the seed shortage. At the same time, the use of the seed to
capitalize emerging'local seed enterprises was also a strength in that it helped to reduce
future vulnerability to seed shortages by promoting new market-oriented suppliers. These
suppliers, due to their presence and established reputations in the community, have high
potential to establish themselves as sources of high quality seed and new varieties.
Meanwhile, the direct provision of seed to farmers helped to increase demand for a new
variety which previously had only been available on a limited basis in the community.
Related to this, it is observed that the distribution of the seed to all farmers in the
community, as seen in one case, can be expected to be less effective in stimulating linkages
with the emerging local seed suppliers relative to the-case in which seed was distributed to
only about 1/6 of the community members, leaving room for farmers to acquire next-

generation seed from these initial recipients or from the new seed enterprise.

45

In Danli’s growth stage seed market, the expectation was that more indirect, market-
oriented approaches to seed relief could be beneficial in more-developed seed market
enviromnents. Indeed, while the seed distribution did help to speed the recovery of bean
area given the threatening seed shortages, the advanced level of development of the
market suggests that a market-oriented approach could have been more efl'ective in
meeting farmers’ seed needs while being less disruptive to the area’s seed market.

. First, due to the capital-intensive nature of Danli’s bean production systems which
require substantial early-season cash expenditures on inputs and land preparation services,
the loss of the bean crop in Danli threatened farmers’ ability to replant due to financial
constraints rather than a simple shortage of seed. This point argues that the provision of
credit—a market-oriented demand intervention, would have allowed a more complete
recovery of farmers’ activities by facilitating farmers’ access to complete input packages,
rather than to just one input—seed.

Of course, given the diversion of seed from commercial channels after Hurricane
Mitch, increases to farmers’ demand would have also required concurrent assurances of a
seed supply to meet this demand. Overall, given the established market channels and
farmers’ familiarity with commercial seed, it is evident that providing seed through
existing market outlets which already dealt in bean seed could have reduced the secondary
economic effects of reduced demand for inputs, while reinforcing farmers’ use of the seed
and services that the commercial outlets ofl‘er thus promoting the continued development

of these services.

46

6 Conclusions and implications

This paper has addressed three research questions about the implications of a natural
disaster for seed markets in developing countries. Case study research provided evidence
supporting hypotheses of how a disaster afl‘ects supply and demand in seed markets at
difi’erent levels of development, how farmers’ feasible options and responses afier a shock
differ depending on the developmental status of their local seed system, and how
interventions that seek to mitigate a disaster’s efl‘ects can be more efl'ective. and help
reduce future vulnerability to disasters if they accomodate the developmental status of the
market in their design. The paper concludes with a summary of key lessons learned, their
implications for future seed relief programs and policies, and a reflection on the

shortcomings of the study and outstanding research needs.

6.1 Summary of key lessons fi'om the case studies

Several key points emerge fi'om the case studies of Honduras’s seed markets. First,
because seed markets at differing levels of development will respond differently to a
shock, difl‘erent interventions are required to ensure seed security, even if each faces a
similar shock initially. In some cases, distributions of seed itself may either be unnecessary
or inadequate, depending on the availability of seed through commercial outlets, the nature
of the production systems that are utilized in the area, and whether the supply shock has
afl‘ected an entire area or just isolated households within the area.

Second, in areas where a commercial seed supply exists, relief seed distributions that

circumvent existing market channels can exacerbate the economic efl‘ects of the disaster,

47

while neglecting valuable opportunities to promote the continued development of these
same markets.

Third, well-designed relief seed operations can help to stimulate farmers’ willingness
to pay for seed by increasing their exposure to high-quality seed or varieties whose
dissemination is otherwise constrained. However this should not be interpreted as
suggesting that new varieties should be forced upon farmers at times of vulnerability, for
example by making them the only option available, especially if they are unproven locally.

Fourth, relief seed distributions can also be used as start-up capital for local seed
enterprises, helping to decentralize and diversify seed supplies and reduce vulnerability to
firture crises.

Finally, utilizing linkages among markets at difi‘erent stages of development and in
difi‘erent regions, as promoted by PROLESUR in Lempira after the Hurricane, is crucial to
mitigating the effects of a localized crisis and promoting the spillover of development

among inter-linked markets.

6.2 Implications for policy and filture seed programs

Alleviating seed crises after a disaster involves far more than a simple distribution of
seed to farmers. The linkages among markets for bean output and bean seed, and linkages
among seed markets at differing stages of development condition the appropriate choice
for a seed intervention after a disaster. An effective response will also take into account
the relation between a market’s vulnerability to crisis and developmental status. Several

implications follow for policy and filture relief seed programs:

48

' First, the underlying status of the seed market and the effects of the crisis cannot be
assumed. Any intervention must be based on a concrete understanding of a particular seed
market, specifically the type of seed demand that farmers exhibit, the alternative sources of
seed that are commonly used and emerging in the area, the chief areas needing investment
for the development of the seed market, and the local capacities for response that exist and
can be mobilized after a disaster.

Second, an understanding of the specific effects of a disaster is also required for the
design of an appropriate and efl‘ective intervention. Did the disaster afl‘ect seed supply
only? Or both supply and demand? Was the lost crop more important as a source of
finance for farmers’ agricultural expenditures, or just as a source of seed? The
interventions that are carried out should be targeted as closely as possible to the nature of
the shock in order to minimize the disruption to existing systems, and structured to
accommodate the developmental status and needs of the market. That is, a demand shock
should be addressed through interventions that restore demand, etc. Furthermore, it is
imperative that the potential interactions between the disaster and interventions’ efi‘ects
also be anticipated. For example, providing credit to help farmers purchase replacement
seed stocks will not be effective unless there is a supply of seed available for them to
purchase.

Third, interventions should attempt to mobilize local resources as much as possible.
This will help to minimize any potential negative impact of the intervention. On the supply
side, local seed channels should be used to the full extent possible for any distribution of

seed, and complemented where necessary to compensate for any obvious weaknesses in

49

the system, ensure equitable access to seed, etc. In the case of demand-side interventions,
the use of credit or vouchers that can be redeemed with local commercial outlets or
community seed sources can encourage the use of existing channels and minimize the
secondary effects of an intervention more than interventions that circumvent existing
markets or channels.

Fourth, seed relief activities provide an opportunity to promote investments to
decentralize and diversify the seed supply, as the dangers of overly-centralized and
undiversified seed supplies are painfully evident immediately following a disaster. This
leads to increased political will to address the issue, while community solidarity is at a high
enabling progress where it might otherwise be bogged down by local political and social
issues. The availability of relief funds can also help to overcome economic constraints to
the implementation of programs to reduce vulnerability at this point.

Finally, concurrent with the need for centralization and diversification of seed supplies
is the need to forge linkages among seed markets, so that localized crises can be defused,
and responses to generalized crises can draw on the diverse capacities of the
heterogeneous seed markets that are linked. Progress towards the creation and
strengthening of such linkages does not demand a crisis situation, as opportunities exist
even in “normal” times for the exchange of seed, varieties, and grain among diverse

markets, all of which contribute to smoother, more effective responses in times of crisis.

50

6.3 Issues requiring further research and limitations of the study

This paper has addressed the effects of a disaster on the bean seed system, and
considered how difl‘erent seed relief interventions interface with local seed markets that
are at different stages of development. The focus of the research was necessarily on the
short term interactions between the relief interventions and the market.

The paper leaves room for further research in three important areas. First, there is a
need to examine the efl‘ects of the relief activities on the longer term development of the
market. While the results of the current paper indicate the potential for longer term effects,
research is needed to gauge how the initial effects that were observed are actually
sustained over the medium to longer run. Important issues, for example, related to
adoption rates for the new varieties which were difl‘used in the relief distribution, and
whether the distribution affected farmers’ willingness to pay for seed and use new seed
sources. Related to this, the dynamic effects of the interventions also need to be
considered over the medium to long term—i.e. to document the sorts of investments that
are spurred by the initial interventions, and how these investments themselves create
endogenous change in the bean seed system. Such research would require an analysis of
markets at several points in time, preferably with a base period established prior to the
disaster for use as a reference point. It would also benefit from a comparison of similar
seed markets that are the recipient of different interventions, so that the developmental
paths of each system can be compared and evaluated.

The second major area of research that is needed is a more in-depth analysis of some

of the structural components of the seed market, how they are affected by a disaster, and

51

how they can be strengthened and mobilized through relief interventions. For example, it is
well accepted that formal and informal/local seed systems are complementary in serving
small farmers’ seed needs. There is virtually no information, however, on how informal
systems respond to crises, nor is there any typology of informal systems which can be used
to guide their mobilization in efl‘ecting interventions after an emergency. This makes it
more dificult to design an intervention (for either general seed system strengthening or a
relief intervention) at the regional level that can increase its effectiveness by taking an
integrative approach of utilizing both the formal and informal systems.

Third, knowledge about relief seed interventions would also be increased through a
more formal assessment of the issues that were raised in this paper. The rapid appraisal
methodology, while enabling the identification and exploration of crucial issues in an
efficient and timely manner, did not allow for quantification of the effects that were
observed or a more formal testing of the hypotheses. Ideally, the rapid appraisal would
have been used to initiate the research process, and facilitate the formation of hypotheses
that could have then been tested more formally. Due to time limitations, however, this ,was
not feasible for the research that was conducted.

Despite the success of the rapid appraisal in identifying salient issues relating to the
disaster intervention, it is a key limitation of this study that a more formal assessment was
not carried out based on the observations and issues brought out in the appraisal. Issues
that would have benefitted from more extensive investigation include the extent of bean
crop and seed losses to Mitch both nation-wide and in the case study areas; the variety and

reach of the different relief actions that were employed; more extensive consultation at the

52

project sites and the national level, especially with individual growers of commercial bean
seed who market to Hondugenet and Zamorano; and a more comprehensive survey of the
bean seed system in Honduras, including both its horizontal and vertical linkages. It is
recommended that this paper he used as the basis for a follow-up study that addresses the
longer-term interactions between the relief interventions and the development of seed
markets. Such a study could also utilize more formal hypothesis testing in order to provide

more concrete evidence in support of the findings that were presented in this paper.

53

References

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78(3): 207-216.

Alvarez Welchez, L. (1999). Personal Interview. Coordinador Nacional del Proyecto,
PROLESUR. July 1, 1999.

Anderson, M. B. and PI. Woodrow. (1991) “Reducing Vulnerability to Drought and
Famine: Developmental Approaches to Relief.” Disasters. 15(1): 43-54.

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Cromwell, E., E. Friis-Hansen, M. Turner. (1992). The Seed Sector in Developing
Countries: A Framework for Performance Analysis. London, Overseas Development
Institute. '

Departamento de Informacion Agricola. (1998). Campendia Estadistica Agrapecuaria.
Tegucigalpa, Gobiemo de Honduras.

Global Information and Early Warning System (GWIES). (1999). Special Report an
Honduras. FAO, January 29, 1999.
http://www.fao.org/WAICENT/faoinfo/economic/giews/english/giewse.htm.

Hammerton, J. L., G. Calixte, et al. (1984). “Hurricanes and Agriculture: Losses and
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Ignacio Sanz, J. (1999). "Seeds That Bring Hope: A Relief Effort for Central America
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J afl‘ee, S. and J. Srivastava (1992). Seed System Development : The Appropriate Roles of
the Private and Public Sectors. Washington, DC, World Bank.

54

Martel, P. V., R. H. Bemsten, M.T. Weber. (1998). "Food Markets, Policy, and
Technology: The Case of Honduran Dry Beans." E. Lansing, Department of Agricultural
Economics, Michigan State University.

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Production Characteristics, Adoption of Improved Varieties, and Policy Implications. E.
Lansing, Doctoral Dissertation, Department of Agricultural Economics. Michigan State
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Martinez, R. (1999). Personal Interview. General Manager, Hondugenet. July 5, 1999.

Moncado, E. (1999). Personal Interview. Seed Conditioning Plant, Commercial Unit for
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PROLESUR (undated). Evaluacia’n de variedades locale. Candelaria, PROLESUR.

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Centro America: Proyecto PROFRIJOL. Experiencias en la produccian artesanal de
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55

Appendix A

Bean Production Before and After Mitch"

 

 

 

 

 

 

 

 

 

 

 

 

Pn'mera Postrera
Area Production Yield Area Production Yield
harvested (QQ) (QQ/mZ) harvested (QQ) (QQ/mZ)
(M) (M)
1990-98
48,299 454,138 9.64 96,468 1,004,504 10.4
Average
1999
68,590 615,341 9.0 . 88,829 645,959 7.3
Difi‘erence
142 % 135% 94% 92 % 64% 70%

 

Source: Direccion General de Estadisticas y Censos

*Preliminary estimates

56

 

Name
Juan Carlos Rosas

Raul Espinal
Danilo Escoto

J osé Aguilar
Edgar Salinas
Guillermo Giraldo
Rafael Martinez
Francisco Pe'rez
Tom Crowley
Raul Iglesias Rovelo
Jacqueline Chenier
Rigoberto Gomez

Appendix B

Persons interviewed

Organization

Bean Research Program, Escuela Agricola Panamericana

Grain and Seed Technology Unit, Escuela Agricola Pan-americana
National Bean Program

Seed Certification Dept., Secretary of Agriculture and Livestock
Seed Certification Dept., Secretary of Agriculture and Livestock
Seeds of Hope Project, CIAT

Hondugenet

SEAGRO

APSO-Agency for Personal Service Overseas

CARE-Honduras

CARITAS

CEPA-Centro de Entrenamiento para Pequefios Agricultores

Manuel de Jesus Castillo CEPA-Centro de Entrenamiento para Pequefios Agricultores

Oswaldo Diaz
Jose Luis Flores
Utilia Hernandez
Paul Teeple

Carlos Amaya

Jose’ Angel Ferrufino
Sonia Euceda de Cruz
Federico Rodriguez

José Jimenez

Heman Avila

Justo Domingo Torres
Federico Trece Ramos
Luis Alvarez Welchez
Pablo Zelan Mejia
Rosa Maria Hernandez
Laura Guzman

Raul Zelaya

CRS-Catholic Relief Services
COHASA H

CCD-Christian Development Comission
Peace Corps

FEPROH—Fomento Evangélico para el Progreso de Honduras
FEPROH—Fomento Evangélico para el Progreso de Honduras
FEPROH-Fomento Evange’lico para el Progreso de Honduras
GTZ-AG-Vegetable Sanitation Project

IPCA-Investigacién Participativa en Centro America
PLANDERO-Plan de Desarrollo Rural de la Region de Occidente
PLANDERO-Plan de Desarrollo Rural de la Region de Occidente
PRODERCO-Proyecto de Desarrollo Rural en el Centro Oriente
PROLESUR-Proyecto Lempira Sur

PRR-Programa de Reconstruccion Rural

TROCAIRE

TROCAIRE

World Neighbors

57

Yorito Case Study
Freddy Sierra

Nery Murillo Sosa
Marvin Sanchez
Joel Martinez

Saul San Martin
José de la Paz Matute
Manuel Castro
Mauricia Velazquez
Elbia Cruz

Cesar Romero

Danli Case Study
Vladimir Heromin
Séverin Mellac
Manuel Alvarez
Jorge Pineda

Lempira Sur Case
German Flores

Edgardo Navarro
J osé Canales
Enrique Valdez
Manuel Bonilla
Pedro Escalante
Carlos Melendez
Atilio Nataren
Heman Nataren

IPCA-Investigacion Participativa en Centro America
COSAPSYL

CARYOSVYL

Yoro Regional Development Project

Sertedeso '

Los Cafetales-Comite de Investigacion Agricola Local (CIAL)
Los Cafetales-CIAL'

Los Cafetales-CIAL

Los Cafetales-CIAL

La Sabana de San Pedro-Comite de Investigacion Agricola
Local

Red Cross

Accion contra el hambre ‘
AgroComercio Danli
World Food Program

PROLESUR-Proyecto Lempira Sur
PROLESUR-Proyecto Lempira Sur
PROLESUR-Proyecto Lempira Sur
Mennonite Social Action Cemmittee
Mayor, Input supplier

Input supplier

Input supplier

Seed project participant

Seed project participant

58

 

3 1293 02427 4882