Digital platforms have brought disintermediation in the agriculture sector. From the studies, some were happy with the digitization as it solves the trust issue that exists between farmers, brokers and consumers. These channels have offered direct market linkage to the farmers. Some have concerns with the digitization opting for one on one interaction as this would help them judge their pricing better, when making a sale, they said body language helps with negotiation. Brokers are seen as controllers of a cartel, while digitization might work to eliminate them, some believe this could lead to creation of silos with brokers colluding behind closed doors. Theoretical analysis argues that ICT has played a great role in reduction in information costs, but this has come with added costs involved in the transaction within the agricultural value chain.
Find references for this section at the bottom of this page or see the PDF for in-text citations.
In the initial review corpus of 75 studies, assessments of farmers’ experiences of platformed agriculture were rare. According to Foster, Graham, and Waema (2019, 65), the adoption of ICT and Internet connectivity has caused digital disintermediation in the agricultural sector. These channels of disintermediation range from having e-auctions, creating online market linkages, and adoption of digital processes to support the supply chain activities. Some are happy with the digitization as this solves the mistrust in the value chain, especially with the brokers, who are seen as controllers of a cartel.
For me, they [brokers] are a complication… What is happening is we cannot buy directly from the producer at the auction, we have to buy from a broker. The brokers are the only people who sell tea at the auction, so they actually control the auction. That is why there is the perception of a cartel (Foster, Graham, and Waema 2019, 64–65).
They believe that the brokers are always acting to their advantage. “It’s nice to know what’s happening in the market (…) the last two years have been bad. Last year’s been very poor and it’s going further down this year. So, I wonder why. We do keep getting information from people, but sometimes I think it’s rubbish that comes. What everybody does is justifies his position” (Foster, Graham, and Waema 2019, 65). It was clear that with digitization, there is exposure to a broader market, and online channels act as market linkages.
“[W]hat will change is that with the online auction breaks the boundaries so people in the US will be able to access the information (…) so they don’t have to come all the way to Mombasa to buy tea, they can access our tea from our systems, trading can be done online and [we] will ship the tea and they will wait for the tea on the other side (Foster, Graham, and Waema 2019, 66).
We’ve been debating the idea of selling all our products online. We would have an [internal] auction as well (…) We would have it on a portal where you know, this is the type of tea we have. And we send samples to so many buyers worldwide anyway (Foster, Graham, and Waema 2019, 69–70).
In the Mombasa tea auction case, those who are against e-auction hold on to needing face-to-face communication as a way to judge their pricing.
[M]y business is much better when I can see physically, I can know whether you are giving two or three dollars but if I can sit [in the office] here I can’t know your body language—to know if by looking at you I can get that one more dollar. I think that this is something we’re going to lose if we go that way (Foster, Graham, and Waema 2019, 69–70).
They also state that lack of physical presence is likely to create silos with brokers colluding behind closed doors as opposed to the auction that happens openly.
[T]he resistance [to the e-auction] was based on the fear that the buyers may collude, you know they are seated behind a machine like this (…) in an office somewhere. Being traders they may want to buy teas at the lowest prices possible and it is easy for five of them to come together and say, ‘Hey, you buy for us we are not going to push you,’ and then tomorrow somebody else does the same and the next week somebody else does the same (Foster, Graham, and Waema 2019, 69–70).
Theoretical analysis argues that ICT has played a great role in reducing information costs, but this has added costs involved in the transaction within the agricultural value chain.
References
Foster, Christopher, Mark Graham, and Timothy Mwolo Waema. 2019. “Making Sense of Digital Disintermediation and It Development: The Case of the Mombasa Tea Auction.” In Digital Economies at Global Margins, edited by Mark Graham, 55–78. Cambridge, MA: MIT Press.