Seed Economics-Commercial Considerations for Enterprise Management in Developing Countries

The majority of our staple food crops are annual cereals and legumes for which farmers have to obtain seed to produce a new crop each year. For this reason, it is always said that "seeds are the fundamental input to crop production." That statement is true in a biological sense, but it can be misleading in terms of organizing a system to supply seed to farmers. The fact that seeds are 'essential' does not mean that one can easily sell them because, being a living product, they have some other unusual characteristics. Most important. the farmers themselves can usually produce seed. and this is always the case with the traditional staple crops. Consequently. there is no obligation for farmers to purchase seed - it can be obtained from other sources within the farm, village, or nearby areas. In the past. many seed projects made the mistake of emphasizing production while giving little attention to marketing or to financial management. As a result. they often had unsold stocks of seed. or they resorted to subsidies to create an unreal demand. However, such approaches have become less favored in recent years. as many governments have sought to reduce their expenditure due to policy changes or simply a lack of resources. Consequently. many activities, which were previously regarded as a service to farmers, are now expected to be financially viable and 'sustainable' without external support. As a result of this change, it is now much more important to understand the economics of seed production and supply as bases for establishing new enterprises that can meet farmers' needs regularly and at a moderate cost. In the case of many staple food crops. this is not an easy task. since as already noted. farmers have alternative options for meeting their seed requirements. This is why government seed organizations and 'parastatals' must also become more conscious about costs. since they usually have the responsibility for producing seed of the strategic crops. which is the most difficult to sell. There are other reasons why it is important to have a reliable source of seed available, that is, to provide a channel for introducing and diffusing new varieties coming from research stations. In this case, the economics of variety diffusion and its impact on farmers are very important dimensions of the seed supply system. We recognize the importance of the 'informal seed sector' by which seed is retained or moved within the farms or community. but there is still a need for a secure formal channel, which effectively links research to agriculture. Some farmers will also choose to buy fresh seed from time to time to renew their stocks in cases such as a build-up of disease.