Promoting Low-Cost, Chemical-Free Grain Storage
Dates of service: February 2016 - July 2016
IDinsight service: Decision-focused evaluation; Preference elicitation
IDinsight contacts: Dan Stein
Academic paper: What drives smallholder farmers’ willingness to pay for a new farm technology? Evidence from an experimental auction in Kenya
Farmers are losing a significant portion of their crops (and therefore their income) because of poor storage and pest infestation. While the technology for improved storage already exists, it remains largely unused. The Purdue Improved Crop Storage (PICS) project at Purdue University developed low-cost, hermetic grain-storage bags that prevent pest damage during crop storage without having to use chemicals. These bags allow farmers to consume or sell crops later in the season when prices might be higher. This increases food security and offers a healthier alternative to chemical pesticides.
The PICS bag was introduced to the Kenyan market in 2013 in partnership with Bell Industries Limited. It quickly became the Kenyan market leader for this technology. Nevertheless, market penetration remained at less than 1% of the total potential market for grain storage in Kenya. As part of a learning partnership with the Bill & Melinda Gates Foundation, IDinsight worked with the PICS project and Bell Industries to test different strategies to increase farmers’ awareness and demand for the bags.
IDinsight conducted an evaluation that compared the effectiveness of different media messages at generating interest in the PICS bags among smallholder farmers in western Kenya. Individual farmers were randomly given a short textual, audio, or video informational message about the PICS bags. They were then asked for the highest price they were willing to pay for the bag using the Becker-DeGroot-Marschak method, an incentive-compatible procedure used in experimental economics to measure willingness to pay. IDinsight also estimated the demand curve for the PICS bag based on the willingness to pay exercise, which can be used to determine optimal pricing of the bag.
IDinsight found that the different media were equally effective at generating farmer interest and willingness to pay for the bags, and that the price elasticity of the bag was high. Therefore, price reductions could lead to significant increases in sales volumes.
IDinsight’s key recommendation was that Bell industries could increase profits by reducing the price of the PICS bag. However, shifting market dynamics after the project made this recommendation less relevant. Other demand-generation projects throughout the country resulted in increased demand for PICS bags, and soon sales of the bags was constrained by supply rather than demand. Therefore, Bell industries decided to invest in increased supply, and did not lower the price.