Key Questions on Demand for Raw Material

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Why Buyer-Seller Linkages are Needed

Identifying Market Opportunities

Selecting Suitable Enterprises

Selecting Suitable Locations

Selecting Linkage Partners

Specifying the Partners' Roles

Forming and Managing Producer Groups

Designing Buyer-Seller Contracts

Designing Product Pricing Systems

Performance Monitoring and Recording

Non-Quantifiable Outcomes

Alternative Linkage Models

KEY QUESTIONS ON DEMAND FOR RAW MATERIAL

1.	Does the purchasing company guarantee to buy all the raw material the smallholders produce? Considerations
2.	Can the company afford to pay the price for raw material that is needed to attract smallholders? Considerations
3.	Does the price offered give smallholders an income comparable to what they can earn from other enterprises? Considerations
4.	Might a rapid increase in supply lead to a rapid fall in price? Considerations
5.	Might the purchasing company drop the price once smallholders have planted? Considerations

Related Information: Key questions on demand for end products

CONSIDERATIONS

1.	Does the purchasing company guarantee to buy all the raw material the smallholders produce? Considerations The company will normally buy raw material only if it meets agreed quality standards, and only up to the quantity agreed in a contract.
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2.	Can the company afford to pay the price for raw material that is needed to attract smallholders? Considerations The company must earn a reasonable profit too. It should not offer a price that it cannot sustain.
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3.	Does the price offered give smallholders an income comparable to what they can earn from other enterprises? Considerations The net profit is what counts for smallholders. If they can earn more by using their land or labour for something else, they will switch.
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4.	Might a rapid increase in supply lead to a rapid fall in price? Considerations The company should make clear how much it is willing to buy and should discourage smallholders from producing more than that quantity
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5.	Might the purchasing company drop the price once smallholders have planted? Considerations The company should guarantee the price offered to contracted smallholders, at least for one season
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Natural Resources Institute 2003