Develop a Contractual Arrangement Between Farmers and Exporters. The pigeonpea value chain should now change the direction of its perception to the vertical coordination kind of relationship among the actors in the value chain. Since the direct market seems to be the best option in terms of cost reduction in a value chain, farmers should organize themselves and have direct transaction with the exporters. Therefore, there is a need to enter into contract with exporters. The contractual arrangement with exporters can provide farmers with a number of advantages. Exporters can provide farmers with inputs, training by employing extension agents to supervise farmers to ensure that they adhere to the market requirements, technical assistance and other services, and credit, as well as having a guaranteed market for pigeonpea they produce. This can reduce cost not only in marketing but also in production of pigeonpea and increase competition in international market because they will get a competitive price. According to transaction cost theory, when farmers produce pigeonpea specifically for certain company they will be locked up and their bargaining power is reduced but this option is still important since it reduces the total cost of transaction in the value chain and increase their living standard compared to those who produce individually without any arrangement. According to a report by Food and Agriculture Organization of the United Nation in (2007), traditional buyers who do not get involved in production support programs and usually do not enter into long term commercial relationships with farmers generally buy and sell on a day-to- day basis. They typically lack the capacity to define, monitor, or enforce a quality or safety standard. Through the contractual arrangement, exporters can expand their market to the European market since this market demands high quality pigeonpea and through this arrangement it is easy to meet their requirement. This could benefit the participants in a value chain in meeting the more stringent quality standards demanded by European buyers. According to Xxxxx, Xxxxxxx and Monaco, (2002), Technoserve was organizing small farmers in northern Tanzania into local groups which are provided with appropriate training in village- level grain cleaning and handling. These groups were linked directly to exporters, who in turn were linked with identified European buyers. To facilitate and expand the exporters‟ cash purchases from these groups, the government and non government organization should help fa...
