Smallholder agriculture and market engagement
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The document discusses the role and challenges of smallholder agriculture in market engagement, emphasizing their significant contribution to food production and the complexities they face in accessing markets. It outlines successful case studies where smallholders have benefitted from innovative business models and partnerships, highlighting the importance of building capacities and overcoming constraints. The analysis also calls for a tailored approach to support smallholder inclusion in value chains, addressing socio-cultural factors and the need for multi-stakeholder partnerships.
![Aklilu, H.A., H.M.J. Udo, C.J.M. Almekinders, and A.J. van der Zijpp (2008) “How resource poor households value and access poultry: Village poultry keeping in Tigray,
Ethiopia” Agricultural Systems 96: 175-183.
Asfaw, S., D. Mitthöfer and H. Waibel (2010) “Agrifood supply chain, private-sector standards, and farmers’ health: evidence from Kenya” Agricultural Economics 41: 251–263.
Barrett, C. (2008) “Smallholder market participation: Concepts and evidence from eastern and southern Africa” Food Policy 33: 299–317.
Cadilhon, J.-J. and L. Kobusingye (2014) “Adding value to aquaculture products: Kati Farms (Uganda) Ltd.” International Food and Agribusiness Management Review 17(B):
133-137.
Cadilhon, J.-J., Pham Ngoc Diep and B. Maass (2014) “The Tanga Dairy Platform: fostering innovations for more efficient dairy chain coordination in Tanzania”. A paper
presented at the International Food and Agribusiness Management Association Forum on 18 June 2014 in Cape Town, South Africa. Available online here.
Collier, P. and S. Dercon (2014) “African Agriculture in 50 Years: Smallholders in a Rapidly Changing World?” World Development 63: 92–101.
da Silva, C.A., D. Baker, A.W. Shepherd, C. Jenane and S. Miranda-da-Cruz (Eds.) (2009) Agro-industries for development. Wallingford: CAB International and Rome: FAO.
Dorward, A., J. Kydd and C. Poulton (Eds.) (1998) Smallholder cash crop production under market liberalization. Wallingford: CAB International.
Grossman, J. and M. Tarazi (2014) “Serving Smallholder Farmers: Recent Developments in Digital Finance.” Focus Note 94. Washington, D.C. CGAP, June.
Holloway, G. and S. Ehui (2002) Expanding market participation by smallholder livestock producers: a collection of studies employing Gibbs sampling and data from the
Ethiopian highlands, 1998-2001. Socio-economics and Policy Research Working paper 48. ILRI, Nairobi.
Jayne, T., D. Mather and E. Mghenyi (2010) “Principal Challenges Confronting Smallholder Agriculture in Sub-Saharan Africa” World Development 38 (10): 1384–1398.
Lipton, M. (2005). Crop science, poverty, and the family farm in a globalising world. 2020 Discussion paper 40. International Food Policy Research Institute, Washington, DC.
Little, P., D. Debsu and W. Tiki (2014) How pastoralists perceive and respond to market opportunities: The case of the Horn of Africa Food Policy [forthcoming]
Markelova, H., R. Meinzen-Dick, J. Hellin and S. Dohrn (2009) “Collective action for smallholder market access” Food Policy 34 (1): 1-7.
Maertens, M., B. Minten and J. Swinnen (2012) “Modern Food Supply Chains and Development: Evidence from Horticulture Export Sectors in Sub-Saharan Africa”
Development Policy Review 30 (4): 473-497.
Minten, B., L. Randrianarison and J. Swinnen (2009) “Global Retail Chains and Poor Farmers: Evidence from Madagascar” World Development 37 (11): 1728-1741.
Murray-prior, R. B., P. J. Batt, C. Dambui, and K. Kufinale (2008) “Improving Quality in Coffee Chains in Papua New Guinea.” In Proving the Performance of Supply Chains in
Transitional Economies, Sep 23, 2007, Sofitel Plaza Hotel, Hanoi, Vietnam: International Society of Horticultural Science.
Pingali, P., Y. Khwaja and M. Meijer, (2005). Commercializing small farms: Reducing transaction costs. FAO-ESA Working Paper No. 05-08.
Prabakar, C., K. Devi and S. Selvam “Labour Scarcity – Its Immensity and Impact on Agriculture” Agricultural Economics Research Review 24 : 373-380.
Reardon, T. and C.P. Timmer (2012) “The economics of the food system revolution” Annual Review of Resource Economics 4: 225-264.
Staal, S. J., A. Nin Pratt, and M. Jabbar (2008) Dairy Development for the Resource Poor Part 1: A Comparison of Dairy Policies and Development in South Asia and East
Africa PPLPI Working Paper No. 44-1. FAO, Rome, Italy.
Swinnen, J.F.M. (2005). When the market comes to you-or not: The dynamics of vertical coordination in agri-food chains in transition. Final report of the World Bank (ECSSD)
ESW on Dynamics of Vertical Coordination in ECA Agrifood Chains: Implications for Policy and Bank Operations.
Swinnen, J., L. Colen, and M. Maertens (2013), Constraints to smallholder participation in high-value agriculture in West Africa, In: Rebuilding West Africa’s Food 22
Potential, A.
Elbehri (ed.), FAO/IFAD.
Uathaveekul, P. (2007) “Certified organic supply chains: the case of Swift Co. Ltd” in Batt, P.J. and J.-J. Cadilhon (Eds.) Proceedings of the International Symposium on Fresh
Produce Supply Chain Management. AFMA, Department of Agriculture and FAO, Bangkok, and Curtin University of Technology, Perth WA.
References](https://image.slidesharecdn.com/globalgapjooct2014-141030032547-conversion-gate01/85/Smallholder-agriculture-and-market-engagement-22-320.jpg)
Smallholder agriculture and market engagement
- 1. Smallholder agriculture and market engagement 27 October 2014 Derek Baker, University of New England Jo Cadilhon, ILRI GLOBALG.A.P. SUMMIT 2014, Abu Dhabi, UAE, 27-29 October 2014
- 2. Outline 2 Smallholders 1. What is a smallholder? 2. Why are we interested in them? Commercial engagement of smallholders 1. What is success? 2. What works? 3. Why? 4. What does this mean for value chain development? Context for smallholders 1. Agribusiness as a sector 2. Investment in developing country agriculture 3. Retail revolution 4. Non-traditional exports
- 3. What is a smallholder? 500 million smallholder farms, involving 2 billion people (FAO-compiled Agricultural Census data.) 3 But definitions and statistical treatments are difficult… 2 common themes Land • small areas • land/labour ratio is declining in much of Africa (Jayne et al., 2014) • labour shortages are acute in some African and many Asian countries (Prabakar et al., 2011) • landlessness is an increasing phenomenon across the developing world Subsistence and livelihoods • production is diversified; household consumption a patchwork of purchase, sale and home consumption; large net sellers are rare (Barrett, 2008) • timing and volume of sales are more due to need for cash (Grossman and Tarazi (2014) or adverse events (Little et al., 2014) than to price incentives • livestock in particular are more than just food or income; they also have strong social, cultural, religious importance for communities as well as value as assets (Aklilu et al., 2008)
- 4. Context: Agroindustry in development (Henson and Cranfield in da Silva et al., 2009) (de Janvry, in da Silva et al., 2009)
- 5. 5 Context: Agroindustry in development (Henson and Cranfield in da Silva et al., 2009) (de Janvry, in da Silva et al., 2009)
- 6. 6 Context: Shares of high value exports sourced from smallholder producers: Why do buyers choose to buy from smallholders? Is there a choice?
- 7. Context: Resource flows to/in developing countries: 1990-2011 + forecast increasing amount is South-South South-South and North-South South-South and North- Philanthropies are South major players Source: The World Bank
- 8. Context: Retail revolution • Ongoing since 1930s in USA and industrialised countries • Started 30 years ago in developing countries: – Coexistence of large private and state-owned retailers – Supermarket’s increasing share of food retail sales – Supermarkets’ increasing share of fresh produce sales – Retail formats adapted to suit urban/rural settings and to satisfy rich/middle-class/poor consumers – Procurement systems become more efficient • Impacts: lower food prices for consumers but challenging for smallholder suppliers • More recent consumer and retailer choices for sustainability and sourcing local food 8 (Reardon and Timmer, 2012)
- 9. Why the development-related interest in smallholders? Smallholders: development-related drivers 1. They produce a large bulk of product 2. Production is thought to be efficient (Maertens et al., 2012); and small 9 scale processing can be employment-creating (Staal et al., 2008) 3. Historically, poverty reduction is associated with increases in productivity on smallholder farms (Lipton, 2005) 4. Belief that technological improvements + market access leads to poverty reduction for smallholders These assumptions have been questioned (Collier and Dercon, 2014), and with them substantial aspects of prevailing development theory: “African smallholders have not chosen to be entrepreneurs, they are in this activity by default” (p.99)
- 10. 10 Constraints faced by smallholders 1. Land: • quantity and quality • security of access • legal title • intra-household issues 2. Scale: • Unit costs (e.g. standards) • Capacity utilisation (e.g. value adding processes) • Transaction costs (e.g. negotiation, contracting, loans) • Service costs (e.g. training) 3. Access to markets and inputs 4. Access to capital 5. Off-farm opportunities 6. Education and skills 7. Technical advice, information 8. Innovation contexts The key question is: are there barriers to overcoming these constraints?
- 11. Smallholder commercial engagement: what is success? 11 1. “Engagement” or “commercialisation” 2. Food security 3. Margins 4. Profits 5. Volumes through high value channels 6. Quality achieved (Public and Private issues; of which standards are one aspect) 7. Skills and experience 8. Schooling 9. Empowerment 10.Safety 11.Community and regional economic performance 12.Community development
- 12. Smallholder commercial engagement: what is success? 12 1. “Engagement” or “commercialisation” 2. Food security 3. Margins 4. Profits 5. Volumes through high value channels 6. Quality achieved (Public and Private issues; of which standards are one aspect) 7. Skills and experience 8. Schooling 9. Empowerment 10.Safety 11.Community and regional economic performance 12.Community development
- 13. Smallholder commercial engagement: what is success? Success with contracting of Madagascar smallholders to supply European supermarkets: • higher welfare • greater income stability • shorter lean periods • improved technology adoption • better resource management • spillovers to the productivity of the staple crop rice Gains attributed to private standards, for which contracts were packaged with inputs and technological advice. Constraints to scaling out: infrastructure; skills and human capital; transactions costs; reluctance of local retailing to impose private standards Minten et al. (2009) 13 Reduced chemical inputs due to contracts linked to extension packages was associated with improved farmer health (Asfaw et al., 2010) .
- 14. Which models seem to work and why? “Business models” thinking due to Vorley et al. (in da Silva et al., 2009), regarding: vertical co-ordination, collective action, value proposition development. Outgrower arrangements (Dorward et al., 1995), collective action (Markelova et al., 2009) and trader credit (Jayne et al., 2010) are all mechanisms that have sought to utilise surplus production in rural areas, with value addition accelerating their effectiveness. Vertical co-ordination and integration have been widely advocated (Swinnen, 2005; Pingali et al., 2005), especially to promote and use private standards. Non-food crops, or crops that are not consumed by the local population, offer the pro-poor advantage of not increasing food prices to the poor. This is not the case for staple foods (Barrett, 2008; Jayne et al., 2010; Murray-Prior et al., 2008). Prior achievement of particular technical or organisational steps (e.g. use of advanced genetics, access to extension (Holloway and Ehui, 2006)) 14
- 15. Case study 1: Kati Farms (Uganda) Ltd Kati Farms (U) Ltd • Created by young woman enterpreneur • Business plan: to add value to farmed fish delivered by WAFICO coop and to market innovative processed fish products • Star product: fish sausages • Main distribution network: 500 informal street roasters retailing grilled sausages to poor urban consumers Key aspects of engagement: • innovative food products • customize products to different market segments • smallholder farmers organized and trained to deliver good-quality produce • trust between suppliers and customers in the value chain • emerging agribusiness talent nurtured through technical and managerial training, business support, access to credit and appreciation (Cadilhon and Kobusingye, 2014) 15
- 16. Case study 2: Swift Co. Ltd (Thailand) Swift Co. Ltd • Started operating in 1984, by 2001 had 47 farmers on 15.5 hectares • Business plan: to supply premium quality fresh produce to customers, wherever they 16 are, and to provide a benefit to all actors in the value chain • Star product: GLOBALG.A.P.- and organic-certified pre-cut and packed green asparagus, ready for sale in supermarkets around the world • Currently one of leading Thai fresh produce exporters still supplying from smallholder farmers with total area of 250 ha under organic asparagus Key aspects of engagement: • cooperation with farmers • investments of time, money and human resources into production systems, logistics, traceability and quality control, and independent certification (Uathaveekul, 2007)
- 17. Case study 3: Tanga Dairy Platform (Tanzania) 17 Tanga Dairy Platform • Multistakeholder platform for regional dairy development: government, NGOs, farmers’ and processors’ representatives, private sector and consumers • Meets quarterly to discuss issues and find solutions to improve dairy production, group strengthening and marketing • Action delegated to interested groups and individuals: general assembly, board, executive committee, ad hoc working groups Key aspects of engagement: • delivers achievements useful to all types of members • lobbying power for the dairy sector • support from the regional government • Attractive platform for dairy development partners (Cadilhon et al., 2014)
- 18. 18 Case study 4: Queen Fine Foods vanilla production (Tonga) Queen Fine Foods • Partnered with small plot holders in different regions of the Pacific. • A new program is the rehabilitation of vanilla farming in Tonga. • Rather than land purchase, Queen pursued to engage directly with local farmers. • A wide range of innovative social steps to • mitigate risk • promote value • engender loyalty Key aspects of engagement: • pricing and payment • input supply • service delivery • long term commitment, non-commercial or incidental services • continuous social activity • loyalty programs • value added assistance (organic certification, pre-and post harvest handling and quality training)
- 19. Implications for smallholder– inclusive value chain development • One model does not fit all • Look for success measures shared by buyers and sellers • Build the technical and managerial capacities of smallholders and their groups • Risks, including culturally-defined risks, are as important as returns • Spillovers to food security are possible: make them positive ones • Facilitate business linkages for smallholder groups • Take special care in choosing the value chain captain • Smallholder groups need to invest their resources in chain management in order to lead a chain • Multi-stakeholder partnerships are more difficult to organize but can lead to more sustainable and inclusive outcomes for smallholders 19
- 20. Provocative statements for GLOBALG.A.P. GLOBALGAP is already strong in building capacities of smallholder groups, improving product quality and fostering multi-stakeholder dialogue to facilitate international food trade… How about….. • Recognising socio-cultural aspects of agriculture and livestock in its quality schemes • Building partnerships with public sector and banks to alleviate smallholder constraints • Helping domestic retailers and their suppliers in developing countries to adopt National GAP schemes • A step-by-step protocol for smallholder engagement and continuous improvement 20
- 21. Acknowledgements This work was undertaken as part of the CGIAR Research Program on Policies, Institutions, and Markets (PIM) by a team of scientists from the International Livestock Research Institute (ILRI) and the University of New England (UNE). Funding support for this study was provided by PIM and UNE. This presentation has not gone through IFPRI’s standard peer-review procedure. The opinions expressed here belong to the authors, and do not necessarily reflect those of PIM, IFPRI, or CGIAR. 21 The authors wish to thank case study personnel for their discussions and the material they provided Jo Cadilhon wishes to dedicate this presentation to Mr Paichayon Uathaveekul (†22/09/2014), former Chairman of Swift Co. Ltd, and an inspirational figure for all who strive to link smallholder farmers to dynamic markets
- 22. Aklilu, H.A., H.M.J. Udo, C.J.M. Almekinders, and A.J. van der Zijpp (2008) “How resource poor households value and access poultry: Village poultry keeping in Tigray, Ethiopia” Agricultural Systems 96: 175-183. Asfaw, S., D. Mitthöfer and H. Waibel (2010) “Agrifood supply chain, private-sector standards, and farmers’ health: evidence from Kenya” Agricultural Economics 41: 251–263. Barrett, C. (2008) “Smallholder market participation: Concepts and evidence from eastern and southern Africa” Food Policy 33: 299–317. Cadilhon, J.-J. and L. Kobusingye (2014) “Adding value to aquaculture products: Kati Farms (Uganda) Ltd.” International Food and Agribusiness Management Review 17(B): 133-137. Cadilhon, J.-J., Pham Ngoc Diep and B. Maass (2014) “The Tanga Dairy Platform: fostering innovations for more efficient dairy chain coordination in Tanzania”. A paper presented at the International Food and Agribusiness Management Association Forum on 18 June 2014 in Cape Town, South Africa. Available online here. Collier, P. and S. Dercon (2014) “African Agriculture in 50 Years: Smallholders in a Rapidly Changing World?” World Development 63: 92–101. da Silva, C.A., D. Baker, A.W. Shepherd, C. Jenane and S. Miranda-da-Cruz (Eds.) (2009) Agro-industries for development. Wallingford: CAB International and Rome: FAO. Dorward, A., J. Kydd and C. Poulton (Eds.) (1998) Smallholder cash crop production under market liberalization. Wallingford: CAB International. Grossman, J. and M. Tarazi (2014) “Serving Smallholder Farmers: Recent Developments in Digital Finance.” Focus Note 94. Washington, D.C. CGAP, June. Holloway, G. and S. Ehui (2002) Expanding market participation by smallholder livestock producers: a collection of studies employing Gibbs sampling and data from the Ethiopian highlands, 1998-2001. Socio-economics and Policy Research Working paper 48. ILRI, Nairobi. Jayne, T., D. Mather and E. Mghenyi (2010) “Principal Challenges Confronting Smallholder Agriculture in Sub-Saharan Africa” World Development 38 (10): 1384–1398. Lipton, M. (2005). Crop science, poverty, and the family farm in a globalising world. 2020 Discussion paper 40. International Food Policy Research Institute, Washington, DC. Little, P., D. Debsu and W. Tiki (2014) How pastoralists perceive and respond to market opportunities: The case of the Horn of Africa Food Policy [forthcoming] Markelova, H., R. Meinzen-Dick, J. Hellin and S. Dohrn (2009) “Collective action for smallholder market access” Food Policy 34 (1): 1-7. Maertens, M., B. Minten and J. Swinnen (2012) “Modern Food Supply Chains and Development: Evidence from Horticulture Export Sectors in Sub-Saharan Africa” Development Policy Review 30 (4): 473-497. Minten, B., L. Randrianarison and J. Swinnen (2009) “Global Retail Chains and Poor Farmers: Evidence from Madagascar” World Development 37 (11): 1728-1741. Murray-prior, R. B., P. J. Batt, C. Dambui, and K. Kufinale (2008) “Improving Quality in Coffee Chains in Papua New Guinea.” In Proving the Performance of Supply Chains in Transitional Economies, Sep 23, 2007, Sofitel Plaza Hotel, Hanoi, Vietnam: International Society of Horticultural Science. Pingali, P., Y. Khwaja and M. Meijer, (2005). Commercializing small farms: Reducing transaction costs. FAO-ESA Working Paper No. 05-08. Prabakar, C., K. Devi and S. Selvam “Labour Scarcity – Its Immensity and Impact on Agriculture” Agricultural Economics Research Review 24 : 373-380. Reardon, T. and C.P. Timmer (2012) “The economics of the food system revolution” Annual Review of Resource Economics 4: 225-264. Staal, S. J., A. Nin Pratt, and M. Jabbar (2008) Dairy Development for the Resource Poor Part 1: A Comparison of Dairy Policies and Development in South Asia and East Africa PPLPI Working Paper No. 44-1. FAO, Rome, Italy. Swinnen, J.F.M. (2005). When the market comes to you-or not: The dynamics of vertical coordination in agri-food chains in transition. Final report of the World Bank (ECSSD) ESW on Dynamics of Vertical Coordination in ECA Agrifood Chains: Implications for Policy and Bank Operations. Swinnen, J., L. Colen, and M. Maertens (2013), Constraints to smallholder participation in high-value agriculture in West Africa, In: Rebuilding West Africa’s Food 22 Potential, A. Elbehri (ed.), FAO/IFAD. Uathaveekul, P. (2007) “Certified organic supply chains: the case of Swift Co. Ltd” in Batt, P.J. and J.-J. Cadilhon (Eds.) Proceedings of the International Symposium on Fresh Produce Supply Chain Management. AFMA, Department of Agriculture and FAO, Bangkok, and Curtin University of Technology, Perth WA. References