Approaches to pro-poor livestock market development

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Presented by Steve Staal (ILRI) to the 12th Inter-Agency Donor Group Meeting, Nairobi, Kenya, 10-13 May 2011

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Approaches to pro-poor livestock market development

  1. 1. Approaches to Pro-Poor Livestock Market Development Steve Staal 12 th Inter-Agency Donor Group Meeting, Nairobi 10-13 May, 2011
  2. 2. Outline of presentation <ul><li>Concept of Pro-Poor livestock market development </li></ul><ul><li>Approaches aimed at farmers </li></ul><ul><ul><li>Collective action </li></ul></ul><ul><ul><li>Innovation platforms </li></ul></ul><ul><ul><li>Hubs </li></ul></ul><ul><ul><li>Contract farming </li></ul></ul><ul><li>Approaches aimed at small scale market agents </li></ul><ul><li>Emerging principles </li></ul>
  3. 3. Principles of pro-poor market development <ul><li>Increases access to markets (volume, value, reliability) in particular for resource-poor, smallholder livestock producers </li></ul><ul><li>Provides increased access to women and marginalized group, possibly even new roles </li></ul><ul><li>Is not just about producers: small scale market agents, and value addition along the supply chain </li></ul><ul><li>Provides improved access by poor consumers to low cost and safer livestock products </li></ul><ul><li>Drives productivity increases on farm </li></ul>
  4. 4. Targeting farmers: Collective action <ul><li>Cooperatives, producer companies, farmer business associations, self-help groups </li></ul><ul><li>Advantages </li></ul><ul><ul><li>Improved bargaining power </li></ul></ul><ul><ul><li>Professional management </li></ul></ul><ul><ul><li>Improved access to volume markets, higher quality and more reliable services, including BDS </li></ul></ul><ul><ul><li>Platform for knowledge management, joint learning, innovation in production and value addition </li></ul></ul><ul><ul><li>Access to financial resources, savings </li></ul></ul><ul><li>Risks </li></ul><ul><ul><li>Individuals lose some control over assets and cash flow </li></ul></ul><ul><ul><li>Higher costs and lower prices </li></ul></ul><ul><ul><li>More limited end markets (formal) </li></ul></ul><ul><ul><li>Interference by political, community actors </li></ul></ul>
  5. 5. Collective action (cont) <ul><ul><li>Basic lessons </li></ul></ul><ul><ul><ul><li>Refrain from asset-intensive and management-intensive enterprises </li></ul></ul></ul><ul><ul><ul><li>Loyalty and farmer-ownership may not be enough to sustain participation </li></ul></ul></ul><ul><ul><ul><li>New business-oriented models offer advantages including bounded owner-membership </li></ul></ul></ul><ul><ul><ul><li>Sustainability is generally dependent on: prices and transaction costs </li></ul></ul></ul>
  6. 6. Targeting farmers: Innovation Platforms <ul><li>Innovation platforms are simply arrangement which allow individuals and organizations to come together regularly to address issues of mutual concern and interest </li></ul><ul><li>IPs generally not designed to be sustainable over the long run </li></ul><ul><ul><li>Short to medium driven project-driven intervention </li></ul></ul><ul><li>Aims of Innovation Platforms </li></ul><ul><ul><li>Improving linkages of farmers to other value chain actors : </li></ul></ul><ul><ul><ul><li>Buyers, suppliers of inputs, services and knowledge, and public decision makers, regulators </li></ul></ul></ul><ul><ul><li>Improving innovation capacity of members </li></ul></ul><ul><ul><ul><li>Market development, negotiation, joint learning </li></ul></ul></ul><ul><ul><li>End result is increased capacity to identify and interact positively and remuneratively with selected VC actors </li></ul></ul>
  7. 7. Innovation Platforms (cont) <ul><li>Conditions </li></ul><ul><ul><li>Evidence suggests need for a credible broker to facilitate IP processes (Pusker et al 2010) </li></ul></ul><ul><li>Implementation </li></ul><ul><ul><li>Can be coupled with some sort of collection (hub, self-help group) that forms the sustainable component </li></ul></ul><ul><li>Examples </li></ul><ul><ul><li>Fodder Innovation Project (Puskur et al 2010) </li></ul></ul><ul><ul><li>Lili (Livestock Livelihoods) Project (Moyo et al 2010) </li></ul></ul><ul><ul><li>imGoats – ongoing - linked to farmer hubs </li></ul></ul><ul><li>Jury is still out </li></ul>
  8. 8. EADD Chilling Plant Hub TRANSPORTERS TESTING FARMERS FIELD DAYS FEED SUPPLY AI & EXTENSION VILLAGE BANKS OTHER RELATED MEs HARDWARE SUPPLIERS CHILLING HUB Source:EADD
  9. 9. Targeting farmers: Hubs <ul><li>EADD dairy hubs - a few lessons so far (Baltenweck et al, 2011 forthcoming) </li></ul><ul><ul><li>Handle issues of raising equity from farmer carefully – disclosure, transparency, consequences for benefits, ownership </li></ul></ul><ul><ul><li>Avoid dogma wrt in-house service provision vs out-sourcing (control vs efficiency) </li></ul></ul><ul><ul><li>While focusing on group organizational capacity and sustainability, don’t lose sight of producer performance - extension </li></ul></ul><ul><ul><li>Village banks can play multiple roles – paying for BDS and new savings </li></ul></ul><ul><ul><li>Large variability in hub evolution, limited control by project teams </li></ul></ul><ul><ul><li>Assets can create vested interests, threaten member ownership </li></ul></ul>
  10. 10. Targeting farmers: Contract farming <ul><li>Principles driving contract farming </li></ul><ul><ul><li>Managing market risks (for producer and buyer) </li></ul></ul><ul><ul><li>Access to quality services and inputs (producer) </li></ul></ul><ul><ul><li>Managing disease risk and quality, SPS (buyer) </li></ul></ul><ul><li>Pig contract production in Vietnam (Lapar et al 2008) </li></ul><ul><ul><li>Large scale production , not scale neutral </li></ul></ul><ul><ul><li>Not consistent higher returns to labor </li></ul></ul><ul><ul><li>Large barriers to entry, limited to large investors - so very limited opportunity for smallholders </li></ul></ul>
  11. 11. Contract farming (cont) <ul><li>Dairy contract farming in India (Birthal et al, 2006) </li></ul><ul><ul><li>Few actual CFs in dairy, so used cooperatives and contract agents </li></ul></ul><ul><ul><li>Higher producer profits, in spite of lower prices </li></ul></ul><ul><ul><li>No increase in farm productivity </li></ul></ul><ul><li>Emerging lessons </li></ul><ul><ul><li>No clear livestock examples suitable for smallholders, except poultry </li></ul></ul><ul><ul><li>Limited to large batch production, where are substantial market risks for producer </li></ul></ul><ul><ul><li>“ Leakage” limits its application to dairy </li></ul></ul>
  12. 12. Targeting market actors: BDS for small scale traders <ul><li>Principles </li></ul><ul><ul><li>“ Private sector” too often implies large private and modern/formal </li></ul></ul><ul><ul><li>Ignores reality that small scale or traditional agents often occupy by far the largest market share in developing countries </li></ul></ul><ul><ul><li>Use a BDS approach to develop their capacity to upgrade value chains, provide better services to clients, higher quality/safer products to consumers (BDS means catalyzing a 3rd party actor) </li></ul></ul><ul><ul><li>Requires change in mind-set away from the “evil middlemen” and instead recognition of role they play </li></ul></ul>
  13. 13. BDS for traders – dairy example SDP training and certification of small scale dairy actors (Omore et al 2011 forthcoming) <ul><ul><li>Now formalized in GoK and KDB practices, and partly as a result, there is now a National Dairy Traders Association </li></ul></ul><ul><ul><li>Due to lower transactions costs, estimated over $30M in annual benefits to Kenyan economy, split between producers and consumers </li></ul></ul><ul><ul><li>Now being adapted and piloted in Uganda and Assam </li></ul></ul><ul><li>Many other adaptations including the input side: FARMAfrica agro-vet franchise model </li></ul>Milk Traders Training Service Providers (BDS) Regulatory Authority Certification/Licensing Training & certification of competence Accreditation & monitoring Reporting Cess fee Training guides Applying the Innovation in a Quality Assurance Scheme Involving Business Development Services (BDS) Hygienic cans
  14. 14. Emerging principles <ul><li>(I did not mention: auctions, approaches to export and high end markets, certification of attributes, SPS, value addition, branding) </li></ul><ul><li>Evolution of models for market collective action towards putting more emphasis on </li></ul><ul><ul><li>Capacity for innovation, and engagement with other value chain actors </li></ul></ul><ul><ul><li>Stronger underlying business model, more bounded member ownership </li></ul></ul><ul><li>No clear role for contract farming in many cases </li></ul><ul><li>Greater opportunity to bundle services, BDS, including financial services </li></ul><ul><li>Increasing recognition of potential role of small scale market actors for upgrading value chains and providing services </li></ul>

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