High Value AgricultureRahul BhargavaThursday 5th July, 2012Contents High Value Agriculture value chain analysis 1 End-market analysis, demand monitoring and driven planning 1 Agricultural marketing 1 APMC reform 2 Progress and impact of interventions 2 Structural factors of value chains 3 End-market analysis 4 Market intelligence 4 Good practices for value chain development 4 Forthcoming ADB project 5High Value Agriculture value chain analysisEnd-market analysis, demand monitoring and driven planning1. Has end-market analysis of existing and potential high value agricultural produce of the region been undertaken?2. To what extent are capacity and infrastructure development decisions made with end-markets in mind?3. To what extent is High Value Agriculture policy demand-driven?4. What effort has gone in developing an enabling environment speciﬁcally in response to end-market demand?5. Which actors are most demand and end-market aware and act on this awareness?Agricultural marketing1. Are the value chains you deal with/are a part of unorganized and characterized by fragmentation?2. Are there too many intermediaries?
High Value Agriculture value chain analysis3. Is infrastructure a key bottleneck? Compared to other bottlenecks, viz. market intelligence, governance, vertical linkages?4. Is transportation cost to market excessive? Comparable to pre- market losses?APMC reform1. What is the impact of APMC reform (major in Andhra Pradesh, Tamil Nadu; partial in Karnataka and Gujarat) and what is the observed outcome on High Value Agriculture’s potential in the region?2. The model APMC Act provides for, (a) Direct marketing; (b) Contract farming; (c) Markets by cooperatives, growers, local bodies, private sector; (d) Direct purchase centres and farmers markets; (e) PPP in management; (f) Redeﬁning the functions of APMC and SAMB; (g) Setting-up State Marketing Bureaus. How much progress has been made? Which of these helped pro- mote High Value Agriculture, that is value chains and smallholder farmer integration?3. To what extent has reform and infrastructure development been market driven?4. Are model marketing oriented facilities, such as those by the National Institute of Agricultural Marketing (NIAM), viable?5. Are sorting and grading lines for F&V active?6. Are electronic auctions, and the transparency they bring, for F&V planned?7. What is the status of cold storage? Under PPP and other model?Progress and impact of interventions1. Strengthening of Agricultural Marketing System (SAMS) in Karna- taka • Food Safety (Sanitary and Phytosanitary measure) & GAP 2
High Value Agriculture value chain analysis • Grades & Standards • Market News & Information • Marketing Extension2. Multi State Agricultural Competitiveness Project (MACP; post SAMS) in Andhra Pradesh, Tamil Nadu • Expanding market infrastructure and opportunities • Increasing farmer access to market opportunities • Facilitating intensiﬁcation and diversiﬁcation of productionStructural factors of value chainsValue chain analysis starts with end markets1 , i.e. buyers, including 1 USAID’s Microenterprise Develop-characteristics, price, quality, quantity and timing of products. “End ment ofﬁce’s (USAID/MD) value chain approach. http://microlinks.market buyers are a voice and incentive for change. They are impor- kdid.org/good-practice-center/tant sources of demand information, transmit learning and [may] value-chain-wiki/ key-elements-value-chain-approachinvest if ﬁrms down the chain. End-market analysis assesses currentand potential market opportunities through interviews with currentand potential buyers, and takes into consideration trends, prospectivecompetitors and other dynamic factors. During chain analysis, thefocus should be on the current and potential production capacity ofthe chain in the [region, state or country being] studied and its abilityto respond to end market demand. It is through the analysis of endmarkets that the investment needs that will drive chain upgrading[can be identiﬁed].” Chains operate in an enabling environment “that can be global,national and local and includes norms and customs, laws, regu-lations, policies, international trade agreements and public infra-structure (roads, electricity, etc.). [...] The analysis may need to befurther broken down in terms of ﬁrm size: there may be particularconstraints and opportunities facing micro- and small enterprises.” “Vertical linkages between ﬁrms at different levels of the valuechain are critical for moving a product or service to the end market.Horizontal linkages–both formal as well as informal–between ﬁrmsat all levels in a value chain can reduce transaction costs, createeconomies of scale, and contribute to the increased efﬁciency andcompetitiveness of an industry.” “Supporting services markets include ﬁnancial services; cross-cutting services such as business consulting, legal advice and tele-communications; and sector-speciﬁc services, for example, irrigationequipment. As not all services can be provided by value chain actors,supporting services markets are essential to competitiveness. 3
High Value Agriculture value chain analysis “Value chain governance refers to the relationships among thebuyers, sellers, service providers and regulatory institutions thatoperate within or inﬂuence the range of activities required to bring aproduct [...] from inception to its end use.”End-market analysisADB’s Technical Assistance project ‘Advanced Project Preparednessfor Poverty Reduction – Institutional Development for a Value ChainApproach to Agribusiness in Bihar and Maharashtra (Subproject12)2 ’ has amongst its stated outcomes, “increasing awareness and 2 http://pid.adb.org/pid/TaView.htm? projNo=43166&seqNo=06&typeCd=2capacity to develop demand driven agrimarketing marketing strategiesby value chain stakeholders and the service sector” and “supportdemand driven horticultural value chains within the public sector andNGO/Service Sectors” [emphasis added]. “End-market demand informs supply chain actors who in turnbuild capacity to meet demand and compete in the marketplace.There are exceptions to the principle of demand driving supply.” Forexample, a unique geographical indication status such as for Basmati,can generate demand. Initially, analysis must be conducted through secondary researchby identifying customer segments where value chain clients shouldfocus their sales and marketing effort. Next, primary market researchmust be undertaken to understand customer needs and how toaddress needs better than the competition.Market intelligence“A lack of intelligence about a target end market translates into ahigher risk of failure. Value chains (and entire industries) need thecapacity to develop market intelligence on a regular basis.Good practices for value chain development• Facilitating linkages to speciﬁc market segments rather than general end markets.• Promoting the principle of demand driving supply among all value chain actors – a culture of producing what can be sold rather than locating markets for what can be produced. Linkages alone are not enough; the key is matching a value chain’s strengths with a target market, then adapting the product/service to meet the needs of this market. 4
High Value Agriculture value chain analysis• More than one value chain actor should keep target end-markets under constant scrutiny.• Encouraging value chain analysis as an iterative process whereby the end-market study and supply chain assessment inform one another.• Thoroughly exploring all existing and potential local, national, regional and global end markets. Local, national and regional end markets are often more accessible and less demanding than global markets.Forthcoming ADB projectAccording to the Agribusiness Infrastructure Development Invest-ment Program (AIDIP), a program of Asian Development Bank,Integrated Value Chains may comprise several or all of the following3: 3 http://www2.adb.org/Documents/ RRPs/IND/37091/37091-02-ind-oth-01. pdf1. Aggregation facilities2. Sorting, grading, packaging3. Storage (ambient and controlled temperature)4. Value addition and market intelligence5. Distribution facilities including logistics6. Value chains for end-to-end linkages 5