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

Outline
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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

What is a smallholder?
500 million smallholder farms, involving 2 billion people (FAO-compiled Agricultural Census data.)
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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)

Context: Agroindustry in development
(Henson and Cranfield in da Silva et al., 2009)
(de Janvry, in da Silva et al., 2009)

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Context: Agroindustry in development
(Henson and Cranfield in da Silva et al., 2009)
(de Janvry, in da Silva et al., 2009)

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Context:
Shares of high value
exports sourced from
smallholder producers:
 Why do buyers choose
to buy from
smallholders?
 Is there a choice?

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

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
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(Reardon and Timmer, 2012)

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
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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)

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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?

Smallholder commercial
engagement: what is success?
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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

Smallholder commercial
engagement: what is success?
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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

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)
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Reduced chemical inputs due to contracts linked to extension packages was
associated with improved farmer health (Asfaw et al., 2010) .

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))
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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)
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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
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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)

Case study 3: Tanga Dairy
Platform (Tanzania)
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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)

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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)

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
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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
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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.
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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

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