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A pro-poor approach to upgrade value chains in Tanintharyi region of Myanmar

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Presented by Jared Berends, Karl Rich and Michael Lyne at the Asia-Pacific System Dynamics Conference, Brisbane, Australia, 3-4 February 2020.

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A pro-poor approach to upgrade value chains in Tanintharyi region of Myanmar

  1. 1. A pro-poor approach to upgrade value chains in Tanintharyi region of Myanmar February, 2020 Jared Berends, Lincoln University, Christchurch, New Zealand Karl Rich, International Livestock Research Institute Michael Lyne, Lincoln University, Christchurch, New Zealand
  2. 2. Introduction • Agriculture underpins the Myanmar economy; stubbornly high rural poverty rates • Small-scale farms in Myanmar are critical leverage points to improve the livelihoods of farm and non-farm households • In 2017 Lincoln University and ILRI, together with an INGO and microfinance partner entered into a consortium to strengthen rural livelihoods in Myeik and Palaw Townships in Myanmar with funding from New Zealand’s Ministry of Foreign Affairs and Trade
  3. 3. Introduction • Pork (and paddy) selected from a short-list of eight potential products • SD tools employed to quantify, ex-ante, possible upgrading interventions, considering impacts across chain actors but with a focus on target population of small-scale farmers • Selected upgrading interventions to be implemented within project’s lifetime (3 years) • Today’s presentation relates only to the pork value chain
  4. 4. Research Methods • Eight weeks of field-level research in Southern Myanmar including: • Four participatory Spatial Group Model Building (SGMB) workshops with value chain actors (12 participants, 40% female), including the use of Layerstack (Rich et al, 2018) • Four Reference Group workshops and FGDs, KIIs, and farm visits to verify and triangulate information • SGMB developed basic concept models (casual loop diagrams) of key chain problems • Concept model transformed into quantitative SD models using Stella Architect for scenario testing • Data analysis across 14 indicators of chain performance and impacts
  5. 5. Research methods • SGMB sessions delivered a consensus on chain dynamics and feedback loops, producing agreed concept models • SGMB participants developed a shared understanding on how structure and relationships in the value chain shape behaviour and performance “Before I believed it was bad behaviour of the brokers causing low pig prices, now I realise it’s the structure of the system” Pig Farmer, Myeik Township
  6. 6. Output from SGMB: Concept Model Basic concept modules, with key feedback loops: • Investment loop (R) • Credit/debt cycle (R) • Horizontal & vertical coordination (R) • Import substitution (B) • Technical capacity (R) • Use of commercial pig feed (R)
  7. 7. Model Characteristics 2. Farmer Production - Village pig systems (local/hybrid, breeder/fattener) - Birth to slaughter - Health/disease component 1. System Pricing - Calculates Myeik live pig price using inventory model - Covers regional and domestic demand/supply for different pork products 4. Farmers Finance - Costs, revenues, savings and cash flow - Access to informal and formal finance 3. Farmer individual investments - Changing between local to hybrid pigs - Changing from farrow-to-fatten to wean-to-fatten - Change in breeding sow numbers 5. Producer Group and Investments - Active/inactive and joining/leaving PG members - Savings for investments - Price rebates for members - costs, revenues and cashflow - PG investments in training, management, artificial insemination, and animal health workers 6. Producer Organisation and Investments - PO costs, revenues, and cashflow - Investments in upgraded slaughterhouse facility 7. Farmer knowledge - Change in knowledge from training and interaction with other farmers
  8. 8. Ex-ante impact evaluations • Baseline • 640 pig producers across 32 villages in Myeik and Palaw Township • Disease outbreak and importation ban • Model Scenarios • Baseline: No project interventions • Scenario 1: Project interventions cover all pig producers in target villages • Scenario 2: Project establishes Producer Groups (PGs) and targets PG members for interventions • Scenario 3: After five years PGs are upgraded to Producer Organisations with the institutional arrangements to support ongoing • Interventions (within scenarios) • Micro-finance loans • Animal Health Workers • Training on hybrid pig production and commercial pig feed • Artificial Insemination • Combination of interventions
  9. 9. Results: Live pig price • Continuing oscillations of the live pig price due to demand shocks (Chinese New Year) and supply shocks (pre-wet season sales linked to paddy inputs and disease) • Disease outbreaks cause a sudden reduction in the price of live pigs due the combination of oversupply in the market (panic selling) and reduction in consumer demand • Prices rise quickly and overshoot pre-disease levels due to low supply and rebounding demand • Import ban magnifies price oscillations • Recent pig import ban (ASF) saw price fluctuations following model’s results
  10. 10. Results: profitability of pig farming • Without the project’s intervention, purchasing one to three piglets for fattening (Wean-to-Fatten), regardless of the breed, is not commercially viable • Keeping one to three sows and selling a mixture of piglets and fattened pigs is a profitable enterprise (Farrow-to-Fatten) • Hybrid pig systems are four times more profitable than local pig systems; however they incur significant entry costs and are higher risk and are beyond the reach of most poor families • During disease outbreaks hybrid pig farms have periods of negative cashflow • Hybrid farmers who have taken on debt to finance their upgrading or expand their businesses are especially vulnerable to dropping out of pig farming
  11. 11. Results: Rank order of Interventions • Across the three Scenarios a rank order for project interventions emerged 1. Improved credit facilities (high priority) 2. Animal Health Workers (high priority) 3. Training and the introduction of commercial pig feed (medium priority) 4. Artificial insemination (low priority) • Evidence of a multiplier effect from the combination of interventions
  12. 12. USD Change (%) USD Change (%) Scenario 3.1: MFI loans ($100,000) 460,081 3% 1,890,293 85% Scenario 3.2: Training on pig production 407,658 -9% 1,652,420 62% Scenario 3.3: AHWs 403,057 -10% 1,833,542 80% Scenario 3.4: AI Unit 374,978 -16% 1,390,886 36% Scenario 3.5: Combination 659,315 47% 3,765,188 269% Short-term Medium-term Scenario 3 comparison of profits of all pig producers in target villages compared to baseline Results: Rank order of Interventions In isolation interventions bring modest or negative impacts in the short-term. Combination of interventions ensures short-term positive results • A well-sequenced combination of interventions ensures short-term positive outcomes and strengthen medium- and longer-term results for small-scale farmers
  13. 13. Results: Potential negative impacts of credit • Current financial products available from micro-finance partner may cause liquidity problems for producer groups • Periods of negative cashflow are exacerbated by disease outbreaks and results in poorer producers ceasing pig farming and dropping out of Producer Groups • Especially relevant given the likelihood of ASF outbreak in Myanmar
  14. 14. Results: Scenario testing • The collective action module allowed scenario testing with different types of producer organisations and varying institutional arrangements • The Producer Group module built on the work of McRoberts et al (2013) and added price rebate and savings stocks • Savings rates are driven by profitability of Producer Group enterprises and capacity short- falls • Savings takes priority over rebates, but rebates allow Producer Group membership to maintain competitive compared with non-membership Producer Group cashflowRevenue Costs Producer Group savings Savings Producer Group price rebates Securing price rebates Investing in Producer Group capacity Covering funding shortfalls - + Producer Group assets capacity gap + Profitability of capacity investments + Savings rate+ + + - Desired Producer Group balance + Maximum flexible cash - + + + Paying rebates to members +
  15. 15. Results: Scenario testing • Institutional arrangements that reward small-scale farmers in proportion to their patronage and investment delivered higher levels of reinvestment in the organisation and larger profits for members • Investments in the capacity of producer organisations enabled poorer members of the community to engage in Hybrid Wean-to-Fatten pig systems and then transition to the more profitable Hybrid Farrow-to-Fatten • Investing in producer organisation will extend the reach and sustainability of the project

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