The private sector has shifted from a position of not wanting to know where their supplies come from and not wanting to be considered responsible for production outside of their farms, to increasing interest in knowing about the capacity, productivity, profitability and quality of the produce coming to them from individual farmers. These new trends are being driven by food safety issues, i.e., compliance but also to secure and support longer term supplies into their business process.
Public sector is increasing looking to the market to support more sustainable outcomes. There is increasing interest on having a lighter footprint and supporting programs that invest in farming community through local service providers and especially through local business development services.
The role of EAS in Linking Farmers to Markets
Modernizing Extension and Advisory ServicesLinking Smallholder Farmers toMarkets and the Implications forExtension and Advisory servicesMEAS Global Learning Exchange Shaun Ferrison Best Fit Approaches in Catholic Relief ServicesExtension and Advisory ServicesWashington, D.C., June 6, 2012
Trends in Private Sector led Agricultural Market Development• 1700’s - Plantation farming (sugar, rubber, pineapples, banana)• 1800’s - Estate farms and outgrowers (tea, horticulture)• 1900’s - Outgrowers (coffee, cotton, oil palm)• 1900’s - Contract Farming (cotton, horticulture, potatoes)• 1940’s - Certification (coffee, cocoa, cotton, textiles, etc)• 2000’s - Agro-Dealer networks (Export trading, Farmers Gold)• 2000’s - New Business Models (Unilever, Sysco, Mars)• The private sector trends are shifting from seeking supply flexibility through smallholders, towards a greater emphasis on sustainability and quality of supply through identified smallholder suppliers.
Trends in Public led Agricultural Market Development– 1960’s-1970’s - Green revolution (supply led)– 1970’s – 1980’s - Farming systems / Participatory– 1995 - 2000 Testing supply chains (chain-wide)– 1990’ – mid 2000’s Making markets work for the Poor (BDS)– 1990’s – date Territorial methods (diversification)– 2009 – date New Business Models (private sector led)
The Investment Dilemma Public Development Sector Private / Government Sector More sustainable and equitable Economic Growth for more progress for the Poorer farmers Endowed farmers• Focus on reducing hunger & • Focus on returns to strengthening resilience. investment.• Provides pathways out of • Can provides clear links to poverty, but progress is slow more rapid results.• Success transforms poor • Success accelerates overall people’s lives, but may shift growth leading to national economic growth measurable national wealth levels. creation and employment.
Key factors in Market LinkageKey factorsLocationFarm size Formal MarketsAccess to Financial servicesAccess to TechnologiesFarmer typesSkills trainingFarmer organizationUse of farm labor Informal MarketsAccess to water resourcesRoads and transportEducationInformation Technologies
Key Questions for the role of extension in linking farmers to markets• Which farmers?• Which markets?• What factors improve market performance?• How does better market access help farmers?• How can we improve market linkage?• Can existing extension services do the job?
Types of Farmers• Highly heterogeneous• Different options• Different ambitions• Different starting points• Scope for women• Opportunities for Youth?
Maize Farmer Segmentation in East and Southern Africa Commercial Top 1-2% of farmers who produce up to 50% Scaled farmers of the traded grain Commercial 15-18% of smallholders who sell the bulk smallholders of the other 50% of traded grain 20-30 % of farmers who are market Vulnerable but Viable neutral Vulnerable 30-50% of farmers who are net buyers Highly Vulnerable Ultra poor Require food safety netSource: Adapted from Nicholas Sitko, 2011.
Three market areas• Informal markets – Remain the major market option for smallholders – Limited services – Limited grading• Formal markets – Push :pull markets – Higher value – Graded – Traceable• Structured public markets – Formal market systems that target smallholder suppliers
Linking Farmers to Informal markets These are the mass markets in which most smallholder farmers are engaged. However, these are largely unregulated, untaxed and lack services….Net sellers Net buyersA fraction of the farming community The majority of farmers16% of rice farmers in Madagascar produce 50% farmers net buyers East Africa (Weber 1988)50% traded grain (Barrett & Dorosh, 1996) 61% of Somali farmers net buyers (Weber 1988)10% Kenyan farmers sell 75% of all maize sold 73% Rwandan farmers net buyers (Weber 1988)by smallholders in 1997/98 (Nyoro 1999) 71% Kenyan Maize farmers (Nyoro et al, 1999)6% of Mozambican farmers sold 70% maize, 70% maize farmers in Kenya, Malawi, Zambia(Jayne et al, 1996) and Madagascar net buyers (Jayne et al, 2010)2% maize farmers sell 50% of grain in market(Jayne et al 2008)Have land assets of 6 ha and above, but larger Below 4 ha, often lower than 2 hafarmers will have 100+ ha Source: Adapted from Christopher Barrett, 2008. Smallholder participation in E and S Africa.
Linking farmers to Formal Markets• Increasing number of studies show that smallholder farmers can prosper when linked effectively to formal, growing private sector markets.http://www.linkingworlds.org/images/stories/PDF/ValueChains_Paper_WEB.pdf
Linking farmers to Public Markets• New approaches to public procurement are using market instruments to buy produce from smallholder farmers• Supply people and Purchase for Progress P4P institutions that require publically supported food interventions. Local and regional Procurement LRP
Following example is based on extension strategies for farmer segments• Farmers with < 4 ha • Farmers with > 4 ha (70% of farmers) (20-30% of farmers) – Less endowed – Better endowed – Limited market access farmers – Women – Good market access – Youth – Experienced male• Improved productivity of farmers key staples • Focus on key value chain.• Diversification into • Improve business capacity higher value products and links to BDS• Off-farm labour options • Improve labour use and labour productivity
Methods for Market linkage• There are many types of market linkage methods being used, but they typically have the following components… “Produce what you can sell don’t try to sell what you have produced”1. Set up2. Market Evaluation3. Business planning and investment4. Implementation (skills training x training)5. Marketing and market sales (quality, grades traceability)6. Evaluation and upgrading7. Scaling
Missing skills in Extension?• Ability to evaluate market opportunities• Gather marketing data• Assess production costs and service quality• Develop business plans• Negotiate new business models with partners• Evaluate profitability against plans• Provide farmers with upgrading plans that go beyond natural resource management
Scaling up new extension services will require greater use of information technology• New extension approach can take advantage of the scale and cost with ICT.• However, much needs to be done to make these systems effective and more sustainable.• Finding farmer focused methods is an important part of this task
Conclusions• Transforming extension is a major global challenge – Requires new models and incentive structures to integrate public and private sector partners• Greater focus on business development – According to some leading firms, farmers respond better to business services than production support. – Careful targeting of subsidies – Co-investment between service providers and users• Extension services require upgrading, outsourcing and integration with ICT community of service providers – Rigorous monitoring of activities – Performance payments
This presentation was given: By Shaun Ferris, CRS, on behalf of MEAS at the Global Learning Exchange on Best Fit Approaches in Extension and Advisory Services in Washington, D.C. on June 6, 2012
Disclaimer:This presentation was made possible by the generous support ofthe American people through the United States Agency forInternational Development, USAID. The contents are theresponsibility of the author(s) and do not necessarily reflect theviews of USAID or the United States Government.www.meas-extension.org
FarmerSegmentCommercial 100 ha + Sell 95% + LargeFarmers corporations (1-2% population)Commercial 5-10 ha + Sell 50% +smallholders Value chain (10-15 % population) IntermediaryVulnerable but 2- 5 ha Market Neutral aggregatorsviable farmers Intensification Local (20-30 % population)Vulnerable & <2 ha traders Net buyersfarmers Diversification (30-40 % population)Highly Food <1 ha or no Regularly Needvulnerable / security landemerging from food supportshock (5-10 % population)