Producer Organisations and value chains


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Producer Organisations and value chains

  1. 1. Capacity Building for Producer Organisations in Value Chain Developement Chiang Mai, 19-21 October, 2011 Cooperatives, Collective action and Alliances1 Pier Paolo Ficarelli, GIZ India, ILRI-CGIAR
  2. 2. What is the Topic How agro-producers got organised and have co-operated till today? • Collective action and farmer pro-social behaviours in agriculture is entrenched in the oldest rural traditions to cope with resource scarcity rural poverty and climatic adversities the world over • Informal smallholder co-operation today is most in the form of self-help groups to access credit or CBOs managing common pool resources (irrigation, watershed and forest areas) and producer groups • From the beginning of the last century informal co-operation has been institutionalised in different forms, the oldest being the cooperative movement (England 1800,1904 in India) • The process industrialisation of agriculture and the increased vertical integration of Value Chain actors has given rise to new forms of producer co-operation with retailers and the food industry, e.g. contract farming Who will be the agro-producers of tomorrow, how will they co-operate?2
  3. 3. What it is still the dominant picture today? Market Asymmetries Unequal land distribution Excessive land fragmentation Dominance of smallholdings Unequal access to production resources Industrial Failure of public extension services & retail Unequal access to agricultural markets buyers Over-exploitation of natural resources Misuse of agro-inputs Farmer Farmer Consequences Farmer Farmer Small famers as end looser Farmer Farmer Farmer Vulnerability and farmer suicide Agro- businesses as top winners Social inequality Environmentally unsustainable growth Food insecurity Input suppliers3
  4. 4. Producer Co-operation in Agriculture (I) “Bottom –up” co-operation Type Local level Meso-macro level Self-Help Groups (SHGs) Micro-credit CBOs umbrella organisations Interest groups (FIGs) SHG federations INFORMAL Farmer Clubs (FCs) Informal association, JLGs CBOs National movements Producer groups (PGs) Regional, National Federations Associations National Farmers Unions FORMAL Co-operatives Business membership org. Alliances Professional Associations Market- oriented Value Chains4
  5. 5. What are the Challenges (I) “Bottom –up” Producer co-operation Type Local level Meso-macro level Local Governance Advocacy vs. Service focus Focus on loans for consumption Scarce visibility and policy influence Capacity of public extension services Financial sustainability INFORMAL Linkages with service providers Provision of technical and facilitation Facilitation competency and capacity services to affiliated groups Access to crop and life insurance Scaling out/scaling up Leadership/Internal governance Good governance Promotion mechanisms & incentives Political parties interference Ownership & trust Local Politics Financial accountability Poor links and feedback mechanisms FORMAL Input procurement efficiency and with the base economic viability Management & OD Training in technical and quality Links with buyers & marketing skills aspects5
  6. 6. Producer Co-operation in Agriculture (II) “Top–down” co-operation Relationship established by buyers with sellers Type Local level Meso-macro level Informal contracts LOW Alliances with organic producers INTENSITY Regular sub-contracting of Representation registered farmers based on organiastional Contracting Co-operative and structure of HIGH Associations buyers (retailers INTENSITY Outgrower schemes or industry) Contract farming Industry and market-linked Value chains6
  7. 7. Challenges (II) “Top–down” co-operation Based on the relationship established by buyers with sellers Type Local level Meso-Macro Quality and quantity assurance Market price control by Gvt. Limited buyers’ LOW Risk mitigation measures presence in rural INTENSITY Access to financial services areas Access to inputs Targeted mainly to better-off farmers Poor farmer Value Chain Governance issues representation and HIGH Public sector regulatory framework consultation in INTENSITY Ensuring farmer fair deals and income buyers’ Insurance services organisational Role of public sector as a facilitator structures7
  8. 8. What are the (mega)-challenges? 1. How to speed up the process of producers organisational development to ensure positive transition of the majority of smallholder from agriculture in joining the service and industrial economy? 2. How to build on the strength of established producer organisations to increase their economic efficiency, increase benefits to their members and ensure sustainable food production? 3. How can SHG, co-op, and association federations that works scale out their memberships and support local level organisations capacity in linking with markets? 4. Can alliances in contemporary agricultural value chain and “top- down” direct linkages with buyers be the trigger for famer organisational development?8
  9. 9. Opportunities Direct or indirect incentives for strengthening producer organisations and participation in agricultural and food value chains: • Increasing demand of food and processed food due to urbanisation • Business models promoting Small & Micro-Enterprises(SMEs) for value addition, seed, floriculture, dairy etc. • Business models for service delivery • Readiness of private sector to co-operate with public sector • Stronger rural-urban linkages • Increased consumer interest in food production and quality • ICTs and increased rural connectivity (e-services and m-services) • Agribusiness CSR initiatives • Biomass production for the energy industry9
  10. 10. Lesson learnt Organisation and producer co-operation is a pre-condition for ensuring participation of small producers in formal markets Small producer organisational development is a painstakingly change process with a high rate of failure, requiring lot of hard work of highly motivated field workers and support organisations Common platforms and PPP as key funding mechanism to involve agri- business in public sector interest in strengthening small producer organisations Industry driven value chains can (re)-focus “traditional” FOs on to high value markets and income and provide incentives for their professionalization New business models for production and buyer- producer relationships are required for linking with high value markets and may be not on traditional smallholder-based FOs ICT can speed up access to information and services to formal and informal FOs Low –carbon and green economies are new incentive frameworks for collective action and participation of small producers in alternative markets10
  11. 11. Conditions for sustainable small producer organisations Genuine producer collective actions are shaped by the local social and political environmental context and not necessarily aligned with the need of modern agricultural markets. They work generally only when certain conditions are met, such as Elinor Ostrom’ s universal principles for people-led organisations: 1. The group and its purpose must be clearly defined; 2. Costs and benefits must be equally shared; 3. Decision-making must be by consensus; 4. Misconduct should be monitored; 5. Sanctions should start out mild and escalate only as needed; 6. Conflict resolution should be fast and fair; 7. The group must have the authority to manage its affairs;11 8. The relationship of the group with others must be appropriately structured.