This document discusses high value agriculture and value chain analysis. It addresses end-market analysis and making decisions based on end-market demand. It also discusses agricultural marketing issues like intermediaries and infrastructure bottlenecks. Reforms to the Agricultural Produce Marketing Committee (APMC) are mentioned. Progress and impact of interventions to strengthen agricultural markets and multi-state projects are summarized. Key factors in structural value chain analysis are outlined, including end markets, enabling environment, linkages, and governance. The document provides examples of good practices for value chain development and components of an integrated value chain proposed in an Asian Development Bank project.

1. High Value Agriculture
Rahul Bhargava
Thursday 5th July, 2012
Contents
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 5
High Value Agriculture value chain analysis
End-market analysis, demand monitoring and driven planning
1. 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 marketing
1. Are the value chains you deal with/are a part of unorganized and
characterized by fragmentation?
2. Are there too many intermediaries?

2. High Value Agriculture value chain analysis
3. 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 reform
1. 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 interventions
1. Strengthening of Agricultural Marketing System (SAMS) in Karna-
taka
• Food Safety (Sanitary and Phytosanitary measure) & GAP
2

3. High Value Agriculture value chain analysis
• Grades & Standards
• Market News & Information
• Marketing Extension
2. 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 production
Structural factors of value chains
Value 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-approach
invest if firms down the chain. End-market analysis assesses current
and potential market opportunities through interviews with current
and potential buyers, and takes into consideration trends, prospective
competitors and other dynamic factors. During chain analysis, the
focus should be on the current and potential production capacity of
the chain in the [region, state or country being] studied and its ability
to respond to end market demand. It is through the analysis of end
markets 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 be
further broken down in terms of firm size: there may be particular
constraints and opportunities facing micro- and small enterprises.”
“Vertical linkages between firms at different levels of the value
chain are critical for moving a product or service to the end market.
Horizontal linkages–both formal as well as informal–between firms
at all levels in a value chain can reduce transaction costs, create
economies of scale, and contribute to the increased efficiency and
competitiveness 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, irrigation
equipment. As not all services can be provided by value chain actors,
supporting services markets are essential to competitiveness.
3

4. High Value Agriculture value chain analysis
“Value chain governance refers to the relationships among the
buyers, sellers, service providers and regulatory institutions that
operate within or influence the range of activities required to bring a
product [...] from inception to its end use.”
End-market analysis
ADB’s Technical Assistance project ‘Advanced Project Preparedness
for Poverty Reduction – Institutional Development for a Value Chain
Approach to Agribusiness in Bihar and Maharashtra (Subproject
12)2 ’ has amongst its stated outcomes, “increasing awareness and 2
http://pid.adb.org/pid/TaView.htm?
projNo=43166&seqNo=06&typeCd=2
capacity to develop demand driven agrimarketing marketing strategies
by value chain stakeholders and the service sector” and “support
demand driven horticultural value chains within the public sector and
NGO/Service Sectors” [emphasis added].
“End-market demand informs supply chain actors who in turn
build capacity to meet demand and compete in the marketplace.
There are exceptions to the principle of demand driving supply.” For
example, a unique geographical indication status such as for Basmati,
can generate demand.
Initially, analysis must be conducted through secondary research
by identifying customer segments where value chain clients should
focus their sales and marketing effort. Next, primary market research
must be undertaken to understand customer needs and how to
address needs better than the competition.
Market intelligence
“A lack of intelligence about a target end market translates into a
higher risk of failure. Value chains (and entire industries) need the
capacity 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

5. 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 project
According 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 following
3: 3
http://www2.adb.org/Documents/
RRPs/IND/37091/37091-02-ind-oth-01.
pdf
1. Aggregation facilities
2. Sorting, grading, packaging
3. Storage (ambient and controlled temperature)
4. Value addition and market intelligence
5. Distribution facilities including logistics
6. Value chains for end-to-end linkages
5