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Improving the livelihood of smallholder farmers
Value Chain Challenges
Smallholders face challenges all along the value chain
Addressing smallholder needs along the value chain and its environment
Smallholders face challenges all along the value chain
Rapid changes in the social and economic environment are making it challenging for smallholders to supply their products to the market and to improve their families' livelihoods. The aspects that need to be considered include:
- The effects of (and opportunities linked to) market liberalization and integration
- The rise of the retail sector
- Unsteady government support for and intervention in agriculture and rural areas
Over the past 20 years, new trading policies have liberalized and integrated markets. Some farmers have benefited while others have seen their incomes fall. The terms of trade (the price that farmers sell compared to what they buy) have been volatile. The integration of world markets has formed closed supply networks where buyers and sellers sign contracts to produce and trade a wide range of specialized products. This new organization of supply chains is unfamiliar territory for many smallholders. It is accompanied by a market concentration, with a small number of companies (often transnational) dominating large parts of the agrifood system, leaving smallholder farmers with little market power in comparison. There is concern that rural poverty might worsen as supermarkets expand, but connecting small farmers more directly to changing consumer demand and major markets offers real hope as well. The devil is in the detail of the contracts that can be negotiated and the support that can be given to farmers to help them do their part and obtain remuneration.
Framework to analyse smallholders' challenges in the market place: The value chain and its supporting environment
The challenges along the value chain in the framework presented include:
- Insufficient investment in agricultural R&D; no breakthrough on yield improvement comparable to what the Green Revolution did for irrigated areas in Asia.
- Informal and poorly organized input supply networks.
- Farmers have little knowledge of modern agriculture; extension services are under-performing; farmers lack access to capital/loans and assets (e.g. irrigation, storage), face high exposure to uninsured risks (weather, natural disasters), and may be indebted with little prospect of freeing themselves of this burden.
- In relation to market challenges, few farmers are organized under cooperatives or associations and most therefore have little bargaining power on price; their post-harvest produce handling knowledge and physical installations are poor; logistics to reach retailers directly are poor.
- The overall supporting environment (policy, institutional, market conditions) often displays anti-agricultural bias.
Addressing smallholder needs along the value chain and its environment
The Foundation's proposition focuses on smallholder opportunities and needs along the value chain and corresponding policy and institutional environments. The key challenges are to increase productivity and work to integrate the chain through partnerships and business contracts, ensuring gains for small-scale growers:
- Raise productivity through R&D, technology transfer, and access to inputs
- Integrate the chain through partnerships and business contracts
- Improve the regulatory and institutional environment
Reference:
Chain empowerment, Supporting African farmers to develop markets, 2006. Royal Tropical Institute KIT | Faida MaLi | IIRR | L. Peppelenbos (ed.)