PRODS PAIA Workshop Vertical Integration

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PRODS PAIA WorkshopVertical Integration
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Vertical linkages identified as key issue in
several consultations/meetings 1997-99

• 14th Session of the Regional Commission on Farm
  Management for Asia and the Far East, Ho Chi Minh
  City, December 1997
• Fourth Biannual Conference of the African Farm
  Management Association (AFMA), Stellenbosch,
  South Africa, January 1998.
• Farmer-Centred Agricultural Resources Management
  Symposium on, Rainfed Agriculture in Asia,
  Hanoi, September 1998.
• Strategies for Farming Systems Development -
  Scientific planning meeting of the Ecoregional
  Programme for humid and sub-humid tropics of
  sub-Saharan Africa (EPHTA), Ibadan, November
  1998.
• Roundtable on strategies for commercialising
  small-farmer agriculture, Bangkok, June 1999

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Examples of issues identified relating to
vertical integration of agriculture

• Growing role of sectors downstream of
  agricultural production
• Increasing demand for livestock products, fish,
  vegetables, fruits
• Emergence of niche markets and agribusiness firms
• Reduction in public sector agricultural support
  services
• Increasing role of NGOs and private sector
• Scarcity of non-agricultural employment
  alternatives

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Hypotheses which emerged from consultations

• Emerging agribusinesses such as fast food chains,
  supermarkets, packaging and processing plants,
  and hotels provide significant new opportunities
  for market oriented production.
• Development through market-based agriculture will
  not eliminate rural poverty, therefore specific
  options can and need to be targeted to resource
  poor farmers.
• To take advantage of new opportunities, farmers
  generally need to be organized into groups or
  cooperatives, in view of the benefits of scale
  for bargaining, coordinated supply, and access to
  credit and other support services.

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• Farmers capabilities for planning, technical
  management and resource allocation need to be
  reinforced for farmers to take advantage of
  contracting opportunities or to respond
  effectively to market signals.
• Governments have a role in the development of
  commercial, market-oriented production systems
  e.g. reinforcing and reorienting extension
  services, improving information services,
  increasing market access, and improving economic
  infrastructure.
• Third parties NGO or private sector can play
  an important role in supporting farmer groups and
  catalysing agreements between farmers and various
  types of buyers.

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Issues incorporated into AGS MTP technical
projects

• 214A1 Enhancing small farmer livelihoods (small
  farmer competitiveness)
• 214A2 Meeting urban food needs
• 214A3 Sustainable commercial provision of
  services
• 214A4 Agribusiness and post-production systems
  development
• 214A5 Agricultural services databases and
  information systems
• 210A1 MO 7 Economics of production systems
  intensification

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Follow up actions/outputs in 2000-01 biennium

• Case studies and guidelines on farm-agribusiness
  linkages Asia, Latin America
• Family farm development in CEE country studies
  and consultations
• Farmer organizations in Latin America
• Adjustments in export-oriented production,
  Caribbean and Pacific Islands
• Farm (business) management in extension Asia,
  CEE, Africa, Latin America
• Farmer record keeping and accounts Asia, Africa
• Contract farming monograph Shepherd

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Intervention areas/issues for 2002-03 biennium

• Costs and benefits of linkage arrangements and
  organizational structures
• Policy and legal frameworks (for contracts) which
  create enabling environment
• Producers negotiating capacity and skills to
  meet quality and timing standards
• Roles and requirements of producer organizations
  / NGOs
• Demand, potential and comparative advantage for
  higher value products

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RED FLAGS FOR PRODS PAIA
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High Profile IssueQuestionable Comparative
Advantage

• Examples
• Agroindustrialization, globalization and
  international development AAEA preconference,
  August 1999
• Concentration in processing and marketing, and
  effects on rural poor Santiago, 27-28 November
  2000
• Agribusiness Management Towards Strengthening
  Trade among Asian and Pacific Countries Chiang
  Mai, November 2000

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Confounding production systems intensification
with commercialization, ubanization,
globalization, liberalization, decentralization,
devolution
12
1.0
ALVSK
0.8
DEPMT
LUI
ACROP
DEPSF
SELLC
0.6
POPD
VILPOP
NOTYPE
FLDINT
FLDTYP
APROC
SERVICE
DEPSF
NOTYPE
0.4
DEPVL
APROC
AWAGE
-0.4
AHUNT
FLDTYP
DEPVL
COSTM
APROC
COSTM
AHUNT
SELLC
-0.6
DISURB
DISTWN
ATREE
-0.8
AFISH
FALO
-1.0
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What Scope for PRODS PAIA?

• Supporting and paying for intensification
• Enterprise shifts to higher value crops
• Inter-enterprise synergies and resource flows
• Contractual arrangements for inputs supply
• Savings mobilization and financing of investments
• Farm and community-level value addition
• Partnership and cooperation among and between
  stakeholders