Understanding Agricultural chains Towards Enhanced Market Access

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Understanding Agricultural chains
TowardsEnhanced Market Access

• Nerlita M. Manalili
• VREDESEILANDEN

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Outline

• A Simplistic View of Marketing Agricultural
  Chains
• Dynamic Markets and Accompanying Challenges
• Towards a Deeper Understanding of Agricultural
  Chains
• Market Access and Agricultural Chains
• Towards Strengthened Positions in the Chains

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A Simple Marketing System
Information/ communication
Producers (sellers)
Market (Buyers)
Goods / services
payment
Action/ decision
Porter
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In reality marketing is not as simple as it seems
Information/ communication
Goods / services
Market (Buyers)
Producers (sellers)
value
payment
Action/ decision

• a product passes through number of intermediaries
  (trader, processors, wholesaler, etc) before it
  reaches the end user(consumer/buyer)
• each level that a product passes through adds
  value to it (storage, cleaning, processing, etc)
  and becomes a chain of value adding activities
• and leads to a different product form
• information flow governs the value addition
  decisions in the chain
• if in simple marketing system - information
  distortion occurs, more so in a chain
• - buyer seller behavior is complicated,
  more so in a chain

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Simple Notion of Markets and Marketing
Lots of people buying vegetables
in the market nearest me
Surely I have a ready market for my vegetables
I am producing vegetables
The Reality is No assurance of ready Markets
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Points Commonly Missed About Markets
Marketing
What form, mode Price are they sold/purchased?
Who are Currently/buying Supplying?
In what way are my products
Similar/different?
What are The potential entry points or
barriers to entry?
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Shifting Trend
Produce first Then sell
Know market Then Produce to Specifications

• Requires farmers awareness of
• who their end consumers are
• in what agricultural chain they are in

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Dual Face of Agrifood Markets

• Enhanced Presence of Modern retailers

• Popularity of Traditional retail markets

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• These leads to dynamic markets
• Small producers are
• ill equipped to compete in these ever increasing
  dynamic markets
• need to be brokered in to be able to cope and be
  integrated in dynamic markets
• Information and Communication, among others plays
  a crucial role in the process of
• integrating producers to dynamic markets

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Factors driving dynamic market change
Creates changes in supply chains
Leading to small scale producers SMEs

• Consumer Pull
• Policy push
• Urbanization
• Commercial
• opportunity
• Food standards
• Foreign
• investment

• Technology
• Management
• Organization
• Industry Structure
• concentration
• Procurement
• Standards
• Finance

Skills Assets Of Producers SMEs
INCLUSION SMALL PRODUCERS SMEs EXCLUSION
Entry Points Policies Institutions Business
Models Collective Action Support Systems
Research
development
Regoverning Market
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Market Dynamics Impact Pathways to
Smallholder producers
Small holder producers
Usually lacking in capacity to absorb
produce And the incentives to Produce more
passers
nichers
failures
Modern retailers
Traditional Markets
Sustainability price war Discounts Promotion
costs
Entry requirements bonds accounting legal
documents business permits, traceability etc. Pro
curement Modes Consignment Deferred payment

• Changing
• Quality
• Quantity
• Variety
• Price
• Marketing systems
• (distribution,etc)
• consumer
• behavior

Spillover Effects
Farming system (nichers) Continous supply
(specialty produce) Production planning Mono
cropping Staggard planting (regularity of
supply)
Manalili 2007
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Understanding Agricultural Chains

• Network of independent units/enterprises
  contributing to the planning,
• design, production distribution of a product
  from its inception
• (production planning) to its
  consumption by end consumer/user
• where product flow at each enterprise unit
  which transforms product into different forms
  (raw materials to final product) and that
  transformation is refer to as value added
• value delivery system
• a chain participant captures only a certain
  percentage of the total value generated by the
  system
• May come in different names depending on focus of
  analysis
• supply chain - on managing the chain
• value chain - on the value added

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Trader /wholesaler (volume, place)
Producers market
Retailer 3 One stop shopping
convenience
Retailer 1 (At your doorstep)
Retailer 2 (At your neighborhood , cleaned)
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Supply Chain Management (SCM) an approach to
managing agricultural chains

• the coordination management of all activities
  within an agricultural chain with the goal of
  maximizing value for the consumer
• it aims to satisfy consumers through continual
  improvement of the elements (managed system,
  managing system and interfaces)
• competition is no longer between the business
  units
• of the same level but between chains
• operating in the same or substitute industries

• the key is coordination among and between
• participants in the chain
• the challenge is to ensure each participant who
  captures only a certain percentage of the
  total value generated by the system gets their
  fair share

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Knowing more about the agricultural chain

• Will help determine your

• Tells you about

• contribution to the chain
  do you add value or are
  you just
  duplicating others function?
• Is there a danger my contribution can be taken
  over by others?
• identify opportunities within
  
• are their gaps not served
  

• Strength and weaknesses
• ( to improve on)
• Threat (to anticipate prepare for)
• Assess future, to evaluate and decide

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Market Access Agricultural Chains

• Market access means
• Be able to bring products to markets
• On a sustainable basis, getting an acceptable
  price for their products
• Within the context of sustainable agricultural
  chain (SAC) Being part or integrated in an SAC
• finding what you can do best
• having a strong position in it

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Market Strategies in an SAC context
Challenges
Market Driving Forces

• Information on markets
• product product standards
• volume and prices
• technology, resources (credit)
• Source and accessibility
• process and raw materials
• Consumer preferences
• Varying quality perceptions
• Access to alternative markets
• competition competitors strategies
• trade requirements
• (export, certification, food
• safety, etc)
• a lot more

World Bank 2002
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Enhancing position and integration in the chain

• Vertical integration

• Horizontal Integration

• Assuming other roles and position in the chain
• Integration of post farm activities
• Specialization in farm production

• Participation in coordination and management of
  the chain
• Observer active participant

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How do we help farmers be integrated in the chain

• In terms of activities
• To improve on his current segment as chain
  participant
• To add more activities and move to other chain
  segments

• In terms of coordination management
• To participate in decision process
• In setting norms and standards
• Through innovation

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Four forms of inclusive chain development
Integration of post-farm activities Integration of post-farm activities
no participation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no participation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
Source Regoverning Market (with enhancements by
Manalili)
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Pathways of enhancing farmers position in the
chain within the Four forms of inclusive chain
development
Integration of post-farm activities Integration of post-farm activities
no participation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no participation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
2
4
1
3
Source Regoverning Market (with modification by
NMM)
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Four forms of inclusive chain development
Integration of post-farm activities Integration of post-farm activities
no participation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no participation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
Know more about improving Farming systems and
quality Of product (to have better Chance at the
market and Get better prices)
Source Regoverning Market (with enhancements by
Manalili)
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Four forms of inclusive chain development
Integration of post-farm activities Integration of post-farm activities
no particpaipation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no particpaipation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
Enhance quality Add value and Process products
Source Regoverning Market (with enhancements by
Manalili)
25
Four forms of inclusive chain development
Integration of post-farm activities Integration of post-farm activities
no participation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no participation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
Farmer study groups Specialized
activity/ Knowledge Negotiation skills that
they get to influence chain decisions
Source Regoverning Market (with enhancements by
Manalili)
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Four forms of inclusive chain development
Integration of post-farm activities Integration of post-farm activities
no participation in chain Management CHAIN Activity integrator CHAIN (CO-) OWNER participation in chain mnagement
no participation in chain Management CHAIN Participant CHAIN Partner participation in chain mnagement
Specialization in farm production Specialization in farm production
Cooperatrive business Product development Branding
, marketing
Source Regoverning Market (with enhancements by
Manalili)