Homebased agroprocessing for the commercial market

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Home-based agro-processing for the commercial
market

• Stephanie Gallat, Food Technologist, FAO
• The Rural Poor and Tomorrows Markets
• Parma 23th - 24th June 2007
• 17th Symposium, International Food and
  Agribusiness Management Association

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Presentation outline

• Characteristics of home-based agro- processing
• Importance of agro-processing in developing
  economies
• Strategies for improving market access
• FAOs role in supporting home-based
  agro-processing

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What is home-based agro-processing?

• Micro-enterprise level
• Informal activity not licensed or registered
• Dual function home consumption and income
  generation
• Operates from residential premises
• Does not use specialised equipment

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Home-based processing....cont.

• Employs simple and relatively cheap processing
  methods
• Part-time or seasonal activity depending on
  availability of raw materials
• Processing methods are not standardised hygiene
  is not assured product quality is variable

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Agro-processing in developing economies

• employment agro-processing accounts for 20-35
  of wage employment in the manufacturing sector of
  most developing countries
• value-addition in SSA, agribusiness represents
  49 of manufacturing value-added and 43 of
  services value-added

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Size of the informal sector
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Contribution of informal sector to national
economy

• In Kenya, MSE sector grew from 13 share of GDP
  in 1993 to 18 in 1999
• 66 of MSEs are located in rural areas focus on
  agricultural based activities
• Employment in MSE sector accounted for over 74
  of national employment in 2002
• Average Kenyan MSE employs 1-2 people while over
  70 employ only one person

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Development of the MSE sector?

• MSEs have high mortality rates more than 50
  dont survive beyond their 3rd anniversary
• Of those that survive most dont grow less than
  1 succeed in moving from micro to small scale

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Strategies to improve market access

• KNOW YOUR MARKET
• essential to analyse consumer demand product
  type quality specifications mode of supply
  affordability
• IDENTIFY APPROPRIATE TECHNOLOGY
• the most important determinant of growth is
  technological change in the case of LDCs, on
  diffusion of knowledge (Joseph Stiglitz, 2007)

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Strategies to improve market access

• ORGANIZE
• organization of processors to facilitate
  access to business services and technical
  training, economies of scale, raising production
  volume to commercial level
• LINK INTO SUPPLY CHAINS
• linkages with producers, input suppliers,
  traders and secondary processors to promote
  specialisation, efficiency and information flow

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Focus on domestic markets

• International markets offers new business
  opportunities BUT increased risk
• Domestic markets are big and growing, offer
  greater security and easier access
• Not just supermarkets!

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Demand domestic markets dominate
Global processed food sales traded products 2002
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International trade in processed products
Source FAO SOFA 2005
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Changing consumption patterns
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Not JUST supermarkets!
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Technology is it appropriate?

• IMPORTANT to ANALYSE the extra cost of
  introducing new technology is the investment
  justified? Yes, IF
• adding value/improving quality opens new market
  opportunities
• increasing production volume opens new market
  opportunities
• existing processing methods pose food safety
  hazard
• opportunity cost of labour-saving technology

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Introducing new technology...?

• Sun-drying is one of the most widespread and
  cheapest technologies for food preservation.
  Solar drying is an improved form of sun-drying,
  but its introduction has not been always
  successful due to
• extra cost
• extra work
• improved quality and shorter drying time may not
  be important criteria

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OR...improving the traditional?

• Instead of introducing new technology, improving
  existing one e.g. improving sun-drying by
• raising food off the ground onto mats or drying
  trays
• covering food with cloth or netting
• cutting food into smaller pieces
• blanching fruits and vegetables to retain colour

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Examples of home-based processing
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Swazi rural processing group
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Instant soup mixes
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green leafy vegetables
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parboiling
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drying
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pounding bambara beans
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Swazi marula industry
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boiling marula juice
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shelling marula kernels
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Community processing centre in Afghanistan
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pot-in-pot evaporative cooler
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tomato paste manufacture
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sieving
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simple dryer
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solar tent dryer
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drying vegetables
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Small-scale oil extraction
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commercial oil screw expeller
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oil processing training
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Gari processing in West Africa
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pressing
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disaggregating
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roasting
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High Quality Cassava Flour
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cassava grits
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Lessons learnt

• analyse the market who are your customers, what
  do they want, how much can they afford to pay?
• identify appropriate technology match technology
  to market requirements and customers ability to
  pay for improved quality and value-added

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Lessons learnt...cont.

• organize to benefit from business services,
  technical training, increased efficiency and
  economies of scale
• link into supply chain promotes specialisation,
  efficiency and information flow

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FAOs role in promoting home-based processing

• Information Network on Post-harvest Operations
  (INPhO) www.fao.org/inpho
• Small-scale enterprise development resource
  materials and training guides
• Catalogue on labour-saving technologies

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We are working on...

• Food processing guide targeting home-based
  processors
• Farmer field school business modules
• Post-harvest management guides for farmers and
  micro-level processors