Understanding Agricultural chains Towards Enhanced Market Access

1. Understanding Agricultural chains TowardsEnhanced Market Access Nerlita M. Manalili VREDESEILANDEN

2. 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

3. A Simple Marketing System Information/ communication Producers (sellers) Market (Buyers) Goods / services payment Action/ decision Porter

4. 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

5. 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

6. 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?

7. 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

8. Popularity of Traditional retail markets Dual Face of Agrifood Markets Enhanced Presence of Modern retailers

9. 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

10. Creates changes in supply chains Factors driving dynamic market change 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

11. 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. Procurement 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

12. 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

13. Trader /wholesaler (volume, place) Producers market Retailer 3 One stop shopping convenience Retailer 1 (At your doorstep) Retailer 2 (At your neighborhood , cleaned)

14. 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

16. 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 other’s 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

17. 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

18. 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

19. 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

20. 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 How do we help farmers be integrated in the chain

21. Four forms of inclusive chain development Source: Regoverning Market (with enhancements by Manalili)

22. Pathways of enhancing farmers’ position in the chain within the Four forms of inclusive chain development 2 4 1 3 Source: Regoverning Market (with modification by NMM)

23. Four forms of inclusive chain development 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)

24. Four forms of inclusive chain development Enhance quality Add value and Process products Source: Regoverning Market (with enhancements by Manalili)

25. Four forms of inclusive chain development Farmer study groups Specialized activity/ Knowledge & Negotiation skills that they get to influence chain decisions Source: Regoverning Market (with enhancements by Manalili)

26. Four forms of inclusive chain development Cooperatrive business Product development Branding, marketing Source: Regoverning Market (with enhancements by Manalili)