UNDERSTANDING AGRICULTURAL CHAINS TOWARDSENHANCED MARKET ACCESS

Nerlita M. ManaliliVREDESEILANDEN

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

Producers(sellers) Market

(Buyers)payment

Information/ communication

Action/ decision

A Simple Marketing System

Goods / services

Porter

Producers(sellers)

Market (Buyers)

payment

Information/ communication

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

value

In reality marketing is not as simple as it seems

Goods / services

I am producing vegetables

Lots of people buying vegetables in the market nearest me

Surely I have a ready market formy vegetables

The Reality isNo assurance of ready Markets

Simple Notion of Markets and Marketing

Who are Currently/buyingSupplying?

What form, mode& Price are they sold/purchased?

In what way are my products Similar/different?

What areThe potential entry points or barriers to entry?

Points Commonly Missed About Markets & Marketing

Shifting Trend7

Produce first Then sell

Know marketThen Produce

to Specifications

Requires farmers’ awareness of :

• who their end consumers are• in what agricultural chain they are in

Dual Face of Agrifood Markets Enhanced Presence of Modern retailers

Popularity of Traditional retail markets

These leads to dynamic marketsSmall producers are

ill equipped to compete in these ever increasing dynamic marketsneed 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

•Consumer Pull•Policy “push”•Urbanization•Commercial opportunity•Food standards•Foreign investment Entry PointsPolicies Institutions Business Models Collective Action

Support Systems Research &

development

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

INCLUSION

SMALL PRODUCER

S& SMEs

EXCLUSION

Skills & Assets

Of Produc

ers&

SMEs

Factors driving dynamic market change

Regoverning Market

Creates changes in supply chains

Leading to small scale producers & SMEs

Small holder producers

Modern retailers

Traditional Markets

nichers passers

failures

Entry requirementsbonds accountinglegal documentsbusiness permits, traceabilityetc.

Procurement ModesConsignmentDeferred payment

Sustainabilityprice warDiscountsPromotion costs

Farming system(nichers)Continous supply (specialty produce)Production planningMono croppingStaggard planting (regularity of supply)

Manalili 2007

Spillover Effects

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

Market Dynamics’ Impact Pathways to Smallholder producers

Usually lacking

in capacity to absorb produceAnd the

incentives to

Produce more

•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 analysissupply chain - on managing the chainvalue chain - on the value added

Understanding Agricultural Chains

Retailer 1(At your doorstep)Retailer 2

(At your neighborhood , cleaned)

Producers market

Trader /wholesaler (volume, place)

Retailer 3One stop shopping convenience

Supply Chain Management (SCM):an approach to managing agricultural chains

14

• 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

15

Knowing more about the agricultural chain

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

Will help determine your Tells you about

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 SACfinding what you can do best having a strong position in it

Product and service differentiation Value-added demand Quality Safety Sustainability Reducing interventions Eliminating non value activities Improving efficiency

Market segmentation Chain differentiation

Satisfy the need for Integral chain care

Low cost strategy Chain optimization

Market Driving Forces

World Bank 2002

•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

Challenges

Market Strategies in an SAC context

Enhancing position and integration in the chain

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

Vertical integration Horizontal Integration

20

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

Four forms of inclusive chain development

21

Integrationof post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with enhancements by Manalili)

Pathways of enhancing farmers’ position in the chain within the Four forms of inclusive chain development

22

Integrationof post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with modification by NMM)

1

2

3

4

Four forms of inclusive chain development

23

Integrationof post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specialization in farm production

Source: Regoverning Market (with enhancements by Manalili)

Know more about improvingFarming systems and qualityOf product (to have betterChance at the market and Get better prices)

Four forms of inclusive chain development

24

Integration of post-farm activities

no particpaipation

in chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with enhancements by Manalili)

Enhance qualityAdd value and Processproducts

Four forms of inclusive chain development25

Integrationof post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER

participation in chain

mnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with enhancements by Manalili)

Farmer study groups Specialized activity/Knowledge & Negotiation skills that they get to influence chain

decisions

Four forms of inclusive chain development26

Integration of post-farm activities

no participation in

chainManagement

CHAIN Activity integrator

CHAIN (CO-) OWNER participatio

n in chainmnagement

CHAIN Participant

CHAIN Partner

Specializationin farm production

Source: Regoverning Market (with enhancements by Manalili)

Cooperatrive businessProduct developmentBranding, marketing