Commercial value chain integration

International Year of Family Farming

About commercial value chains

How can family farms integrate into and benefit from commercial value chains?

What are the characteristics of family farms in ACP countries? First, poorer family farms generally use their limited resources to meet immediate family needs rather than fund agricultural production. 

They also want to keep some money in reserve for unforeseen expenses, such as illness or funerals. In addition, the time of the year when investments should be made in agriculture often coincides with other unavoidable expenditure. For example, paying school fees may coincide with the time that fertiliser should be purchased. This lack of money means that family farms often opt to produce traditional food crops that require few inputs. Farmers grow enough for their own families and, if there is anything left over, they sell it. This means that it is difficult for them to invest in production and break the vicious cycle of poverty.

Second, family farmers generally want to avoid risk. They have limited resources and are reluctant to risk these on growing new crops that might not do well on their farm or may be difficult to sell.

Third, there is the question of labour. Family farms are dependent on family labour, including that of children. They do not have money to pay labourers, who generally want to be paid in cash. So if they do hire labour it is usually around harvest time, when they can sell the crop quickly and get an immediate return.

Fourth, farmers may not own their land. Even if they do their ownership may be difficult to prove, as many countries have poor land registration systems. This gives rise to at least two problems. If farmers do not have security of tenure they will plant seasonal crops and won't consider making long-term investments in, for example, tree crops. And even if reliable agricultural banks or other rural financial institutions are available in their area, family farms often do not have sufficient collateral to arrange a loan.

Finally, family farmers know a lot about growing the crops they have always grown but are often poorly equipped to improve their current practices, grow new products or raise different types of animals and poultry. Access to relevant knowledge is a major constraint at a time when many public extension services are understaffed and ill equipped to provide farmers with advice about new products and a more commercial approach to farming.

Given these far-reaching problems, how can family farms be incorporated into modern value chains?! Some can't: they are just too poor, too remote and the farms are too small. But there is potential for many farm families to move away from the occasional sale of surpluses to become commercial farmers, and link their production to the steadily increasing demand for food from the urban areas of ACP countries. CTA's Value Chain programme is geared to supporting family farmers make this transition.

It is extremely important to establish long-term trust between farmers and the companies that operate along the value chain. If companies trust farmers to deliver products, they will make the investments needed to process and market those products. If farmers believe that companies will honour their commitments to buy specific crops at an agreed price, they will grow these crops and sell them to the company.

True, establishing such trust takes a lot of time and work. It can easily be jeopardised by freelance buyers who encourage farmers to side-sell, by political interference and by sudden changes in market demand. Developing the necessary commitment often requires farmers to work with companies through informal or formal groups, such as associations and cooperatives, and meetings can take up a lot of time. CTA is commissioning studies that provide examples of how farmers and companies have successfully established linkages, in order to share these experiences around the ACP regions.

Efficient value chains often involve contract farming. This method of production can have several advantages for family farms with limited cash reserves. Companies usually provide inputs in advance, deducting the price from the proceeds when the farmer sells the product. Where there is considerable trust, some companies may even provide loans for hiring labour, for purchasing inputs, and for other farming activities not necessarily related to the contract. They may also provide extension services, help prepare the land and organise transport for the products. A good partnership can also help reduce risk. In this way contract farming can address many of the problems that poor family farmers face, particularly if companies agree to pay farmers on delivery of the crop or very soon afterwards. CTA is working with farmer organisations in ACP countries to improve their knowledge of contract farming and other value chain issues so they can help their members to become involved in commercial production.

While trust needs to be established between farmers and companies, there is also a need to improve the dialogue with the public sector so policies can be developed that foster the involvement of family farms in commercial value chains. Promoting multi-stakeholder dialogue and institutional support to commodity associations can help to influence agricultural research and development policies and ensure a better and more effective participation of family farmers in modern value chains. CTA is supporting several multi-stakeholder fora in ACP regions in this context.

Training is necessary at all levels if value chains involving family farmers are to work well. Companies need trained staff who not only have business management skills but also the capacity to work effectively with farmers. CTA is working in all ACP regions to upgrade agribusiness and value chain training at university level and for the staff of agricultural companies. In the Caribbean and the Pacific it is supporting regional organisations and helping them produce value chain guides specifically tailored to local needs. Training materials for extension staff and family farmers are in short supply. There is much that could be done if funding was more widely available. For example, CTA is working with an international organisation in Africa to develop short guides for pastoralist families and those who work with them.

CTA staff specialised in value chains and ICTs are working together to develop ICTs that can address the needs of family farmers. For example, using mobile phones to deliver extension messages has enormous potential especially in areas where government extension services are facing serious problems. Text messages are already widely used to disseminate market information and, in Africa, CTA is working to develop a network to enable different information services to share their experiences.

 

Additional Resources 

Thematic Event

CTA international conference on Value chains

http://makingtheconnection.cta.int/resources

Publications

Moving herds publication
http://publications.cta.int/en/publications/publication/1778/

Linking smallholder farmers to markets
http://publications.cta.int/en/publications/publication/1564/

Return to International Year of Family Farming

M. Vincent Fautrel
Senior Programme Coordinator
Agri Trade and Value Chain Development
fautrel@cta.int