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Value Chain for Commercialisation of Agriculture

Value Chain for Commercialisation of Agriculture. World Vision Honduras Case Study Karen Lewin Economic Development Specialist. Introduction. Case Study : Commercialisation of Agriculture in Western Honduras

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Value Chain for Commercialisation of Agriculture

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  1. Value Chain for Commercialisation of Agriculture World Vision Honduras Case Study Karen Lewin Economic Development Specialist

  2. Introduction Case Study: Commercialisation of Agriculture in Western Honduras Objective: outline the keys to enabling small holder farmers to access the market and increase their negotiating power in the market place.

  3. World Vision Honduras Case Study Commercialisation of Agriculture Successful market access

  4. Funded by World Vision UK Proyecto Acesso a Mercados Increased household income from $235 p.a. to $6,455 Direct beneficiaries 257. Indirect 12,300. Formed 5 micro-enterprises among youth and women to make jam, chutney etc. Job creation - Employed 40-60 labourers Won lucrative Walmart contract, with guaranteed weekly volumes (10 tonnes). Phase II – expanded operating area. Farmer to farmer training. Up to 20 people ready to join each of the 8 associations.

  5. Sector specific providers Cross-cutting providers x Producers Financial (cross cutting) WHAT IS A VALUE CHAIN? Full range of activities that are required to bring a product or service from its conception to its end use, including all the market channels available to all firms Global Retailers National Retailers Exporters Wholesalers Processors Producers Input Suppliers

  6. Value Chain Development steps Action for Enterprise (AFE)

  7. Value Chain Pre-Project

  8. Analysis of the Value Chain • Farmers have low market power because: • Low negotiating power as sellers • Few buyers accessible. • Not organised to supply the volumes and variety needed by supermarkets. • Low power as buyers – purchase inputs from expensive retailers. • At the mercy of the broker (pre-harvest financing, price takers, perishable crop).

  9. Spectrum of market structures Perfect Competition Monopolistic Competition Oligopoly Monopoly Competition is the greatest possible

  10. Perfect Competition – very few differentiation or cost advantages Differentiation Advantages Cost advantages

  11. Escaping Perfect Competition Most small holder farmers and entrepreneurs in developing countries operate in conditions of perfect competition, with few competitive advantages. It is a race to the bottom, competing on the lowest price. Escape perfect competition - develop a competitive advantage: Able to access new markets Increased market power Better input prices Ability to negotiate better sales price Greater profitability

  12. Analysis of Opportunities in the Value Chain • Market survey • Analysed volumes and prices; estimated demand and current supply. • Results: • Under-served markets in El Salvador • Market opportunities in larger regional markets (San Marcos, San Pedro Sula, Santa Rosa) • Supermarkets looking for quality vegetable producing using ‘Good Farming Practices’ (low pesticide use). • Growing consumer demand for near-organic vegetables. • Unmet demand for fresh, locally processed items (vegetable chips, tomato sauce, jams, chutneys).

  13. Developing a Competitive Advantage • 1. Technical input (Farmer Field School). • Produced high quality vegetables without use of harmful pesticides. • Increased yields and no. of plantings per year. • 2. Organising for Production • Farmers organised themselves into 8 cooperatives. • Cooperatives organised into Commercialisation Network. • Through trust and solidarity, able to coordinate production. • Formed solidarity groups – able to access finance. • Released from pre-harvest financing of the coyote. • Coordinated purchase of inputs direct from wholesaler.

  14. Developing a Competitive Advantage 3. Creating Linkages • Linked farmers to new buyers through training, market information and reputation. • Farmers producing to order through the agricultural calendar. • Built a collection centre so buyers could come to a central point. • Training farmers in advocacy and negotiation – government built a new road, improving government agricultural extension services.

  15. Developing a Competitive Advantage • 4. Added value • Food processing • Formed 5 micro-enterprises making jam, chutney, tomato sauce, chips. • Quality accreditation • Sold direct to supermarkets • Transport • Farmers bought pick ups to transport their produce • to the collection centre. • Packaging • Pack vegetables as required by customer. • Presentation of processed food items (labelling, jars, chip packet)

  16. Testimonials • ‘Before we were coffee pickers for 2 months a year’. • ‘Now we rent land and produce and employ labourers’. • ‘We have been able to buy a pick up to transport our produce’ • ‘The effects are more than this. Its brought changes to our families. My wife has completed her schooling and is now going to do further study in entrepreneurship’ • ‘I used to spray lots of chemicals on my produce. I wouldn’t eat it because I knew what I had put on it. Now I am getting higher yields without harmful pesticides. I didn’t believe it was possible’.

  17. How did the Value Chain Analysis help? • Identified opportunities further up the value chain (formal retail sector, lucrative markets). • Framework for focusing quantitative research (demanded volumes in various markets, prices against current supply). • Identified constraints in the business environment (access to finance, lack of agricultural extension, unfair business practices). What more needs to be done? • Tacking other constraints in the business environment • Commercially viable solutions to market services • Scaling up

  18. What other tools help: Porter’s 5 forces – mapping the competitive environment PESTLE – Analysing the external environment: Political, Economic, Social, Technological, Legal and Environmental factors. Porter’s Diamond of Competitive Advantage – analysing country specific competitive advantages; away from a reliance on factor conditions. www.ledcast.net(LED, PACA website) www.microlinks.org(USAID website with Tools). www.seepnetwork.org (Market Facilitation Initiative)

  19. Access to Markets Expert Organisations Action for Enterprise (AFE) Mesopartners (PACA and LED) Practical Action (UK-based NGO) CHF International Mennonite Economic Development Associates (MEDA) ACDI/VOCA Chemonics International Development Alternatives International (DAI)

  20. Questions Karen Lewin Economic Development Specialist karenlewin@live.co.uk Mob: 0431 482 231

  21. Next Session Workshop Mapping the Market as a System

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