Development aid has targeted food security and
agri-business for more than 40 years, but has yet to succeed in overcoming the
imbalance between supply and demand. Nor has it made much impact on reducing
hunger and rural poverty among communities that rely on the production and sale
of agricultural products for food and incomes. As demand for food rises and the
world becomes increasingly urban, this problem will be exacerbated. Practical
solutions are required urgently. Through its activities, ITC’s Food and
Agri-Business Programme (FABP) is developing scalable solutions by taking a
market perspective.
Feeding
the world in 2050?
According to a World Bank prognosis the world’s
population is set to grow from its current 7 billion to more than 9 billion by
2050. More than 50% of the global population today already lives in urban areas
and have stopped working the land for their own food requirements. Despite many
years of development assistance, most developing countries still waste at least
40% of the produce they grow between the field and the first stage of
conditioning, and waste a further 10% between the primary conditioning stage
and the person who is going to eat or buy it.
Uncertainties and delays faced by transport
companies operating in landlocked countries in Africa force them to pay a
premium to obtain refrigerated food-quality containers (commonly called
reefers) of between US$ 6,000 and US$ 9,000 in addition to facing steep
demurrage fees if the containers are delayed outside of the contractually
agreed usage window. These costs come on top of high fuel costs. Even when
containers are available, delays at border crossings increase fuel usage as
trucks run generators to maintain food container temperature within tight
limits.
The challenge of feeding urban populations has
been with us for a long time. Essentially, the complexity of perishable produce
supply can be reduced to three main issues:
1. Reducing wastage of
good food that is being grown or fed so that more of it gets to users;
2. Increasing
productivity per hectare of land of the right varieties of food or animals to
satisfy buyer and customer preferences; and
3. Freeing access
across developing country borders so that food items can move unhindered from
places of surplus to places where demand exceeds local supply.
Traditional development approaches often focus
on individual issues or stages of production such as plant research, farmer
associations, farming techniques, rural development, micro-finance and
community processing. ITC, however, sees these issues as inter-connected
challenges in an end-to-end market value chain stretching from customers back
to farmers and farm supplies or from ‘fork to farm’. That perspective, of a set
of activities aligned around market objectives understood by every stakeholder,
leads to a different approach to solving the food challenge.
A new approach is required because successful
food exporting depends on value chain stage and support service activities
being closely orchestrated. A food processor with a contract to deliver a range
of chilled, packaged produce and juices to a hotel or exporter relies on
farmers harvesting the right varieties at an agreed time, on collectors not
damaging the produce in transport, on timely and accurate laboratory tests to
meet buyer requirements and on financing to pay suppliers of produce and
packaging.
Farmers need to know what markets and uses
their produce or animals will be destined for before planting or rearing as the
requirements are often very different. For example, fruits for slicing or
juicing need to be harvested early so that cutting and pressing do not
instantly lead to bruising and fermentation. Customers from different geographic
regions have different tastes and seasonal windows for delivery are very
precise. The smallest lack of attention at any stage can lead to the rapid
destruction of a whole season’s crop.
If farmers see their future as part of a
self-sustainable food business, with sufficient income generation to allow some
new investment each season, the right conditions for expanding food production
will be established. In any food business there are three critical success
factors that must be mastered:
1. Cultivating or
rearing the food people want with consistent quality and timely delivery;
2. Reducing the time
from harvest/slaughter to market; and
3. Preserving
nutritional quality, appearance and taste for as long as possible (often
referred to as shelf life).
Success or failure in the food business is
therefore directly linked to how well stakeholders come together to respond to
the three main issues listed above and identified as the roots of the food
challenge. This translates to good planning and communications and getting the
same messages understood by all stakeholders at the same time.
An integrated
ITC approach to value chain development
As the main issues are organizational and
behavioural, ITC’s FABP has developed a four-step participatory approach that
pays attention to the context of social development, communications and
relationship building. It brings stakeholders from every stage of the chain,
including support services, banks and development agencies, to work together.
This process fully engages stakeholders and helps them to improve their
performance based on a common understanding of target market requirements and
potential solutions. It is adaptable, to meet actual circumstances, and is
capable of focusing, re-energizing as well as aligning development efforts
around agreed market options:
1. Provision of market knowledge & sector
intelligence – ITC
provided advice and training to stakeholders from across a sector to support
decision-making and structuring of food and agri-business value chains and
support services; transfer of know-how on information, communications and
support service delivery, and on the requirements for linking communities,
micro-enterprises and small- and medium-sized enterprises (SMEs) to markets.
2. Value chain performance analyses, the design of
market-led sector strategy, and development activities –
ITC confirms the baseline situation and facilitates a
process for stakeholders to develop the content and priorities for their
strategy together. ITC challenges stakeholder ideas and feasibilities, helps
design investment and development activities, acts as intermediary with
potential resource providers, organizes and supports the management of
private-sector led stakeholder implementation coordination bodies.
3. Turning opportunities into real sustainable business
through integrated sector development programmes –
ITC provides a range of project-based advisory,
information, coaching and linkage-building services at micro, meso and policy
levels to improve sector-wide enterprise efficiency and support services. They
include: market orientation, access to sector specialists active in markets,
improving transparency and reducing exploitation in trade, building direct
linkages with sector and import associations for long-term supplier development
and equitable contracting, reinforcing trade information services, agri-food
trade promotion, counselling on non-tariff measures, food quality, food
technology, packaging, labelling, agri-business collection centres and
logistics, mobile communications and financing.
Some of these services are described below
and in the article on ITC’s intervention in Uganda and Ethiopian coffee sectors
in this edition of International Trade Forum. Some development requirements, defined by stakeholders in their implementation
plans, may be beyond the scope of ITC, for example in cases related to
agriculture. ITC then assists stakeholders to find the right development
resource providers for their needs and counsels stakeholders on how to
coordinate several partners simultaneously and manage the relationships.
4. Advice on holistic sector development and policy
design – Impartial
development advice on how to achieve export competitiveness may be provided for
policy- and decision-makers based on ITC’s global experience and information
sources. This advice is provided through several ITC services: Business and
Trade Policy, Export Strategy, Market Analysis and Research, and Enterprise
Competitiveness, independently or coordinated through the Sector Competitiveness
Food and Agri-Business Programme.
Examples
from some of ITC’s projects
A comprehensive participatory value chain
approach from ITC’s Food and Agri-Business Programme is addressing both wastage
and productivity issues for hundreds of smallholder farmers in four parishes in
Jamaica. Hoteliers, food processors, fresh produce exporters and buyers are
working together with farmers, collectors and agricultural extension services
to define performance gaps and agree on needs along fruit and vegetable value
chains. They produced a strategy and prioritized implementation plans
coordinated by an elected committee. The top priority was better organization
of fresh produce supply chains to be addressed through a transparent process.
ITC specialists recommended testing private-sector managed rural agri-business
collection centres (ABCCs) and took stakeholders to see examples and discuss
their plans directly with operators in other countries.
Agri-business collection centres are designed
to be the hub for a number of value-added services, for example: collection,
grading, conditioning, packaging and payments, as well as soil testing, farm
inputs delivery and application training, and demonstrations of appropriate new
technology. Development banks can be provided with reliable production records
and sales data that can support requests for financing of improvement projects
or farm inputs linked to recorded buyer demand. In the case of Jamaica this has
led to significant interest in advancing credit for such schemes. In the past,
buyers had almost given up on smallholder farmers. Now, since they are directly
involved in the process, there are encouraging signs of long-term relationships
developing including regular meetings, development banks extending financing and
non-project funded improvements.
In the fruits and vegetables sector in Fiji and
the pineapple sector in Benin, stakeholders prioritized easy-to-use ITC voice
and text mobile solutions that are being offered to link buyers and customers
to farmers and agricultural extension workers so each has access to the same
information at the same time. The mobile-phone based service allows buyers to
specify to farmers and extension services what varieties and volumes of produce
they want to receive. Extension services use the system to organize farmer
field training and farmers can notify buyers weeks in advance of harvest of
their intended delivery date. Farmers and collectors can also see how a large
volume order is being filled – and how much is still open to offer. This system
provides transparency through comparisons to town market prices and creates the
first reliable records of transactions, demand and supply. In countries where
telephone banking is allowed, direct payments to rural farmers can be made.
In Cameroon, similar activities benefiting
hundreds of communities are being delivered in the manioc and coffee sectors,
where ABCCs have also included coffee washing, processing and simple tasting
and food hygiene testing equipment that can work and be maintained in rural
areas with intermittent or no mains electricity supplies. For the first time
growers can taste their own coffee and understand the impact of different
growing and processing techniques on its quality and value. The coffee
communities have already seen a 25% increase in the prices achieved for their
coffee and a dramatic increase in outturn.
In the manioc sector ABCCs are becoming social
hubs for the communities they serve showing improvements in quality continuity
and organization of harvest and supplies. In these examples ITC and local
sector development coordination bodies worked closely with a number of other
development agencies, including agricultural and land ministries such as the
Ministry of Agriculture and Rural Development, Ministry of Finance (MINADER),
International Fund for Agricultural Development (FIDA), the Food &
Agriculture Organization (FAO) and the International Institute for Tropical
Agriculture (IITA).
In cereals value chains in West Africa, and
agri-foods value chains in the Common Market for the East and Southern Africa
(COMESA)
region, ITC is working with policymakers, freight services, border fiscal
services, development banks, plant health, food safety and quality inspection
services to ease the cross-border transit of food products – especially for
landlocked countries. Non-tariff measures at borders and ports come in many
disguises. ITC seeks to identify which are useful measures and which are unnecessary
barriers. It can then demonstrate the cost to the competitiveness of the sector
and bring stakeholders together to determine alternative solutions.
Similar market-led integrated stakeholder
participatory approaches are employed by ITC in manufactured natural products
value chains such as hides, skins and leather, and cotton, textiles and
clothing. Whereas 10 years ago ITC specialists had to explain or undertake
group exercises to demonstrate basic value chain concepts, they are now widely
understood and the importance of taking a value chain perspective to design
practical development responses is widely recognized. But, being understood
does not mean that relationships along value chains are working as they should,
that stakeholders fully understand where and how they add or destroy value, or
are aligned around a common win-win objective with buyers.
Many current development activities are still
organized out of rural development or agriculture programmes, which may be very
good for that particular area but restrict their potential to create an impact
further downstream. Even with good end-to-end value chain analysis, addressing
issues in isolation simply does not work to overcome the organizational and
behavioural problems that are the main source of the performance issues
outlined above.
The examples above are
designed to show how important it is for donors and regional economic
commissions to consider envelopes of funding that are flexible enough to
provide for holistic end-to-end value chain solutions and how stakeholder
engagement and ownership is the key to improved value chain performance and
better community livelihoods.