Integration of Small Farmers inot

Rosa S. RolleSenior Agro-Industry and Post-harvest OfficerFAO Regional Officer for Asia and the Pacific

Integration of Small Farmers into Horticultural Supply Chains

PRODUCERCONSUMERTHE HORTICULTURAL CHAIN Basic Facts Spans the continuum from the producer to the consumer

Includes a number of stakeholders;

Can be either simple or complex

Is driven by consumer demand

INFORMATIONChallenges Faced by Small FarmersOversupply of produceLack of awareness of market requirementsPoor quality produceLow farm gate pricesPoor access to technology, information and financeInability to meet quality, safety and volume requirements of marketsOverall lack of competitivenessGroup Formation: Key to Success for Small FarmersGroup formation to get competitive access to: finance inputs production technologypost harvest technologyextension services markets.

Group FormationHorizontal CollaborationClustering

Vertical collaborationContract farmingHorizontal CollaborationClustering involves small farms of similar size pooling their resources and outputs and working together to market collectively to an agreed buyer(s) and to follow a common quality management program.

A cluster can produce only one type of produce, or a diversified assortment of produce, depending on the market they supply.

Benefits of Clustering for Small FarmersBenefits include:Economies of scaleImproved negotiation capacityEffective linkages with Governments and private sectorImproved access to information, knowledge and skillImproved volume, quality and consistency of supplyIncreased prices and improved incomes for producersWider market opportunitiesVertical CollaborationContract Farming - agricultural production is carried out according to an agreement between a buyer and farmers, which establishes conditions for the production and marketing of a farm product or products

(FAO Contract Farming Resource Center http://www.fao.org/ag/ags/contract-farming/en/)Who Initiates and Manages?ExportersFarmer leadersProcessorsSupermarketsProjects: e.g. Helvetas Profil project in Lao PDR through an Organic Farmers Market

Small farmers form a group and produce according to a contractFarmer receives financing, inputs, training and makes investmentsStable supply through production planning: consumer demand is stable throughout the yearUse of technology to produce off-season: canopy shading, irrigation, greenhouseContract Farming: What is involved? Use of quality seeds and inputs and technology to improve quality of producePre-harvest practices (GAP), timing of harvest (in terms of hours), traceability and post-harvest logistics are keyConsumers quality and other preferences are communicated back into the chain to the small farmer

Desired Result of Contract FarmingFarmers produce according to contracted demand, also off-season, so better priceGood quality seed and inputs produce good quality produce, sometimes for exportQuality produce is rewarded by better prices in premium marketsProduce is traceable back to farmer, violations in GAP practices will be punished

Farmer knows better who is the buyer of his produce, and where it is consumedFarmer receives precise specifications, grades and quantities to ensure that he knows what the consumer wants and that he produces what is demandedFarmer has less freedom, but more information to improve his decisions

Contract SpecificationsMay include agreement on:Crop varietyMethod of productionGrowth conditionsTiming of productionAcreageProduce quality specificationsTime and point of deliveryPrice and terms of payment

Types of ContractsFormal contracts between a producer and a buyer.

Gentlemans agreement between the producer and buyer.Advantages of contract farming for small producersOpportunity to access information and technologyAn assured market (no risk of overproducing)Price stabilityAbility to meet safety and quality requirements of buyers

Advantages of Contract Farming for BuyersConsistency of supplies and pricesBetter quality produceTimeliness of supplies

Factors that Contribute to SuccessTrust between the farmer and the contractorSecure marketsFarmers must be honest and eager to improve quality and to work in groupsBuyers must be sincere and keep their promiseGovernment must provide the enabling environment to support contract farming e.g. policy support, infrastructure, etc.

THANK YOURosa.Rolle@fao.org