The agricultural value chain has existed since the onset of the millennium and this has been basically a function of people in the agricultural development sector of the world’s developing economy. Even though there is no one majorly accepted definition of the agricultural value chain, it can simply be described as the full range of produce, products, and services make up the movement of agricultural products from farm to fork.
These people in the agricultural development of developing countries such as donors and organizations like the UN’s Food and Agriculture Organization- FAO, Department for International Development – DFID, World Bank, and the rest circulated some documents designed to help evaluate value chains to make decisions on best intervening measures. These measures will improve on existent agricultural value chains, or open new ones. Due to many interpretation versions, these guides come with different methodologies.
Structured financing ensures that the right amount of capital or input is given to real time members of the value chain e.g., supporting poultry farmer with chicks, feed, and fund for cages or supporting a fish processor with procurement of facilities and working capital. The aim is to aid flow of finance in the right part of the pyramid, and it can be done on individual basis or via target groups such as farmers cooperatives and associations. This ensures the appropriate interest and moratorium which is more convenient than commercial bank loans. Collateralization of personal or company assets, involvement of stakeholder guarantors and risk mitigation are also proven methods of financing the agricultural value chain.
Government and Institutions
Government and non-government institutions largely influence availability and distribution of fund and resources such as inputs. Government and policy makers also determine policies, strategies and regulations that guide agricultural value chain activities. The policies and regulations that guide importation or exportation of agricultural produce and products depends largely on Government, relationship between companies and economies are linked to activities of NGO’s and institutions.
For efficient running of the agricultural value chain, ICT has become a great tool. Data management, weather management e.g, PICSA, technical innovations, effective communication and all related matters are provided by ICT. The intervention of Government, NGO’s, companies, and individuals has brought about reduction in cost and increased availability of many ICT products and services.
Farmers, agricultural extension officers, researchers, marketers, bankers, microcredit institutions, logistics units, advertisers and sellers all use mobile phones, computers, applications, software packages, food processors, defeathering machines, precision planters, drones, and other innovations to get the jobs done.
Social media marketing is a big success that has strengthened linkages in the agricultural value chain through specific advertisement, agribusiness online hubs, ecommerce websites, networking etc. Online banking, automated payment systems such as Point of Sale, Contactless cards, Automated Teller Machines etc., all play symbolic and impactful roles in improving the agricultural value chain.
Virtual conferences, seminars, and trainings have drastically reduced the rate at which people spend productive time and fund on traveling for information or research, making human resources more available to improve productivity. This has also widened the coverage of, and increased the travel speed of information.
Network and Market Chain
A major characteristic of functionality in any agricultural value chain is networking and linkage between farmers and the market. Not all network or market chains are direct due to a function of power, class, politics, and governance. Although, the value chain is expected to be full integration, involving the bottom feeders of the value chain till the tail end, some cuts happen. For instance, Unilever’s tea estates in Kenya, East Africa grow and process teas only to be taken back to Europe for blending and packaging in trade names such as Brooke bonds, Lipton yellow label tea or PG Tips. This also extends to producers of Cocoa in countries like Cote D’Ivoire, Ghana and Nigeria who then sell to foreigners that take it to first world countries, blend, and finish as chocolate, then market in brand names.
Farmers and marketers go into arrangements, signing documents such as Memorandum of Understanding, committing to supply food crops and animal protein in varying volumes, grades, standards, and other specifications, mostly at a pre concluded price. Companies often, take responsibilities of assisting farmers with land and desired seed breeds, technical support services, transportation, and logistics of produce to their preferred locations e.g., factory sites, warehouses. Olam group does this in many countries such as Nigeria, Ghana, Gambia, and Cote D’Ivoire. They support farmers in Nigeria with land and cocoa seeds.
Promotion of market linkages is termed as Inclusive Value Chains. This involves incorporation of small-scale farmers into existent or novel value chains for derivation of more extensive value from the agricultural value chain.
Upgrading and Enabling Environment
Upgrading assists farmers in locating new practices, ideas, and partners to facilitate marketing of products. Upgrading can also mean improvement of old methodology, to reduce risk and cost, thereby improving profitability.
- Process Upgrading: increment of yields or production cost reduction. It may also include better marketing and packaging. These activities stimulate increase in yields and sales, providing more food to homes.
- Horizontal coordination: managing activities with peers on the same value chain level. An example ids fish farmers cooperative.
- Vertical Coordination: improving on one off buyer-seller relationship to a solid long-term association. Vertical coordination helps farmers achieve higher certainty and security as regards upcoming sales activities and income. This act relies greatly on relationship and trust between customers. This can be a slow process that involves slow and steady steps.
Upgrading enhances the likelihood of enabling environment. An enabling environment covers many terminologies relative to controlled inflation, market induced exchange rates, precinct taxation, peace and decorum, macro-economic stability. Improvement in technologies, irrigation, communication, and transportation systems all aid upgrading which in turn creates enabling environment for the agricultural value chain.
In all of it, Government and Policy Institutions have the greatest roles to play in methodology of the agricultural value chain, as their activities and decisions determine the outcome of all methodologies.