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Agricultural Value Chains in Developing Countries - Open Education Online

Agricultural Value Chains in Developing Countries

The agricultural value chain at the starting point of the spectrum consists of the producers or farmers who provide plant crops and animals for consumption. At the endpoint of the spectrum is the consumers who use the produce or products. In between these two points lie the small, medium, and large-scale businesses who turn the produce to products, market, brand, and sell them to end users or consumers. Every person or entity has a role to play in this chain. In the agricultural value chain, we will find growers, processors, transporters, wholesale sellers, retail sellers, branders, marketers, and of course, consumers. Some sectors of critical importance to the agricultural value chain are media and financial institutions. Each person or company can play more than one role in the value chain.

In developing countries, agriculture continues to be a major source of income and employment for many, which comprises 50-90% depending on the country or region. In the last twenty years, the agricultural value chain in developing countries has experienced significant change and upgrade. Many agricultural research institutes and development banks such as World Bank and African Development Bank have encouraged embracement of updated technology through inputs of improved breeds and varieties. These institutions alongside government and non-government organizations have promoted modern involvement, and other supports to improve and modernize the agricultural value chain.

Nevertheless, majority of developing countries are still far behind in the upgrading of their agricultural value chain as they experience certain major and minor constraints. The major purpose of the agricultural value chain is “Value Addition” which involves transforming farm produce to finished or packaged products for the purpose of versatility, longevity, traceability, convenience and many more reasons. Value added products also attract better market price.

The major threats to upgrading of agricultural value chains in developing countries are Access to Market, Enabling Environment (Funding, Infrastructures), Market or Customer Mindset, In these threats lie strengths, weaknesses, and opportunities untapped or undertapped.

Access to Market

Majority of farmers in developing countries operate on small to medium scale, therefore giving them little or no access to foreign and regional markets, and more access to local markets. The local market becomes saturated and gives lower value price to farm produce and value-added commodities. The lesser population who operates on a large scale are the ones with easier access to regional and international market.

Overall, there is shortage in availability of products for export, and a saturation of local market with produce lacking in added value. Access to market depends largely on producers access to technical knowledge, enabling environment, bargaining ability, and knowledge of market/consumer mindset. Many developing countries are upgrading. Specifically, the youth who have access to good education, internet, information, data, and networking have made a huge difference, attracting global recognition, funding and partnerships through innovations and business ideas. Many developing countries such as Ghana, South Africa, Nigeria, Cote D’Ivoire, Turkey, India, Cape Verde, Rwanda, Kenya and so on have keyed into this, upgrading the agricultural value chain rapidly. These countries are attracting, and welcome investors, partners, and funding organizations to this effect.

Enabling Environment

An enabling environment is one which caters to the financial, structural, and environmental needs of the agricultural value chain, so this depends largely on the availability of resources and physical infrastructures to the players. Many developing countries have great climate to suit a wide range of species and breeds of fauna and flora but that is not enough. Technological innovations, knowledge improvement, human factors, and physical resources to manage elements such as soil, temperature and climate must be sufficiently available.

Developing countries are beginning to brace up in this aspect also. There have been intervention form government and non-governmental organizations, individuals, private and public companies at local, regional, and international levels, developing the agricultural value chain by making fund, infrastructures, and other resources available. However, these countries still have lots of ground to cover.

Market/Consumer Mindset

Market or consumer mindset is relative to market access. The food and food product market like every other, is dynamic and the only constant thing is change. Year in year out, people’s taste and demand evolve and lean towards higher or improved value addition and nutrient specification such as organic, vegan, vegetarian, gluten free, etc. This means non-commoditized value-added products demand that market/customer mindset should be on many strata of the agricultural value chain.

To play in high ended value addition, players in the agricultural value chain should understand the consumer mindset and produce to fit their demands. To effectively participate and succeed in the agricultural value chain, key players from producer to the last product or service provider must be able to access vital market information and be able to interpret in product presentation. The more they can deliver on product quality and other product characteristics expected fit into the value chain, the more demanding market demands are met. By doing this, players in the developing countries agricultural value chain can tailor their activities and penetrate larger market platforms.

Consumers in developing countries are beginning to exhibit dynamism in their demand. To meet these upgraded demands at indigenous, regional, or foreign/international level, players in the agricultural chain need to scale up. An enabling environment is needed to scale up production and value addition. No country can meet up to such demand with a predominantly subsistence, small to medium scale of agriculture. More intervention will enable the players in this agricultural value chain attain peaks.

Upgrading the Primary Players

To carry small holder food producers in the subsistence or small to medium scale level along in the agricultural value chain, Contract-farming is significant and should be adopted. The contract should be arranged to favor all players, ensuring that MOU’s are signed properly, specifications are well detailed and clearly achievable, environments are enabling enough, and off taker prices are at optimum value.

Groups and associations can be formed so that small scalers can pool products together into significant quantity, or they may partner with bigger farms to pull resources together in meeting off taker requirement.

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