Rosa S. Rolle Senior Agro-Industry and Post-harvest Officer FAO Regional Officer for Asia and the Pacific Integration of Small Farmers into Horticultural Supply Chains

PRODUCER CONSUMER THE 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 INFORMATIONINFORMATION

Challenges Faced by Small Farmers Oversupply of produce Lack of awareness of market requirements Poor quality produce Low farm gate prices Poor access to technology, information and finance Inability to meet quality, safety and volume requirements of markets Overall lack of competitiveness

Group Formation: Key to Success for Small Farmers  Group formation to get competitive access to:  finance  inputs  production technology  post harvest technology  extension services  markets.

Group Formation 1. Horizontal Collaboration Clustering 2. Vertical collaboration Contract farming

Horizontal Collaboration Clustering 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 Farmers Benefits include: Economies of scale Improved negotiation capacity Effective linkages with Governments and private sector Improved access to information, knowledge and skill Improved volume, quality and consistency of supply Increased prices and improved incomes for producers Wider market opportunities

Vertical Collaboration Contract 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

Who Initiates and Manages? Exporters Farmer leaders Processors Supermarkets Projects: e.g. Helvetas Profil project in Lao PDR through an Organic Farmers’ Market

Small farmers form a group and produce according to a contract Farmer receives financing, inputs, training and makes investments Stable supply through production planning: consumer demand is stable throughout the year Use of technology to produce off-season: canopy shading, irrigation, greenhouse Contract Farming: What is involved?  Use of quality seeds and inputs and technology to improve quality of produce  Pre-harvest practices (GAP), timing of harvest (in terms of hours), traceability and post-harvest logistics are key  Consumers’ quality and other preferences are communicated back into the chain to the small farmer

Desired Result of Contract Farming Farmers produce according to contracted demand, also off-season, so better price Good quality seed and inputs produce good quality produce, sometimes for export Quality produce is rewarded by better prices in premium markets Produce 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 consumed  Farmer receives precise specifications, grades and quantities to ensure that he knows what the consumer wants and that he produces what is demanded  Farmer has less freedom, but more information to improve his decisions

Contract Specifications May include agreement on: Crop variety Method of production Growth conditions Timing of production Acreage Produce quality specifications Time and point of delivery Price and terms of payment

Types of Contracts Formal contracts between a producer and a buyer. Gentleman’s agreement between the producer and buyer.

Advantages of contract farming for small producers Opportunity to access information and technology An assured market (no risk of overproducing) Price stability Ability to meet safety and quality requirements of buyers

Advantages of Contract Farming for Buyers Consistency of supplies and prices Better quality produce Timeliness of supplies

Factors that Contribute to Success Trust between the farmer and the contractor Secure markets Farmers must be honest and eager to improve quality and to work in groups Buyers must be sincere and keep their promise Government must provide the enabling environment to support contract farming – e.g. policy support, infrastructure, etc.

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