IRD Seminar Small scale farming and local food supply: linking farmers to markets Andrew Speedy – Visiting Professor, School of Agriculture Monday 12 January 2015

Small scale farming

FAO themes Animal health Animal production Aquaculture Biodiversity Biotechnology Child Labour in Agriculture Climate change Climate smart agriculture Communication for development Decent Rural Employment Emergencies Family farming Fisheries Food chain Food prices and markets Food loss and food waste Gender Genetic resources Hunger Indigenous people Investment in agriculture Land tenure Livestock and the environment Nutrition Organic farming Pollinators and bees Quinoa Research and Extension Right to Food Rural Institutions School food Seeds Social protection Sustainable forest management Trade Urban agriculture Water

Ways out of poverty (small farmers) Technology – Apply existing technology – New technology – biotech, GM, chemical, precision ag Microfinance (better: savings schemes) Access to markets Contract farming Value chain approach (private sector led) Exit strategy

Ways out of poverty (small farmers) Diversification – Fruit and veg – Aquaculture – Non farm enterprises – Agro-tourism Internal migration (urban industries) International migration

Projects Rice production Dairying Small ruminants Agricultural policy Normative activities (Codex, OIE, IPPC) Technical cooperation in emergencies

Milled rice yield by country MT/Ha CountryYield MT/Ha Source USDA

Milled rice yield by country MT/Ha CountryYield MT/Ha Source USDA

Milled rice yield by country MT/Ha CountryYield MT/Ha Source USDA

United States Item2013 Gross value of productionUSD Primary product: Rice 3, Total, gross value of production 3, Operating costs: Seed Fertilizer 2/ Chemicals Custom operations Fuel, lube, and electricity Repairs Purchased irrigation water Commercial drying Interest on operating capital 0.57 Total, operating costs 1, Allocated overhead: Hired labor Opportunity cost of unpaid labor Capital recovery of machinery and equipment Opportunity cost of land (rental rate) Taxes and insurance General farm overhead Total, allocated overhead 1, Total costs listed 2, Value of production less total costs listed Value of production less operating costs 1, Supporting information: Yield (tonnes per ha) Price (dollars per tonne at harvest) 317 * Current_Costs_and_Returns_All_commodities/crice.xls [USA] Rice production costs and returns per planted [ha], excluding Government payments, 2013*

Production solutions: Improved varieties

Seed production and distribution of improved varieties

Fertilizer and chemicals

Integrated pest management

SRI

Improved feeding

Animal health

Livestock diseases Zoonotic diseases – Food borne diseases – Cistercercosis Avian influenza Newcastle disease CSF, ASF and PRRS Foot-and-Mouth Disease FMD Hemorrhagic septicaemia East Cost Fever

“Household incomes range from 420 US-$ to 1,570 US-$ per year. Income structure is quite diverse with non-cash benefits being prominent in the small systems. For example, draught power, manure and fuel from cow dung, and milk used in the household account for 16 percent of the household income in IN-2CO. Off farm income is quite important for all the stall fed systems in Orissa and constitutes 5 to 45 percent of the household income. The returns from farming range from 460 US-$ to 2,910 US-$ per year. The dairy contributes 25 to 85 percent to the whole farm returns. The returns from cash crops are also important, ranging from 15 to 70 percent, depending on farm type. Net cash farm income closely follows the level of farm returns with the exception of the large commercial cow system (IN-15CO), where net farm income is relatively low, mainly due to comparatively high cash costs and hired labour costs in dairy per 100 litres ECM. The highest net cash farm income was obtained in the commercial buffalo based dairy farming system (IN-6BO), mainly due to lower unit costs of milk production. The net cash farm income ranges from 190 US-$ to 1,100 US-$ per year. The low net cash income of 190 US-$ per year (IN-2CO) is due to low milk yields, small size of land holding, and slightly lower milk prices paid by the cooperative due to lower fat content and remote location.” From: FAO The Economics of Milk Production in Orissa, India, with Particular Emphasis on Small-scale Producers Economics of small scale milk production [India]

Linking farmers to markets Local markets Traders Cities, hotels, schools, government offices Export Cooperatives Contract farming

Value chain approach

Porter’s Value Chain Porter, M.E. (1985) Competitive Advantage, Free Press, New York, 1985.

Input supply Agricultural production 1 st level handling ProcessorsWholesalers/d istributors RetailersConsumers Value chain for agricultural products: the difference in the approach Input supply Agricultural production 1 st level handling ProcessorsWholesalers/d istributors RetailersConsumers Push Pull

Sheep & goats (Ethiopia)

Group breeding scheme (Menz)

Farmers group (Menz)

Pig production (Uganda)

Cattle production (Tanzania)

Milk trader (Morogoro)

Value chain actors Service providers (extension, credit, veterinary etc.) Input suppliers (feed, seed, breeding) Producers (farmers) Traders Processors Retailers Consumers

Constraints in value chain approach Access to credit Input supply (seed, feed, drugs) Technology, training Transport to market Information (demand, price) Private sector Interest rates

Interventions Breeding Feeding Animal Health Group marketing Dairy hubs Traders, transport Processors Exporters Supermarkets, hotels, schools, etc,

Keys to value chain approach Identified market with potential growth Private sector leadership Government only in enabling role Sustainable economics No external support (interference)

10 Costs Drivers of Each Value Chain Activity 1.Economies of Scale 2.Learning 3.Capacity Utilization 4.Linkages among activities 5.Interrelationships among business units 6.Degree of vertical integration 7.Timing of market entry 8.Firm’s policy of cost or differentiation 9.Geographic location 10.Institutional Factors (regulation, union activity, taxes etc.)

Groups

Contract farming

Value chain selection is key Poor to poor value chains in research for development

Poultry!

Dairy improvement

Fish

Fruit and Veg

Value chain development must be driven by private sector Government has an enabling role

Small farm economics Poor 1 USD per day Good 3 USD per day 1 cow 1 USD per day 5 cows 5 USD per day

Agricultural restructuring The objectives for agriculture and rural development will be set within the conceptual framework of ‘sustainable development’. Agriculture will become increasingly market-based, with the primary set of goals pertaining to the welfare of farmers, the broader rural population, and consumers. The role of government will shift from being the provider to being a facilitator of investments and services provided by others. The government will embrace and apply the concepts of “partnership’ and ‘co-management’ with the private sector and with community-based organizations in order to better achieve societal goals.

Agricultural restructuring Ensure adherence to principles that encourage sustainable development and the welfare of farmers and consumers. Provide public investment in appropriate infrastructure. Encourage but closely regulate investment by the private sector. Develop a fair system of contract farming for small farmers to work with the private sector.

Small farms / Commercial farms Households (nông hộ) Small farms (gia trại) Large farms (trang trại) Towards 50:50 urban:rural Dualistic approach Support for small farmers Commercial value chain (private sector)

Rural urban market Global percent rural 50 percent urban

History of development Japan Korea Malaysia Vietnam Cambodia Laos Myanmar

History of development Kenya Botswana Namibia Mozambique Uganda Tanzania Ethiopia