1. Spencer Henson International Food Economy Research Group Department of Food, Agricultural & Resource Economics University of Guelph

2.  The allure of higher-value markets  Challenges posed by higher-value markets  Processes of smallholder inclusion/exclusion  Donor strategies  Assessing impacts of donor interventions  Donor interventions: Cross-cutting issues  Who should do what?  Conclusions

3.  Changes in consumer demand:  Industrialized countries  Developing countries  Increased trade in ‘non-traditional’ agri-food exports  Emergence of high-value market ‘niches’  Scope for ‘decommodification’ of traditional agri-food exports  Evident opportunities for developing countries  Focus on ‘hitching’ smallholders to a vibrant engine of growth

4.  Supply chains distinct from those for traditional agri-food products  Rapid evolution of high-value supply chains  Distinct capacities required  Implications for smallholders

5. Traditional Products  Low price elasticity  Trader or processor-driven supply chains  Fragmented supply chains  Limited supply chain integration/coordination  Low value to volume ratio  Often low perishability  Differentiation along limited quality attributes  Historically high level of state intervention High-Value Products  High price elasticity  Buyer-driven supply chains  Concentrated supply chains  High levels of supply chain integration/coordination  High value to volume ratio  Often high perishability  Differentiation along multiple quality attributes  Historically little state intervention

6.  Global supply chains  Spatial agglomeration  Firm concentration in processing and distribution  Quality-based competition  Coordination & Integration  Standards as mode of governance:  Risk management  Product differentiation

7.  Lot of donor support  Wide range of approaches:  ‘Bottom-up’  ‘Top-down’  Not many countries like Kenya  Spectre of smallholder exclusion  Interest in ‘good practice’

8.  Practitioner survey  Buyer survey  Country studies:  Kenya  Uganda  Ghana  Zambia  Study products:  Horticultural products  Dairy products  Honey  Spices

9.  Buyer-driven supply chains – key role of exporter  Exporter sources from available supply chains  Inclusion driven by:  Meet buyer requirements in export markets:  Critical capacities  Minimise procurement cost:  Supplier price  Own transaction costs  Competing uses for resources

10. HighComparative AdvantageLow No effective competition Food safety management Advanced quality management Competition from Larger Farmers Productivity Logistics Basic quality management Intense competition High

11. Production costs Transaction costs

12. HighComparative AdvantageLow No effective competition Food safety management Advanced quality management Competition from Larger Farmers Productivity Logistics Basic quality management Intense competition High

16. Source20022008 Intermediaries37.4%23.9% Small—scale out-growers74.2%66.1% Medium and large-scale out-growers 43.2%49.4% Own production39.7%40.6% Other exporters16.8%5.6%

17.  Resources internal to supply chain:  Human assets  Physical assets  Natural c  Financial capital  Social capital  Resources external to supply chain:  Infrastructure  Institutions  Technological conditions

18. StrategyExamples Augment internal resources of supply chain Farmer extension Group formation/strengthening Technical assistance to exporters Strengthen industry associations Facilitate industry ‘code of practice’ development Finance production/management upgrades Augment resources external to supply chain Strengthen physical infrastructure Modernise rules/regulations Capacity-building for conformity assessment Strengthen BDS Off-set additional production and/or transaction costs Direct provision of market intermediary services Cover adjustment costs Subsidy/payment for conformity assessment Payment/subsidy for buyer outreach costs Enhance price received by exporter Market research Trade promotion

19. Intervention inputs Resource augmentation Assured compliance Short-term supply Sustained supply

22.  Diminishing returns as move up high-value continuum  Capacity-bridging versus capacity-building  Long-term sustainability – fixing the fundamentals  Need to have critical minimum capacities  Sequencing  Working with lead firms  Role as ‘honest broker’  Role as ‘risk taker’

23. Production costs Transaction costs

24.  Diminishing returns as move up high-value continuum  Capacity-bridging versus capacity-building  Long-term sustainability – fixing the fundamentals  Need to have critical minimum capacities  Sequencing  Working with lead firms  Role as ‘honest broker’  Role as ‘risk taker’

25. PerformanceCapacity-BridgingCapacity-Building Time to achieve impacts ShortLong Number of entrantsHighLow Rate of drop-outHighLow

26.  Diminishing returns as move up high-value continuum  Capacity-bridging versus capacity-building  Long-term sustainability – fixing the fundamentals  Need to have critical minimum capacities  Sequencing  Working with lead firms  Role as ‘honest broker’  Role as ‘risk taker’

27.  Lots of interventions:  Producer groups  Technology transfer  Residue monitoring plan for access to EU  Processing facilities  Trade fairs  Organic certification  Efforts undermined by:  Vibrant local informal market  Persistence of traditional production methods  Weakness of producer groups

28.  Diminishing returns as move up high-value continuum  Capacity-bridging versus capacity-building  Long-term sustainability – fixing the fundamentals  Need to have critical minimum capacities  Sequencing  Working with lead firms  Role as ‘honest broker’  Role as ‘risk taker’

29.  Critical role:  Cost discovery  Establishment of key resources:  Internal to supply chain  External to supply chain  Key market linkage  Substitution of private and donor capital  Inevitably ‘top down’  Less scalable  More rapid impacts

30.  Direct support for exporters  Promoted enhancement of food safety capacity  Basic principles of operation:  Needs assessment  Cost-sharing  Considerable success at building firm-level capacity……  …..but excluded (smaller) less able firms

31.  Diminishing returns as move up high-value continuum  Capacity-bridging versus capacity-building  Long-term sustainability – fixing the fundamentals  Need to have critical minimum capacities  Sequencing  Working with lead firms  Role as ‘honest broker’  Role as ‘risk taker’

32.  Experimented with wide range of fresh produce  Activities:  Brought in new ideas & practices  Procured biomass internationally  Funded field trials  High failure rate  Successes:  Vanilla  Chilies

33. Government Logistics/infrastructure Legal framework Policy framework Training/extension Private Firms Technical support Market linkages Access to fixed/working capital Identification of market opportunities Donors Linking smallholders and exporters Support to government/promoting policy reform Training/capacity-building Provision of fixed capital Sharing/promoting ‘good practice’ Project Implementers Linking/brokering smallholders and exporters Training/capacity-building Market identification and assessment Farmer mobilisation and organisation

34.  High-value markets very challenging for smallholders  Don’t have to aim ‘for the stars’ …. there is a world outside of GlobalGAP  Need to see processes of inclusion/exclusion from exporter’s perspective  Key role of internal and external resources  Challenges in seeing appropriate role for donor support