Modernizing Extension and Advisory Services

Linking Smallholder Farmers to Markets and the

Implications for Extension and Advisory services

Shaun FerrisCatholic Relief Services

MEAS Global Learning Exchange on Best Fit Approaches inExtension and Advisory Services

Washington, D.C., June 6, 2012

Trends in Private Sector led Agricultural Market Development

• 1700’s - Plantation farming (sugar, rubber, pineapples, banana)

• 1800’s - Estate farms and outgrowers (tea, horticulture)

• 1900’s - Outgrowers (coffee, cotton, oil palm)

• 1900’s - Contract Farming (cotton, horticulture, potatoes)

• 1940’s - Certification (coffee, cocoa, cotton, textiles, etc)

• 2000’s - Agro-Dealer networks (Export trading, Farmers Gold)

• 2000’s - New Business Models (Unilever, Sysco, Mars)

• The private sector trends are shifting from seeking supply flexibility through smallholders, towards a greater emphasis on sustainability and quality of supply through identified smallholder suppliers.

Trends in Public led Agricultural Market Development

– 1960’s-1970’s - Green revolution (supply led)

– 1970’s – 1980’s - Farming systems / Participatory

– 1995 - 2000 Testing supply chains (chain-wide)

– 1990’ – mid 2000’s Making markets work for the Poor (BDS)

– 1990’s – date Territorial methods (diversification)

– 2009 – date New Business Models (private sector led)

The Investment Dilemma

More sustainable and equitable progress for the Poorer farmers

• Focus on reducing hunger & strengthening resilience.

• Provides pathways out of poverty, but progress is slow

• Success transforms poor people’s lives, but may shift national economic growth levels.

Economic Growth for more Endowed farmers

• Focus on returns to investment.

• Can provides clear links to more rapid results.

• Success accelerates overall growth leading to measurable national wealth creation and employment.

Public Development Sector Private / Government Sector

Key factors in Market LinkageKey factorsLocation Farm sizeAccess to Financial servicesAccess to TechnologiesFarmer typesSkills training Farmer organizationUse of farm laborAccess to water resourcesRoads and transportEducationInformation Technologies

Formal Markets

Informal Markets

Key Questions for the role of extension in linking farmers to markets

• Which farmers?

• Which markets?

• What factors improve market performance?

• How does better market access help farmers?

• How can we improve market linkage?

• Can existing extension services do the job?

Types of Farmers

• Highly heterogeneous• Different options• Different ambitions• Different starting

points• Scope for women• Opportunities for

Youth?

Maize Farmer Segmentation in East and Southern Africa

Top 1-2% of farmers who produce up to 50% of the traded grain

15-18% of smallholders who sell the bulk of the other 50% of traded grain

20-30 % of farmers who are market neutral

30-50% of farmers who are net buyers

Highly Vulnerable Ultra poor

Vulnerable

Vulnerable but Viable

Commercial smallholders

Require food safety net

Commercial Scaled farmers

Source: Adapted from Nicholas Sitko, 2011.

Three market areas

• Informal markets– Remain the major market option for smallholders– Limited services– Limited grading

• Formal markets– Push :pull markets– Higher value– Graded – Traceable

• Structured public markets– Formal market systems that target smallholder suppliers

Linking Farmers to Informal markets

Net sellers Net buyersA fraction of the farming community The majority of farmers

16% of rice farmers in Madagascar produce 50% traded grain (Barrett & Dorosh, 1996)10% Kenyan farmers sell 75% of all maize sold by smallholders in 1997/98 (Nyoro 1999)6% of Mozambican farmers sold 70% maize, (Jayne et al, 1996) 2% maize farmers sell 50% of grain in market (Jayne et al 2008)

50% farmers net buyers East Africa (Weber 1988)61% of Somali farmers net buyers (Weber 1988)73% Rwandan farmers net buyers (Weber 1988)71% Kenyan Maize farmers (Nyoro et al, 1999)70% maize farmers in Kenya, Malawi, Zambia and Madagascar net buyers (Jayne et al, 2010)

Have land assets of 6 ha and above, but larger farmers will have 100+ ha

Below 4 ha, often lower than 2 ha

These are the mass markets in which most smallholder farmers are engaged. However, these are largely unregulated, untaxed and lack services….

Source: Adapted from Christopher Barrett, 2008. Smallholder participation in E and S Africa.

Linking farmers to Formal Markets

• Increasing number of studies show that smallholder farmers can prosper when linked effectively to formal, growing private sector markets.

http://www.linkingworlds.org/images/stories/PDF/ValueChains_Paper_WEB.pdf

Source: Adapted from Jefferson Shriver, 2011.

Linking farmers to Public Markets

• New approaches to public procurement are using market instruments to buy produce from smallholder farmers

• Supply people and institutions that require publically supported food interventions.

Purchase for Progress P4P

Local and regional Procurement LRP

Following example is based on extension strategies for farmer segments

• Farmers with < 4 ha (70% of farmers)– Less endowed– Limited market access– Women– Youth

• Improved productivity of key staples

• Diversification into higher value products

• Off-farm labour options

• Farmers with > 4 ha (20-30% of farmers)– Better endowed

farmers– Good market access– Experienced male

farmers• Focus on key value chain.• Improve business capacity

and links to BDS• Improve labour use and

labour productivity

Methods for Market linkage

• There are many types of market linkage methods being used, but they typically have the following components…

“Produce what you can sell don’t try to sell what you have produced”

1. Set up2. Market Evaluation3. Business planning and investment4. Implementation (skills training x training)

5. Marketing and market sales (quality, grades traceability)

6. Evaluation and upgrading7. Scaling

Missing skills in Extension?

• Ability to evaluate market opportunities• Gather marketing data • Assess production costs and service quality• Develop business plans• Negotiate new business models with partners• Evaluate profitability against plans• Provide farmers with upgrading plans that go

beyond natural resource management

Scaling up new extension services will require greater use of information technology

• New extension approach can take advantage of the scale and cost with ICT.

• However, much needs to be done to make these systems effective and more sustainable.

• Finding farmer focused methods is an important part of this task

Conclusions

• Transforming extension is a major global challenge– Requires new models and incentive structures to integrate

public and private sector partners• Greater focus on business development

– According to some leading firms, farmers respond better to business services than production support.

– Careful targeting of subsidies– Co-investment between service providers and users

• Extension services require upgrading, outsourcing and integration with ICT community of service providers– Rigorous monitoring of activities– Performance payments

This presentation was given:

By Shaun Ferris, CRS, on behalf of MEAS

at the Global Learning Exchange on Best Fit Approaches in Extension and Advisory

Services

in Washington, D.C.

on June 6, 2012

Terms of Use: Terms of Use:

© Shaun Ferris and MEAS project. This work is licensed under a Creative Commons Attribution 3.0 Unported License.

Users are free:• to Share — to copy, distribute and transmit the work• to Remix — to adapt the work

Under the following conditions:• Attribution — Users must attribute the work to the author(s)/institution

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Disclaimer:Disclaimer:

This presentation was made possible by the generous support of

the American people through the United States Agency for

International Development, USAID. The contents are the

responsibility of the author(s) and do not necessarily reflect the

views of USAID or the United States Government.

www.meas-extension.org

Farmer Segment

Farmers move up a level

Farm size Buyers move down a level

Food versus Sales(% population)

Commercial Farmers

100 ha + Sell 95% +(1-2% population)

Commercial smallholders

5-10 ha + Sell 50% +(10-15 % population)

Vulnerable but viable farmers

2- 5 ha Market Neutral

(20-30 % population)

Vulnerable farmers

<2 ha Net buyers

(30-40 % population)

Highly vulnerable / emerging from shock

<1 ha or no land

Regularly Need food support(5-10 % population)

Local traders

Intermediaryaggregators

Food security

Intensification &

Diversification

Value chain

Large corporations