Transcript Agribusiness & Competitive Agro

AGRIBUSINESS & COMPETITIVE
AGRO-INDUSTRIES
David K. Hitchcock
Senior Agribusiness & Infrastructure Officer
FAO - Bangkok
MY PRESENTATION
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“Real” differences
Sector trends & impacts
Priority policy reforms & institution strengthening
Strategies & interventions for promoting agroindustries & value chains
• Effects of industry standards and quality
requirements
• Challenges ahead
Real Differences
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SMALL HOLDERS
Risk-averse.
Limited internal
resources.
Poor access to external
resources.
“Shock”-sensitive –
low threshold.
Poor or non-existent
business skills.
AGRI-BUSINESSMEN
• Risk-takers.
• Adequate internal
resources.
• Able to access external
resources.
• Shock-proof - buffer
systems in place.
• Proven survival
business skills.
Real Differences
SMALL HOLDERS
AGRI-BUSINESSMEN
• Inaccessible markets.
• Independent decisionmakers – household.
• Planning flexibility
limited to < 1 week.
• Reluctant to
cooperate.
• Input supply, land
tenure, food security.
• On their doorstep.
• Corporate decisionmaking.
• Extended planning
time 6 – 12 months.
• Require cooperation
and organization.
SECTOR TRENDS & IMPACTS
SECTOR TRENDS & IMPACTS
General:
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Emphasis on market-driven systems;
Role of private sector important;
Smallholders becoming commercialized; &
Agribusiness & agro-industry policy reforms &
investment accelerating pace of AA
development.
SECTOR TRENDS & IMPACTS
Agrifood Systems:
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Soaring food prices - primary production more viable
Higher incomes – demand for high value commodities
Technological changes - value addition
Trade liberalization - cross border demand
Urbanization - product quality & delivery standards
Changing diets - more meat, fish & fruits
More women earning - processed or pre-prepared
Global manufacturing - value addition
SECTOR TRENDS & IMPACTS
Organizational & Institutional Changes:
• Growing concentrations - retail & processing
• Larger agribusiness enterprises - economies of scale
• Increasing private sector standards – food quality &
safety
• Food transactions - increasing use of contracts
• Retailers/manufacturers - rely on specialized
procurement/dedicated wholesalers
• Sale of food - supermarkets replacing local markets
SECTOR TRENDS & IMPACTS
Positive effects:
• Increases value addition opportunities.
• Agro-processing stimulates demand & market
size.
• Exporters/agro-processors provide crucial inputs
& services.
• Agro-industries stimulate innovation.
• Encourages productivity & improves quality.
SECTOR TRENDS & IMPACTS
Negative effects:
• Standards and contracts difficult for smallholders.
• Small-scale agro-processors unable to compete
with large scale manufacturers.
• Traders in local markets squeezed out by
specialized procurement practices & certified
products.
SECTOR TRENDS & IMPACTS
Agribusiness Development is context-specific
& dependent on:
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The product sector & market requirements;
Development stage of the country;
Ag’ sector policies, institutions & services;
Government action to promote A&A
(If agribusiness is to play a key role in reducing poverty, Government needs to
create enabling conditions, while monitoring & taking steps to protect &
enhance farmers & others most likely to be affected by agri-business)
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
The business environment is an important
driver for domestic & export agroenterprises, but it is not very conducive to
A&A. Many countries have:
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Complex laws & regulations governing business,
Ineffective intellectual property rights;
Inadequate commercial services;
Lack of infrastructure;
Ineffective local governments; &
Weak information & communication systems
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
Policy environment requires:
• Legal & regulatory frameworks that define rules &
determine rights with respect to resources and business
operations;
• Strengthen public sector cooperation with the private
sector;
• Commodity, regional industrial & professional based
associations inc’ producer ass’ & cooperatives;
• Trade-offs between pace & nature of agro-industrial
development & poverty; and
• Institutional mandates for influencing, regulating &
supporting PS investment in AA.
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
Legal & Regulatory Frameworks:
• Covers rules, rights & obligations for resources,
assets & business operations.
• Level of protection of intellectual property rights.
• Legal or procedural preferences favoring
government owned/assisted enterprises.
• Employment/contractual conditions & distribution
of benefits from agri-business development.
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
“P-P-P” Cooperation:
• Requires communication/cooperation between
public and private sector;
• Public investment support of private sector
innovation/product development mobilizes
assets, knowledge & capacities of A&A;
• Policy attracts foreign investments & access to
technologies; &
• Enhances effectiveness of regulatory framework
& PS compliance.
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
Institutional Support:
Commodity, regional, industrial & professionallybased associations, including producer
organizations & cooperatives play a key role in:
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Connecting producers and clients;
Vocalizing view points;
Taking collective actions;
Networking & facilitating linkages;
Providing training, technology & legal support.
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
Trade-Offs include:
• Rapid agro-industrial development can displace
small farmers, processors, stores and traders.
• AA policies unlikely to address food insecurity
and poverty by themselves.
POLICY REFORM &
INSTITUTIONAL STRENGTHENING
Institutional Mandates:
• Very few government department mandates
cover all issues that enable/inhibit AA.
• Mechanisms are required to strengthen linkages
among public agencies responsible for policies,
institutions and services impacting on AA
AGRO-INDUSTRY & VALUE CHAINS
PROGRAMS
AGRO-INDUSTRY & VALUE CHAINS
PROGRAMS
An increasing need for value chain programs that:
• Improve delivery of services;
• Create value addition for small farmers; &
• Help farmers respond to changing markets and
consumer requirements.
These programs should complement AA policy
reforms and institutional strengthening.
AGRO-INDUSTRY & VALUE CHAIN
PROGRAMS
The programs should be designed to
complement AA policy reforms and
institutional strengthening through:
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Business linkages;
Reducing transaction costs;
Aligning capacities of farms & firms;
Ensuring fair governance within chains;
Improving market practices, strengthening
producer organizations; &
• Upgrading technologies.
AGRO-INDUSTRY & VALUE CHAIN
PROGRAMS
Key lessons – Strategies & Interventions:
• PPP must ensure that specialized PS management skills
& technical expertise is directed at benefiting small
farmers & processors.
• Entrepreneurial capacities of small farmers must be
strengthened to understand/meet timing, quality & safety
requirements of the supply chain. Capacity building must
address start-up, financing & development of
small/medium agro-processing enterprises.
• Value chain programs should facilitate and support FBO
& producer organizations – they provide economies of
scale & platform for small farmers to do business. But
they must be profitable & business management &
governance very important.
AGRO-INDUSTRY & VALUE CHAIN
PROGRAMS
Key lessons – Strategies & Interventions:
• Financial & business services to small farmers &
processors important – reduces costs and expands
operations, especially where transaction costs-to-output
high. Contractual arrangements critical.
• Reduce vulnerabilities by building capacities of chain
participants to innovate, diversify or exit as markets
change.
• Comparative advantage & investment appraisals before
implementation & monitoring of impacts & benefits
essential to reduce vulnerabilities.
• Public-Private sector engagement ensure AA are rulesbased & non-discriminatory & committed to good
governance, development & poverty reduction.
INDUSTRY STANDARDS & QUALITY
REQUIREMENTS
INDUSTRY STANDARDS & QUALITY
REQUIREMENTS
Industry standards:
• Manage risks relating to product safety & quality;
• Enable comparisons of prices between suppliers,
• Reduce transaction costs; &
• Strengthen consumer confidence & loyalty.
Branding & labels can differentiate products.
Certification informs consumers about supply chain
practices.
Standards ensures consumer protection & provides both
incentives and sanctions for improvement of product
quality & safety.
INDUSTRY STANDARDS & QUALITY
REQUIREMENTS
Unlikely poorer countries can keep up & benefit from
advances in product specification & certification
requirements, without access to sophisticated
technologies, efficient & low-cost communication &
information systems, adequate infrastructure &
supportive institutions & services. Need to initiate dialog
on standards between P&P on:
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Strengthen compliance & certification & reduce costs;
Reform of institutions & legal frameworks;
Investments in physical facilities, labs, equipment, infra’;
Support institutions responsible for food safety, control of
fraud, animal & plant health;
• Technical assistance to establish PPP
RESPONDNG TO CHALLENGES
RESPONDING TO CHALLENGES
Information & Analysis:
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Analysis of trends, changes & factors affecting
transformation of agri-food systems;
Characterization & appraisal of structure of agroindustries and value chains;
Analysis & benchmarking to identify strategies for
agro-industry &value chain development; and
Development of information & knowledge management
systems for A&A as well as small-scale producers and
processors.
RESPONDING TO CHALLENGES
Enabling Policies, Institutions & Services:
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Strategies for improving AA policies, legal and regulatory
frameworks, institutions & services;
Incorporation of AA strategies and actions into country-level
program frameworks & strategic plans for agricultural
development;
Reinforce communication & cooperation with PS firms,
foundations and NGOs active in AA development;
Reinforce compliance & certification systems for food safety
standards and industry quality requirements;
Reinforce market information services & financial institutions &
services for market-oriented farmers and agro-enterprises; and
Provide basic infrastructure to improve market access and reduce
business costs.
RESPONDING TO CHALLENGES
Support to Agro-Industries & Value Chains:
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Appraise market & agribusiness opportunities & develop sound
methods for prioritizing agro-industries & value chains;
Facilitate innovative arrangements linking smallholder farmers
with commercial farmers, exporters or agro-processing firms in
long-term relationships
Identify innovative micro-financing products that facilitate the
participation of small farmers in agribusiness ventures;
Design & implement initiatives that improve entrepreneurial
capacities of smallholder farmers and small agro-enterprises to
participate in value chains for high-value products, including
branded and certified products; and
Identify & use innovative mechanisms to link public funding with
private sector resources.
Thank you and enjoy the
workshop!