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Agro-industries Organizations and Services
Contributor : FAO-AGS (2008-02-28 15:02:46)
Organizing Smallholders: producer organizations and co-operatives
The Proposition
The rapidly growing markets for high-value agricultural products in both developed and developing countries opens up tremendous opportunities for smallholders. However, only if small-scale farmers come together in an organized way can they engage profitably in the highly competitive agro-industrial sector.
Rationale and Recommended Response (Click here to read)
Update on the Debate
The discussion began with a debate on the proposition statement: The rapidly growing markets for high-value agricultural products in both developed and developing countries opens up tremendous opportunities for smallholders. However, only if small-scale farmers come together in an organized way can they engage profitably in the highly competitive agro-industrial sector. The statement was strongly supported by some of the participants, given the potential benefits of economies of scale and transaction cost savings. Some participants challenged the proposition by noting the often high costs of organization and their lack of sustainability. A question was posed if the upsurge of interest was more a result of a supply drive by NGOs and donors. A criticism was raised of the lack of evidence and the need for qualification in making the proposition statement ... [More]
Current focus of the Debate
What are the business services most needed by small-scale farmers to enhance their profitability?
Are farmer organizations best placed to provide such services?
What have been the reasons for past failure of farmer organizations in developing countries?
What support services are most relevant to enhancing smallholders´ profitability? Are farmer organizations best placed to provide such services?
29 Comments
Dr.Shailendra Pandey , (2008-05-01 11:58:49)
The importance of farmers organisation is urgent need. The resource for improving farming system can be leverage only through the strong presence in form of Institutions(Farmers club, Commin interest groups etc.)Most of the organisation failed due to lack of awereness and poor exposure to the changing world situation,The farmers grooup is formed by the external agencies and totally depend on the external resource with free bie expectation. The utilisation of local resources and building the capcity with more exposure can solve the problem of poor base of the farmers institution. The strong service and delivery though the farmers group can be mean for the strong presence of the institution.
The importance of farmers organisation is urgent need. The resource for improving farming system can be leverage only through the strong presence in form of Institutions(Farmers club, Commin interest groups etc.)Most of the organisation failed due to lack of awereness and poor exposure to the changing world situation,The farmers grooup is formed by the external agencies and totally depend on the external resource with free bie expectation. The utilisation of local resources and building the capcity with more exposure can solve the problem of poor base of the farmers institution. The strong service and delivery though the farmers group can be mean for the strong presence of the institution.
Carlos Felipe Ostertag , (2008-04-29 00:40:21)
I agree that farmer and smallholder organizations are important when trying to link farmers to growth markets (LFM), but I also think that formal organization is not necessarily the most important, or key, variable to consider. Informal smallholder "collective action" can also be very effective. So my suggestion is to better use the term collective action, either formal o informal, as a key variable for facilitating LFM.
Recent studies conducted by the Andean Platform "Ruralter" in Latin America indicate that investment in conventional smallholder organizations, usually driven either by farmers or development/donor agents, has not exhibited a very impressive impact. These models usually involve some degree of vertical integration, where rural organizations do not specialize, but participate in several market chain links. Farmer-driven business models have frequently received subsidies, which is not bad at all if they are temporary, but the fact is that these organizations usually remain eternally dependant on them. Of course, there are some exceptions to the rule, as is the case of Colanta in Colombia, a cooperative owned by thousands of small dairy farmers, which succesfully competes with giant dairy multinationals.
I think that the two main contraints, and causes of failure, of farmer-driven business models are (a) the lack of a clear market access, and (b) a weak business and market orientation. However, these serious constraints are mostly solved by alternative business models, which incorporate the private sector and facilitating agents such as NGOs.
In private sector-driven business models, consisting of vertical alliances between private enterprises and rural actors, real market access and profitability become powerful stimulants for smallholder collective action. In this alternative model, smallholder organizations or groups tend to specialize in one or two supply chain links, usually primary production coupled with basic or intermediate processing. The role of facilitators, usually NGOs, is considered as highly convenient, because they can greatly accelerate the alliance process and increase probabilities for success. This private sector-driven model is more agile in LFM, but also required attention to human capital development of rural actors.
What services are most important for smallholder organizations or groups? A recent, second Ruralter study focusing on private sector-smallholder alliances in the Andean region, point out that some key services are the following:
-- technical support relative to agricultural production, processing and new-product development;
-- business training and coaching,
-- credit for working capital
In general, I would like to stress the importance of human capital development for all business models or cases, if the objective is to consolidate sustainable rural organizations that can becone independent decison-makers. I would add that a key rural business development service (RBDS)consists of the actual process of facilitating private sector and smallholder alliances, with the objective of establishing real value chains.
I agree that farmer and smallholder organizations are important when trying to link farmers to growth markets (LFM), but I also think that formal organization is not necessarily the most important, or key, variable to consider. Informal smallholder "collective action" can also be very effective. So my suggestion is to better use the term collective action, either formal o informal, as a key variable for facilitating LFM.
Recent studies conducted by the Andean Platform "Ruralter" in Latin America indicate that investment in conventional smallholder organizations, usually driven either by farmers or development/donor agents, has not exhibited a very impressive impact. These models usually involve some degree of vertical integration, where rural organizations do not specialize, but participate in several market chain links. Farmer-driven business models have frequently received subsidies, which is not bad at all if they are temporary, but the fact is that these organizations usually remain eternally dependant on them. Of course, there are some exceptions to the rule, as is the case of Colanta in Colombia, a cooperative owned by thousands of small dairy farmers, which succesfully competes with giant dairy multinationals.
I think that the two main contraints, and causes of failure, of farmer-driven business models are (a) the lack of a clear market access, and (b) a weak business and market orientation. However, these serious constraints are mostly solved by alternative business models, which incorporate the private sector and facilitating agents such as NGOs.
In private sector-driven business models, consisting of vertical alliances between private enterprises and rural actors, real market access and profitability become powerful stimulants for smallholder collective action. In this alternative model, smallholder organizations or groups tend to specialize in one or two supply chain links, usually primary production coupled with basic or intermediate processing. The role of facilitators, usually NGOs, is considered as highly convenient, because they can greatly accelerate the alliance process and increase probabilities for success. This private sector-driven model is more agile in LFM, but also required attention to human capital development of rural actors.
What services are most important for smallholder organizations or groups? A recent, second Ruralter study focusing on private sector-smallholder alliances in the Andean region, point out that some key services are the following:
-- technical support relative to agricultural production, processing and new-product development;
-- business training and coaching,
-- credit for working capital
In general, I would like to stress the importance of human capital development for all business models or cases, if the objective is to consolidate sustainable rural organizations that can becone independent decison-makers. I would add that a key rural business development service (RBDS)consists of the actual process of facilitating private sector and smallholder alliances, with the objective of establishing real value chains.
Betina Edziwa , (2008-04-09 16:02:36)
I agree with most observations that farmer groups have failed for number of reasons, what is more important is the sustianbility. As long as the formation of such groups is donor funded and pushed it will not be able to sustain it self. There is need to re-focus attention,especially in developing countries. General projects have come and cease to operate once the donor-pulls out, the same applies to the producer or market groups formed with such support. There is therefore need to further investigate the sustainabiltiy factors that can drive the cooperatives/groups. some factors to consider include, good governance, transpancy, direct economic and social benefits, ownership etc. The need to exist as a group should emnate from the farmers after which they can seek external support to move foreward, through self-reliance.
I agree with most observations that farmer groups have failed for number of reasons, what is more important is the sustianbility. As long as the formation of such groups is donor funded and pushed it will not be able to sustain it self. There is need to re-focus attention,especially in developing countries. General projects have come and cease to operate once the donor-pulls out, the same applies to the producer or market groups formed with such support. There is therefore need to further investigate the sustainabiltiy factors that can drive the cooperatives/groups. some factors to consider include, good governance, transpancy, direct economic and social benefits, ownership etc. The need to exist as a group should emnate from the farmers after which they can seek external support to move foreward, through self-reliance.
David Kahan , (2008-04-03 13:45:09)
The experience mentioned by N.S Parthasarathy highlights the importance of markets and the linkage to markets for farmers to be interested in creating a farmer organisation and continuing with it in a sustainable way. A question that comes to mind is whether farmer organisations should be built up only after market linkages have been developed (as in the Andrha Pradesh case) or alternatively reach out to markets after setting up a farmer organisation. While N.S identifies a basic truism "not to impose farmer organisations - in a top down manner - on farmers", in many contexts farmers do not organise themselves spontaneously and need an external body to facilitate the process. Moreover, traders and processors might prefer to establish a linkage with farmers if they are already organised as a group. Can we be so bold as to ask - What should come first - the organisation or the marketlinkage? And who should be responsible for their organisation -the buyers, the farmers themselves, or an intermediate organisation?
The experience mentioned by N.S Parthasarathy highlights the importance of markets and the linkage to markets for farmers to be interested in creating a farmer organisation and continuing with it in a sustainable way. A question that comes to mind is whether farmer organisations should be built up only after market linkages have been developed (as in the Andrha Pradesh case) or alternatively reach out to markets after setting up a farmer organisation. While N.S identifies a basic truism "not to impose farmer organisations - in a top down manner - on farmers", in many contexts farmers do not organise themselves spontaneously and need an external body to facilitate the process. Moreover, traders and processors might prefer to establish a linkage with farmers if they are already organised as a group. Can we be so bold as to ask - What should come first - the organisation or the marketlinkage? And who should be responsible for their organisation -the buyers, the farmers themselves, or an intermediate organisation?
Mhmet Sukur , (2008-04-02 17:43:30)
With regard to the two question posed about business services and whether they can be provided by farmer organizations, I draw your attention to a very interesting case study about assofurit in southern Italy called : Business development services for small producers in southern Italy—the case of ASSOFRUIT by Tito Bianchi and Lynn Pikholz, Small enterprise development Vol 13, No1., published some time back in 2002.
Three of there concluding points are as follows:
1. The first order of explanations for ASSOFRUIT’s success in organizing producers and providing services to its members lies in the strong European Union financial incentives to collective sales and marketing. As explained earlier, these subsidies align the interests of ASSOFRUIT’s leaders with those of its members as both parties stood to benefit from achieving higher sales revenues. And the goal of achieving higher sales revenues for members was a key driver of ASSOFRUIT’s expansion into providing new (and much needed) BDS services to its members. If the amount of the subsidy depends on an increase in joint sales, and an increase in joint sales depends on finding more and better buyers, other
services were naturally needed. And once members saw ASSOFRUIT’s excellent management of the EU subsidy, and tasted its benefits, they saw the possibility that ASSOFRUIT could help them with other higher risk market challenges that they were facing.
2. In order to isolate the factors that have contributed to ASSOFRUIT’s success in providing services to farmers, it is useful to distinguish different phases in the organization’s history. If there were is a lesson to be learned in this story, it is about the sequence of interventions that works better in convincing producers who traditionally distrust each other to collaborate. The lesson is that money (provided by EU incentives) can be very useful to get people to do things together for the first time, but it has be followed by honest, efficient and pro-active management. Clearly the members found in ASSOFRUIT a very dynamic management. In particular they have found in the leaders a great capacity to develop new projects continuously and to access the available funding sources. Not all of these projects directly benefited ASSOFRUIT’s members: some were deliberately targeted at the economic development of the wider region. For example, ASSOFRUIT is currently launching a new project that aims to have the regional government declare the area of Metaponto a ‘food-processing district’. This would allow the microregion to take advantage of regional infrastructure development funds, especially aimed at integrating different phases of the production chain.
3. The co-existence of smaller farmers with several larger ones within the organization, is perhaps the one finding that has clearer policy implications for development planning. ASSOFRUIT is a coalition of many enterprises of a range of sizes, and non-negligible economic importance. This equal structure, that certainly complicates the management of the group, is one of the reasons for its economic dynamism: the individual members are in themselves modern and well-informed entrepreneurs, while the smaller firms are only allowed to join through their respective cooperatives. In other words, small farmers, taken as a group, are equal players at the table through the representation of their respective cooperatives.
With regard to the two question posed about business services and whether they can be provided by farmer organizations, I draw your attention to a very interesting case study about assofurit in southern Italy called : Business development services for small producers in southern Italy—the case of ASSOFRUIT by Tito Bianchi and Lynn Pikholz, Small enterprise development Vol 13, No1., published some time back in 2002.
Three of there concluding points are as follows:
1. The first order of explanations for ASSOFRUIT’s success in organizing producers and providing services to its members lies in the strong European Union financial incentives to collective sales and marketing. As explained earlier, these subsidies align the interests of ASSOFRUIT’s leaders with those of its members as both parties stood to benefit from achieving higher sales revenues. And the goal of achieving higher sales revenues for members was a key driver of ASSOFRUIT’s expansion into providing new (and much needed) BDS services to its members. If the amount of the subsidy depends on an increase in joint sales, and an increase in joint sales depends on finding more and better buyers, other
services were naturally needed. And once members saw ASSOFRUIT’s excellent management of the EU subsidy, and tasted its benefits, they saw the possibility that ASSOFRUIT could help them with other higher risk market challenges that they were facing.
2. In order to isolate the factors that have contributed to ASSOFRUIT’s success in providing services to farmers, it is useful to distinguish different phases in the organization’s history. If there were is a lesson to be learned in this story, it is about the sequence of interventions that works better in convincing producers who traditionally distrust each other to collaborate. The lesson is that money (provided by EU incentives) can be very useful to get people to do things together for the first time, but it has be followed by honest, efficient and pro-active management. Clearly the members found in ASSOFRUIT a very dynamic management. In particular they have found in the leaders a great capacity to develop new projects continuously and to access the available funding sources. Not all of these projects directly benefited ASSOFRUIT’s members: some were deliberately targeted at the economic development of the wider region. For example, ASSOFRUIT is currently launching a new project that aims to have the regional government declare the area of Metaponto a ‘food-processing district’. This would allow the microregion to take advantage of regional infrastructure development funds, especially aimed at integrating different phases of the production chain.
3. The co-existence of smaller farmers with several larger ones within the organization, is perhaps the one finding that has clearer policy implications for development planning. ASSOFRUIT is a coalition of many enterprises of a range of sizes, and non-negligible economic importance. This equal structure, that certainly complicates the management of the group, is one of the reasons for its economic dynamism: the individual members are in themselves modern and well-informed entrepreneurs, while the smaller firms are only allowed to join through their respective cooperatives. In other words, small farmers, taken as a group, are equal players at the table through the representation of their respective cooperatives.
N S PARTHASARATHY , (2008-03-25 06:33:07)
Imposing the formation of producers´ associations from the top and political interferance are some of the reasons for failure. My association with a producing unit for starch and maize derivatives in Andhra Pradesh, India,seems to indicate that ready market near at hand, genuine weight as basis for compensation without interferance of brokers, correct instrumental asessment of moisture content, on the spot cash (brokers pay in installments)and the facility to use part of the realisation at the factory premises to buy their basic farming needs and materials at fair prices are highly conducive to spontaneous formation and efficient functioing of farmer groups in pro-active collaboration with the processor who is also the market provider.Uncertainty of market for the produce is the single most source of farmer distress that drives him or her to the arms of unscrupulous intermediaries who do not like to encourage associations to serve their own interests
Imposing the formation of producers´ associations from the top and political interferance are some of the reasons for failure. My association with a producing unit for starch and maize derivatives in Andhra Pradesh, India,seems to indicate that ready market near at hand, genuine weight as basis for compensation without interferance of brokers, correct instrumental asessment of moisture content, on the spot cash (brokers pay in installments)and the facility to use part of the realisation at the factory premises to buy their basic farming needs and materials at fair prices are highly conducive to spontaneous formation and efficient functioing of farmer groups in pro-active collaboration with the processor who is also the market provider.Uncertainty of market for the produce is the single most source of farmer distress that drives him or her to the arms of unscrupulous intermediaries who do not like to encourage associations to serve their own interests
David Kahan , (2008-03-19 15:37:47)
As some of you have noted there is no single model of farmer organisation and these organisations are in a constant state of change. In some contexts - particularly amongst resource poor households - self help groups based on social affinity have been very successful in empowering the poor and providing them with a capital base (India, Bangladesh and many parts of Africa). Similarly farmers have also been brought together under micro finance schemes and savings and credit organisations. In some cases these organisations have acted as building blocks for more formal farmer associations and cooperatives. Farmers are also often members of more than a single organisation. The functions and services of each organisational type also varies depending on local situational contexts. In some situations where farmer awareness and capacity is high, producer groups may be formed spontaneously by the farmers themselves; whilst in other contexts they do require the assistance of NGOs or other intermediate support organisations. The package of support services required also needs to be seen to be dynamic, responding to changing client demands. Complete packages of business services need to be provided as they respond to client demand. Fayaz, noted the importance of market information, but this would only be useful if the information is timely and relevant and farmers possess the business skills to use the information effectively. In some situations these services might be best provided on a fee basis by the private sector as embedded services. Yet in other contexts where farmer organisations are mature and run professionally, these member organisations could also be viable and sustainable service providers. In other contexts where there is limited or no private sector presence, the role of the public sector and NGOs in service delivery may be necessary to kick-start development. In short we have to recognise that development as a dynamic process where the roles of the private and public sector as service providers change in line with changes in client needs and demands.
As some of you have noted there is no single model of farmer organisation and these organisations are in a constant state of change. In some contexts - particularly amongst resource poor households - self help groups based on social affinity have been very successful in empowering the poor and providing them with a capital base (India, Bangladesh and many parts of Africa). Similarly farmers have also been brought together under micro finance schemes and savings and credit organisations. In some cases these organisations have acted as building blocks for more formal farmer associations and cooperatives. Farmers are also often members of more than a single organisation. The functions and services of each organisational type also varies depending on local situational contexts. In some situations where farmer awareness and capacity is high, producer groups may be formed spontaneously by the farmers themselves; whilst in other contexts they do require the assistance of NGOs or other intermediate support organisations. The package of support services required also needs to be seen to be dynamic, responding to changing client demands. Complete packages of business services need to be provided as they respond to client demand. Fayaz, noted the importance of market information, but this would only be useful if the information is timely and relevant and farmers possess the business skills to use the information effectively. In some situations these services might be best provided on a fee basis by the private sector as embedded services. Yet in other contexts where farmer organisations are mature and run professionally, these member organisations could also be viable and sustainable service providers. In other contexts where there is limited or no private sector presence, the role of the public sector and NGOs in service delivery may be necessary to kick-start development. In short we have to recognise that development as a dynamic process where the roles of the private and public sector as service providers change in line with changes in client needs and demands.
Peter Steele , (2008-03-19 10:47:41)
There are no ´one-size fits all´ model for encouraging associations of small-scale farmers to better represent themselves within markets and/or agro-indusrial ventures into which they may be able to sell their products. Many of the issues of the low-income countries relate directly to poverty - to subsistence farming, limited technical ability, limited education, limited business acumen and so on. You will be familiar with this; the experience of the group debate is wide. India (and many other rapidly ´industrializing´ countries) has its fair share of subsistence-based agricproduction, but there are also extensive regions in which agricproduction meets the most advanced techstandards found worldwide (e.g. Punjab). The challenge for planners, developers, investors and similar in regions or states in which these mixed agriceconomies exist is one of sector targeting - providing the frameworks, etc. that will encourage the many thousands of small-scale people to take part (with some chance of success). So far, there has been no mention of the ´stock-and-station´ agent/model that successfully helped establish agricproduction in Australia & New Zealand during the past 120 years, and which is now in decline. Someone out there within the agriceconomic think sectors may have some experience worth sharing. Peter Steele. Rome. 19/03
There are no ´one-size fits all´ model for encouraging associations of small-scale farmers to better represent themselves within markets and/or agro-indusrial ventures into which they may be able to sell their products. Many of the issues of the low-income countries relate directly to poverty - to subsistence farming, limited technical ability, limited education, limited business acumen and so on. You will be familiar with this; the experience of the group debate is wide. India (and many other rapidly ´industrializing´ countries) has its fair share of subsistence-based agricproduction, but there are also extensive regions in which agricproduction meets the most advanced techstandards found worldwide (e.g. Punjab). The challenge for planners, developers, investors and similar in regions or states in which these mixed agriceconomies exist is one of sector targeting - providing the frameworks, etc. that will encourage the many thousands of small-scale people to take part (with some chance of success). So far, there has been no mention of the ´stock-and-station´ agent/model that successfully helped establish agricproduction in Australia & New Zealand during the past 120 years, and which is now in decline. Someone out there within the agriceconomic think sectors may have some experience worth sharing. Peter Steele. Rome. 19/03
Fayaz Ahmad , (2008-03-19 09:46:50)
A. Reasons for failure of farmers organization
Although the previous comments are of high value and i will second most of the comments from another angle. The different reasons for failure of farmers organizations are
NGOs involovement in the association formation: farmers are organized by NGOs and are directed by these agencies without involoving them i.e. farmers dont have their own vision and mission but they are working on the vision of the development organization. similarly the NGOs some times dont allow the farmers to come forward and become an independent intity as these association are most of the time source of fund generation for the NGOs from donors.
some time the ngos become part of the value chain which is not mandated to do so and they put forward their own efforts and the real actors are excluded from the process which hampers their interest.
2. ownership of the association is most of the time an issue, due to which most of the members loose interest and association becomes non functional
3.Package based interventions: most of the time the associations are formed to get certain type of benefit from the government and non governmnet organization and when the package comes to an end, the association starts loosing interest and at last it fails to fulfill for what it has been formed
4. distribution of profit among the members also create problems and the influential gets more benefit as compared to the middle or small land holders.
5. the small land holder get very low share out of the total profit that doesnt make any difference in their lives. due to this reason they dont want to join the association
B.Services Required for Farmers
I think the most important thing is the market information required by small land holders. they dont have sufficient information about the prices, markets, different techniques to increase productivity and so many other types of market information.
2. technical support is always needed by the farmers to get involve in state of the art techniques to increase their land productivity as well as reduce pre and post harvest losses
3. financial capital is required for any intervention. linkages development with micro finance institution is required for small land holders
farmer organization are the best places to provide these serivces and the reasons are that they know the real problems of the farmers, have strong linkages with different market actors, financial instittutions and public sector organization.
A. Reasons for failure of farmers organization
Although the previous comments are of high value and i will second most of the comments from another angle. The different reasons for failure of farmers organizations are
NGOs involovement in the association formation: farmers are organized by NGOs and are directed by these agencies without involoving them i.e. farmers dont have their own vision and mission but they are working on the vision of the development organization. similarly the NGOs some times dont allow the farmers to come forward and become an independent intity as these association are most of the time source of fund generation for the NGOs from donors.
some time the ngos become part of the value chain which is not mandated to do so and they put forward their own efforts and the real actors are excluded from the process which hampers their interest.
2. ownership of the association is most of the time an issue, due to which most of the members loose interest and association becomes non functional
3.Package based interventions: most of the time the associations are formed to get certain type of benefit from the government and non governmnet organization and when the package comes to an end, the association starts loosing interest and at last it fails to fulfill for what it has been formed
4. distribution of profit among the members also create problems and the influential gets more benefit as compared to the middle or small land holders.
5. the small land holder get very low share out of the total profit that doesnt make any difference in their lives. due to this reason they dont want to join the association
B.Services Required for Farmers
I think the most important thing is the market information required by small land holders. they dont have sufficient information about the prices, markets, different techniques to increase productivity and so many other types of market information.
2. technical support is always needed by the farmers to get involve in state of the art techniques to increase their land productivity as well as reduce pre and post harvest losses
3. financial capital is required for any intervention. linkages development with micro finance institution is required for small land holders
farmer organization are the best places to provide these serivces and the reasons are that they know the real problems of the farmers, have strong linkages with different market actors, financial instittutions and public sector organization.
Vinay Chand , (2008-03-19 01:43:02)
The business service most needed by small farmers by a long way is the provision of finance at reasonable rates. This is the biggest challenge in developing countries and in transitional economies where the older systems have collapsed. Without it, farmers are forced to borrow from money lenders at exhorbitant rates or from traders on terms that tie them to selling the produce to them. In India there are massive funds dedicated to this but not distributed to small farmers.
The most important support service that could be given is a an equitable farm gate price. Due to a need to repay debts most farmers have to sell immediately on any terms offered or that they are tied to. Too small a proportion of the value chain price is accounted by farm gate. Farmers are thus caught in a vicious cycle of poverty. If they were paid a fair price it would only be a matter of time before savings free them from the tyranny of rural indebtedness that the politicians promised to eradicate decades ago.
A farmer owned service company would be the ideal way to channel funding and services. By joint responsibility farmers could satisfy bank requirements. A fair farm gate price could be achieved.
The business service most needed by small farmers by a long way is the provision of finance at reasonable rates. This is the biggest challenge in developing countries and in transitional economies where the older systems have collapsed. Without it, farmers are forced to borrow from money lenders at exhorbitant rates or from traders on terms that tie them to selling the produce to them. In India there are massive funds dedicated to this but not distributed to small farmers.
The most important support service that could be given is a an equitable farm gate price. Due to a need to repay debts most farmers have to sell immediately on any terms offered or that they are tied to. Too small a proportion of the value chain price is accounted by farm gate. Farmers are thus caught in a vicious cycle of poverty. If they were paid a fair price it would only be a matter of time before savings free them from the tyranny of rural indebtedness that the politicians promised to eradicate decades ago.
A farmer owned service company would be the ideal way to channel funding and services. By joint responsibility farmers could satisfy bank requirements. A fair farm gate price could be achieved.
Bill Samuel , (2008-03-18 14:28:01)
I think the reasons for failure are well known, and have been clearly spelt out in this discussion. Let´s turn the question around. What are the factors leading to success? Do producer organizations work better for particular products? That seems to be the case with dairy. Do they work better in particular societies? Do particular structures work better than others? How have successful co-ops and other organizations avoided being hijacked by politicians, etc.?
Some good examples of successful, and sustainable, organizations, such as Chido´s intervention, would be very useful.
I think the reasons for failure are well known, and have been clearly spelt out in this discussion. Let´s turn the question around. What are the factors leading to success? Do producer organizations work better for particular products? That seems to be the case with dairy. Do they work better in particular societies? Do particular structures work better than others? How have successful co-ops and other organizations avoided being hijacked by politicians, etc.?
Some good examples of successful, and sustainable, organizations, such as Chido´s intervention, would be very useful.
krishna mishra , (2008-03-18 08:23:29)
The reasons for the failure of farmers organisations in developing countries are as follows;
faulty structure of the organisation/legal entity
ownership pattern and resultant conflict
lack of finance to compete
lack of professional management
lack of participation
The small farmers´ organisation can play an important role both in the demand side and supply side of the agri system.They can provide the small farmers´ the best quality seeds/fertilisers/information/financial assistance and can play a role in linking to the market.This reqires professional approach .
The reasons for the failure of farmers organisations in developing countries are as follows;
faulty structure of the organisation/legal entity
ownership pattern and resultant conflict
lack of finance to compete
lack of professional management
lack of participation
The small farmers´ organisation can play an important role both in the demand side and supply side of the agri system.They can provide the small farmers´ the best quality seeds/fertilisers/information/financial assistance and can play a role in linking to the market.This reqires professional approach .
Chido Makunike , (2008-03-17 23:49:25)
Two years ago I had the pleasure of interacting with what seemed an unusually successful farmers´ cooperative in south-eastern Senegal. They grow bananas and were in the process of switching from conventional to organic production. They are in a remote area far from the main banana market, the capital city, Dakar. The roads are bad, the distances long and there are no cold storage facilities for their produce. They discovered that organic bananas stayed fresh longer after harvest than conventionally grown banana. Given the remoteness of their location, just one or two extra days of freshness could make the difference between a crop that is fresh long enough for a buyer to come and collect his order and one that went bad before the buyer could arrive to pick up bananas he had ordered.
Their overall needs and challenges are not different from those of small scale farmers anywhere in the world: market information,better prices, the need for operating capital between harvests, technical information, assistance with managerial issues and so forth.
This particular cooperative got donor assistance with a difference. They were assisted to set up and to employ a lean management team that handled marketing, accounting, order-taking and similar issues.One of the five was an agronomist who served as the cooperative´s extension officer. They claimed most of the cost of the approximately five member team and the office were carried by the cooperative itself, with a small part subsidised by donors. Each of the approximately 400 member cooperative paid an annual fee from the proceeds of the bananas for the support of the management team.
Among the issues they were dealing with at the time were to try to set up linkages with someone with cold storage facilities in Dakar for their bananas, so that they would not be so dependent on the somewhat unreliable practice of waiting for buyers to come to them, causing losses when the buyer did not show up on the promised day. They were also exploring simple processing of their produce so that they did not rely on fresh banana sales only, as prices would obviously slump during periods of market saturation.
I was new to the country at the time and my French was poor so I was not able to ask as many questions as I would have liked about their organizational model. But despite the gaps in my knowledge, I was satisfied that they had been assisted to organise themselves in a way that made them stronger than many other cooperatives I had seen over the years.
The managers provided the technical and managerial support the farmers did not have the capacity for themselves, yet the cooperative retained final control over their own operations, rather than ceding it to an NGO. NGO and donor partners with whom the cooperative worked for various lengths of time apparently were allowed to do so on condition that they respected the autonomy of the cooperative.
Whatever problems they may have had, I perceived this cooperative to be a more confident,dynamic and successful than many others I have seen. I thought that with suitable modification, their structure could be a model for many other cooperatives.
Two years ago I had the pleasure of interacting with what seemed an unusually successful farmers´ cooperative in south-eastern Senegal. They grow bananas and were in the process of switching from conventional to organic production. They are in a remote area far from the main banana market, the capital city, Dakar. The roads are bad, the distances long and there are no cold storage facilities for their produce. They discovered that organic bananas stayed fresh longer after harvest than conventionally grown banana. Given the remoteness of their location, just one or two extra days of freshness could make the difference between a crop that is fresh long enough for a buyer to come and collect his order and one that went bad before the buyer could arrive to pick up bananas he had ordered.
Their overall needs and challenges are not different from those of small scale farmers anywhere in the world: market information,better prices, the need for operating capital between harvests, technical information, assistance with managerial issues and so forth.
This particular cooperative got donor assistance with a difference. They were assisted to set up and to employ a lean management team that handled marketing, accounting, order-taking and similar issues.One of the five was an agronomist who served as the cooperative´s extension officer. They claimed most of the cost of the approximately five member team and the office were carried by the cooperative itself, with a small part subsidised by donors. Each of the approximately 400 member cooperative paid an annual fee from the proceeds of the bananas for the support of the management team.
Among the issues they were dealing with at the time were to try to set up linkages with someone with cold storage facilities in Dakar for their bananas, so that they would not be so dependent on the somewhat unreliable practice of waiting for buyers to come to them, causing losses when the buyer did not show up on the promised day. They were also exploring simple processing of their produce so that they did not rely on fresh banana sales only, as prices would obviously slump during periods of market saturation.
I was new to the country at the time and my French was poor so I was not able to ask as many questions as I would have liked about their organizational model. But despite the gaps in my knowledge, I was satisfied that they had been assisted to organise themselves in a way that made them stronger than many other cooperatives I had seen over the years.
The managers provided the technical and managerial support the farmers did not have the capacity for themselves, yet the cooperative retained final control over their own operations, rather than ceding it to an NGO. NGO and donor partners with whom the cooperative worked for various lengths of time apparently were allowed to do so on condition that they respected the autonomy of the cooperative.
Whatever problems they may have had, I perceived this cooperative to be a more confident,dynamic and successful than many others I have seen. I thought that with suitable modification, their structure could be a model for many other cooperatives.
Sudha Mysore , (2008-03-17 07:53:10)
Our experience has shown that ´producer cooperatives´ have failed in several fields,mainly because of the institutional factors. A cooperative needs to be registred and gets to be governed by the cooperative law, making it mandatory for it to be headed by a government official. This brings along a huge red tape and takes a complete diversion from the basic principle of ´participatory governance´. In this regard forming a ´like minded people´s association´ or self help group is easier and can be more efficient. A number of success stories that have been in operation for over a decade are available for ready reference. The critical factor according to some of these examples is commitment on the part of individuals and transperancy in operations. Investment into infrastructure and expanding operations becomes an impediment for these groups. It is here that the private/ corporate sector can play a major role and arriving at a model that would ensure active participation by the private sector needs to be explored.
Our experience has shown that ´producer cooperatives´ have failed in several fields,mainly because of the institutional factors. A cooperative needs to be registred and gets to be governed by the cooperative law, making it mandatory for it to be headed by a government official. This brings along a huge red tape and takes a complete diversion from the basic principle of ´participatory governance´. In this regard forming a ´like minded people´s association´ or self help group is easier and can be more efficient. A number of success stories that have been in operation for over a decade are available for ready reference. The critical factor according to some of these examples is commitment on the part of individuals and transperancy in operations. Investment into infrastructure and expanding operations becomes an impediment for these groups. It is here that the private/ corporate sector can play a major role and arriving at a model that would ensure active participation by the private sector needs to be explored.
Vitoon Panyakul , (2008-03-14 16:33:55)
In my experience, having committed and competent human resources, both at the leadership level as well as at middle management level, is a key success factor for farmer cooperative. Training provides an initial support but inventing internal mechanism to keep these trained staff with the organization is even more critical. In other words, it is easy to establish a farmer coop but very difficult to keep it going. Many development institutions, government and NGOs alike, only want to do the easy job but have no interest (or sometimes in the case of NGOs no resources and capacities) to undertake the more difficult jobs.
In my experience, having committed and competent human resources, both at the leadership level as well as at middle management level, is a key success factor for farmer cooperative. Training provides an initial support but inventing internal mechanism to keep these trained staff with the organization is even more critical. In other words, it is easy to establish a farmer coop but very difficult to keep it going. Many development institutions, government and NGOs alike, only want to do the easy job but have no interest (or sometimes in the case of NGOs no resources and capacities) to undertake the more difficult jobs.
Vinay Chand , (2008-03-14 02:26:39)
Farmer Associations and co-operatives have always been needed and developed. In Europe and in USA the cooperatives have played crucial roles and still do so. Why then do people discuss if there has been an upsurge? The answer is that the dominance of neo-conservative sentiment in development institutions and developed countries and their disciples in developing countries argued that cooperatives had failed in developing countries.
So they did in many cases but only because of politicians and others taking them over for their own ends. The track record of cooperatives in representing member interests or organising joint procurement and marketing is undeniable.
Farmer Associations and co-operatives have always been needed and developed. In Europe and in USA the cooperatives have played crucial roles and still do so. Why then do people discuss if there has been an upsurge? The answer is that the dominance of neo-conservative sentiment in development institutions and developed countries and their disciples in developing countries argued that cooperatives had failed in developing countries.
So they did in many cases but only because of politicians and others taking them over for their own ends. The track record of cooperatives in representing member interests or organising joint procurement and marketing is undeniable.
Mark Etroph , (2008-03-13 21:35:42)
The reasons for failure of producer organisations are manifold. Often farmers are brought together through donor or NGO interests rather than their own volition. In many situations farmers do not enjoy economic benefits. There are also social factors such as group conflicts that explain organisational breakdown. In many cases the problem may rest with leadership - lack of capacity and skills. Sometimes there is a failure to share the benefits equitably amongst members. Nevertheless many of these problems can be remedied by follwing ´good practices´ of group formation and management. The external environment is more difficult to control and this is largely a result of factors that impede the flow of financial benefits to their members.
The reasons for failure of producer organisations are manifold. Often farmers are brought together through donor or NGO interests rather than their own volition. In many situations farmers do not enjoy economic benefits. There are also social factors such as group conflicts that explain organisational breakdown. In many cases the problem may rest with leadership - lack of capacity and skills. Sometimes there is a failure to share the benefits equitably amongst members. Nevertheless many of these problems can be remedied by follwing ´good practices´ of group formation and management. The external environment is more difficult to control and this is largely a result of factors that impede the flow of financial benefits to their members.
Sudha Mysore , (2008-03-12 11:41:31)
I agree with the proposition. Under Indian conditions co-operatives in several fields except milk have failed, reasons for the same are well researched. Forming producers or like minded associations has been recognised as a means to achieving economies of scale and improved efficiency.
NGOs or public sector organisations can play an important role in bringing together the farmers and setting up these groups, provide the technical knowledge etc.,. However, critical factor is making them participatory; setting up forward linkages of these groups to the ´markets´ and financial institutions; making them sustainable.
A global forum of this nature would be of immense help in bringing together ideas and success stories and models that can be replicated under different situations. The issue is defining the role of private sector in this process.
I agree with the proposition. Under Indian conditions co-operatives in several fields except milk have failed, reasons for the same are well researched. Forming producers or like minded associations has been recognised as a means to achieving economies of scale and improved efficiency.
NGOs or public sector organisations can play an important role in bringing together the farmers and setting up these groups, provide the technical knowledge etc.,. However, critical factor is making them participatory; setting up forward linkages of these groups to the ´markets´ and financial institutions; making them sustainable.
A global forum of this nature would be of immense help in bringing together ideas and success stories and models that can be replicated under different situations. The issue is defining the role of private sector in this process.
David Kahan , (2008-03-11 16:12:39)
Bill,
I´m sure we all agree that there has been an upsurge of interest in producer organisations by farmers, NGOs and donors (See the recent World Bank Development Report, 2008, for evidence). It´s irrelevant whether producer organisations were created through donor or NGO interest rather than ´spontaneously´ from below by the farmers themselves or even by the private sector The true test of sustainability rests on their effectiveness in generating economic benefits. This, in turn, depends on the ability of management to generate wealth and distribute the benefits equitably amongst members. This can be achieved through any or all of these approaches to organising farmers but this depends largely on the specific rural context.
With respect to the second point you mention about the preference of the private sector, I would suspect that any entrepreneur would be pleased to work with farmers that are organised (in whatever form) if the reliability of supplies and quality of produce can be assured and additional wealth created.
Bill,
I´m sure we all agree that there has been an upsurge of interest in producer organisations by farmers, NGOs and donors (See the recent World Bank Development Report, 2008, for evidence). It´s irrelevant whether producer organisations were created through donor or NGO interest rather than ´spontaneously´ from below by the farmers themselves or even by the private sector The true test of sustainability rests on their effectiveness in generating economic benefits. This, in turn, depends on the ability of management to generate wealth and distribute the benefits equitably amongst members. This can be achieved through any or all of these approaches to organising farmers but this depends largely on the specific rural context.
With respect to the second point you mention about the preference of the private sector, I would suspect that any entrepreneur would be pleased to work with farmers that are organised (in whatever form) if the reliability of supplies and quality of produce can be assured and additional wealth created.
Bill Samuel , (2008-03-10 17:07:42)
David´s rejoinder to Martin also needs substantiating. What is the evidence for the "upsurge" of interest? Does that interest come from the farmers themselves or from NGOs and donors?
I guess the private sector is usually too busy to get involved in this sort of Blog but it would be nice to know its preferences in working with farmers: as individuals; as informal groups set up by NGOs; as formal cooperatives; or as groups that are set up by the agribusiness itself?
David´s rejoinder to Martin also needs substantiating. What is the evidence for the "upsurge" of interest? Does that interest come from the farmers themselves or from NGOs and donors?
I guess the private sector is usually too busy to get involved in this sort of Blog but it would be nice to know its preferences in working with farmers: as individuals; as informal groups set up by NGOs; as formal cooperatives; or as groups that are set up by the agribusiness itself?
krishna mishra , (2008-03-10 11:58:19)
I am in total agreement with the observations / apprehensions made by some observers.There are four major issues which needs to be tackled at the level of producers´ organisation 1)participatory level 2) management 3) revenue for investment 4)distribution of profits.But before this a prpoper policy guidelines should be at place by Government in addressing to all those issues.The farmers will continue to be at the recieving end in the agri system until they are empowered which they can only derive from being organised.Secondly the management of the extraneous factors to the production system should be handled by professional/professional organisation.Thirdly the agriculture system needs investment in capital formation which can not be achieved only throgh state´s intervention but by private investment in the form of equity in the farmers´ producers organisations.Fourth the distribution of profits on the basis of users availment of sevice/investors should also be clearly defined.
I am in total agreement with the observations / apprehensions made by some observers.There are four major issues which needs to be tackled at the level of producers´ organisation 1)participatory level 2) management 3) revenue for investment 4)distribution of profits.But before this a prpoper policy guidelines should be at place by Government in addressing to all those issues.The farmers will continue to be at the recieving end in the agri system until they are empowered which they can only derive from being organised.Secondly the management of the extraneous factors to the production system should be handled by professional/professional organisation.Thirdly the agriculture system needs investment in capital formation which can not be achieved only throgh state´s intervention but by private investment in the form of equity in the farmers´ producers organisations.Fourth the distribution of profits on the basis of users availment of sevice/investors should also be clearly defined.
Nicole Pasricha , (2008-03-09 07:48:47)
It seems that in many cases producer groups/associations are constrained by the lack of human capacity to really take those types of organizations to the ´next level´ whereby they could play a real role in seeking out better and higher value opportunities for their members within the value chain or subsector that they are working in. Especially in the case of associations that have been established with NGO or donor assistance, the leadership can sometimes lack the skills needed to operate in a business oriented manner. Support services needed include financial services (to begin to operate and think like a business collecting revenue, borrowing, and using surplus income to invest in new technolgies or HR that could move the association) and training on governance and financial management aspects of producer groups. In regions where associating with others carries negative connotations (ie. FSU countries etc) there is also the additional need for community engagement work and sensitization to the benefits of group association for those that would otherwise be skeptical.
It seems that in many cases producer groups/associations are constrained by the lack of human capacity to really take those types of organizations to the ´next level´ whereby they could play a real role in seeking out better and higher value opportunities for their members within the value chain or subsector that they are working in. Especially in the case of associations that have been established with NGO or donor assistance, the leadership can sometimes lack the skills needed to operate in a business oriented manner. Support services needed include financial services (to begin to operate and think like a business collecting revenue, borrowing, and using surplus income to invest in new technolgies or HR that could move the association) and training on governance and financial management aspects of producer groups. In regions where associating with others carries negative connotations (ie. FSU countries etc) there is also the additional need for community engagement work and sensitization to the benefits of group association for those that would otherwise be skeptical.
Edgar Smith , (2008-03-08 21:42:37)
Coops have failed in many countries due to the fact that they have been induced/forced into existence without the necessary preliminary education of members as to what was involved.The economic case for organising producers into groups is strong... access to technology, inputs, transport services that individually accessed would be impossible or much more costly. Whether groups flourish depends on whether they have competent management, are inclusive and only undertake commercial operations which have been appraised as being viable in terms of having sufficent volume and competent staff to have a chance of making money.
Cooperatives started in Tanzania in the 1930´s ( Kilimanjaro Coffee Cooperatives)and were a great success and led to the emergence of coops in other cash crop sectors such as cotton and tobacco. However, in the 70´s the forced creation of coops and their politicisation led to the breakdown of the movement as many coops were uneconomic due to low volumes and their involvement in businesses that they had no competency in ( hotels, bus services, transport fleets).There is always the danger that when something works well then Governments want to add to it and add to it until it breaks under the strain of all the activities it has been encouraged to undertake.
Coops have failed in many countries due to the fact that they have been induced/forced into existence without the necessary preliminary education of members as to what was involved.The economic case for organising producers into groups is strong... access to technology, inputs, transport services that individually accessed would be impossible or much more costly. Whether groups flourish depends on whether they have competent management, are inclusive and only undertake commercial operations which have been appraised as being viable in terms of having sufficent volume and competent staff to have a chance of making money.
Cooperatives started in Tanzania in the 1930´s ( Kilimanjaro Coffee Cooperatives)and were a great success and led to the emergence of coops in other cash crop sectors such as cotton and tobacco. However, in the 70´s the forced creation of coops and their politicisation led to the breakdown of the movement as many coops were uneconomic due to low volumes and their involvement in businesses that they had no competency in ( hotels, bus services, transport fleets).There is always the danger that when something works well then Governments want to add to it and add to it until it breaks under the strain of all the activities it has been encouraged to undertake.
Ramesh S Arunachalam , (2008-03-08 17:10:35)
The point that farmers need aggregators is well taken although the form may vary, depending on context. However, saying that producer organisations lack capability and/or focus more on political/advocacy aspects requires significant qualification. There are several good examples of well run and capable producer organisations not being able to deliver value to the producers because of many structural weaknesses inherent in the agriculture and other systems space. As a very senior technocrat in India, who also served as Agriculture Production Commissioner in the states noted, "In agriculture, there are many issues/risks/problems and unless they are simultaneously tackled, even one of them can quickly wash out any gains made. So, the key aspect is to address structural weaknesses and market imperfections, if at all any thing is to be done for agriculture."
The point that farmers need aggregators is well taken although the form may vary, depending on context. However, saying that producer organisations lack capability and/or focus more on political/advocacy aspects requires significant qualification. There are several good examples of well run and capable producer organisations not being able to deliver value to the producers because of many structural weaknesses inherent in the agriculture and other systems space. As a very senior technocrat in India, who also served as Agriculture Production Commissioner in the states noted, "In agriculture, there are many issues/risks/problems and unless they are simultaneously tackled, even one of them can quickly wash out any gains made. So, the key aspect is to address structural weaknesses and market imperfections, if at all any thing is to be done for agriculture."
Betina Edziwa , (2008-03-08 14:51:02)
Although the small holder farmers may see the benefits of the economies of scale, experience has shown that inter and intra group
conflicts make the cooperatives/associations dysfunctional irrespective of the marginal benefits they may get. There is need to take cognisance of the social fabric under which groups/cooperatives/associations operate. Addressing group dynamics should be integrated in the agri-business aspects.
Although the small holder farmers may see the benefits of the economies of scale, experience has shown that inter and intra group
conflicts make the cooperatives/associations dysfunctional irrespective of the marginal benefits they may get. There is need to take cognisance of the social fabric under which groups/cooperatives/associations operate. Addressing group dynamics should be integrated in the agri-business aspects.
krishna mishra , (2008-03-07 05:19:59)
The focuss of the debate has been rightly identified.The failure of the farmers´ organisation needs to be delineated and addressed objectively.The cooperatives of farmers have failed in solving their problems.The structure of the new hybrid cooperative structure needs to be implemented in India for better solving farmers´ problems.
The focuss of the debate has been rightly identified.The failure of the farmers´ organisation needs to be delineated and addressed objectively.The cooperatives of farmers have failed in solving their problems.The structure of the new hybrid cooperative structure needs to be implemented in India for better solving farmers´ problems.
krishna mishra , (2008-03-06 16:09:06)
I agree with the proposition.The importace of the producers; association is very much felt in the Idian context more because 76% of the ownership of land are owned by small and marginal farmers.The farmers need to be organised and that organisation needs to be managed professionally.An appropriate organisation needs to be evolved and appropriate policy prescriptions needs to be defined where the competancies of management of the organisation and production management are properly balanced and the claim to the residue is clearly defined.It is hightime that when the integration has happened at the market level,a similar integration should happen at the producers´ level
I agree with the proposition.The importace of the producers; association is very much felt in the Idian context more because 76% of the ownership of land are owned by small and marginal farmers.The farmers need to be organised and that organisation needs to be managed professionally.An appropriate organisation needs to be evolved and appropriate policy prescriptions needs to be defined where the competancies of management of the organisation and production management are properly balanced and the claim to the residue is clearly defined.It is hightime that when the integration has happened at the market level,a similar integration should happen at the producers´ level
david kahan , (2008-03-04 14:45:29)
Martin,
Your reference to the lack of empirical evidence of economies of scale from producer associations needs to be substantiated. What are these references? Surely, for farmers to market produce collectively and purchase inputs in bulk at discounted prices results in economies to their members. If the benefits were not apparent then how can you explain the upsurge and interest in producer associations? Where´s the evidence?
David
Martin,
Your reference to the lack of empirical evidence of economies of scale from producer associations needs to be substantiated. What are these references? Surely, for farmers to market produce collectively and purchase inputs in bulk at discounted prices results in economies to their members. If the benefits were not apparent then how can you explain the upsurge and interest in producer associations? Where´s the evidence?
David
Martin Hilmi , (2008-03-03 16:17:50)
There has been some debate over smallholders and their associating together, either formally or informally, and the earining of profit.For example, the economies of scale that, in theory, should derive from smallholder association have been flawed on empirical evidence on more occasions and this is only one of the many fallacies that have derived over the years.
There has been some debate over smallholders and their associating together, either formally or informally, and the earining of profit.For example, the economies of scale that, in theory, should derive from smallholder association have been flawed on empirical evidence on more occasions and this is only one of the many fallacies that have derived over the years.
