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Value chain financing in agriculture
01.06.2007
This paper provides an overview of value chain financing concepts and applications. It highlights issues and directions in the commercialization of agriculture, value chain development, agricultural and agribusiness finance and discusses the potential benefits and cautionary pitfalls associated with value chain financing. It is argued that value chain development supported by appropriate policies, institutions and services that constitute an enabling business environment can be instrumental in leveraging access to financial services in agriculture in developing countries. In this regard, ideas for promoting value chain financing are proposed and questions on its future are offered for reflection. -
The practice of contract farming in India: making it inclusive and effective
01.10.2013
Agricultural marketing reforms are central to changing the agricultural/agribusiness sector. The Amended APMC Act in India, which permitted contract farming, direct purchase from farmers, and setting up of private wholesale markets, was seen as the way forward to kick start the process of modernizing markets and giving better market access and choice to primary producers. The practice of contract farming, which is one of the new institutions as a result of the policy reforms, leaves much to be desired in India's smallholder context as there is exclusion of small farmers who make up most of the farming population. In this context, this paper examines the extent and nature of small producer exclusion, reasons thereof, and various policy options to encourage more inclusive and effective contract farming so that these mechanisms could be leveraged for inclusive and market-oriented sustainable agricultural development. -
Smallholder attrition in contract farming schemes in India: extent, causes, and concerns
01.10.2013
This paper maps the extent and causes of farmer exit from contract farming arrangements in southern India using survey data for five schemes: cotton, gherkins, papaya, marigold, and broiler chickens. The paper finds that farmer attrition is quite widespread and that poorer farmers from marginalized social groups are more likely to exit these arrangements. While this is an important policy concern, the study also distinguishes between voluntary exit, where the farmer opts out, versus involuntary exit, where the contracting firm drops the farmer as a supplier because of constraints in delivering quality produce, or the firm's interaction with the farmer forces the farmer out. The paper also highlights the episodic nature of farmer participation, wherein farmers leverage opportunities to contract occasionally as part of a dynamic portfolio of alternatives. The paper emphasizes that while involuntary exclusion is of serious concern, voluntary exit and episodic participation are perhaps less important issues from a policy perspective. -
Two islands - two outcomes: food, fruit, and fuel in multi-contractual farming supported by the tobacco industry
01.10.2013
The contract farming of seasonal crops raises the question of how farmers can be supported when they are not producing the contracted crop. Farmer incomes and relationships between company and farmers can be enhanced if the company can provide additional incomeearning opportunities. This approach is particularly pertinent in those developing countries where management, technical, and marketing linkages are weak. In addition, many farming communities have little access to short-term finance to fund their cropping cycle, apart from sometimes avaricious money lenders. The specific focus of this study is to introduce the recent experiences of five multi-contractual projects sponsored by two tobacco organizations: PT Sadhana Arifnusa Corporation (Sadhana) in Indonesia and the Southern Development Company (SDC) in Fiji. As tobacco is a six-month crop, both companies considered that broadening their cropping base during the ‘off season’ would provide additional income for their farmers. It would also offer additional employment to seasonal workers who are employed only during the delivery, processing, packing, and storage of crops. The outcomes of this paper can act as a template for a detailed analysis that can determine the successes and constraints of multi-cropping under contract, and the promotion of farmer-company relations, including how they can restrict side-selling, a major constraint of contract farming. -
Contract farming for biofuels: a literature review
01.10.2013
An apparent contributory factor to the upward trend in food prices in recent years has been the rapid explosion in biofuel production in some countries, which has usually occurred as a result of government blending mandates and subsidies. Lacking suitable land in developing countries for large-scale operations, companies seeking supplies of appropriate feedstock have often turned to contract farming as a way of securing supplies. This article reviews the available literature covering this topic, noting that significant difficulties have been experienced with biofuel contract farming operations, with few, if any, real successes. These problems are attributed to a lack of understanding on the part of the companies of the capacities of smallholders, the general lack of experience of biofuel companies with contract farming including suitable price-setting methods, the impact of biofuel production on farmers’ food production, and, finally, the lack of appropriate policies. The enthusiasm for subsidizing the sector has contributed to the difficulties. The paper concludes that there is a need to re-examine the costs and benefits of subsidies and their impact on successful commercial operations involving small farmers. Further, companies need to take lessons from experiences with more traditional contract farming operations. -
Conference report: The 2013 G8 Summit: questioning the New Alliance
01.10.2013
Earlier commitments by the G8 to support agriculture in the wake of the 2007-08 food price crises have been partly forgotten. However, last year's G8 Summit saw the launch of the ‘New Alliance for Food Security and Nutrition’, and a year on, ‘Nutrition for Growth’ attracted donor focus at a meeting leading up to this year's summit. Yet doubts exist about whether the New Alliance, under its current design, risks harming rather than helping Africa's smallholder farmers. -
Reviews
01.10.2013
A review of the literature on value chains, including but not restricted to Markets and Rural Poverty: Upgrading in Value Chains, edited by J. Coles and C. Mitchell, and Value Chains, Social Inclusion and Economic Development: Contrasting Theories and Realities, edited by A.H.J. Helmsing and S. Vellema, all reviewed by Nigel Poole. Competition and Efficiency in International Food Supply Chains: Improving Food Security, by John Williams, is reviewed by Ulrich Kleih. Finally, Contract Farming Handbook: A Practical Guide for Linking Small-scale Producers and Buyers through Business Model Innovation by Margret Will, is reviewed by Andrew W. Shepherd. -
Events
01.10.2013
Food-related meetings and conferences occurring between December 2013 and April 2014.