Strengthening Agricultural and Market Value Chains - by Chuma Ezedinma UNIDO-Regional Office-Nigeria November 2015
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Strengthening Agricultural and Market
Value Chains
by
Chuma Ezedinma
UNIDO-Regional Office-Nigeria
November 2015
1
Agriculture/Market Value Chains
Agriculture value chains empowers farmers to
shift from subsistence farming to an
entrepreneurial business, it gives them the tools
they need to take ownership of the process and
build sustainable markets.
Market-oriented agriculture encourage farmers
to invest in their fields in order to increase yields
while decreasing production costs.
The input value chain encompasses those
involved in the steps leading up to the harvest.
These include agro-dealers, who sell farmers
agro-inputs and provide information on their use
or producer organizations that help farmers
learn more effective farming techniques.
The output value chain encompasses all the
steps that an agricultural product takes, from its
point of origin to the consumer.
2
Typical organizational Value Chain models
Model Driver of organization Rationale
Producer-driven • small-scale producers, especially when • access new markets;
(Association) formed into groups such as associations or • obtain higher market price;
cooperatives • stabilize and secure market position.
• large scale farmers.
Buyer-driven • processors; • assure supply;
• exporters; • increase supply volumes;
• retailers; • supply more discerning
• traders, wholesalers and other traditional customers – meeting market
market actors. niches and interests.
Facilitator-driven • NGOs and other support agencies; • ‘make markets work for the poor’;
MARKETS, IFAD, etc • regional and local development.
• national and local governments.
Integrated • lead firms; • new and higher value markets;
• supermarkets; • low prices for good quality;
• multi-nationals. • market monopolies
3
1. Value Chain: Improving Coordination, Cooperation and Efficiency
Farmer Cooperation in Agricultural Production
With too many small scale farmers at the agricultural production level,
cooperation is key to improve marketing power
5
2. Cost Reduction Strategies at the Farm Level:
Example in Cassava Production
35
100% 13.6% 11.6% 27.9% 40.5%
29.4
30 Use of Improved
25.4 26
25
21.2
inputs and
17.5
US$/ton
20 mechanization is
15 the key to
10 improve
5 efficiency at the
0 farm level
Traditional Improved Mechanized Mechanized Mechanized
system varieties planting planting and planting
harvesting &harvesting
&improved
varieties
3. Improving Value Chain Financing
Buyer Driven
Model
Commercial Banks /Financial institutions prefer to support small farmers where the
market risks can be controlled
9
Ware House Receipt Model
10
Regional Office Nigeria 2015 Retreat
4. Innovative Financing is key to growth in modern agro
food value chains
Significant gaps in financing systems
Financing working and investment capital for input supply,
non-farm assets, and industrial property has to be at core of
financing agenda for industrial development
Multiple financial products to meet emerging needs e.g.
timeliness, low cost (< 5%) and long term (15 – 20 year) loans
for internal and external infrastructure development in agro
industrial parks
Strengthen risk assessment and lending criteria
Adopt modern technological innovations to improve financing services
11Using ICT to improve Agricultural Financing
1 1. Abara Obodo 9. Nsukwa.
2. Abudu 10. Onicha Ugbo
3. Afor Ozoro 11. Onuobo
4. Edum Afor 12. Oyoko
5. Igbesi 13. Utenim
2 6. Iselle-Uku 14. Ebelleh
7. Koko Junction 15.Ogwashi-Uku
8. Nkwo Uromi 16. Ukokpo
3
4
Agbor
5
6 20% 40%
7 Asaba
Onitsha
10%
8
40%
70%
9
M-PESA, originally designed as a Umunede
system to allow microfinance-loan 10
repayments to be made by phone, 11 No. Market Name Agbor Asaba Umunede
reduces the costs associated with
1. Abara Obodo 25% 25% 50%
2. Abudu 20% 20% -
3. Afor Ozoro 50% - -
handling cash and making possible 12 4.
5.
6.
Edum Afor
Igbesi
Iselle-Uku
30%
30%
100%
10%
20%
-
40%
50%
50%
lower interest rates. 13
7.
8.
9.
Koko Junction
Nkwo Uromi
Nsukwa.
30%
30%
20%
20%
20%
30%
20%
50%
40%
10. Onicha Ugbo 20% - 40^
11. Onuobo 40% - -
It has been broadened to become a 14
12.
13.
14.
Oyoko
Utenim
Ebelleh
20%
20%
-
10%
20%
20%
30%
40%
30%
general money-transfer scheme in 15 16
15.
16.
Ogwashi-Uku
Ukokpo
-
-
10%
30%
60%
50%
Kenya.Marketing
Marketing is a business function that identifies consumer needs,
determines target markets and applies products and services to
serve these markets. It also involves promoting such products and
services within the marketplace.
Marketing is integral to the success of a business, large or small,
with its primary focus on quality, consumer value and customer
satisfaction. The "Marketing Mix" Strategy is a tool made up of four
variables known as the "Four P's" of marketing.
Products are the goods and services that your business provides
for sale to your target market. In developing a product consider
quality, design, features, packaging, customer service and any
subsequent after-sales service.
Place is in regards to distribution, location and methods of getting
the product to the customer. This includes the location of the
business, shop front, distributors, logistics and the potential use of
the internet to sell products directly to consumers.
Price concerns the amount of money that customers must pay in
order to purchase your products. There are a number of
considerations in relation to price including price setting,
discounting, credit and cash purchases as well as credit collection.
Promotion refers to the act of communicating the benefits and
value of your product to consumers. It then involves persuading
general consumers to become customers of your business using
methods such as advertising, direct marketing, personal selling
and sales promotion.
13Branding and Packaging are important
Market Information: Strengthening Value Chains with ICT
Using ICT to improve access to markets
15Impact of ICT – Mobile Phones Reduces logistics and transportation costs. Farmers obtain the latest information with a phone call instead of making a long trip to a market. Helps in collection, aggregation and delivery. Improves negotiation power. Farmers’ increase their power to negotiate, particularly with traders, based on their ability to understand pricing in multiple markets, to cut out intermediaries, and to sell directly to larger-scale buyers. More sophisticated marketing plans based on price information. For example, farmers can modify the date of marketing, product permitting, or switch to alternate markets, transport and regulation permitting. Broader and deeper networks. Farmers communicate by phone with traders and farmers outside of their immediate geography as opposed to making a physical trip. The ability to communicate more easily and to triangulate information creates deeper trust in key trading relationships. Innovative partnerships. partnerships are facilitated and built among groups of producers, or by virtue of direct communication with corporations and traders, or through the ability to supply product based on just-in-time and/or quality needs. Informed use of inputs. Farmers can identify sources of inputs, obtain them more cheaply, and are better able to buy and apply them at the optimal times. Need to improve the Growth Improves farm business management through better information Enhancement Support (GES) about which inputs to use, new knowledge about grades and standards for produce, and increased interaction with corporations, Scheme and the E-Wallet System traders, and other farmers.
The Challenge to Agribusiness Sector Development
Existing and intending Agro-
72%
industrialists blame poor access to
Infrastructure, Finance, Secure
Feedstock Supplies and exacting
56% 55% Operational Environment
53%
45%
39%
28%
24%
19%
5%
Infrastructure Financing Securing Policy & Regulatory Human Capital Governance Information & Land Government Competitive
Supplies Communication Coordination Environment
Environment
Note: Data from 75 investors; 1Respondents have cited all challenges that are applicable to them
17Agro Industrial Clusters:
……. a new agricultural investment framework
Shift agriculture from
government
controlled to private
sector led
To stimulate
Transform the
private sector agricultural financial
investments to landscape
drive a market-led
agricultural Channel investments
in infrastructure and
transformation services
Strengthen the policy
and investment
climateSCPZ
Delineated area,
typically 250 ha.,
dedicated to driving the
facilitation of modern
processing capacity
ABIR
The immediate SCPZ
production neighborhood,
typically 30-50 km radius,
• constitutes the host
communities
• critical to ensuring
adequate feedstock
supplies
19Business Plan
Description
Focus crop Rice
Beans, Cassava, Cocoyam,
Additional crops Maize, Melon, Groundnut and
Yam
Raw materials required for the
638,424 MTPA
SCPZ
Growing area required 137,745 hectares
Total area of SCPZ 256.01 hectares
Combined SCPZ Development Investment Opportunity1
Site Management: Utilities, roads, and
agro-specific infrastructure
Investment
Power: Bioenergy and distribution
Opportunities
Water: Well and pump house, pumping
and treatment, and distribution
Initial Combined
$27.71 million
Investment
Combined
SCPZ Internal Infrastructure
Investment Over $48.81 million
Details
Length of road Four Years
13.72km
Total average water demand 5,626 cum/day Year 1: $11.8 million
Wastewater generation 3,957.92 cum/day Profit After Tax Year 2: $7.9 million
MSW generation
Year 3: $6.1 million
56.91TPD
Power demand 56.66MVA IRR 20.97%
Payback Period 4 yearsAgro Industrial Corridors: Transform the agricultural landscape
21Brings Additional Players into the Value Chain
Site/Estate/Infrastructure
1 Investors ?
Industrialist/Agro
2
Processors
•Finance
•Land Devt/Alloc 3 Farmer Coops/Companies
•Ease of Doing
Business 4 Service Providers
Ease of Doing Business indicators
Government (Federal, State,
Starting a Business
5 LG)
Dealing with Construction Permits
Getting Electricity
Registering Property
6 Development Partners
Getting Credit
Protecting Investors
Paying Taxes
Trading Across Borders
Enforcing Contracts
Resolving InsolvencyBuilding Trade Capacity
Three key problem areas that require specialized assistance to enable the expansion and competitiveness of
exports from Nigeria:
The lack of marketable products for exports;
The lack of capacity to conform to international standards;
The lack of information on rules of trade, markets and procedures to connect with export markets.
The 3 Cs that enables a country to Compete, Conform and Connect.
Products to Markets
Develop Competitive
Prove conformity with Connect to the
manufacturing
Market Requirements Market
capability
Compete Conform Connect
.........by upgrading supply capacities and standards infrastructure
Strategic partnerships with international standards measurement and accreditation bodies: International
Organization for Standardization (ISO), International Laboratory Accreditation Cooperation (ILAC),
International Accreditation Forum (IAF), International Bureau of Weights and Measures (BIPM),
International Organization of Legal Metrology (OIML).
23Regional Office Nigeria 2015 Retreat
NATIONAL QUALITY INFRASTRUCTURE & INTERNATIONAL LINKAGES
Metrology
Certification National Testing
Quality
Infrastructure
Standardization Accreditation
CODEX
24Regional Office Nigeria 2015 Retreat
5 Key Areas
1. Assistance for the promulgation of a National Quality Policy (NQP)
and improvements in ensuing legislation for the NQI
2. Establishment of a National Accreditation Body (NAB) and Capacity
development for accreditation auditors
3. Establishment of a National Metrology Institute (NMI)
4. Improved Private sector capacity to create and support conformity
assessment bodies (CAB) in the NQI Program
5. Extend the use of the NQI services through awareness activities and
better trained NQI’s workforce.
25Developing SPS Compliance
Developing SPS compliance infrastructure involves the following:
Help frame legislation and regulations for SPS compliance.
Introduce the new ISO 22000 for food safety management.
Creating a Competent Authority with enforcement power to monitor producers
and players in the value chain to ensure conformity to standards.
Develop traceability systems that enable authorities to trace problems in
exported products through the value chain.
Establish or upgrad microbiological/chemical and metrological laboratories
with international accreditation for SPS testing.
Set up support services with CODEX Alimentarius Committees and a SPS
Enquiry Point.
Set up national or regional technical support centres for expert assistance to
laboratories, government officials, producers and processors.
26Thank You
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