In February 2014, TCi convened a two day workshop in Hyderabad, India with ICRISAT looking at how new aggregation models could help supply and deliver micronutrient and protien-dense food for the malnourished in India. Check out a blog post about the event here:

1. Interna'onal
Lessons:
Models
for
Linking
Smallholder
Farmers
to
Markets
TCi
2014©
Prabhu
Pingali
Professor
of
Applied
Economics
&
Director,
Tata-­‐Cornell
Ini'a've
for
Agriculture
&
Nutri'on,
Cornell
University
Bhaskar
MiJra
Associate
Director,
Tata-­‐Cornell
Ini'a've
for
Agriculture
and
Nutri'on,
Cornell
University
and
Tata-­‐Ins'tute
of
Social
Sciences
(TISS)
Ka'e
RickeJs
Research
Associate,
Tata-­‐Cornell
Ini'a've
for
Agriculture
and
Nutri'on,
Cornell
University

2. Why
might
companies
choose
to
source
from
smallholder
farmers?
TCi
2014©

3. The
business
case:
Supply:
• Inves'ng
in
supply
base
and
seeking
to
expand
procurement
network
• Increase
produc'vity,
quality
or
supply
chain
efficiency
by
inves'ng
in
smallholder
farmers
and
traders
• Develop
new
products,
develop
local
supply
sources
and
reduce
dependency
on
import
markets
(i.e.,
lower
costs)
Brand,
Marke'ng
and
Reputa'on
• Market
differen'a'on
• Develop
strategic
partnerships
(rural
communi'es,
governments,
NGOs,
civil
society
groups)
• Strengthen
local
demand
and
image
through
smallholder
sourcing
projects
TCi
2014©

4. 4
©Tata-­‐Cornell
Agriculture
and
Nutri8on
Ini8a8ve
(TCi),
2013
Women’s
empowerment
Pathways
to
improved
nutri'on:
TCi
conceptual
framework
TCi
2013©

5. 5
©Tata-­‐Cornell
Agriculture
and
Nutri8on
Ini8a8ve
(TCi),
2013
1. Increases
rural
household
incomes
(food
affordability)
2. Expansion
of
the
local
food
supply
(food
availability)
through
increased
produc'vity
and/or
responding
to
demand
for
dietary
diversity
demand
INCREASED
MATERNAL
HEALTH
AND
REDUCTION
IN
CHILDHOOD
STUNTING
TCi
2014©
Linking
farmers
to
markets
can
create
nutri'onal
impacts
through…

6. Farmers
Tradi'onal
retailers
Traders
&
intermediaries
Input
companies
Consumers
Provide:
• Seeds
• Fer'lizer
• Crop
insurance
• Animal
health/
nutri'on
• Food
ingredients
Produce:
• Dairy/meat
• Hor'culture
• Seed
Provide:
• Purchasing
• Transporta'on
• Price
informa'on
• Basic
processing
• Corner
stores
• Wet
markets
• Roadside
stands
• ‘mom
and
pop’
stores
Food
markets
can
provide:
• Low-­‐priced
fruits
and
vegetables
(micronutrients)
plus
cereals
(calories..
• Employment
(income)
for
poor
rural
households.
Direct
selling
to
market
Farmers
produce
for
input
markets
Direct
selling
Agri-­‐food
value
chains
Modern
retailers
• Supermarkets
in
urban
and
peri-­‐
urban
areas
• Mul'na'onal
trading
companies
• Mul'na'onal
food
manufactures
Supply/input
coordina'on
Direct
selling
Quality
standards
Quality
standards
Sell
Sell
Sell
Sell
Sell
Sell
TCi
2013©

7. In
prac'ce,
smallholder
farmers
can
be
integrated
by:
Independent
farmers
Regional
‘hubs’
Coopera'ves
and
farmer-­‐based
organiza'ons
Lead-­‐farmer/nucleus
clusters
TCi
2014©
Buyer
Buyer
Buyer
Buyer
Product
flow
Product
flow
Product
flow
Product
flow

8. Interna'onal
models
for
integra'on
and
aggrega'on
Individual
farmers
linked
through:
Company
Product(s)
Key
Implemen'ng
Partner(s)
Country
Corporate
mo'va'on
Regional
“hub”
Starbucks
Coffee
N/A
Global
Expand
supply,
invest
in
quality.
Armajaro
Cocoa
Source
Trust
(sister
NGO
organiza'on)
Global
Expand
supply,
invest
in
quality.
Coopera'ves
&
farmer-­‐
based
organiza'ons
(FBOs)
Unilever
Black
soy
Local
university
(extension
services)
Indonesia
Capture
new
market
ops,
reduce
costs.
Coca
Cola
Mangos
NGO
(Technoserve)
Uganda,
Kenya
Capture
new
market
opportunity,
expand
supply.
Sysco
Broccoli
NGO
(Oxfam,
ADAM)
Guatemala
Expand
available
supply.
Lead
farmer/
nucleus
clusters
Tate-­‐Lyle
Sugarcane
Rabobank,
local
government
Vietnam
Capture
new
market
opp.,
reduce
costs.
Heineken
Sorghum
NGO
(Technoserve)
Sierra
Leone
Capture
new
market
opp.,
reduce
costs.
Chiquita
Passion
Fruit
NGO
(Rainforest
Alliance)
Costa
Rica
Expand
supply.
TCi
2014©

9. Model
1:
Regional
‘hub’
Starbucks
Crop:
coffee
Mo'va'on:
To
ensure
responsible
produc'on
prac'ces,
support
the
produc'on
of
high
quality
coffee,
and
monitor
the
needs
of
the
farmers
Starbucks
started
C.A.F.E.
Prac'ces–
now
reaching
141,000
farmers
in
20
countries.
Regional
‘hub:’
• Farmer
Support
Centers
(FSC)
link
growers
to
necessary
services.
• Extension
access,
lead
farmer
training
• Credit
access
• Quality
trainings
and
quality
experts
In
2012,
Starbucks
has
purchased
more
than
90%
of
their
supply
through
the
program.
Armajaro
Ltd.
Crop:
cocoa
Mo'va'on:
Armajaro
LTD
faced
growing
demand
for
cocoa
and
were
dependent
on
a
farming
system
characterized
with
low
produc'vity,
persistent
poverty
and
child
labor.
The
firm
created
Source
Trust
to
implement
regional
hubs
for
service
provision,
quality
control,
aggrega'on,
and
community
care
&
empowerment.
Regional
‘hub’:
• Farmer
Development
Centers
(FDCs)
operated
by
the
NGO
Source
Trust
(created
by
Armajaro)
offers
extension
services
to
help
farmers
improve
livelihoods
through
beier
crop
yields
and
quality.
Specifically,
FDCs:
– Provide
extension,
courses,
and
informa'on
– Develop
premium
cocoa
opportuni'es
for
growers
– Seedling
nurseries
and
clean
plan'ng
materials
– Farm
inputs/credit
– Village
resources
(malaria
preven'on,
community
infrastructure).
TCi
2014©

10. Regional
hubs:
Take-­‐aways
Regional
“hubs”
demand:
1)
Long
term
commitment
in
infrastructure
and
human
capital
development
and
2)
Large
investments.
This
model
tends
to
work
where:
• Clearly
established
demand
with
strong
growth
prospects.
• Supply
needs
to
be
safeguarded
and
sustained.
TCi
2013©

11. Model
2:
Coopera'ves
&
farmer-­‐
based
organiza'ons
(FBOs)
Unilever
Crop:
black
soy
Mo'va'on:
Unilever
expanded
sourcing
to
capture
new
market
opportunity
in
Indonesia
for
black
soy
and
expand
locally
available
supply.
Star'ng
with
12
farmers
in
2001,
they
expanded
produc'on
to
source
from
6,600
farmers
that
were
organized
into
coopera'ves
with
government
and
local
NGO
assistance.
These
farmers
now
supply
30%
of
the
market
demand
covered
by
Unilever.
Coopera've
model:
• Leveraged
government
and
academic
partners.
• Coopera've
planorm
allows
farmers
access
to
loans,
improved
seeds,
agronomic
assistance.
• Yields
for
farmers
have
doubled
since
the
program
began
8
years
ago.
Local
brand
designa'ng
locally
sourced
soy
has
improved
reputa'on
throughout
Indonesia.
TCi
2014©

12. Model
2:
Coopera'ves
&
farmer-­‐
based
organiza'ons
(FBOs)
Crop:
frozen
broccoli
Mo'va'on:
Sysco
wanted
to
make
investments
to
expand
their
supply
and
ensure
long-­‐term
sustainability.
The
company
iden'fied
Superior
Foods
(who
has
links
to
small
scale
farming
opera'ons/prodcut
in
La'n
America)
as
a
key
partner
to
do
this.
Superior
Foods
worked
together
with
a
local
exporter,
Sumar,
and
local
NGOs
to
link
indigenous
smallholder
farmer
coopera'ves
in
Guatemala
to
this
new
broccoli
value
chain.
Coopera've
model:
• 16
coopera'ves
par'cipa'ng
• Technical
support
is
given
by
local
NGOs
who
assist
the
coopera'ves
with
quality
upgrading
and
business
development
• Volume
contracts
were
established
with
the
coopera'ves
• NGO
partners
invested
in
basic
infrastructure
investment
(seedling
produc'on
and
packing
sheds)
TCi
2014©

13. Linking
through
coopera'ves
and
FBOs:
Take-­‐aways
Successful
coopera've
models
demand:
1. Provision
of
necessary
services
to
meet
quality
and
quan'ty
demands
2. Partnership
with
technical
service
providers
(NGOs,
academic
ins'tu'ons,
or
public
sector)
This
model
tends
to
work
where:
• Strong
NGO/public
partnerships
can
assist
with:
– Organiza'on
of
new
coopera'ves
(if
not
yet
established)
– Technical
service
provision
– Co-­‐investment
for
necessary
infrastructure
TCi
2014©

14. Model
3:
Linking
through
lead
farmers
and
nucleus
clusters
Crop:
cane
sugar
Mo'va'on:
Tate
&
Lyle
invested
in
a
new
cane
processing
plant
in
Vietnam
to
capture
strong
na'onal
demand
for
sugar.
There
was
high
cane
imports
and
legal
prohibi'on
of
large
holdings,
so
they
began
a
smallholder
sourcing
program
with
the
government
and
the
Rabobank
Founda'on
(RF)
to
reduce
import
costs
and
capture
new
market
demand
for
sugar.
Lead
farmer
model:
• Created
network
of
respected
field
managers,
lead
farmers
that
work
with
20,000
farmers.
• SMS
data/GPS
system
communicates
when
to
harvest
&
deliver,
and
conveys
quality
and
payment
informa'on
to
farmers,
• Partnership
with
Rabobank
enabled
access
to
credit
and
took
advantage
of
public
subsidies
for
new
agriculture
endeavors.
Credit
system
is
now
self-­‐sustaining
and
default
rate
is
4%.
• IT
system
allows
for
quick
communica'on
about
projected
supply.
TCi
2014©

15. Model
3:
Linking
through
lead
farmers
and
nucleus
clusters
Crop:
sorghum
In
2005,
Heineken
started
a
local
sourcing
program
for
sorghum
as
a
subs'tute
for
malted
barley
for
beer
markets
in
Nigeria,
Ghana,
and
Sierra
Leone.
In
addi'on
to
developing
new
product
lines
for
growing
beverage
markets,
shorter
supply
chain
for
primary
materials
would
lower
import
bill
(safeguard
against
price
shocks).
1,600
farmers
now
sell
into
this
supply
chain.
Lead
farmer
model:
• Iden'fica'on
and
training
of
nucleus
farmers
who
organized
the
collec'on
of
sorghum
from
village-­‐level
groups.
• Interven'ons
in
a)
credit
facilita'on
for
nucleus
farmers
and
b)
micro-­‐credit
to
farmer
groups
were
enacted
in
order
to
assist
cul'va'on.
• Insufficient
training,
credit
access
and
poorly
communicated
quality
parameters
leq
farmers
and
company
frustrated.
New
approach
is
now
being
undertaken
with
addi'onal
partners
(NGOs
and
local
research
ins'tute).
TCi
2014©

16. Linking
through
lead
farmers
and
nucleus
cluster
mechanisms:
Take
aways
Nucleus
clusters
and
lead
farmer
models
require:
1)
Iden'fica'on
of
suitable
lead
farmers/nucleus
farms
and
adequate
training
2)
Nucleus
farms/lead
farmers
to
be
well-­‐known
and
respected
individuals
in
the
community
This
model
tends
to
work
where:
• There
is
strong
alignment
of
expecta'ons
on
quality
and
volume
standards.
• Local
capacity
building
is
a
priority
and
development
of
local
leaders
is
possible.
TCi
2014©

17. Cri'cal
ins'tu'onal
considera'ons
• Crop-­‐specific
processing
infrastructure
for
smallholder
farmers
and
value
chain
par'cipants
needs
to
be
developed.
– Perishable
crops
requires
immediate
processing
– Fresh
produce
requires
intense
labor
• Ownership
structures
throughout
the
developing
world
are
diverse.
– Can
range
from
fully
controlled
state
schemes
to
full
private
agribusiness
control.
• Contractual
arrangements
vary
considerably.
Range
includes:
– Seasonal
credit
and
liile
interven'on
from
buyer
• Use
of
market
specifica'on
and
resource
contracts
– Quasi-­‐planta'on
system
where
outgrowers
labor
as
quasi-­‐wage
workers
(extreme
produc'on
contracts).
• Regulatory
environment
depends
on
market
focus
– Export
markets
demand
compliance
to
interna'onal
and
import
standards
(pes'cide
load,
labor
standards)
and
tariffs.
– Procurement
for
modern
retailers
(supermarkets)
require
compliance
with
elevated
quality
standards
of
mul'na'onal
retailers.
TCi
2014©

18. In
the
interna'onal
context…
experience
shows
that
companies
need
to
ask:
18
• What
is
the
business
benefit(s)
sought?
• Is
sourcing
from
small
scale
producers
feasible
with
this
crop?
– How
does
the
crop
fit
into
the
local
farming
systems?
– Can
the
crop
be
grown
efficiently
and
cost-­‐compe''vely
in
this
par'cular
region
and
by
this
set
of
farmers?
– What
investment
is
needed
at
farm
and
processing
and
market
levels
to
meet
required
volumes,
quality
and
standards,
and
to
get
the
sourcing
model
to
the
point
where
it
is
self-­‐sustaining?
– Who
will
make
this
investment?
How
long
will
it
take?
• What
could
go
wrong?
– Are
the
risks
to
the
company,
smallholders
and
other
affected
par'es
manageable
(e.g.
climate
change,
changing
consumer
preferences,
currency
movements)?
• What
could
be
the
development
impact?
– Are
other
investments
needed
to
reduce
risk,
increase
development
benefits,
or
promote
sustainable
farming
prac'ces?
TCi
2014©
Adapted
from
Sustainable
Food
Lab
©
2013

19. Moreover,
companies
need
to
consider
the
household,
community,
value
chain
and
market
context…
19
Important
Ques'ons
• Is
there
a
good
case
for
farmers
to
invest
in
this
crop?
• If
there
is
a
farmer
group
(e.g.
coop)
and
do
they
have
the
business
skills
&
assets
to
be
capable
trading
partner?
• Are
there
intermediate
suppliers
and
what
influence
do
you
have
on
them?
• What
else
beyond
the
value
chain
is
needed
for
success?
• Are
there
are
any
major
ecological
or
social
concerns
from
the
produc'on
of
this
crop?
Adapted
from
Sustainable
Food
Lab
©
2013
TCi
2014©

20. Food
&
nutri'on
insecurity
There
are
many
well-­‐known
problems
related
to
smallholder
sourcing,
which
create
commercial
and
reputa'onal
risks
for
companies
if
not
handled
well.
Examples
from
the
cases
(and
informal
interviews
around
failure
points)
include:
Women’s
exclusion
Child
Labor
Low
produc'vity
&
quality
(therefore
low
crop
income,
high
costs)
Poor
environment
prac'ces
(soil
erosion,
deforesta'on,
etc)
Poor
health
&
safety
on
farm
e.g.
pes'cide
management
etc
Over
dependency
on
one
crop
/
buyer
Side
selling
Labor
condi'ons
No
ability
to
make
claims
based
on
verifiable
impacts
Poor
management
and
profitability
Unreliable
delivery
Farmers
(produc'vity,
quality,
income)
Aggregator
/
Trader
Processor
Branded
Firm
Farming
Households
Across
smallholder
farmer
aggrega'on
models,
various
risks
are
common…
Adapted
from
Sustainable
Food
Lab
©
2013
TCi
2014©

21.
Thank
you!
21
Website:
tci.cals.cornell.edu
Blog:
blogs.cornell.edu/agricultureandnutri'on/