New approaches to feeding the world’s population
Development aid has targeted food security and agri-business for more than 40 years, but has yet to succeed in overcoming the imbalance between supply and demand. Nor has it made much impact on reducing hunger and rural poverty among communities that rely on the production and sale of agricultural products for food and incomes. As demand for food rises and the world becomes increasingly urban, this problem will be exacerbated. Practical solutions are required urgently. Through its activities, ITC’s Food and Agri-Business Programme (FABP) is developing scalable solutions by taking a market perspective.
Feeding the world in 2050?
According to a World Bank prognosis the world’s population is set to grow from its current 7 billion to more than 9 billion by 2050. More than 50% of the global population today already lives in urban areas and have stopped working the land for their own food requirements. Despite many years of development assistance, most developing countries still waste at least 40% of the produce they grow between the field and the first stage of conditioning, and waste a further 10% between the primary conditioning stage and the person who is going to eat or buy it.
Uncertainties and delays faced by transport companies operating in landlocked countries in Africa force them to pay a premium to obtain refrigerated food-quality containers (commonly called reefers) of between US$ 6,000 and US$ 9,000 in addition to facing steep demurrage fees if the containers are delayed outside of the contractually agreed usage window. These costs come on top of high fuel costs. Even when containers are available, delays at border crossings increase fuel usage as trucks run generators to maintain food container temperature within tight limits.
The challenge of feeding urban populations has been with us for a long time. Essentially, the complexity of perishable produce supply can be reduced to three main issues:
1. Reducing wastage of good food that is being grown or fed so that more of it gets to users;
2. Increasing productivity per hectare of land of the right varieties of food or animals to satisfy buyer and customer preferences; and
3. Freeing access across developing country borders so that food items can move unhindered from places of surplus to places where demand exceeds local supply.
Traditional development approaches often focus on individual issues or stages of production such as plant research, farmer associations, farming techniques, rural development, micro-finance and community processing. ITC, however, sees these issues as inter-connected challenges in an end-to-end market value chain stretching from customers back to farmers and farm supplies or from ‘fork to farm’. That perspective, of a set of activities aligned around market objectives understood by every stakeholder, leads to a different approach to solving the food challenge.
A new approach is required because successful food exporting depends on value chain stage and support service activities being closely orchestrated. A food processor with a contract to deliver a range of chilled, packaged produce and juices to a hotel or exporter relies on farmers harvesting the right varieties at an agreed time, on collectors not damaging the produce in transport, on timely and accurate laboratory tests to meet buyer requirements and on financing to pay suppliers of produce and packaging.
Farmers need to know what markets and uses their produce or animals will be destined for before planting or rearing as the requirements are often very different. For example, fruits for slicing or juicing need to be harvested early so that cutting and pressing do not instantly lead to bruising and fermentation. Customers from different geographic regions have different tastes and seasonal windows for delivery are very precise. The smallest lack of attention at any stage can lead to the rapid destruction of a whole season’s crop.
If farmers see their future as part of a self-sustainable food business, with sufficient income generation to allow some new investment each season, the right conditions for expanding food production will be established. In any food business there are three critical success factors that must be mastered:
1. Cultivating or rearing the food people want with consistent quality and timely delivery;
2. Reducing the time from harvest/slaughter to market; and
3. Preserving nutritional quality, appearance and taste for as long as possible (often referred to as shelf life).
Success or failure in the food business is
therefore directly linked to how well stakeholders come together to respond to
the three main issues listed above and identified as the roots of the food
challenge. This translates to good planning and communications and getting the
same messages understood by all stakeholders at the same time.
An integrated ITC approach to value chain development
As the main issues are organizational and behavioural, ITC’s FABP has developed a four-step participatory approach that pays attention to the context of social development, communications and relationship building. It brings stakeholders from every stage of the chain, including support services, banks and development agencies, to work together. This process fully engages stakeholders and helps them to improve their performance based on a common understanding of target market requirements and potential solutions. It is adaptable, to meet actual circumstances, and is capable of focusing, re-energizing as well as aligning development efforts around agreed market options:
1. Provision of market knowledge & sector intelligence – ITC provided advice and training to stakeholders from across a sector to support decision-making and structuring of food and agri-business value chains and support services; transfer of know-how on information, communications and support service delivery, and on the requirements for linking communities, micro-enterprises and small- and medium-sized enterprises (SMEs) to markets.
2. Value chain performance analyses, the design of market-led sector strategy, and development activities – ITC confirms the baseline situation and facilitates a process for stakeholders to develop the content and priorities for their strategy together. ITC challenges stakeholder ideas and feasibilities, helps design investment and development activities, acts as intermediary with potential resource providers, organizes and supports the management of private-sector led stakeholder implementation coordination bodies.
3. Turning opportunities into real sustainable business through integrated sector development programmes – ITC provides a range of project-based advisory, information, coaching and linkage-building services at micro, meso and policy levels to improve sector-wide enterprise efficiency and support services. They include: market orientation, access to sector specialists active in markets, improving transparency and reducing exploitation in trade, building direct linkages with sector and import associations for long-term supplier development and equitable contracting, reinforcing trade information services, agri-food trade promotion, counselling on non-tariff measures, food quality, food technology, packaging, labelling, agri-business collection centres and logistics, mobile communications and financing.
Some of these services are described below and in the article on ITC’s intervention in Uganda and Ethiopian coffee sectors in this edition of International Trade Forum. Some development requirements, defined by stakeholders in their implementation plans, may be beyond the scope of ITC, for example in cases related to agriculture. ITC then assists stakeholders to find the right development resource providers for their needs and counsels stakeholders on how to coordinate several partners simultaneously and manage the relationships.
4. Advice on holistic sector development and policy design – Impartial development advice on how to achieve export competitiveness may be provided for policy- and decision-makers based on ITC’s global experience and information sources. This advice is provided through several ITC services: Business and Trade Policy, Export Strategy, Market Analysis and Research, and Enterprise Competitiveness, independently or coordinated through the Sector Competitiveness Food and Agri-Business Programme.
Examples from some of ITC’s projects
A comprehensive participatory value chain approach from ITC’s Food and Agri-Business Programme is addressing both wastage and productivity issues for hundreds of smallholder farmers in four parishes in Jamaica. Hoteliers, food processors, fresh produce exporters and buyers are working together with farmers, collectors and agricultural extension services to define performance gaps and agree on needs along fruit and vegetable value chains. They produced a strategy and prioritized implementation plans coordinated by an elected committee. The top priority was better organization of fresh produce supply chains to be addressed through a transparent process. ITC specialists recommended testing private-sector managed rural agri-business collection centres (ABCCs) and took stakeholders to see examples and discuss their plans directly with operators in other countries.
Agri-business collection centres are designed to be the hub for a number of value-added services, for example: collection, grading, conditioning, packaging and payments, as well as soil testing, farm inputs delivery and application training, and demonstrations of appropriate new technology. Development banks can be provided with reliable production records and sales data that can support requests for financing of improvement projects or farm inputs linked to recorded buyer demand. In the case of Jamaica this has led to significant interest in advancing credit for such schemes. In the past, buyers had almost given up on smallholder farmers. Now, since they are directly involved in the process, there are encouraging signs of long-term relationships developing including regular meetings, development banks extending financing and non-project funded improvements.
In the fruits and vegetables sector in Fiji and the pineapple sector in Benin, stakeholders prioritized easy-to-use ITC voice and text mobile solutions that are being offered to link buyers and customers to farmers and agricultural extension workers so each has access to the same information at the same time. The mobile-phone based service allows buyers to specify to farmers and extension services what varieties and volumes of produce they want to receive. Extension services use the system to organize farmer field training and farmers can notify buyers weeks in advance of harvest of their intended delivery date. Farmers and collectors can also see how a large volume order is being filled – and how much is still open to offer. This system provides transparency through comparisons to town market prices and creates the first reliable records of transactions, demand and supply. In countries where telephone banking is allowed, direct payments to rural farmers can be made.
In Cameroon, similar activities benefiting hundreds of communities are being delivered in the manioc and coffee sectors, where ABCCs have also included coffee washing, processing and simple tasting and food hygiene testing equipment that can work and be maintained in rural areas with intermittent or no mains electricity supplies. For the first time growers can taste their own coffee and understand the impact of different growing and processing techniques on its quality and value. The coffee communities have already seen a 25% increase in the prices achieved for their coffee and a dramatic increase in outturn.
In the manioc sector ABCCs are becoming social hubs for the communities they serve showing improvements in quality continuity and organization of harvest and supplies. In these examples ITC and local sector development coordination bodies worked closely with a number of other development agencies, including agricultural and land ministries such as the Ministry of Agriculture and Rural Development, Ministry of Finance (MINADER), International Fund for Agricultural Development (FIDA), the Food & Agriculture Organization (FAO) and the International Institute for Tropical Agriculture (IITA).
In cereals value chains in West Africa, and
agri-foods value chains in the Common Market for the East and Southern Africa
region, ITC is working with policymakers, freight services, border fiscal services, development banks, plant health, food safety and quality inspection services to ease the cross-border transit of food products – especially for landlocked countries. Non-tariff measures at borders and ports come in many disguises. ITC seeks to identify which are useful measures and which are unnecessary barriers. It can then demonstrate the cost to the competitiveness of the sector and bring stakeholders together to determine alternative solutions.
Similar market-led integrated stakeholder participatory approaches are employed by ITC in manufactured natural products value chains such as hides, skins and leather, and cotton, textiles and clothing. Whereas 10 years ago ITC specialists had to explain or undertake group exercises to demonstrate basic value chain concepts, they are now widely understood and the importance of taking a value chain perspective to design practical development responses is widely recognized. But, being understood does not mean that relationships along value chains are working as they should, that stakeholders fully understand where and how they add or destroy value, or are aligned around a common win-win objective with buyers.
Many current development activities are still organized out of rural development or agriculture programmes, which may be very good for that particular area but restrict their potential to create an impact further downstream. Even with good end-to-end value chain analysis, addressing issues in isolation simply does not work to overcome the organizational and behavioural problems that are the main source of the performance issues outlined above.
The examples above are designed to show how important it is for donors and regional economic commissions to consider envelopes of funding that are flexible enough to provide for holistic end-to-end value chain solutions and how stakeholder engagement and ownership is the key to improved value chain performance and better community livelihoods.