Nearly 500 million smallholder farmers operate globally. Collectively, they produce most of the food consumed in developing countries. They also make up the majority of people in the world living on less than two US dollars a day. What unites them, however, is not so much the need for humanitarian aid but rather access to the necessary assets, capital and training to create sustainable businesses.
Partners, Not Beneficiaries
Smallholders have the potential to become viable economic entities, yet there is a pre-existing shortfall between actual and potential yields. This, according to the Food and Agriculture Organization of the United Nations (FAO), is due to “suboptimal use” of advice and training, and “insufficient adoption of productive technologies.”
Echoing this sentiment, Smallholder Farmers and Business (2015), a newly published, 176-page report from business strategists Hystra, collects best practices from 15 successful organisations working worldwide to increase smallholder farmers’ productivity as a way of boosting their incomes.
Among those organisations and initiatives championed is Tetra Laval’s and Tetra Pak’s Dairy Hub project, co-run by PRAN, the largest food processing company in Bangladesh.
The Dairy Hub project not only trains dairy farmers on how to optimise productivity, but also provides them with the products and services needed to do so.
As Smallholder Farmers and Business highlights: “Improving food security starts by viewing smallholder farmers as business partners rather than as beneficiaries.”
Stategies for creating new value along the value chain
Smallholder Farmers and Business details pioneering strategies over three broad sections for creating “new value along the value chain, cost-efficiently, and capturing the value created and sharing it sustainably for both farmers and the organisations working with them”:
- Creating more value
The first section of the report discusses ways to increase incomes, transform lives and grow businesses. The most efficient way to do this is through the adoption of productivity-enhancing technologies. These present the biggest potential income gain for smallholder farmers — especially the most vulnerable.
- Operating more cost efficiently
The middle section examines, among other things, the ‘early adopters’ of new agricultural methods and products, as well as detailing how and when training should be introduced into the mix. Training must be delivered before farmers need to make an investment into equipment or materials so they quickly see “results from changing their practices without any cash investment, and begin to trust the organisation’s advice. It also ensures farmers are in the best possible situation to reap all the benefits of their investment, once they make it.”
Among the chosen organisations in the report are JAIN Irrigation Systems and Samruddhi (BASF), who jointly provide support to more than 500,000 farmers across India with holistic farming solutions, renewable energy-based products and technical advice for sustainable agriculture. The PRAN-Tetra Laval work to train smallholder farmers on good agricultural practices at little or no cost is highlighted: “Only after farmers have taken these first steps does PRAN-Tetra Pak recommend them to invest into new breeds of cows and expensive equipment such as milking machines.”
- Capturing and sharing value
The third and final section of the report goes deeper into the long-term aspects of doing business with smallholders and raises the question of why some farmers are more loyal than others. Then there are financial aspects such as financing and dependency to consider. Recurring issues include high customer churn and “side-selling”, where farmers sell off crops that cannot be stored and handled easily. Milk is one such product, but many harvested crops become spoilt or stolen if farmers do not sell them off quickly.
Biopartenaire, an organisation in the Ivory Coast that offers 23,000 cocoa farmers payment, training and technical services, revealed that it uses incentives to drive loyalty and honesty when buying goods from smallholders. According to the report, “PRAN-Tetra Pak has succeeded in creating a dense enough network of milk collection centres to have most small cattle owners conveniently deliver even small quantities of milk,” and “in the absence of any other competing network offering a similarly convenient and consistent value proposition, PRAN-Tetra Pak’s side-selling rate stands virtually at 0%.”
The value of good advice
Smallholder farmer, Rajendra Hari Patil in India, is in many ways the embodiment of this train of thought. “I lost my job as a teacher,” he told an interviewer in 2015, “but I had farmland and thought to give farming a shot. I began by farming part-time, but when I learnt about drip irrigation and tissue-culture farming, I made up my mind to get into farming full-time”.
Supported by JAIN Irrigation Systems, Rajendra adopted more efficient farming techniques for his plot of banana groves Maharashtra, India, which is now so successful that he is regularly asked to give advice to other smallholders about how to transform their farms.
Blueprints for sustainable development
There is no silver bullet for improving food security. Each country, region, and famer must be considered on a case-by-case basis. There are, however, tried-and-tested approaches that can be apply when doing business with smallholders. Click on the link below to download Smallholder Farmers and Business and learn more about the 15 organisations chosen by Hystra (out of 270 studied globally) that operate in over 15 commodities and serve over two million smallholder farmers globally.