Rabo International Advisory Services (RIAS) BV Lessons Learned about involving small scale producers in Coordinated Supply Chains Gerard van Empel March 2005

Rabo International Advisory Services (RIAS) BV 2 Efficiency role of supply chain Commodity producers Collection & Wholesale ProcessorsRetailers Supply chain Price at farm gate Inefficient Supply chain Efficient Supply Chain Consumer prices in retail shops

Rabo International Advisory Services (RIAS) BV 3 Differentiation of supply chains

Rabo International Advisory Services (RIAS) BV 4 Lessons learned (1) Strong integrator or supply chain manager required Input supplier part of the chain but not the manager Small farmers need to be well beyond the subsistence stage Specialized small farmers are easier to deal with

Rabo International Advisory Services (RIAS) BV 5 Lessons learned (2) Specialization normally starts when farmers have confidence in the chain Very product specific Exports only possible through organized supply chain (traceability, consistency in quality etc.) Small farmers need to be organized and empowered to ensure fair share of the cake

Rabo International Advisory Services (RIAS) BV 6 Bottle necks Poor image of co-ops and associations hijacked by Governments in the past Poor contract enforcement In most supply chains, solution only for the higher end of small farmers High transaction costs High risk of residue contamination Lack of medium term finance to improve product quantity and quality

Rabo International Advisory Services (RIAS) BV 7 Interventions (1) Improve enabling environment regarding: Co-operative legislation Contract enforcement Land titles/ land as collateral Stronger enforcement of fyto sanitary veterinary regulations Separate agricultural policy from rural development (poverty elevation) policy Stimulate economies of scale

Rabo International Advisory Services (RIAS) BV 8 Interventions (2) Create appropriate policy instruments like: Agricultural finance guarantee fund for medium term finance (strict eligibility criteria) Improve training and extension services Warehouse receipt systems Crop insurance or weather derivatives structures