Hit the one in the middle! - Creating Value for farmers

23-02-2017

In the movie Rocky 4, his trainers tells Rocky when he claims seeing three opponents instead of one (because he is completely smashed in pieces by his Russian opponent Ivan Drago) – HIT THE ONE IN THE MIDDLE! Agriterra tries to give cooperatives the tools to hit the one in the middle and get a better margin in the value chain.

Caught in the chain
Many farmers and their cooperatives are caught in long value chains in which they are often at the losing end. Their competitors are many and are coming from everywhere. Farmers don’t have al lot of bargaining power, are not cost-efficient and cannot provide added value on their own or with their cooperatives. For this reason investing in cooperatives’ and farmers’ knowledge on value chains and helping them to assess their external circumstances and see the opportunities within the value chain and help them act on it together, is very important.

Direct economic benefit members
In the end farmers will not only be satisfied with their cooperatives when they are financially transparent and well governed. They first look at the direct benefit they have in the form of a better farm-gate price or their return on invested capital and products in the cooperative. For this reason Agriterra started developing and using the Value Creator tool. A thorough analysis is made on where the most value is created in the chain and were the farmers and the cooperative can intervene to getter a bigger piece of the pie. With which actions the highest impact can reached for the income of the farmers in cooperation with their cooperatives?

Horizon, impact and complexity 
At the same time you have to make the assessment when discussing and calculating different intervention strategies on how long it will take before they have a positive impact. Getting certification on farm level for Dragon Fruit might take longer than using your processing plant more efficiently as a cooperative.

Also we have to look at the complexity of the intervention. For example, stepping into a new product line by providing new seeds to your members or making your own seedlings in the cooperative, cost more money and farmers need to be well-educated. Also you depend much on outside expertise. Taking these 3 assessment criteria: Horizon, impact and complexity in mind you get a better focus in your value chain interventions as a cooperative.

Agriterra’s single focus 
Many governments, companies and organisations might be more interested to optimize the whole value chain. Of course this is important, but if you talk about impact for the long-term in employment, fighting poverty, fair distribution of wealth it is just as important to really focus on the ones who at this moment have the worst position in the chain: farmers. Cooperatives should be the vehicle for them to have impact in the value chain and improve their incomes. This will also lead to more possibilities to invest in more sustainability on the farm and attract young people to stay working in agriculture. Vegetables are not going to weed themselves, at least not on the short-run in countries like Vietnam.

In practice: Dien Quang 
In Dien Quang, in the middle of Vietnam, Agriterra conducted a Value Chain analysis last week in vegetables, peanuts and beef cattle. Many interventions in these chains were analysed and calculated, and it is often more simple than you think. For example in the beef sector. Dien Quang has a good climate and circumstances for beef cattle and farmers are historical knowledgeable in keeping cattle. So, we made calculations, we talked to many people, we see many unnecessary losses, inputs are poor, we know the intentions and we see the changing consumer behaviour. 

 

In this week we met a middle man (what’s in the name :)) who buys cattle from farmers and sell it to local markets, and he was making a profit of 200-400 euro per day, while transporting 10-20 cows from farmer to slaughterhouse to market! He is the one Rocky’s trainer was talking about, the man in the middle. By the way you can tell very easy that he is the man in the middle, as he is also able to take care of 8 wives and 35 children! The crazy thing is that the cooperative for which we did the assignment has a slaughterhouse of its  own, so they have assets and people to help their farmers to get a bigger chunk in the chain. So cooperatives and farmers, have to keep on hitting the one in the middle. Agriterra will be at your side! 

Luc Groot, business advisor and coordinator Agriterra