The Roles the Private Sector Plays in Smallholder Farming

Marco Ferroni Syngenta Foundation for Sustainable Agriculture

ICRISAT 40th Anniversary Science Symposium Patancheru, India, September 24-25, 2012

2

The private sector plays essential roles offering

value to farmers

The private sector cannot, however, function on

its own

Public goods and ‘enabling’ institutions are

indispensable companions, making the

government’s role essential, too

Partnerships are often needed to improve the

functioning of value chains, create synergy in

agricultural R&D, and shape social and

environmental outcomes

These are the topics this presentation will

address

Getting started

Farmers’ needs define the private sector’s roles

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• Genetics and plant breeding

• Soil fertility solutions

• Crop protection

• Irrigation

• Mechanization

Technology

• Agricultural extension

• Better organization

• Financial services

• Connectivity

Services • Transport

• Storage

• Information

• Logistics

• Contracts

Access to markets

Millions of small farmers reached commercially every day as they buy

seeds and crop protection products, fertilizer, cell phones, consumer

goods, and tools

Demand is up and corporates respond

Source: Chand and Parappurathu, 2012 4

India: Gross Fixed Capital Formation in Agriculture

as % of GDP-Agriculture (Current Prices)

... in ‘farm-to-fork’ value chains

across the developing world

Driving diversification

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● Diversification an important source of ag growth, with big opportunities for

smallholders

● Small farmers’ contribution to high-value crops:

70 % of vegetables, 55% of fruits, 49% of spices while occupying 44% of land area

More efficient than large farms

Contribution of diversification

to ag growth (%) Gross returns on different farm-size groups in 2003 (Rs./ha)

Source: Birthal, Joshi, & Narayanan, 2012

And posing dilemmas for the public sector in service delivery

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Agricultural extension, India

Access to information from different sources,

by farm size (%)

• Smallholders have less access to

information; 60% not covered by

advisory services

• Media, input dealers and lead

farmers the main sources of

advice

• Mobile apps spreading rapidly

(not shown)

• Government’s reach almost

negligible; has large-farmer bias

• Policy challenges:

• Coverage of small farmers

• Public sector’s role and

effectiveness in extension,

supporting the private sector

and non-profits

Source Small Medium Large

Any 38 51 54

Media 26 42 55

Input dealers 18 25 30

Lead farmers 16 20 21

Ext’n workers 7 14 19

Input dealers includes output buyers and

cooperatives.

Extension workers includes KVKs and government

demonstrations.

Source: Adhiguru et al., 2009

… input supply …

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Seed systems, India

• Liberalization, access to public germplasm and growth in the

demand for commercial seed have spawned a vigorous

private seed industry – particularly (but not only) in hybrid

crops and with a focus on commercially oriented farmers

• This leads to numerous public-private interfaces where good

practice and rules need to evolve:

• Acquisition of source seed

• Seed multiplication

• Quality control

• Conditioning and storage

• Marketing

• Decentralization

• Village seed supply

… and agricultural research

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Agricultural R&D, India

• Agribusiness in India making ‘major investments in

research and producing innovations that are extremely

important to farmers’ (Pray and Nagarajan, 2012)

• About 70 companies undertaking agricultural R&D in India at this time

• Public agricultural research at a crossroads: looking

back on a stellar past, needing renewal in the face of

changed circumstances (including the rise of the private

sector) and India’s ambitious annual agricultural growth

target of 4% under the 12th Plan (DasGupta and Ferroni, 2012)

• Public-private cooperation of the essence going forward

An exciting brave new world out there …

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... with problems all the same

• Many value chains do not function

well (if they function at all)

• Many farmers remain unreached

Responses

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• Some farmers can’t be reached – too poor, too far from market;

commercial farming not their ticket to prosperity

• But – in a world of growing markets – many of the unreached can be

linked to value chains, if applicable constraints removed:

Enablers, market makers

Roads

Dere

gula

tion

Infrastructure

Credit

Outgrower schemes

Coordination

Storage S

tan

da

rds

Leadership

Information

Insurance

Gu

ara

nte

es

Co

op

era

tio

n Logistics

Contract farming

Organization

Contracts

Trust

Companies bundling inputs, advice, markets, money …

Inputs Information and

Advice

Procurement and

Contract Services Financing

High High High None

Medium High High None

High None High Medium

High Medium Low Medium

High Medium Low Medium

High High Medium Low

Medium Medium High None

None Medium None None

High High High None

None Medium None Medium

Medium High High None

None Low None None

... to link smallholders to value chains Source: ESP/Barry, 2012

Current members of ‘Shared Value in Agribusiness’ platform

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Amul

Bayer CropScience

Hindustan CocaCola

DCM

Deepak Fertilisers

Field Fresh

Godrej Agrovet

ITC

Jain Irrigation

KRBL

Mahindra

MAHYCO

Monsanto

Mother Dairy

Namdhari Seeds

Nath Seeds

Nestlé

NSL

Olam

PepsiCo

Rallis

StarAgri

Syngenta

TAFE

Tata Chemicals

UPL

AIC

HDFC Bank

ICICI Bank

IDBI Bank

IFMR Trust

Agribusinesses

Financial institutions

J&K Bank

NABARD

RaboBank

SBI

Yes Bank

Aquaagri

Basix

BKS

CIFA

Digitial Green

Directorate of Wheat Research

Driptech

FICCI

ICRISAT

IFC

INI Farms

Intuit Fasal

Masani Farms

Nokia Life Tools

Pradan

Reuters Market Light

Rudi

Tata International Water

Management Institute

Agro-entrepreneurs, producer

organizations, research, and

support

20 million farmers by 2020 Source: ESP/Barry, 2012

Nature of farm-level intervention

‘Market-led

Extension’ Qu

ali

ty • Marketable yield

• Standards

• Compliance

• Budgeting

• Finance

• Investment

• Extension

• Inputs

• Choice

• Training

• Risk management

• Communication

• Negotiation

• Market intelligence

• Knowledge

• Independence

• Sustainability

Ma

rket lin

ka

ge

s

• Export and Domestic

• Contracts

• Organisation

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Standardize constituent elements

to facilitate going to scale

For example, Jawhar vegetable marketing (SFSA)

Highlights:

● Crop planning along with farmers

● Seedling, agronomy/crop solutions

● ‘Produce together, sell together’

● Collection centres which also serve as information centres

● Provide crates, bags, receipt books, scales on subsidy to start with

● Help in the first few loads to market; later on, hand over to producer group

● End season analysis, learning and sharing success

On-farm grading

Grading & packaging

Loading

Cash payment at market

Sept. 2012:

• 856 farmers

• 7 clusters

• 3 crops

Mobile apps

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Farmforce

by SFSA

A mobile platform to support the integration of

smallholder farmers into formal agro-value chains

Strategic value

proposition

Reduce transaction cost for contract farming, compliance with

food standards, traceability from the field and improve

agronomy at scale Link more farmers to markets

Current state Under development and field testing in Kenya and India

Outlook Platform goes live Q4 2012

A class of enablers

• In the end it is all about partnership: PPPs / for-

profit – non-profit cooperation to accelerate

research and kick-start markets benefiting

small farmers

• APXC (version 1.0 launched September 2012)

• A knowledge sharing platform and an incubator

• So we can stop re-inventing the wheel when we craft

new partnerships in agriculture

• Designed to change the enabling environment for

PPPs in agriculture

www.apcx.org

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The private sector plays essential roles offering

value to farmers

The private sector cannot, however, function on

its own

Public goods and ‘enabling’ institutions are

indispensable companions, making the

government’s role essential, too

Partnerships are often needed to improve the

functioning of value chains, create synergy in

agricultural R&D, and shape social and

environmental outcomes

To recapitulate