Nationally and internationally, agricultural markets are changing rapidly. This is driven by value chains that link rural areas with big retailers or supermarket chains in major cities as well as export markets. This means that farmers must be much more market-responsive if they are to access these lucrative markets and remain profitable. Closer business links between farmers, agroprocessors, exporters, traders and retailers have great potential for mutual benefit. There are many different ways in which farmers can be linked to markets. For example, leading farmers, farmer groups, producer organizations or cooperatives can link farmers directly with retailers, exporters, traders or agribusinesses.
A conducive business environment is a crucial pre-requisite for successful private entrepreneurship, which is urgently needed in the agricultural sector. It encompasses improving the legal and regulatory framework to attract private investment in the development of value chains, in the provision of infrastructure and services and participation in sector-specific policy-making processes. Private sector stakeholders who invest in agriculture include commercial farmers, agro-processors, food manufacturers, retailers, exporters and agro-enterprises.
Standards are agreed criteria by which a product’s performance, its characteristics and/or the process and conditions under which it has been produced, can be assessed. The proliferation of food standards is driven by increased consumer awareness of the need for safe and healthy food. Standards are used as a marketing tool by retailers to distinguish their products from the ones of their rivals and to demonstrate product superiority. However, standards can create barriers for farmers to access markets.
Value Chain Development
Value chain development involves bringing together and strengthening the business partnerships between the different players who produce, trade, process and market agricultural products. The most important challenge is to bring small farmers into value chains as reliable and profitable partners. Without small farmer-focused value chain development, increasing numbers of farmers will be side-lined and excluded from profitable markets and be trapped in subsistence production.
Diversification and Value Addition
Diversification can reduce dependence on volatile commodity markets and minimize business risks. For example, farmers growing food crops such as maize and cassava can reduce their exposure to business risks and are more likely to remain profitable by diversifying into a variety of niche products and supplying different markets. However, diversification is challenging and requires knowing your market, the demand and product preferences of customers, quality specifications and price range. Value addition such as processing and packaging is an important way of increasing the value of a product.