Yet there are growing signs of change across the region. In the town of Ciwedey, western Java, for example, a religious school has organized some 450 surrounding farmers in a highly profitable enterprise that supplies 20 tonnes of potatoes a year to supermarkets and wholesalers. In Nepal, the government has launched a "rural-urban partnership" programme that aims to network farmers with marketing centres. In Thailand's San Sai district, a farmers' group has found a lucrative market for its dried longans in China. And in the Philippines, an FAO project is serving as a "matchmaker" for agrarian reform beneficiaries and agribusinesses willing to invest in their communities.
Those are just a few examples of an emerging trend in many parts of Asia: farmers and agribusinesses are linking up in mutually beneficial contracting arrangements that offer producers lower market risk and greater access to inputs and financing, and ensure processors a guaranteed supply of farm produce.
For AG's Agricultural Support Systems Division (AGS), this shift from traditional to so-called "contract farming" is one of the most critical development challenges facing Asia in the coming century. To help meet that challenge, AGS co-sponsored a consultation in Chiang Mai, Thailand in October that brought together senior-level experts in production, post-harvest management, food processing and marketing from China, Indonesia, Malaysia, Nepal, the Philippines, Sri Lanka and Thailand. Their task: to identify strategies and priorities for supporting development of market-oriented agriculture, with emphasis on improved production-market coordination.
Fast food chains, supermarkets. The consultation found that
industrial processors and newly emerging agribusinesses - such as fast food chains, supermarkets, packaging plants and hotels - collectively provide significant new opportunities for market-oriented production. To take full advantage of these new openings, however, there is need for wide-ranging improvements in government services to agriculture, market infrastructure and information, farming technology, farmers' skills and farmer organization.
Linking agrarian reform beneficiaries and agribusinesses enterprises in the Philippines was no simple task, at first.
The small farmers, being new land owners, had limited technical and financial resources. On the other side, agribusiness required partners who could meet quality standards and ensure timely delivery. In the middle, the Department of Agrarian Reform (DAR) had limited funding and no staff trained in promoting contract farming.
But an FAO project in support of the agrarian reform came up with a winning strategy: it helped establish a "market-matching" go-between, a network of DAR investment and marketing assistance officers, and a market information system. The private sector responded by investing in agrarian reform communities, and the DAR has now institutionalized the programme.
On the role of government in promoting market-oriented agriculture, the Chiang Mai consultation noted that, in all case studies reviewed, government resources or programmes had helped establish private sector linkages and contracting agreements which then catalysed market-oriented production. In the Philippines, a programme for promotion of high-value crops - mainly fruits and vegetables - was seen as an excellent example of effective public-private sector cooperation, with a strong focus on seizing market opportunities.
Among other primary roles of government, the consultation said, should be price stabilization, action to unify markets, improving market infrastructure and information services, and ensuring proper zoning and planning for land use. A "third party" - whether governmental, NGO or private sector - was also considered important in identifying reputable buyers and farmers groups, and helping to ensure "fair and enforceable" agreements.
Finally, farmers need to be organized into groups or cooperatives that can use economies of scale in bargaining, coordinating supply and accessing credit and other support services. Resource-poor farmers, particularly, need support in organizing producer groups in order to increase their negotiating power and benefit from increasing commercialization of agriculture.
South-South networking. Doyle Baker, Chief of AGS' Farm Management and Production Economics Service, sees a growing emphasis on market-oriented agriculture, information systems, rural opportunities, and links to the post-production sector. "Several related initiatives in these areas are underway, or are soon to be launched," he said, "including a rural agribusiness development programme in Indonesia, studies in the Caribbean on crop diversification and in Latin America on the role of farm organizations in the market, a joint project with IFAD and NGOs in southern Africa, and studies in Eastern Europe on the impact on family farms of accession to European Union." Later this month, another AGS-sponsored workshop will assess emerging market opportunities for farmers in Benin, Cameroon, Côte d'Ivoire, Ghana and Nigeria.
"To be successful," Doyle adds, "this new direction must plan, from the start, for institutional sustainability, complementarities and synergies, and South-South networking." He stresses the need for capacity building, especially in farm management - the move to a farm business approach, involving investment, enterprise choice and resource management, will not be easy. In the medium to longer term, two critical questions must be answered: what is uniquely different about market-oriented agriculture, and how should public intervention support it?
"In developing an action plan, goals and approaches must be clearly defined," says Doyle. "Market efficiency is not an end in itself. Its ultimate purpose must be social and economic benefits, chief among them employment generation, income growth and food security. The market-oriented approach must also be linked to an emerging development strategy based on decentralization, people's participation, a systems perspective, and a broad vision of sustainability incorporating environmental, institutional and economic dimensions."
Published November 1998