I appreciate that this is a rather long post but please read through to the end.
Spores magazine released a special issue titled ‘The rise of the agricultural value chain’. I found this issue very interesting and eye-opening. It echoed some of my thoughts and I have chosen to share some of the contents with you. Please find time to read this issue. I truly believe that the most successful Agripreneurs will be the ones that are able to create strong value chains or work effectively within one.
A value chain is a sequence marked by value growth and coordination at each stage of production, processing and distribution, driven by consumer demand. It carries with it a range of support functions, such as input supply, financial services, transport, packaging, market research and advertising. The nodes in an agricultural value chain may consist of INPUT PROVIDER, FARMERS, PROCESSORS, PACKAGERS, DISTRIBUTORS & RETAILERS.
Value may be conferred or increased by improving the quality of a product, through better seed input and post harvest management in the case of crops or higher quality forage for livestock. Value addition may also be achieved through greater efficiency, with better logistics, especially transport. Other ways of adding value include improving presentation and preparation and introducing grading.
Value chains come in all shapes and sizes. Successful value chains are driven by information about consumer requirement often through market research. The 3 main features of a value chain are:
- Co-ordination of all links in the value chain.
- Added value at each stage.
- A market-led approach, responding to local, national and international demand.
Value chains offer a strategy for income generation which has important repercussions for extending the reach of agriculture but also for attracting young people to the rural sectors or dissuading them from leaving it.
The farmers are the first link, but most often the chain is organised by the last link, the one selling the final product. Communication with other links in the value chain is essential since the whole chain will be affected if one link fails. Planning is the key, with careful attention to detail. If value chains are to be sustainable they must be profitable: decisions about who to work with must be based on commercial criteria.
Successful value chains involve collaboration between all stages of the chain. Farmers and produce buyers need to work together to ensure the right quantities at the right time, meet consumer needs and minimise cost.
When it comes to developing a value chain, it is important to have sound market knowledge so as to offer the right product, one for which there will be sufficient demand. To benefit from the value chain model, producers or their associates need to have good organisation and management skills, they must know how to calculate production cost, be able to guarantee quality and a regular supply and traceability. They must also be familiar with the markets and market prices.
If value chains are to work well, they must involve other actors who are not directly involved in the sequence. These include financial services and transport, packaging and distribution companies. A large degree of success of any value chain comes down to the farmers who supply the raw materials. Greatest risk here is the failure to respect commitment. If the value chain concept is to be applied successfully, everyone in the chain must benefit. More importantly, everyone in the chain must perceive that they are being treated fairly and equitably.
Understanding the opportunities and risks inherent in value chain participation is crucial. There is a range of markets to consider but it is important to select the right one. The type of people most likely to benefit from a value chain are those with an entrepreneurial spirit, a willingness to communicate and the financial and knowledge assets to invest in accessing these new markets.
Next post will look in detail at opportunities that exist for agripreneurs within the value chain.
Thank you for taking time out to read this post 🙂