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of the opportunities for farmers in sub-Saharan African countries to increase their
export revenues (Barrett and Browne 1996). A significant portion of this trade was
accounted for by export to Europe under contract farming, or hybrid forms of this
vertical coordination. This coordination was through cold chains for handling the
perishable products.
In summary, a larger proportion of total vegetable production is still intended for
local consumption in spot markets that are located in urban centres, without contractual agreements. However, there are often informal arrangements that allow farmers
and buyers to perform some of the functions that would otherwise exist under formal contracts.
Literature reveals several challenges for smallholder vegetable growers to participate in lucrative markets including:
(i) Their limited ability to afford the costs required to align their farms and postharvest practices to meet specific requirements (e.g. product variety, standards,
delivery methods and food safety), which are gaining increasing importance in
export markets (Dolan and Humphrey 2000).
(ii) Negative effects of demand shocks; unlike milk, which is largely consumed
locally, some of the vegetables produced under contract farming (e.g. baby
corn and green beans) rarely have high domestic demands in SSA. This can
result in high exposure to risk from demand shocks for farmers, exporters or
both (Ashraf et al. 2009).
(iii) Sudden change in contract terms; most of vegetables exported to Europe have
been certified products (e.g. organic, EurepGAP). Certified products are produced under standard practices and processes that may change when growers
are unable to adjust their practices and processes (Averill 2007).
(iv) Women who are normally disadvantaged in terms of resources (land and valuable assets) may not participate fully to derive the same benefits as men
(Carney 1992).
3.3 Common Challenges and Key Analytical Issues
Milk and vegetables are high-value products, but are characterized by a high ratio
of transaction costs to final value because they are perishable and require heavy
investment in processing to prolong shelf-life (Hobbs and Young 2000; Sinja et al.
2006). Production of these high-value products is an opportunity for smallholder
farmers to increase returns to improve family livelihoods, but poorer farmers may
lack the necessary resources to engage in production. The real gain that poorer
farmers obtain from participation in production and marketing may be much lower
than the nominal price in the market. The high transaction costs arise from market
imperfections that limit farmers’ access to services, such as credit. This limits participation of poor smallholders in activities that can potentially enhance their access
to alternative (formal) markets.
Integrating Smallholder Farmers to Commodity Value Chains in Sub-Saharan Africa…
of the opportunities for farmers in sub-Saharan African countries to increase their
export revenues (Barrett and Browne 1996). A significant portion of this trade was
accounted for by export to Europe under contract farming, or hybrid forms of this
vertical coordination. This coordination was through cold chains for handling the
perishable products.
In summary, a larger proportion of total vegetable production is still intended for
local consumption in spot markets that are located in urban centres, without contractual agreements. However, there are often informal arrangements that allow farmers
and buyers to perform some of the functions that would otherwise exist under formal contracts.
Literature reveals several challenges for smallholder vegetable growers to participate in lucrative markets including:
(i) Their limited ability to afford the costs required to align their farms and postharvest practices to meet specific requirements (e.g. product variety, standards,
delivery methods and food safety), which are gaining increasing importance in
export markets (Dolan and Humphrey 2000).
(ii) Negative effects of demand shocks; unlike milk, which is largely consumed
locally, some of the vegetables produced under contract farming (e.g. baby
corn and green beans) rarely have high domestic demands in SSA. This can
result in high exposure to risk from demand shocks for farmers, exporters or
both (Ashraf et al. 2009).
(iii) Sudden change in contract terms; most of vegetables exported to Europe have
been certified products (e.g. organic, EurepGAP). Certified products are produced under standard practices and processes that may change when growers
are unable to adjust their practices and processes (Averill 2007).
(iv) Women who are normally disadvantaged in terms of resources (land and valuable assets) may not participate fully to derive the same benefits as men
(Carney 1992).
3.3 Common Challenges and Key Analytical Issues
Milk and vegetables are high-value products, but are characterized by a high ratio
of transaction costs to final value because they are perishable and require heavy
investment in processing to prolong shelf-life (Hobbs and Young 2000; Sinja et al.
2006). Production of these high-value products is an opportunity for smallholder
farmers to increase returns to improve family livelihoods, but poorer farmers may
lack the necessary resources to engage in production. The real gain that poorer
farmers obtain from participation in production and marketing may be much lower
than the nominal price in the market. The high transaction costs arise from market
imperfections that limit farmers’ access to services, such as credit. This limits participation of poor smallholders in activities that can potentially enhance their access
to alternative (formal) markets.
Integrating Smallholder Farmers to Commodity Value Chains in Sub-Saharan Africa…