Agribusiness and value chains

AGRICULTURAL research has greatly increased the yields of important staple food crops. For many people, this has meant more food availability and trade opportunities. Yet many people in rural areas of developing countries still live in abject poverty.
Therefore, policy makers, donors, and researchers are now refocusing their priorities away from simply producing more food to making sure that agricultural research benefits the poor. How can we ensure that new agricultural technologies are appropriate for the different groups of people who need most assistance? Furthermore, how can we assess whether these new technologies actually reduce poverty and enhance food security and rural employment opportunities? The measures of the direct impacts of new technologies on incomes and yields do not tell the whole story. Both economic and non-economic factors (such as source of vulnerability, gender roles, and the source of the disseminated technology) play an extremely important role in determining whether the poor adopt or benefit from a technology. In addition, social, cultural, and economic factors all influence whether the poor receive direct and indirect benefits from new technologies.
Value chain analysis helps capture all these facets and provide sound and scientific basis to scientists and other decision makers in designing new research programmes with greater uptake and impact. The value chain describes full range of activities which are required to bring a technology or innovation from conception, through the different phases of conceptualisation to technology generation, delivery to final customers, and final disposal after use.
Value chains analysis conceptualises enterprises as parts of chains of different but linked production and exchange activities operating in different geographical areas. It focuses on analysing chain governance i.e. how value is distributed at different levels of the chain and the different interests and power relations which influence this distribution. In this way it leads to a more sophisticated modelling of the positive and negative impacts, whether direct, indirect or unintended, of different interventions. This enables a more complex exploration of alternative strategies for poverty reduction.
Value chains analysis can be a participatory and empowering process. Using maps and diagrams enables even poor and disadvantaged stakeholders to be involved in the collection and analysis of information; conceptualisation and prioritisation of research and development (R&D); technology verification and fine tuning and finally adoption and adaptation.
This promotes dialogue and accountability between stakeholders as they analyse and negotiate their common interests in improving the functioning of chains and identifying those interventions likely to be most useful.
Participatory value chains analysis (PVCA) can highlight the constraints on those controlling the chain and clarify the possibilities for change lower down. It can help overcome barriers and communicate the perspective of those lower down the chain to those nearer the top. It can help make chains freer and fairer and redistribute benefits to those currently disadvantaged.
In its simplest form PVCA involves bringing together stakeholders with knowledge of different levels of the chain to construct a standard flow mapping. This map identifies the main activities in the chains, their geographical spread, the main stakeholders and a rough idea of the relative size and importance of each element. Different types of governance relationships are identified on the map such as: arms length exchange transactions; situations where one stakeholder exercises undue control over others; cases where a lead institute directs others as in a buyer-driven chain and hierarchical relationships where Ministry of Agriculture/Science and Higher Education control  various R&D, educational and extension agencies.
Coming up with good economic policy appropriate to the level of development in a country requires an understanding of how local agricultural enterprises fit into the global economy. This is a big question. How can it be made manageable? The way forward is to focus on the sectors in which the local enterprises specialise and then ask how the global market for products from this sector, is organised. Often these markets are not free-for-all open spaces. The spaces are coordinated by global buyers who source from around the world. Timber, coffee, cocoa and oil palm are case in point for PNG.
 The point to be made here is that grasping the big picture is important, not just for the producers, local entrepreneurs, but also for the policy makers. Should they help local enterprises to find a niche in global value chains coordinated by outside enterprises? Or should they provide support for local enterprises so that they can produce and market their own product overseas?
In all countries excellence can be found in some individual organisations or enterprises. Discussion on improving competitiveness often concentrates on how to achieve more of such individual excellence. This is useful but not sufficient. The competitiveness of the individual organisation/firm depends upon the competitiveness of the value chain to which it belongs. “Competitive pressure to achieve efficiency gains obliges organisations to interact more closely with partners upstream and downstream in the value adding process”. The implication for policy makers is that linkages deserve more attention, both domestic and global. The quality of domestic linkages and domestic support systems plays critical role in creating international competitiveness. 
PVCA cannot be seen as a substitute for negotiating the problems of difference and conflict of interest and the inevitably contentious issue of how far change can take place in the relative position of different stakeholders in the chain without breaking the chain itself. Understanding the chain and its operation is a long term process. Different people will always have different perspectives and complete information will never be possible. Nevertheless PVCA can be a useful tool in identifying different types of interventions which might be desirable at different levels of the chain. It provides a practical focus for stakeholders to discuss their common or conflicting perspectives and a benchmark framework against which impacts and contextual changes can be identified.
Finally, to increase the impact of agricultural research on poverty, income generation, and food security, R&D organisations need to embrace a culture of institutional learning and change. This can be fostered by a spirit of critical self-awareness among professionals and an open culture of reflective learning within organisations. In such an environment, errors and dead ends are recognised as opportunities for both individual and institutional learning that can lead to improved performance.

* Next week’s article will focus on “Agribusiness and Food Safety”