Importance of agriculture value chain

 By Clifton Gwabu 

A plate of food on the table is not a miracle. It involves a process  to ensure the plate of food is possible. 

For agricultural produce there is a chain that is followed from a production point to consumption point. 

If farmers were to realise higher profits, consumers were to enjoy fair price, and the national food security was to be assured, the chain of food system had to be systematically made strong, efficient, healthy and dynamic.

How many consumers in towns and cities around Papua New Guinea care to know how the food they enjoy have been grown, raised, packed, preserved, stored and transported? 

Does the consumer know that the sweet potato bought at Gordon’s market was grown in Goroka and travelled 180 kilometres to Lae, and a further 1200 kilometres by ship to Port Moresby, while the round cabbage was grown in Mt Hagen, and covered a total distance of 1470 kilometres by land and sea? 

Does the consumer of canned corn bought from the supermarket know that the kernels that she enjoyed were from a farm in the USA and had to fly a great distance to be on her plate? 

And did the passenger of a local airline that enjoyed a cookie know that the packet of cookies was produced in Port Moresby from imported wheat, while the apple juice went through a tedious downstream processing in another country before being transported to PNG?

Every agricultural product goes through a process from the farmers to the consumers. 

This is commonly referred to as ’farmgate to plate’. 

As a produce leaves the farm, value is added on to the produce until it ends up on the consumers’ plate, hence the concept of ‘value chain’. 

Value chain simply refers to the flow or ‘the path through which value has been added on the produce or product by a number of actors along the chain as it moves from the farm to the consumer. 

It involves packaging, storage, transport etc. For example, a kilo of sweet potato produced at a farm in Whagi Valley is worth K0.50 at the farmgate, K1 at Mt Hagen market, K2 at Goroka market, K5 at Lae market, K7 at Alotau market and K10 at Gordon’s market in Port Moresby. 

The longer the distance, the greater the margin of sale price between the farmgate and the retail or simply, the value of the kaukau increases and the volume/number in the heap reduces when it leaves Mt Hagen. 

Distance means two things. First, it is the physical or spatial distance. 

In this case transportation logistics and storage facilities become a factor in value addition. 

Second, and fundamentally, distance refers to the transformation process of the state of the product between the farmgate and the plate. 

Simply put, the farm produce gets processed therefore will arrive at the consumer’s plate in a transformed state. 

Most often the distance would be the combination of the two, and can be long, tedious and even circuitous.  

Understanding value chains, its actors and implications are critical to agricultural production in the country. 

Each actor in the value chain is an important player and each one needs to understand each other’s needs for better understanding of the product’s performance and coordination of the chain for improved efficiency, customer satisfaction and profitability.

The success and profitability of a value chain depends on how strong the chain is, or how strong the individual actors in the value chain are. 

Fresh produce value chains in developing countries like PNG feature many weak actors, resulting in a very weak chain.

A value chain is made of key actors as well as support actors. Key actors can include seed suppliers, farmers (or growers), transporters, sellers and consumers. 

These key actors must continuously communicate with each other; understand each other in terms of market requirement of a produce such as size, shape, volume, colour, timeliness, frequency, and chilling during transportation and at depots.

There has to be a good negotiation, which is transparent so that every actor is satisfied with the profit margin.

The support actors are as important as key actors. 

Examples of support actors are agriculture input suppliers, road maintenance authorities, credit facilities, extension officers, quarantine authorities and researchers. 

If one or a number of these actors appear to be weak, the whole value chain will be weak.  

It is important to conduct a value chain analysis (VCA) so that the actors can make informed choices, including those who want to support it like the policy makers and donors. 

A VCA can identify the share of value adding, and the risks faced by each actor. 

It can identify weaknesses that prevent progress and suggest actions for improvement.

The economic value of agriculture produce is multiplied if the value chain of the product is strong, efficient and sustainable.