From June 8 – 10, 2008, women and men leaders from small farmers’ organization and cooperatives, together with partner NGOs/agri-agencies, gathered to participate in the first regional forum workshop of the Linking Small Farmers to Markets (LSFM) initiative, a project designed to respond to agricultural marketing issues through the formation of marketing intermediation mechanisms that will increase the benefit of small farmers engaging in the market that is being piloted in the Philippines, Cambodia and Vietnam. Entitled “Making Markets Work for Small Farmers: Understanding Marketing and Market Intermediation”, the workshop was designed to enhance the knowledge and skills (through experts’ inputs and sharing of actual experiences) of the participants in developing, implementing, advocating and supporting initiatives that would link small farmers to markets.

The first two sessions focused on key inputs to give an update of the current market situation in Asia and how global trends and increased competition is changing the way markets behave, and subsequently how market participants (such as small farmers) should respond. In positioning the small farmer as a participant the market, it was then important to level off on agricultural chains (what they are and how they work) and the significance of conducting a value chain analysis. Resource persons from LSFM pilot sites then shared their experiences in conducting such an analysis for free range chicken (Cambodia) and calamansi (Philippines), while Vietnam shared the results of their initial market study. A portion of the workshop was also dedicated to the formal launching of the LSFM project, which gave the project implementers a chance to thank their sponsors and partners, as well as showcase agricultural products from the three (3) pilot sites in a mini-exhibit.

The next set of sessions tackled marketing concepts, strategies and intermediation models. After a leveling off on definition of terms and concepts, case presentations from the Philippines, Korea and Vietnam were shared and discussed as concrete examples of marketing intermediation models. Each case focused on how the model works, some remaining issues and challenges, lessons learned and recommendations/plans for moving forward. As a way of synthesizing these experiences and also to enhance awareness on other models that have been applied, a presentation on emerging marketing intermediation models (their characteristics, benefits, and limitations and constraints) was also made.

As part of the following session on policy environment and support for marketing intermediation models, the participants discussed some opportunities available to farmers and farmer organizations that could be tapped for strengthening their linkage to the markets. This was done together with representatives from the ASEAN Foundation and the Food and Agriculture Organization or FAO and was followed by a workshop on defining effective marketing models or strategies and the policy support they require.

Each workshop group (first by country, then by sub-regional groupings), was asked to answer and discuss the following questions:

1. Based on the experiences/cases/ models shared, what marketing model/strategy do you think can be adapted or modified given your groups capacity and market situation? (Describe the model/strategy)
2. What concrete actions do you intend to undertake to adopt or implement the model or strategy? Identify other stakeholders you need to engage?
3. What policy do we need to advocate towards favorable agri-marketing policy supportive of small-scale farmers? Identify what agency we need to push the said advocacy?

On the third and last day of the workshop, the participants conducted a field visit to the Province of Thai Nguyen where they got a chance to meet with the Thai Nguyen Farmer’s Union and engage farmers on-site in their green tea farms. While the farmers’ capacities in producing safe and organic green tea have been enhanced by new knowledge and technology, there are still concerns regarding quality and price setting. This is because the lack of packaging and marketing has made it difficult for consumers to distinguish the safe and organic green tea from regular green tea. The group also visited Phuc Thanh Quyet, an AsiaDHRRA project site from 2001-2005. The village leader shared the positive benefits (such as increased income, better housing, etc) their community has experienced as a result of the project.

From the participant’s feedback, it seems that the workshop achieved its objectives and was able to meet most of the group’s expectation. Many felt that they learned many things and could use the workshop materials in their own work/training sessions. Some also thought that more time should have been allotted to the discussion of the business models, as well as more concrete implementation steps in the future. There were also some recommendations on other topics that could be covered by succeeding workshops, e.g. micro-credit.

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After communicating how happy he was to be back in Hanoi, Dr. Uriarte began with an introduction of ASEAN and the ASEAN Foundation. Asia as a region and ASEAN as an association is very diverse and currently composed of 10 member countries. ASEAN is targeting to have its own constitution by November 2008 and establish an ASEAN community among members by 2015. Established by the ASEAN in 1997, the ASEAN Foundation is pursuing two objectives: 1) to promote greater awareness of ASEAN, thus creating an ASEAN identity (e.g. Filipinos, Singaporeans, etc will think of themselves as Asians) and 2) to contribute to the evolution of a development cooperation strategy (academic, cultural, economic, social and other relevant government institutions and bona fide NGOs of ASEAN member countries can all avail of ASEAN Foundation funding)

The ASEAN Foundation has partnered with AsiaDHRRA because it believes that in order for the region to attain its vision of a caring ASEAN community, farmers need to be given a means to participate in the shaping of the future of the region (this should not be left to industrialists). The agricultural sector is important for success of economy; in fact, it is the first thing that needs to be addressed in order for a country to attain development. This is also important to alleviate rural poverty in the ASEAN region. Thus, farmer organizations and farmer workers will remain important for ASEAN to achieve its two objectives.

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Session 1: Current Context of the Market Situation in Asia

The Market Situation and the Challenges for Small Farmers: Agri-business and Competitive Agro-Industries
By Mr. David Hitchcock, Agribusiness and Infrastructure Officer, FAO Regional Office for Asia and the Pacific

Mr. Hitchcock’s presentation focused on the macro-side or larger picture of agribusiness, which is an important aspect to understand about agriculture. There are real differences between small holders (small farmers) and the agri-businessmen and recent sector trends and impacts have made farmers very vulnerable. In general, the private sector continues to play an important role and more and more farmers are being disenfranchised. The market has also changed significantly since the 1970s such that while there are now more opportunities (e.g. bigger profits) for small farmers, there are also more risks. Other movements in agri-food systems include globalization, urbanization, changing diets, more women in the economy, etc.

There are also organizational and institutional changes: before we just worried about our products, but now we need to worry about the quality, etc. The supply chain/value chain is changing and small farmers need to understand trends such as integrated and contract marketing because these are on the horizon and they will have an impact on them.

But agri-business and agro-industries are not “bad”. They can also create a big industry with a lot of opportunities. However, this can disadvantage people who cannot compete so it is necessary to educate, educate and educate. Agribusiness development is also context-specific: this highlights the need to get back to basics and learn from our mistakes/bad examples so that we can contextualize our experiences and adapt them to specific situations.

There is also a need to work with/through government to influence the policy environment. It is not enough that policies are in place; we need to look deeper into the policy guidelines and understand how things are actually implemented. A good policy environment will require bringing farmers together so that they can be given a voice; public private partnerships where there are equal agreements and incentives for farmers and the private sector to work together; safeguarding people’s rights; and revisiting the mandates of governments in providing information and services to farmers (governments are not very efficient at this so there is a need to harness other mechanisms)

On agro-industries and value chain programs, there is a need to look at business linkages, reduce transaction costs (in many cases, the small farmer can not compete with the transaction costs and it is the traders in between that gain the profit), and understand the supply or value chain. At the end of the day, what is important though is that farmers are not only organized, but are capacitated to do their jobs properly and more efficiently so they can produce high quality products. “You are the catalyst for small farmers. You can bring them together so they can compete. You can help build their skills and reduce their risks. You can also help them understand these risks so they can reduce these for themselves in the future.”

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Session 1: Current Context of the Market Situation in Asia

Session 1 Presentation 2: Agri-Marketing in Asia: Agri-business Perspectives
By Mr. Senen Bacani, CEO, Ultrex Management & Investment Corporation (former Secretary, Department of Agriculture, GRP)

Mr. Bacani explained that while he was here to offer an agri-business perspective from the side of the private sector, he has also worked extensively with government, cooperatives and NGOs. There are a variety of issues and concerns facing agri-businesses in Asia right now. First, there are higher incomes and changing lifestyles brought about by advertising and intense competition. Production is increasing despite increasing production costs, and there is a growing concentration of agri-business enterprises due to economies of scale. Products from small producers are being standardized before they reach the consumer, an example of which is product quality improvement and industrial packaging, which is being done by supermarkets. These standards have added value to some products but in other cases, the concern has been more about improving internal management processes to enhance effectiveness in the face of global competition (e.g. getting ISO certification).

But the goal of agri-business can also be aided by government policies. It is important that the public sector produces public goods such as irrigation and farm to market roads to support small producers. Also, to encourage more participation of small farmers in the value chain, it may be necessary to stick to the competencies of the farmer. Farming itself is not easy, and transforming farmers into entrepreneurs may not be practical sometimes. This is why it is necessary to form partnerships. What is important is ensuring that every player in the value chain gets his equitable share. Whether this will entail “leveling off the playing field” somewhat or increasing the leverage of small farmers is part of the challenge.

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Understanding Marketing and Agricultural Chains (Value Chain Analysis)

Session 2: Understanding Agricultural Chains Towards Enhanced Market Access
By Dr. Nellie Manalili, Regional Adviser for Asia on Market Access, Vredeseilanden (VECO)

Much of the problems in the agricultural sector exist because we do not understand what is going on. That is why we need to understand what are agricultural chains and how these are linked to the market.

In a simple marketing system, there is the producer and the buyer. Goods are transferred from one to the other and it is through information and communication that a decision to buy/pay for a product is made. In reality, however, things are not as simple because of intermediaries in between. Products pass through these intermediaries and value is added to the chain where products take on a different form, e.g. from raw coconut to desiccated coconut or copra. The more intermediaries or participants there are in the chain, the greater chances for problems or distortions to happen. Farmers can also decide to add value (join the chain) if they determine that this will be more profitable for them. Otherwise, because of lack of the right information, they will be unable to benefit from the agricultural chain.

Another simple assumption is that producers will always have a ready market for their produce. This is often not the case and it will be important to 1) know market before you produce and 2) know your buyer and the agricultural chain they are in. Some questions that should be answered in relation to this are:

• Who are currently buying and supplying?
• Who are operating here?
• In what mode, form and at what price are they purchased?
• How is my product different or similar from others?
• What are potential entry points? (Sometimes this is learned by trial and error)
  

All products pass through a value chain. But now there is proliferation of professional buyers for retailers (i.e. supermarkets), which is affecting role of intermediaries and the market structure in general. In Asia, however, small markets are still popular and they co-exist with the big supermarkets (referred to as the dual face of agri-food markets). We are also finding new products in the supermarkets being offered as substitutes. These “changing rules in the games” and new standards set by other groups are creating dynamic markets where small producers are ill-equipped to compete. Even small producers who do not engage in these dynamic markets (they just deal with small, traditional markets) can be affected. This happens when suppliers that fail to meet retailer standards bring their products to the traditional market and increase the level of competition there.

In understanding agricultural chains, what is important to remember is that participants in the chain can only gain from their contribution to the chain. In joining a chain, we need to ask ourselves: Is the increase in price (what I will gain) commensurate to the value that I added? Did I make the right decision to add value or not in a given chain? The better we understand agricultural chains, the more we will be able to cut down transaction costs and enhance our position in the chain (by assuming other roles or participating in decision-making processes).

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Session 3: In-Country Presentations on Value Chain Studies (LSFM Pilot Projects)

Study 1: Value Chain Analysis of Free Range Chicken (Cambodia)
By Sim Kong, General Director, CEDAC Agri-based Enterprise Support Program

The value chain for free range chicken follows a typical product flow. Farmers or producers sell the chicken to middlemen, who add value by incurring transportation costs to bring the chicken to the whole sellers. The whole sellers, who do the slaughtering and processing, then pass this on to retailers such as supermarkets who in turn make the chicken available either directly to consumers or food processors (restaurants) who add even more value by preparing/cooking the chicken before this is finally bought and consumed by their clients. Through this entire process, the price of the chicken is increased from 13,000 Cambodian Riel (KHR) or US$3.29 (from the farmer) to 24,000 – 32,000 KHR or US$6.07 – 8.09 (to the consumer).

As part of the analysis, it was determined that there is a strong market demand for chicken because all classes of people eat this. Some concerns and issues in producing free range chicken that emerged are:

• Farmers do not know/count the cost of raising their chickens
• Small farmers are price-takers, not price-setters when it comes to selling chicken
• Small farmers are not getting much benefits through current market (because they are not producing enough)
• There are no market intermediation mechanisms to help small farmers
• There is no interaction between producers and consumers, though many local people support the product
• There is limited implementation of government policies and regulations on food safety and slaughterhouse management
  

It is being recommended for CEDAC to initiate market intermediation mechanisms for the free range chicken farmers.

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Session 3: In-Country Presentations on Value Chain Studies (LSFM Pilot Projects)

Study 2: Value Chain Analysis of Calamansi (Philippines)
By Mr. Jesus Vicente Garganera, National Coordinator, PhilDHRRA

A market research scanning on calamansi that was done revealed important statistics and information for any farmer or group of farmers interested in producing and marketing. It was found that the production of calamansi in the country has been increasing, with major supplies coming from Central Philippines (although it can only be produced there 4-6 months in a year because of typhoons) and less but more consistent (all-year round) supplies coming from Southern Mindanao. A minimum of half a hectare is required to make calamansi production successful and it costs around 4 Philippine Pesos (Php) or 9 US cents to produce one kilo of calamansi. Potential returns are estimated to be about US$2000/year for one farmer.

The value chain actors are comprised of the farmer, the assembler or distributor (who brings the calamansi to the capital of Manila), the retailer (markets that make the calamansi accessible) and the consumer. The price increase from farmer to consumer is almost 1000%!

One initial realization was that the simple repackaging from sacks to crates can already added value because it reduces the number of damaged calamansi being delivered. Fresh calamansi can also be processed into juices, syrups, powders, etc as alternative ways of consumption (as well as maximizing the plentiful harvests during seasonal months), and there is an industrial use for it as well. Therefore, another important learning was that it would be worthwhile diversity the value chain analysis to go beyond the fresh fruit. In order to do this, however, more research is required such as identifying potential industrial markets (i.e. laundry, soap and noodle industry), and analyzing the market segmentation so that farmers will know where they can make the most profit. It will also be necessary to share such findings to the farmers (through a report) and build their capacities further.

Finally, considering its rich vitamin C content (100% RDA in one fruit), it may also be beneficial to discover the health/medicinal benefits of calamansi as input into future marketing strategies.

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Session 3: In-Country Presentations on Value Chain Studies (LSFM Pilot Projects)

Study 3: Market Situation in Vietnam
By Mr. Nguyen Van Tam, Director, Research Department, VNFU

Vietnam is currently transitioning into a market economy. As a new member of the WTO, it is now exporting food products and has diversified some of its economic sectors. However, there are still many challenges ahead before the country can become a 100% market economy:

• Commodity quantities in the markets are still limited and poor
• Production costs are still high and competitiveness is low
• Both entrepreneurs and farmers lack knowledge about the market economy

The value chain analysis that will be done as part of the LSFM project will be on organic tea.

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Session 4: Marketing Concepts Strategies and Intermediation Models

Market Positioning/Marketing Strategies
By Dr. Wen-chi Huang, Associate Professor and Chair, Department of Agribusiness Management, National Pingtung University of Science and Technology

Dr. Huang shared many marketing concepts to the group as a way of leveling off on definitions that would later serve as a good foundation for understanding marketing intermediation models.

“Marketing is about making your product identifiable from others. It is not about what you can produce (your capacity) but what the market needs.” There are also different types of marketing: consumer marketing (supplying branded products), industrial marketing (supplying differentiated ingredients to processors and manufacturers) and commodity marketing (supplying undifferentiated raw materials). Another related concept to understand in marketing is quality, or the attributes of the product (usually defined by a set of standards) that will convince consumers to buy it. It is also important to look at the quality of the “total” product, which includes the product, package, and service. In terms of tools, a marketing plan can be developed (for branded products only) to target a select market for a specific product. The key here is to “select your market and not let the market select you”.

We are all aware of the importance of organizing small farmers because of economies of scale. This is also true in applying marketing strategies where organized farmers can work as a team to meet the needs of the markets/different consumers.

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Session 4: Marketing Concepts, Strategies and Intermediation Models

UMFI Experience - Linking Community-Based Enterprises with the Mainstream Markets (Phil.)
By Mr. Rene Guarin, Executive Officer, Upland Marketing Foundation, Inc. (UMFI)

A marketing program established in 1989, UMFI’s current mandate is to provide market access to Community Based Enterprises (CBEs) with support services on access to technology and finance.

UMFI has been successful in helping CBEs get access to the markets because it has the right mix of staff. While it is organized as a foundation with a board of trustees, management is composed of professionals from the industry with expertise, experience, contacts, and the right attitudes. UMFI also knows the market and so it knows what kind of product to sell.

But once CBEs are able to access the market, they require further support to stay competitive in the market. UMFI has helped CBEs survive in the market by positioning community-based products as “healthy” products (i.e. muscovado sugar labeled as healthy sugar), consolidating products in order to recover marketing and distribution costs, and by creating a common brand for sustainability. This means maintaining a shared standard of quality regardless of source or variety (i.e. organic rice). It also protects CBE market shares by erecting market barriers. Creating a strong brand, setting high standards, and getting certifications all make it difficult for new entrants to “copy” the product.

Some results to date include an 89% increase in CBE farmers’ gross income, as well as recognition as the no. 1 brand for organic rice in a 2007 consumer survey.

In terms of lessons learned, it is important to:

Establish partnerships, trust and transparency. UMFI does not have contracts with its suppliers. It counts on the long-term standing relationships that it has with the farmers that they will deliver when they say they will. It continues to strengthen relationships, have regular meetings and provides services. UMFI is transparent about price setting and makes use of the value chain to determine the margins. Profits are directly built in the price and so the distribution of returns is direct (on a per transaction basis). “Trust is important when you start talking business”.

Ensure quality and quantity. At the farmer level, there is an internal control system that looks after this. At the national level, standards are set. However, there are still some outstanding issues: 1) some products do not meet the standards and have to be returned (one strategy to address this is to require smaller deliveries for new suppliers); 2) suppliers that are growing two varieties (of rice) in one field sometimes compromise the quality of their product; 3) there is not enough supply of organic rice to meet local demands, let alone export (looking at converting regular rice fields to organic ones instead of looking for new land).

Focus on core businesses and roles. It is important to know what and when to outsource other tasks. In looking at the role of farmers (are they producers or entrepreneurs?), it is better to look at what business opportunities the farmer can get into. If farmers are in a good value chain, it may not be necessary to “convert” them to entrepreneurs.

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