Agricultural Value Chains

Daniel Wilson Ndyetabula

Agricultural Value Chains
Think about the following
photos
Agricultural market
Agricultural market
Fresh produce in a supermarket
Example of a food processing factory
Hotels and restaurants
High quality food served in restaurants
 Food demand is changing
Kcal consumption/capita/day (1981=100) Developing Country Consumption
250

Meat
200
Horticulture
150

100
Cereals
50

0
1981 1984 1987 1990 1993 1996 1999 2002

Developing country exports

350
Horticulture
300
Value of exports (1980=100)

250
Meat
200

150

100
Cereals
50

0
1980 1990 2000 2004
 Key
questions ⚫ What is a value chain?

⚫ Why working with and promoting value

chains?

⚫ How to develop a value chain?

 “Value chain” means….

➢ “Sequence of related business activities (functions) from the

provision of specific inputs for a particular product to primary
production, transformation, marketing up to final
consumption”

➢ “An institutional arrangement linking and coordinating

producers, processors, traders and distributors of a
particular product.”
Objective of the value chain
• ….to efficiently capture value in end markets
in order to generate greater profits and create mutually acceptable
outcomes for all farms and firms involved in the VC from production
to consumption and disposal.

VC stakeholders capture VALUE ADDED via:

1 ] Salaries for workers

2 ] A return on assets (profits) to entrepreneurs and asset owners
3 ] Tax revenues to the government
4 ] A better food supply to consumers (consumer surplus)
5 ] A net impact on the environment (externalities)
 Terminology

⚫ Market chain: A set of linkages between actors with no binding

or sought-after formal or informal relationships.

⚫ Supply chain: A market chain that supplies a particular

customer, meeting their particular product specifications and
procedures.

⚫ Value chain: A specific type of supply chain in which actors

support one another, so that they can increase their overall
efficiency and competitiveness.
 Supply Chain versus Value
Chain concept

⚫ Supply chain: refers to a sequence of sourcing and marketing

functions of individual enterprises.

⚫ Supply chain management is a business management tool

rather than a development concept.

⚫ It is rather connected with logistics than with market

development.
 Agricultural value chain…

is defined as…
…the full range of farms and firms and their successive coordinated
value-adding activities that produce particular raw agricultural
materials and transform them into particular food products that are
sold to final consumers and disposed of after use…

in a manner that is profitable throughout,

has broad-based benefits for society,
 Agricultural value chain

The goods, services and

processes involved in an
agricultural product moving
from the farm to the final
customer (consumer).
Activities: agricultural value chain

⚫ Input supply.
⚫ Farm production.
⚫ Post-harvest handling and processing.
⚫ Technologies of production and handling.
⚫ Grading criteria and facilities.
⚫ Cooling and packing technologies.
⚫ Storage and transport.
⚫ Industrial processing.
⚫ Finance.
⚫ Feedback from markets.
 The value chain “map”

Basic sequence of functions in an agribusiness value chain

Trans- Trade Consump-

Specific Production
formation tion
Inputs
Grow, harvest Classify Transport Prepare
Provide Distribute Consume
- equipment Produce the Process
primary stage Pack Sell
- inputs
etc.
Categories of operators in value chains and their relations
Specific Farmers, Packers, Consumers of
Input Traders pineapple juice
(primary Agro-
providers (sales pt.) (the market)
producers) industry
Why working with and promoting value chains?
Advantages value chain approach:

⚫ Allows to understand the chain as a system, which favors

a more comprehensive management of information
between actors.

⚫ Facilitates the identification of critical points that limit

strategic chain development, both organizational and
technological.

⚫ Allows the identification of key stakeholders that make

the chain work and encourage processes of negotiation
between them.
Why promote value chains?
PRIVATE SECTOR:
• Markets do not always develop & function on their own!

ECONOMIC BENEFIT:
• Close coordination of production and distribution along the chain to comply
with quality requirements and reduce cost of logistics

THE ANSWER OF PUBLIC POLICY:

• Economic development generates social benefits by promoting market
success:
• jobs are created and incomes increase
• more tax income is generated that can be spent on education,
infrastructure, protection of resources etc.
• MSMEs and marginalized regions can be integrated into the market
Dimensions of value chain promotion
“Pro-poor growth”
= greater employment and income of poor people

Economic growth Poverty alleviation

= greater volume sold, = the poor benefit at least
higher value products equally or above average from
(“the cake grows”) the income generated (poor
get their “share of the cake”)
 Economic Analysis of VC

Size and market share of VCs in global and domestic markets

• Production and consumption figures
• Export and import figures (using WTO records)
• Share of the VC in the total export value

Value-added along the value chain

• Contribution of chain segments to total value

Profitability of the chain operators

Benchmarking important VC parameters

• Benchmarking of unit cost of production

• Benchmarking of labour and other factor productivities

Source: GIZ.ValueLinks Manual. 2008.

 Value adding to local products
by:
• Improving product quality
• Improving post harvest technology Which leads to:
• Adding processing steps • Higher income for producers
• Improving supply chain efficiency • Higher income to the
• Innovating new products processors
• Applying modern packaging • New market for exporters
• Introducing new designs and traders
• Fulfilling international standards • Stable relationships
• Branding the products
• …..
• Higher export earnings
• More investment
• More jobs
• Environmental sustainibilty of the sub-sectors
 Thank you for your
attention

© Daniel Wilson Ndyetabula

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