[publication|647706|647707] Smallholder farmers generally have limited marketing options, often selling small quantities to traders at the farm gate for unfavourable prices. To help smallholders profit more from agriculture, WFP and partners support them to work together in farmers’ organizations. These organizations receive training to aggregate crops, add value and engage with formal markets for quality produce, gaining crucial experience by selling to WFP.
To meet the quantity requirements of large-scale buyers, smallholder farmers must aggregate their crops and sell collectively. This allows them to negotiate better prices for their crops, as well as access a range of other services. WFP supports farmers’ organizations with training and equipment to strengthen their ability to function as businesses and provide services to their members. In many countries, other innovative aggregation methods are being tested, such as commodity exchanges and warehouse receipts systems.
Farmers’ organizations demonstrate abilities
Generally, large-scale buyers do not purchase food from smallholder farmers’ organizations because they are seen as unreliable and lacking the necessary business skills. However, by marketing their crops to WFP, farmers’ organizations demonstrate that they are reliable and professional suppliers. Having seen this, both institutional and private sector buyers are showing increased interest in procuring crops from these emerging businesses, with farmers’ organizations making sales to millers, processors and supermarket chains.
P4P has shown that despite gains in capacity, farmers’ organizations still require patient buyers who take the challenges they face into account and continue strengthening their capacities. Therefore, WFP supports buyers to make purchases in ways inclusive of smallholder farmers. For example, national governments are now leveraging lessons learned under P4P, using pro-smallholder procurement modalities to source food for national grain reserves, home grown school feeding programmes, hospitals and prisons.
[photo|647713] In countries such as Guatemala, WFP helps the Government to institutionalize and integrate the P4P approach on a national level, using a trust fund to support pro-smallholder procurement and the capacity development of Government institutions. In many other countries – including Burkina Faso, Rwanda and Tanzania – WFP supports governments to make their procurement practices more inclusive. Smallholder-friendly procurement practices may involve softening some contracting requirements, such as by waiving competition and transportation based on the capacity of the farmers’ organization. WFP holds training in its areas of expertise, such as quality assessment and control, warehousing, logistics and market information systems. Exchange visits organized by WFP have proven to be powerful tools for encouraging innovative approaches.
Management Systems International (MSI) and WFP carried out a desk review entitled Supporting Public Procurement from Smallholder Farmers to provide an overview of government buying from smallholder farmers, and recommendations for WFP’s continued support of these efforts. The paper concludes that continued capacity development is needed for smallholder farmers and government institutions.
Supporting Rwandan scale up
The Government of Rwanda was the first to fully embrace and expand the P4P concept under a project called Common P4P (CP4P). Under CP4P, legislation commits the National Strategic Grain Reserve and other public institutions to purchase up to 40 percent of their staple grain requirements from smallholder farmers’ cooperatives.
WFP supports CP4P by training Government officials on various aspects of engaging with smallholder farmers and providing guidance on direct contracting with farmers’ organizations. A WFP consultant was placed with the Ministry of Agriculture to develop a procurement strategy.
Exchange visits inspire in Burkina Faso
[photo|647711] In 2012, Government officials from Burkina Faso went on an exchange visit to Rwanda to learn about the Government’s efforts to support smallholder farmers. After the visit, La Société Nationale de Gestion du Stocks de Sécurité Alimentaire (SONAGESS), Burkina Faso’s national food reserve agency, began working to source 30 percent of its food needs from smallholder farmers’ organizations.
WFP helped SONAGESS expand its price collection system to gather more relevant data from rural markets closer to farmers’ organizations. The Government is now working to expand their warehouse network, and sought WFP assistance to identify locations to maximize procurement from smallholder farmers.
National Food Reserve Agency of Tanzania
In 2012, an agreement was signed to increase WFP purchases from Tanzania’s National Food Reserve Agency (NFRA), while strengthening the NFRA’s pro-smallholder procurement. WFP trained NFRA and Ministry of Agriculture staff as well as farmers’ organization presidents in quality control, warehousing and logistics to support this process. In 2014, these efforts paid off, with the NFRA procuring US$6.9 million-worth of maize (23,000 mt) from 165 farmers’ organizations.
Private sector purchases
Through their engagement with WFP, farmers’ organizations have demonstrated their ability to meet quality requirements and deliver on contracts. This has built critical trust amongst private sector actors and led to increased purchases of crops from smallholder farmers supported by WFP. In Honduras, El Salvador, Guatemala and Nicaragua, farmers’ organizations sold US$20.6 million-worth of crops to private sector buyers, including Walmart. P4P also held round tables to connect farmers’ organizations and buyers.
[photo|647710] In El Salvador, farmers’ organizations developed logos and barcodes for their produce to make sales to supermarkets and other buyers. They have also added value to their crops by marketing black beans in consumer-size pre-cooked cans. Two farmers’ organizations signed a forward delivery contract with flour producing company Harisa, and agreements have been signed through the Ministry of Agriculture for sales to companies such as GUMARSAL and MASECA.
In many countries, P4P-supported smallholder farmers have been linked to millers and processors who buy their surplus crops for the production of fortified foods such as flour blend and high energy biscuits. In Guatemala, a project under the Scaling up Nutrition (SUN) movement is linking smallholder farmers to agro-industry companies that supply processed nutrient-rich food to WFP. A similar project is carried out in Afghanistan, where P4P provides support along the entire value chain – from farmers to local millers and processors. Locally-produced wheat and soya are used in the production of fortified flour, high-energy biscuits and lipid-based nutritional supplements.
Markets for quality
While buyers are increasingly making purchases from smallholder farmers, it is crucial to identify the availability of other markets that pay premium prices for high quality crops. In collaboration with WFP, MSI surveyed private sector buyers in 17 of the 20 P4P pilot countries. The results are described in a paper entitled Markets for Quality beyond the World Food Programme. The study found that 77 percent of buyers were willing to pay premium prices for smallholders’ quality crops, indicating a potential for increased purchases from smallholder farmers.
However, challenges include a lack of infrastructure and government policy on crop quality, low levels of trust and widely dispersed locations of rural farmers. In some countries, traders already own cleaning equipment and are not interested in purchasing high quality crops. The paper recommends that WFP advocate for better enforcement of quality standards, and continued efforts to raise awareness about crop quality. It also highlights the need for private sector actors to maintain relationships forged under P4P. WFP will continue to work with private sector actors to help smallholder farmers enter markets.