Solene, a member of the Mazi Team also works for Yunus Social Business (YSB). Their Philanthropic Venture Funds finance and support social businesses in developing economies, whilst their Corporate Initiatives guide multinationals to apply their core competencies to some of the greatest human challenges. She writes a piece on their blog, about the challenges faced by smallholder farmers and how they should be empowered rather than exploited by intermediaries, looking at examples from across YSB’s work.
With increasing pressure on natural resources due to climate change and population growth, small scale agriculture plays an essential role in ensuring food security and maintaining the genetic diversity of our food supply. Smallholders (those working on up to 10 hectares) already play an essential role. In Brazil, for example, 70% of the food produced is grown by 5.1 million smallholder farmers.
Our food system should be something we are proud of - supporting socially fair and ecologically sustainable agricultural systems. Instead, farmers are unable to claim their fair share of food value chains which puts them under financial stress. As a result, they become socially vulnerable as they face issues ranging from insecurity to lack of access to education and malnutrition. We all count heavily on the work of these farmers to feed us, so let’s give them the attention they deserve!
The various challenges disadvantaging smallholders in the food system include poor infrastructure, high costs of inputs and limited access to credit. However, one of the most important constraints they are facing today is gaining access to consistent and profitable markets for their produce.
Smallholder farmers, especially in developing countries, struggle to transform their product and distribute it to the final consumer. This is in part due to lack of access to post-harvest processing and storage facilities as well as a lack of appropriate marketing skills. This has led them to depend on a multi-layered system of middlemen to commercialize their produce. What is the problem with that? Let’s delve more into how the current food system functions!
HOW DOES FOOD PASS FROM FARMER TO BUYER?
You might not realise it, but your food undertakes a long and complex journey to reach you which involves many middlemen. They provide additional services at each stage of the value chain and therefore occupy the entire space between the production and the ultimate sale of the product. This means they take a disproportionately large share of profit margins at the expense of the farmer. The power this position confers to these middlemen leads to the paradox of consumers being overpriced while producers are struggling to make a living. According to the FAO, middle men sell to the final consumer products on average 20 times more expensive than what the farmer received for them.
WHY SHOULD YOU CARE AS A CONSUMER ABOUT THIS?
The highly fragmented supply chain means we have no sense of where our food originates which distances us from the social and environmental realities underpinning our food supply. This means you can unwittingly be supporting production methods that are socially unjust, while being detrimental to your health and the environment.
The distance between producer and consumer, makes it easier for smallholders to remove themselves mentally and physically from their customers and therefore make compromises in their production methods such excessive use of hormones and pesticides. Your sense of responsibility is greatly diminished if you have never met the people you are feeding. Whereas, a direct link to a producer is a strong deterrent to having short sighted view.
Other adverse effects of the long supply chain include reduced freshness of product served on our table, and increasing amounts of waste created. According to the FAO, 14% of the world’s food is being lost between post-harvest and before retail stage.
It is clear that our current food system based on long supply chains and multiple middlemen is dysfunctional in various ways. However, eliminating middlemen altogether is a distant dream for many farmers in contexts where direct relational marketing (e.g., a farmers market) is not possible. But how then can intermediaries support farmers rather than undermining them?
MIDDLEMEN DON’T HAVE TO PLAY A NEGATIVE ROLE. THEY CAN PLAY THE ROLE OF ENABLERS!
Middlemen can develop the tools and resources to help farmers deliver their produce in a way that is efficient, cost-effective and where as much value as possible is passed to the farmer (e.g., help increase farm productivity, post-harvest technology and better storage facilities).
This is not about repeating what others have tried in the past, but going beyond the current paradigms, doing things differently and reinventing a new sustainable value chain. Patterns must change through social innovation, collaboration and technology. Middlemen can in some cases bypass the many food intermediaries and simplify 5-8 trades down into one. We need to eliminate the markups along the value chain so farmers can get a better price for their crop…
Through this, transparent relationships can be built and intermediaries can help farmers minimise their risks, maximise their opportunities and create an enabling environment for farmers to build financially viable operations and save them from an exploitative system.
Think this is wishful thinking? Think again.
HERE ARE EXAMPLES OF DIFFERENT BUSINESSES YSB IS SUPPORTING TO HELP FARMERS REAP THE REWARDS OF THEIR WORK:
Sumá shortens the chain between farmer and buyer by connecting them directly through a web and mobile platform. This social startup, based in Santa Catarina, already connects over 2,000 smallholder farmers with more than 100 regular food buyers (hotels, restaurants and large kitchens, among others) who want to buy fresh food.
We are shifting the way the food supply chain operates. Sumá believes it is necessary for customers to know who is producing their food and support them. Brazilian smallholders farmers are the base of the chain but their faces and voices are omitted due to the several middleman in the system. – Daiana Censi Leripio, Co-Founder of Sumá
Sumá provides farmers with up-to-date market information and helps them align their production with the demands of the markets. They offer various training workshops and qualifications to enable farmers to build up their skill base.
Through their platform, they give access to fresh products to their customers. Because they cut out all other middlemen they are able to simultaneously increase the revenue of the farmers while offering a cheaper product than conventional distribution systems. They provide information to the buyer to assist them in their purchasing decisions. For example, helping restaurants to prepare their menus according to local production and seasonality of products. The customers know exactly where their food comes from and the farmer who produced it.
Ankole Coffee Producers Cooperative Union (ACPCU): Yunus Social Business Funds Portfolio
ACPCU is a cooperative in Uganda made up of 21 primary co-operative societies. They transform the lives and livelihoods of rural coffee farmers socially and economically by enabling them to take ownership of the coffee value chain in the international market, creating local jobs and developing skills in their community.
This cooperative addresses critical gaps in production, post-harvest handling , processing and marketing of coffee to maximise benefits to farmers. For example, the cooperative has a modern sorting unit, a big warehouse and a modern lab for professional testing. Accessing these extension services and equipment (e.g., coffee roaster or drying technology) helps individual farmers earn more of the final value of the exported coffee. Another way of adding value to the product is to train farmers to work with speciality coffee which uses only the best perfectly ripe beans. This way, they can achieve exceptional taste and reach higher value markets.
Amongst the other services they provide: they help farmers target other activities (e.g., beekeeping) to give farmers other sources of income. In addition, they help farmers to improve their knowledge of organic practices to allow them to work and live under healthy conditions. They are focusing on raising the interest of the younger generation and launching youth projects in schools to teach youngsters how to grow coffee.
WHAT COULD THESE EXAMPLES TELL US ABOUT THE CONDITIONS OF BEING A GOOD MIDDLEMAN?
Let’s look into the commonalities of these social initiatives. Across the range of commodities and geographies, they are:
i) empowering farmers with the tools and skills to grow and develop expertise
ii) shortening the supply chain to redistribute value to both farmers and consumers
iii) increasing farmer livelihood helping consumers re-examine the way they engage with the smallholder farmers.
This way the good middlemen can encourage farmers to wear the hats of distributors, retailers, markets, and pick up the shares normally siphoned off by parts of the food industry. Instead of confiscating profit from the producer, the intermediary is then adding value. In order for this to succeed, ethical middlemen must help farmers build entrepreneurial skills and increase innovation in both their production and marketing methods.
Marketing efforts are a time-proven effective income booster for smallholders and this is a particularly important way to help farmers stabilise their business, especially in uncertain times of climate change. Marketing is not subject to variables such as weather, disease, pestilence etc., so the more the farmer’s income is derived from sources subject to variables, the riskier the farmer’s enterprise. So as farmers leverage their income towards marketing and processing instead of production (20% income derived from production, 80% from marketing/processing) they can avoid risk caused by production variables (only 20% subject to big variables). For example, ACPCU’s helps farmers become market savvy by generating alternative revenue streams and producing value-added products. The ‘speciality coffee’ naturally increases the desirability and value of their final products.
Secondly, the role of information/data could create huge advantages to farmers. For example, providing better market information to farmers can help them identify their customer needs, and invest time and resources to produce according to the demands of the markets which significantly reduces waste. Equally, providing information creates mutual appreciation between farmers and consumers, replacing mistrust and fear. It is increasingly important today that the customer engages in bridge-building conversations with producers to decide which products to buy and which farmers/practices to support.
Through these case studies, we can see that the role of the middlemen doesn’t have to be at the detriment of farmers and instead as these become the centre of their business practice. Now, as customers, we need to take action and support more initiatives that are making fundamental systematic shifts in the way the benefits and risks of supply chains are distributed!
Read more articles on Yunus Social Business work in their blog.