1 Pier Paolo Ficarelli, GIZ India, ILRI-CGIAR

Cooperatives, Collective action and Alliances

Capacity Building for Producer Organisations in Value Chain Developement Chiang Mai, 19-21 October, 2011

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What is the Topic

Who will be the agro-producers of tomorrow, how will they co-operate?

How agro-producers got organised and have co-operated till today?

• Collective action and farmer pro-social behaviours in agriculture is entrenched in the oldest rural traditions to cope with resource scarcity rural poverty and climatic adversities the world over

• Informal smallholder co-operation today is most in the form of self-help groups to access credit or CBOs managing common pool resources (irrigation, watershed and forest areas) and producer groups

• From the beginning of the last century informal co-operation has been institutionalised in different forms, the oldest being the cooperative movement (England 1800,1904 in India)

• The process industrialisation of agriculture and the increased vertical integration of Value Chain actors has given rise to new forms of producer co-operation with retailers and the food industry, e.g. contract farming

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What it is still the dominant picture today?

FarmerFarmer

Farmer

Farmer

FarmerFarmer

Farmer

Industrial & retail

buyers

Input suppliers

Market AsymmetriesUnequal land distribution Excessive land fragmentationDominance of smallholdingsUnequal access to production resourcesFailure of public extension servicesUnequal access to agricultural marketsOver-exploitation of natural resourcesMisuse of agro-inputs

ConsequencesSmall famers as end looserVulnerability and farmer suicideAgro- businesses as top winnersSocial inequalityEnvironmentally unsustainable growthFood insecurity

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Producer Co-operation in Agriculture (I)

Market- orientedValue Chains

“Bottom –up” co-operation

Type Local level Meso-macro level

INFORMAL

Self-Help Groups (SHGs)

Micro-creditInterest groups (FIGs)

Farmer Clubs (FCs)CBOsProducer groups (PGs)

CBOs umbrella organisationsSHG federationsInformal association, JLGsNational movements

FORMALAssociations Co-operativesAlliances

Regional, National FederationsNational Farmers UnionsBusiness membership org.Professional Associations

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What are the Challenges (I)

“Bottom –up” Producer co-operation

Type Local level Meso-macro level

INFORMAL

Local GovernanceFocus on loans for consumption Capacity of public extension servicesLinkages with service providersFacilitation competency and capacity Access to crop and life insuranceScaling out/scaling up

Advocacy vs. Service focusScarce visibility and policy influenceFinancial sustainabilityProvision of technical and facilitation services to affiliated groups

FORMAL

Leadership/Internal governancePromotion mechanisms & incentivesOwnership & trustFinancial accountabilityInput procurement efficiency and economic viabilityTraining in technical and quality aspects

Good governancePolitical parties interferenceLocal PoliticsPoor links and feedback mechanisms with the baseManagement & ODLinks with buyers & marketing skills

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Producer Co-operation in Agriculture (II)

Industry and market-linked Value chains

“Top–down” co-operation

Relationship established by buyers with sellers

Type Local level Meso-macro level

LOW INTENSITY

Informal contractsAlliances with organic producersRegular sub-contracting of registered farmers Representation

based on organiastional structure of buyers (retailers or industry)HIGH

INTENSITY

Contracting Co-operative and AssociationsOutgrower schemesContract farming

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Challenges (II)

“Top–down” co-operation

Based on the relationship established by buyers with sellers

Type Local level Meso-Macro

LOW INTENSITY

Quality and quantity assuranceMarket price control by Gvt.Risk mitigation measuresAccess to financial servicesAccess to inputs

Limited buyers’ presence in rural areas

Poor farmer representation and consultation in buyers’ organisational structures

HIGH INTENSITY

Targeted mainly to better-off farmersValue Chain Governance issues Public sector regulatory frameworkEnsuring farmer fair deals and incomeInsurance servicesRole of public sector as a facilitator

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1. How to speed up the process of producers organisational development to ensure positive transition of the majority of smallholder from agriculture in joining the service and industrial economy?

2. How to build on the strength of established producer organisations to increase their economic efficiency, increase benefits to their members and ensure sustainable food production?

3. How can SHG, co-op, and association federations that works scale out their memberships and support local level organisations capacity in linking with markets?

4. Can alliances in contemporary agricultural value chain and “top- down” direct linkages with buyers be the trigger for famer organisational development?

What are the (mega)-challenges?

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Direct or indirect incentives for strengthening producer organisations and participation in agricultural and food value chains:

• Increasing demand of food and processed food due to urbanisation

• Business models promoting Small & Micro-Enterprises(SMEs) for value addition, seed, floriculture, dairy etc.

• Business models for service delivery

• Readiness of private sector to co-operate with public sector

• Stronger rural-urban linkages

• Increased consumer interest in food production and quality

• ICTs and increased rural connectivity (e-services and m-services)

• Agribusiness CSR initiatives

• Biomass production for the energy industry

Opportunities

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Organisation and producer co-operation is a pre-condition for ensuring participation of small producers in formal markets

Small producer organisational development is a painstakingly change process with a high rate of failure, requiring lot of hard work of highly motivated field workers and support organisations

Common platforms and PPP as key funding mechanism to involve agri-business in public sector interest in strengthening small producer organisations

Industry driven value chains can (re)-focus “traditional” FOs on to high value markets and income and provide incentives for their professionalization

New business models for production and buyer- producer relationships are required for linking with high value markets and may be not on traditional smallholder-based FOs

ICT can speed up access to information and services to formal and informal FOs

Low –carbon and green economies are new incentive frameworks for collective action and participation of small producers in alternative markets

Lesson learnt

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Genuine producer collective actions are shaped by the local social and political environmental context and not necessarily aligned with the need of modern agricultural markets.

They work generally only when certain conditions are met, such as Elinor Ostrom’ s universal principles for people-led organisations:

1. The group and its purpose must be clearly defined;

2. Costs and benefits must be equally shared;

3. Decision-making must be by consensus;

4. Misconduct should be monitored;

5. Sanctions should start out mild and escalate only as needed;

6. Conflict resolution should be fast and fair;

7. The group must have the authority to manage its affairs;

8. The relationship of the group with others must be appropriately structured.

Conditions for sustainable small producer organisations