Role of Private Companies in Agricultural Production

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NETWORK PAPER 48 0952-2468

July 1994

THE ROLE OF THE PRIVATE SECTOR IN

AGRICULTURAL EXTENSION: ECONOMIC ANALYSIS

AND CASE STUDIES

Lisa A Schwartz


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Network Personnel:

Coordinator: John Farrington

Secretary: Alison Saxby

This Network is sponsored by:

The Overseas Development Administration (ODA)94 Victoria Street, London SW1E 5JL

The opinions expressed in this paper do not necessarily reflect those ofODA.

We are happy for this material to be reproduced on a not-for-profit basis.

Please direct any enquiries to the Network Secretary. The Network

Coordinator would appreciate receiving details of any use of this material

in training, research or programme design, implementation or evaluation.

Lisa Schwartz can be contacted at:

Department of Agricultural EconomicsCornell University

IthacaNY 14853-5901, USA

Fax: +1-607-255-9984


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CONTENTS

Page

Abstract 1

Introduction 2

Overview of the "Extension System" Concept 3

Economic Analysis of Private Extension 5

Public and Private Goods 5Externalities 8

Case Study Analysis 9

Private Extension Circumstances 9Private Extension and the Technical Complexity of Agriculture 9Private Extension as Part of Commercial Firm Activities 10Private Extension and Farmers' Associations 15

Complementary Public and Private Extension Activities 19Assessing Extension Performance: Public Versus Private Extension 26

Policy Issues and Future Research 27

Policy Issues 27Future Research 30

Bibliography 34

Endnotes 39

Appendix 1 42

Box 1: The Complexity of Information Supply 7


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THE ROLE OF THE PRIVATE SECTOR IN AGRICULTURAL

EXTENSION: ECONOMIC ANALYSIS AND CASE STUDIES

Lisa A Schwartz

ABSTRACT

After tracing the origins of the concept of "extension", this paper reviews the main

relevant economic concepts (public and private goods; rival/non-rival products;

excludability; free riding; externalities; moral hazard) and their implications for

the opportunities and constraints faced by private extension, whether profit-

oriented or non-profit. Appendix 1 presents detailed case studies from countries

in which major change in extension practice has recently occurred (Ecuador,

Guatemala, Thailand, Jamaica and the Netherlands). Drawing on these, its main

conclusions are:

that extension by commercial companies has commonly been associated with

input supply and with their ability to capture part of the benefits of extension

through input or output markets. Whilst there are notable examples in which

private companies (usually processors/marketers of single commodities) haveworked extensively with smallholders, economic factors clearly orient them

towards medium/large-scale farmers in areas of good infrastructure.

that, whilst farmers' associations (FAs) have been widely promoted in the

North, their strengths in developing countries are usually associated with

marketed commodities, though in some cases they service a range of crops on

an area basis. Cases are noted in which FAs have acted as a "watch dog" on

relations between commercial companies and farmers. Key issues are how

FAs and government relate to each other; how far associations of large-scalefarmers can also cater for smallholders, and how the emergence of FAs can

be promoted.

"mixed" extension systems are becoming increasingly common, in which

government and NGOs take on extension functions for client groups and

geographical areas which have been disregarded by private commercial

organisations. Given these differing circumstances, direct comparisons of

efficiency between public and private extension are hazardous.


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in many countries, the adoption of more open policies towards input supply,

processing and marketing would facilitate a stronger role by the private

commercial sector in extension related to these areas.

The paper concludes by sketching out a framework of questions that need to be

asked in order to obtain a rapid assessment of the current status of extension andof relevant institutions and institutional linkages in any given country. It also sets

out an agenda for future research, in which questions of cost sharing, cost

recovery and decentralisation of government services feature strongly.

INTRODUCTION

Agricultural extension in many countries has come to encompass a wide range ofactivities in both the public and private sectors, yet the exchange of informationcontinues to be the primary focus of all extension activities. The traditional conceptof public agricultural extension involves a professional body of agricultural experts(generally government employees) who teach improved methods of farming,demonstrate innovations, and organise farmer meetings and field days on a widerange of topics. Public extension is sometimes used as a channel to introduce andsometimes enforce agricultural policies. Extension also functions informally asfarmers transfer their best practices to each other. In addition, extension activitiesare carried out by a wide range of organisations in the private business andnon-profit sectors (Moris 1991, Hayward 1989, Lafourcade 1988). This paper

focuses on private extension's role in agricultural development. Specifically, itexamines: (a) the circumstances under which private extension is likely to succeedand in what form; and (b) the role of private extension in an agriculturaldevelopment strategy (especially with regardto how public and private extension can be complementary).

Extension services may be loosely defined as including all activities involved inthe exchange of information relevant to agricultural and livestock production,processing and marketing. The word "extension" has been criticized as inherently

emphasizing the "top-down" dissemination of information while ignoring othertypes of information flow between farmers, extension and research particularlyactivities that involve farmers as equal partners in the process. This paper uses theterm "extension" while recognizing that extension functions are multi-faceted andgo beyond "top-down" dissemination of new technologies. For example, theinformation flow through extension channels may include anything from advicefrom a consultant on refrigerated flower shipping to the feedback to researchers ofresults from farmer-managed varietal trials. This author takes the position that theexistence of multiple (sometimes conflicting) information sources is an advantagefor farmers in that they can best select the information mix most suited to their

goals as producers and the most reliable information source.


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Private firms provide services in accordance with their specialized incentives andfarmers respond in terms of what they see as most beneficial to them. As each typeof extension (public and private) has limitations, the objective for farmers, andagricultural development organisations of all types (local and international) is toattain the best mixture of public, private and NGO services. As Roth (1987)

asserts, the public sector in general is over-burdened by numerous activities andmoving some of them to the private sector might allow more effectiveimplementation of essential services. While extension services cannot, and shouldnot, be totally privatized, there is room for both some privatization of publicextension activities and active promotion of private and NGO extension activitieswhich complement rather than replace existing public extension services.

The analysis in this paper draws on cases in which information exchange, feedbackto research, and all other major extension functions form only one part of a largeragribusiness operation or agricultural project. The paper includes four sections: abrief review of the concept of an extension system; application of fundamentaleconomic principles especially public goods theory to private extension;discussion of the case studies; and a summary of policy issues and suggestions forfuture research.

OVERVIEW OF THE "EXTENSION SYSTEM" CONCEPT

The mixture of public and private extension activities which exists in most

countries, and their relationships with surrounding communities, organisations andinstitutions, constitute an extension system. The distinction between extensiontypes (public, private, not-for-profit) can often become unclear in practice. Publicextension staff may be paid by farmers for special services or they may routinelyexchange their services for food, money and other goods. Private sector extensionservices generally focus on cash crops, or on sale of inputs (seed, chemicals,fertilizer, and machinery). Extension specialists working for private agribusinessfirms often serve multiple capacities (e.g. processor/exporter field staff provideproduction advice to outgrowers and enforce delivery of output, and input supply

firm representatives combine education and marketing). In the private sector,extension activities are often part of a vertically integrated enterprise. InFrancophone West Africa, a single organisation (the Compagnie Francaise pour leDeveloppement des Textiles CFDT) provides extension information on cottontogether with supplies of inputs, and purchases, grades and markets the output.1

Because private extension is generally not a stand-alone activity, it is difficult toestimate overall expenditures on it or the returns to such investments. An exceptionwould be the case of private consulting firms that only provide informationservices for a fee and are not an intermediate factor but rather a final good.


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In order to generate benefits in accordance with a certain objective (e.g. increasedproduction, increased sales, better use of the product, access to a specific type andquality of fruit for export) extension must be a channel through which appropriatetechnology flows. Individuals who undertake to disseminate information in theagriculture sector frequently combine this with a number of related activities.

Extension agents public or private often link farmers and researchersproviding feedback to researchers on indigenous knowledge systems, producerreactions to new innovations, and so on, facilitating the adaptation of researchresults into appropriate technology for different areas. Extension agents mayalso participate in adaptive research activities with researchers and farmers.

Organisation and support of producers' groups or associations is often afunction of public extension field staff or NGO field staff. Working withgroups makes it easier to meet large numbers of farmers. Private firms, orparastatals, may have field staff who organise farmers into groups to easesupply of inputs and collection of output or as part of an outgrowers scheme.

Facilitating access to or distributing inputs is often undertaken by privateextension agents; the risk that it may divert extensionists from their main taskmakes it a controversial function of public extension. However, actualdistribution of inputs in addition to advice on how to get inputs, is oftenprovided by both private and public agricultural field staff.

Numerous other activities are often performed by public or private extension staff:provision of marketing information (prices, places of sale, grade requirements andso on); collection and purchase of output; advice concerning and/or administrationof credit programmes; assistance to small-scale enterprises involved in activitiessuch as food processing or manufacture of farm implements; and teaching at farmertraining centres.

The types of benefits anticipated from extension activity are clearly important indetermining where that activity falls along the public-private extension continuum.

The benefits generated by public extension services include both social welfarebenefits (such as improvements in rural living standards and national food security)and bureaucratic benefits (such as a stock of civil service employment to provideto political supporters and opportunities for enhancing political control through anon-the-ground network of government agents). Public sector extension became animportant employer in many developing countries after independence from colonialrule (Evenson, 1986: Judd, Boyce, and Evenson, 1986).2 This staff expansion hasled to large budgets for field staff maintenance to the extent that after salaries arepaid there is little money left over to cover essential operating costs transportetc., and is one reason why privatization of existing extension services has already

occurred in some countries and is being proposed in others. A distinct second issue


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arises from the fact that public sector extension agents are commonly generalists.Private extension activities often provide specialized information not availablethrough public extension. Finally, a third motivation for private extension occurswhen profit can be directly or indirectly generated through extension activities. Thenext section uses concepts from welfare economics to analyze how extension

activities are distributed between public, private, and not-for-profit organisations.

ECONOMIC ANALYSIS OF PRIVATE EXTENSION

The demand for agricultural information is not uniform across producers. Forexample, the set of all rice farmers in a given country may include small, mediumand large-scale farmers, subsistence and commercial farmers, farms operated bywomen heads of household, farms operated by members of an association, andfarms growing rice for seed or for export. The varied circumstances of thesediverse clients generate diverse needs for information. A range of appropriateextension services will be required to meet their needs; however, suppliers ofinformation may not all be willing or able to undertake the activities necessary tomeet those needs. Ideally, government involvement in extension should be limitedto provision of extension as a public good, to minimize cost and inefficiency,leaving extension activities with private good characteristics to private firms,NGOs, and farmers' associations.

Public and private goods

The agricultural information provided through extension services may fulfil thecharacteristics of a public good, a private good, or may fall in between. A publicgood is characterized as being both non-excludable (you cannot exclude anyonefrom consuming it) and non-rival (its consumption by one person does not diminishits availability to others).3 The consumption of a private good affects solely theperson who is consuming it.4 A key distinction with regard to how closelyinformation fits the public good characterization is how specialized it is. Basicinformation which is relevant to many farmers (such as improved husbandry

methods for traditional crop varieties) is easy to diffuse and thus is non-excludable.Once the information has been disseminated by an extension agent (or over theradio or through a pamphlet), it can continue to spread from farmer to farmer.Clearly many types of agricultural information are not pure public nor privategoods: information may be highly excludable (to all but a limited group who are,for example, members of an association) but at the same time non-rival within thatgroup.What do these properties of information tell us about who is likely to undertakeprivate extension and how? Most private organisations (private firms and NGOs)involved in agriculture provide information as a means to an end: private


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agroprocessors or marketers do so to improve the quality and quantity of rawmaterial supply for processing; input suppliers in order to sell more product; publicsector services or NGOs to increase productivity of food crops, or to fulfil ahumanitarian goal. Clearly, if the provision of information is an intermediate factornecessary for generating profit in an agribusiness operation, it will be provided by

private firms even if it is non-excludable and non-rival.5

On the other hand, directsellers of agricultural information (such as specialized consulting services) wouldtend to view non-rivalry and non-excludability of information as problems to becontrolled. A firm selling information wants to avoid or at least minimize the"free rider" problem, i.e. they do not want information to "diffuse" to potentialcustomers free-of-charge. If information on improved crop production is easilydiffused and shareable but is not a factor in a profitable agribusiness, it may onlybe provided through public extension. Private firms which sell information directlyonly have an incentive to enter the market if that information they sell isunobtainable free elsewhere. However, the process of information supply canquickly become complex in practice (Box 1).

Although information itself may be shareable and non-excludable, the benefits ofacquiring the information can sometimes only be captured by those with access tothe necessary complementary goods (chemicals, seeds, water, equipment, credit,access to storage and transport etc). Specialized consulting services and farmers'organisations typically bundle information with other goods and services. Forexample, pest control information may be combined with diagnostic services andsupply of special inputs. At a high level of technical complexity or specialization,

the relative benefits of information acquisition for farmers are higher, making themmore willing to pay for information services as long as there is no opportunity fora free ride. Advanced commercial farmers are especially likely to be willing to payfor information even without attached services, possibly because of capitalinvestments they have already made.


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In specific cases, the problem of how information will be provided canbecome complex quite quickly. For example, if a tomato paste processingcompany decides to increase its use of bigger tomatoes, farmers will

require "new" technical information to grow the bigger tomatoes. Thecompany may choose to offer a higher price for bigger tomatoes than fortraditional varieties. Farmers should respond by buying the information tobe able to get the higher price (as long as their net benefit is positive).However, farmers will not buy information they can get for free by talkingto, or observing, their neighbours. Thus, the non-rival and non-excludablecharacteristics of information may allow farmers to "free-ride" on others'information. However, in the very short-term, there will be farmers whoinvest in the new information to get a temporary increase in profits relativeto other farmers. Eventually, the information will diffuse but it can beguarded temporarily. The existence of this temporary market may providea tomato consulting firm with an incentive to provide the information.However, if the tomato paste company wants to change over quickly to thenew variety, they have an incentive to provide the information themselves.Alternatively, there may be a tomato farmers' organization whichcontinually provides new technical information to its members. Farmersoften choose to use consulting services or form commodity specificorganizations partly because public sector services are seen to be toogeneral or not reliable enough to providing cutting-edge information

quickly enough to keep up with rapid changes in market demand.

Box 1:The Complexity of Information Supply

In summary, agricultural information supplied through extension services and other

channels, can take on both public and private good characteristics. The public goodattributes dominate in the early stages of agricultural development when there arefew incentives for the private sector to provide extension services.6 Where fewincentives exist for direct sellers of information, extension is provided as a publicservice by public sector and NGOs. It is also effectively exchanged throughinformal communication between farmers and farmers' organisations. Additionally,many private companies provide information (through extension type services) asa part of their business operations. As agriculture develops, agriculturalinformation becomes more specialized, less easily shared, and not universallyconsumable, thus taking on some private good characteristics. Producers have an

incentive to seek private consulting services when they require information that is


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highly specialized and unavailable from other sources. The information theyobtain is proprietary and protected as a private good for as long as possible. Asinformation becomes more specialized and technically complex, public serviceshave the option of introducing fee-for-service arrangements, the free-rider problemdiminishes and public services begin to compete with consulting firms for clientele.

Externalities

When one person's actions directly affect others' environments, it is said that thoseactions involve an externality (or a spillover effect) which may be negative orpositive. As noted above, extension (public or private) has potential for generatingpositive externalities. For example, a technical package disseminated by a privateagribusiness firm may include some techniques which farmers can apply in othersituations or to other crops with positive results. The additional economic benefitsand thus the social value of private extension are greater than anticipated by thefirm. In such a case it may be appropriate for government to influence the firm bycontracting it to strengthen its extension activities in a particular direction.Alternatively, government might want to invest more in supplying informationitself (through the media, extension services, or other methods) to reinforcepositive messages.

Another area where public and private information sources differ is in terms ofincentives to provide incomplete or mishandled information. Consumers of

information provided by extension (public or private) are at a disadvantage if theyare "unable to assess visibly and directly the quality of the good they arepurchasing" (Umali, de Haan, and Feder, 1991). The information supplier knowsthe true nature of the goods being provided but may choose not to pass thatinformation on and risk losing business. For example, a firm selling pesticides ina low income country lacking in institutions able to assess adequately the potentialeffects of its product on humans and the environment, might take the opportunityto sell products not allowed in more developed markets or not to inform consumersabout negative effects. However it would soon become apparent if the

promotional/extension messages were false, or if information on how to useproducts was inadequate and the business would lose credibility. Clearly firms witha long-term perspective have a greater stake in providing reliable information tobuild reputation. However, the logistics of supply in some developed countries maymake it impossible for input suppliers to keep control over packaging of inputs andinstructions on use in remote areas. In addition, less educated consumers might notbe aware that information is lacking. This is an area where the public sector couldto provide information (perhaps together with NGOs), or regulate private provisionof it to compensate for the moral hazard.


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Private extension tends to bemore prevalent under

circumstances of relatively

technically and commercially

advanced agriculture

CASE STUDY ANALYSIS

This section draws on case studies to examine the two broad questions laid out inthe introduction: Under what circumstances is private extension most likely tosucceed and in what form?; and What is the role of private extension in an

agricultural development strategy and how can it complement public sectorextension activities? The discussion is organised around the following sub-topics:7

a) Private extension and the technical complexity of agriculture;b) Private extension as part of commercial firm activities;c) Private extension and farmers' associations;d) Complementarity between public and private extension; ande) Assessing the performance of private extension.

Private extension: circumstances

Private extension and the technical complexity of agriculture

As agriculture develops and becomes more highly commercialized, farmers requirespecialized information and are more able to pay for it. This is illustrated by theevolution of agricultural services in industrialized and relatively advanced lowincome countries. Early incidence of private extensionmay be limited to a few relatively sophisticated

farmers and over time expand into activities whichreach other farmers. For example, in Mexico in themid-1980s, "private services focus[ed] mainly onadvanced technology packages in plant productionand marketing of perishable commodities. Theyprovide[d] support mainly to higher income farmersand groups of farmers and generally [did] not directlycompete with the public sector for clients" (SAR, Mexico, 1987). Although therewere some private extension activities with smaller farmers even in the mid 1980s,

the range of private extension activities in Mexico have expanded since that time.

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Many industrialized nations have decentralized extension systems with a strongprivate element. Some countries have experienced a shift from primarily publicextension to a mixed system accompanied by some amount of public sectorextension cost recovery through fees for service (e.g. Ireland and the UK).However, extension has been completely privatized in some countries (e.g. NewZealand). Generally, industrialized countries have experienced faster growth in thenumber of private agricultural consultants than that of public sector staff. Forexample in the UK, "private sector advisors are more numerous than ADAS

[public] advisers, and provide a great deal of the on-farm advice given to farmers"


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Different types of commercial

firms engage in extension

activities as a part of theirbusiness

(Arnon, 1989, p.631). In addition, public extension has an increasingly difficulttime competing with specialized farm consultants. A lack of funding for publicextension often exacerbates this problem.

Several factors characterize an increasingly commercialized agricultural sector

which affect the incidence of private extension: increased use and availability ofpurchased inputs (including machinery); increased opportunities for high-valueagricultural production and processing. As private input suppliers expandoperations, they naturally increase their involvement in extension as part of theirmarketing activities. On the production side, more high-value production (as wellas limitations on direct government intervention in the production and marketingof cash crops) is often accompanied by private specialized extension as a part ofvertically integrated contract farming schemes.

Private extension as part of commercial firm activities

Input suppliers have an incentive to undertake extension activities as a part ofmarketing especially if the following three conditions hold: (1) farmers requirepurchased inputs to achieve desired production results (quantity and quality); (2)

purchased inputs can be profitably used given relativeprices of inputs and outputs; and (3) there is a fairlyhigh degree of competition between input suppliersfor the same market share.

Extension by input suppliers typically providesinformation about both a firm's products as well asgeneral information related to the product category

(e.g. pest control, plant diseases, drought tolerance etc). Information channels usedmay include written information, posters, farmer meetings, radio, on-farmdemonstrations, exhibits at farm shows etc. Salespeople have an incentive tomaintain good business relations with farmers and farmers typically place highpriority on information regarding access to and use of inputs.9 Thus a reliable sales

representative who also conducts extension activities is likely to be valued byfarmers. However, when input suppliers are involved in extension activities cautionis needed due to the moral hazard problem discussed in the last section.Input suppliers will not invest in their own private extension activities if thebenefits do not outweigh the costs. Shell Corporation in Zimbabwe does notmaintain its own field representatives in the communal (smallholder) areas as theyare able to use the distribution networks of local firms to promote their products.Agricura (a domestic input supplier in Zimbabwe) has developed a distributionnetwork in the communal areas as a part of the firm's growth strategy. Along withselling their products (including some Shell items) they are educating farmers

about pest management and safety. Certainly, their extension activities are biased


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What are the potential

benefits to low income, small

farmers when a private

marketer or processor

undertakes extension

activities?

towards encouraging use of chemical pesticides. However, with cooperationbetween public extension staff, Agricura representatives, and the safety committeeof Zimbabwe's AgroChemical Industry Association (ACIA) farmers get moreinformation and better access to inputs with the cost burden shared between theprivate and public sector.

Marketer/processors, both domestic and exporters, often provide extension supportand supply inputs to client farmers to ensure access to quality raw materials. Suchfirms want to minimize farmers' reliance on outside extension which may not bespecialized enough to provide farmers with information needed to produce a certainkind of output. Extension along these lines is often undertaken through contractgrowing schemes where extension activities allow close and frequent contact withfarmers. The necessary level of contact is typically not possible with publicextension services. For example, when the Zaria/Cadbury tomato-paste operationwas being established in Nigeria, managers found that the ratio of public extensionagents to farmers in the local extension system was 1:2,500. At this rate, if an agenthad access to transport and could visit ten farmers per day (a rather highexpectation), he would be able to visit each client once a year. This wasinsufficient so the firm undertook its own extension activities for contracted tomatoproducers.10 Contract scheme extension ratios cover a wide range, but typically thenumber of farmers covered by an agent does not exceed 200 to 300 and may be aslow as 15 to 20.

Clearly, the type of coverage required depends on the specifics of an operation.

More technically complex operations are likely to require higher ratios. In a highlycompetitive atmosphere where there is a temptation to "poach" output, it may benecessary to maintain fairly intensive coverage in part for policing output.11

However, when problems with poaching are limited, due to remoteness forexample, it may not be necessary to maintain high ratios after farmers have reacheda high level of quality. This is the case for both Kabazi canners in Kenya (1 agentfor 3,000 farmers) and a Thai processor, Siam Agro Industry Co. Ltd. (SAICO) (10extension agents for 3,500 farmers) whose staff inspect supply, estimate prices, andrecruit farmers (Appendix 1).

There are two issues here: (1) the possibility for increased access to extensionoffered by the firm; and (2) the differences in producer prices offered to

sophisticated versus low income small farmers. Inregard to the first issue, if a firm decides thatrelatively large-scale production is more efficient,they may work with only a few large farmers. Thecost of extension support provided bymarketer/processors varies according to "theexperience and skills of the farmers, the complexity of

the commodity production/harvesting process and the


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A key disincentive to the

provision of extension

services by the market or

by processors is the

difficulty of recovering

the value of inputs

provided "up-front"

agricultural package, the amount of training given to agents, and the location of thefarmers..." (Watts et al., 1988, p.179). Working with numerous small units withlimited access to resources and the need for intensive contact with extension hashigh transaction costs but also some advantages. Firstly, relatively inexperiencedfarmers will follow company procedures more readily. Secondly, using more

smaller producers diversifies the source of supply, and thirdly, smaller farmerstypically are willing to take a relatively low price for their output and yet stilldevote the extra labour required to produce high quality. For example, inGuatemala, highland farmers took a lower price for broccoli than large-scalefarmers who complained that the price was too low due to the high labour inputrequired.

In regard to the second issue, the remote location of many processing plants pushesraw material prices down for nearby farmers who tend to have few cash cropoptions (Bolivian cocoa, Njoro Canners' French beans in Kenya). Also related toproducer prices, new farmers may implicitly pay for extension in the form of lowerprices for their crop as an investment in gaining the skills needed to produce ahigher grade. As farmers become more expert at producing higher quality produce,requiring less training and supervision, they may receive a higher price. In this sortof multiple price scenario, farmers' associations may be able to promote farmers'interests, ensuring that prices are increased as quality improves and that productgrade is judged accurately.

It is important to note that small or medium-scale farmers are not optimal

producers for some types of agribusiness. For example, in Jamaica, the governmenttried to keep smallholder banana production going for political reasons and wasunable to compete with the quality of large-scale technically complex production.The industry deteriorated seriously even after large government investments hadbeen made. No amount of private extension would have helped. In many Africancountries (e.g. Kenya, Zimbabwe, Malawi) hybrid maize seed is produced by a fewlarge-scale farmers. The large growers are accomplished and able to deliver a largevolume of consistent quality seed.12 The seed companies providing technicalassistance to a few large-scale farmers have no incentive to undertake widespread

private extension activities to teach smaller farmers how to grow hybrid maizeseed. This is not to say small farmers cannot growhybrid seed rather it is unlikely that a privateinitiative will lead the way. It is critical to recognizethe limitations of the private sector role in promotingnew commodities and production practices especially among small, low income farmers.

The provision of inputs to farmers is not in itself aprofit-making endeavour but rather a way to ensure

that output is of the necessary quality. Fresh produce


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exporters have a particularly strong incentive to undertake extension in order toachieve necessary quality and consistency. However, they often have problemswith misuse of inputs and/or "poaching" of output; private field staff working formarketer/processors carry out relatively intensive monitoring and "policing" nearharvest time to ensure the output comes to the intended buyer. This need for

"policing" sometimes causes firms to keep on field staff even after farmers aretechnically expert, and is expensive for crops like string (French) beans and okrawhich are continuously harvested especially with experienced producers.13

An alternative to field "policing" is for marketer/processors to work throughmiddlemen who act as collecting centres, purchase the produce from the farmersand then sell it to the exporter. The middleman takes responsibility for distributinginputs, ensuring quality and paying the farmers. In terms of extension, this limitsthe firm's direct involvement. Even where middlemen are used the firm maynevertheless send staff directly to the field to introduce new varieties or productiontechniques, or may provide a technical expert contracted to the intermediary towork with the farmers.

For marketer/processors, there are a range of farmer/firm issues which can beimproved through extension activities which help ensure the success of acommercial operation working directly with small farmers. As shown in the Alcosacase in Guatemala, a processor/exporter operation including extension activities,several key elements emerge: method of paying growers; how the product will begraded and how this affects incentives for farmers; how to select and manage field

staff; and how to control the marketing process. If payment is made on acumulative basis (using vouchers for example), farmers may be more likely to sellto poachers offering cash unless the farmers have an established relationship oftrust with the firm.14 If grading is not well understood and accepted by farmers, thefirm may end up with costly low grade material hidden deep inside bags or boxes.One reason for firms to undertake extension activities is to build a partnership withfarmers rather than a adversarial relationship. Firms' policies may not always seemfair to farmers on the surface but extension work, versus "policing", may help firmsovercome poaching, excess low quality product and loss of investment in inputs

by building farmer understanding. Price incentives are important but so arefirm/farmer relations. In the case of input suppliers farmer relations are builtthrough customer satisfaction with a product rather than through extension whichis more a promotional/educational function for input supply firms.

An additional disincentive to private extension provision is that it is costly sorelative benefits must be high to make it worthwhile. Private sector extension staffare generally relatively higher paid and often more experienced and/or better-educated than public sector staff. This is not always the case, as some schemes Njoro's French beans in Kenya hire school leavers and focus on on-the-jobtraining. However, private firms often skim off the cream of the public service


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personnel (such as in Mexico) or hire the best students straight out of school (asshown in Turkey). In general, relatively small commercial firms may have adifficult time undertaking their own extension activities due to the expense oftraining field staff and/or supporting farmer training and supervision. Conversely,larger commercial schemes or firms often have formal training programmes. The

availability of technically competent people for private hire may also be aconstraint to smaller firms which cannot afford extensive training.

In poorer and less politically stable developing countries in particular, there arerelatively few trained freelance agronomist/extensionists. Clearly, firms inZimbabwe and Mexico are more likely to find suitable technical staff than thosein Chad or Cambodia. In a situation where farmers know the crop and there is anestablished market, new firms will have easy entry and limit the profit margins ofindividual small firms, which may not be able to afford to expand into areas thatwould require intensive extension and marketing sales efforts.

Smaller firms may take various measures to reduce the cost of extension activities,for example by coordinating field activities with other organisations such as NGOs,government, or through joint ventures with other firms (local or foreign). InZimbabwe, the use of local sales coordinators working on commission helpedextend a sales network into less commercialized areas. This sort of activitycombined with training and linked with NGO staff working at the grassroots levelcan supplement public extension, but clearly, this concept will only work in areaswhere there is something to sell which interests the private sector. As noted in the

introduction, private and public sector information may conflict. It is up to thefarmers to decide which pieces of information are the most useful. They are likelyto combine information and come to their own conclusions through a process ofexperimentation and discussion with other farmers.

Multi-national or trans-national corporations (TNCs) have different needs thansmaller firms and thus a different outlook on undertaking extension activities.TNCs tend to work with fairly advanced farmers especially those with access toirrigation, agricultural machinery and financial resources. Small-scale farmers in

general are not so attractive as contract growers because they may not haveadequate land, water, machinery, or experience with use of inputs. However, TNCscan provide an incentive for smaller producers to modernize, sometimes directlybut often indirectly by providing price incentives.15 In some areas, massive publicsector investments have been made which allowed smaller farmers to modernizetheir farms. For example, many Mexican wheat farmers were converted to greenrevolution varieties at great public sector cost (including infrastructure, loan andtechnical advisory services, and subsidized prices). The result is that TNCs havea greater incentive to invest in wheat dependent agro-industries in Mexico.


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For extension to beundertaken by private firms,

they must have some way of

recouping part of the benefits

it generates

Numerous farmers'

Associations (FAs) undertake

a wide range of extension

activities for their members

Pay to convince people to use pesticides and they must buy yours to make theinvestment in extension worthwhile. Pay to teach them to grow a better bean andthe beans must be delivered to your firm for you to benefit. However, commercialfirms may choose to invest in extension activities evenwhen they know their ability to appropriate the

benefits will erode over time. Companies invest inextension activities to ensure their share of profits inthe short to medium-term, but may continue extensionactivities long-term to maintain firm/farmer relations,when technology is complex and changing or due toconnections with other services. For example, theTurkish broiler producer zhen provides informationon husbandry through its animal production extension activities and combines thiswith access to clinical services.

Private extension and Farmers' Associations

Typically FAs take on a range of activities and cross-finance between them: such as processing, and bulkhandling of inputs and outputs to generate funds forresearch, extension and training. Large-scale farmers'associations (FAs) are major suppliers of multi-cropextension services in a number of countriesincluding:16

Denmark (2 main farmers' union organisations with some state financialsupport);

France (a variety of unions and cooperatives coordinated by a nationalassociation co-managed by the state and farm industry and chaired by afarmers' representative);

Finland (services run by farm industry with 50% subsidy by the state); and

Sweden (services run by farmers make up two thirds of the services available

to farmers with the other third provided by the state).

FAs are also important providers of extension in low income countries usuallyassociated with a particular commodity (such as grapes in India, sugar and coffeein Colombia, rice in the Philippines, and cotton and tobacco in Zimbabwe). Somefarmers' associations have a more general rural development or political focus.Many FAs organised around a cash crop or export commodity provide servicesmainly to relatively commercialized farmers unless they are started as part of adevelopment project. To take advantage of economies of scale, the public sector


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or non-profit NGOs can jointly establish training centres, or field extensionprogrammes with large-scale commercial farmers' associations to extend servicesto smaller-scale farmers. Once a centre or service exists, it can be adapted to servesmaller farmers if and when the incentives (political or economic) are right (as hasbeen the case for the Cotton Training Centre in Zimbabwe). There may be a

seasonal schedule of events at the centre which focuses on different problems anddifferent audiences as is the case with FedeArroz (the rice growers' association) inColombia. The association has a comprehensive programme on rice which bringstogether farmers, extension agents, researchers, and visitors from other nationaland international organisations with related work. It should be recognized that FAextension activities may only serve a limited group of farmers.

Farmers' associations must have revenue to provide services to their members. Forexample, in Zimbabwe, the commodity specific associations provide a range ofservices to their members including research and extension. The funding of theseservices in Zimbabwe is provided by membership fees, levies on the commoditieswhen marketed (usually 0.5 1.5% of gross value); contributions, and sponsorshipfrom the private sector. In Argentina, there are a range of private sector extensionactivities conducted through FAs which farmers are willing to pay for because theyperceive the benefits. Private firms participating include commercial seedcompanies, chemical and fertilizer suppliers, rural cooperatives and societies, andprivate advisory services. Argentina has a large-scale private advisory service theArgentine Association of Agricultural Experimentation Groups (AACREA) with15 regional groups, 176 local groups with over 2,000 members.17 "The individual

member's subscription costs about the price of one farm labourer per month(US$60), of which 80% covers the professional's fee and 20% goes to the regionaland national tiers [of AACREA]" (Argentina Agricultural Sector Review, 1989,p.30-31).18

Farmers' associations may act as a "watch-dog" when partnerships are formedbetween farmers and private companies in the production and marketing of a crop,such as in contract farming. As noted above, in several cases processors oftenprefer to deal with small-farmers as contract growers. One danger of these

arrangements for the farmers is that problems (e.g. aggregate excess productionover plant capacity) are often blamed on them and contracts are broken (forexample in the Guatemala Alcosa case described below). Processing firms can alsouse grading to lower a farmer's return (Bolivia, Thailand, Guatemala, Mexico,Kenya). Farmers' associations, perhaps in coordination with public sector agencies,could help farmers avoid or minimize these problems as was the case withBolivian grape growers trained to grade grapes by their FA.

In the Guatemala case, ALCOSA, a vegetable processor/exporter, providesextension services combined with credit, input supply, and output purchasing to

small farmers in Guatemala's central highlands (on broccoli, cauliflower and


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The early encouragement of

farmers' associations or

committees can provide an

avenue though not a

foolproof one for

maintaining healthy firm/

farmer relations

brussels sprouts). During the early stages of the operation, farmers wereencouraged to make continuous plantings and almost all output was purchased withlittle grading. Over time the number of farmers expanded, quality requirementsbecame stricter (a second class grade was developed), and payment methods lessdirect and less reliable. At one stage ALCOSA's rejection of a large amount of

produce which the farmers were then unable to sell elsewhere led to a breakdownof trust between the firm and the farmers which was costly to re-build. The caseillustrates the importance of communicating more than technical information tofarmers.

Jamaica's success with tobacco was partly due to forming farmers' committees andinvolving them in decision-making. The successful transfer of tobacco-growingtechnology led to rapidly increasing production of thatcrop while the rest of the agricultural sector stagnated.Government chose to open the door to tobaccoproduction in order to decrease foreign exchangespending and increase exports of manufactured cigarsand bulk tobacco. In Jamaica, contract farming fortobacco was started by both private companies andparastatals. The Cigarette Company of Jamaica, anaffiliate of Carreras Rothman Limited, trains allcontract farmers beginning with the fundamentals oftobacco production. Growers are selected from localfarming and working communities. Prior to the tobacco initiative, few Jamaican

farmers had any experience of growing tobacco, and those who did had not beenexposed to modern methods. After the initiative, imports fell leading to foreignexchange savings of US$5 million in 1981; cigar exports rose by 89% from 1977to 1982. The main reasons for success included: government commitment andsupport; economic incentives for farmers to adopt quickly a new, complextechnology; the number of farmers and area covered was relatively small; andforming farmers' committees and involving them in decision-making led to highmorale among farmers and a better understanding of the economics associated withthe industry.

The Jamaican experience contrasts with the experiences of contract vegetablegrowers for ALCOSA in Guatemala and poultry farmers in Thailand (see Appendix1). In both the Thailand and Guatemala cases farmers were kept in the darkregarding economic forces facing the companies providing extension services. InThailand, in poultry price-guarantee contract farming, "the farmers knowpractically nothing about the markets of both the inputs (feeds, chicks, andmedicine) and the output (grown chickens) because the company wants them toconcentrate only on production. Furthermore, the company does not like to see thefarmers grouping themselves into farmers' organisations. Most farmers would not

communicate among themselves for information about poultry raising because all


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Public extension cannot

realistically be replaced

entirely by private extension

services

aspects of the market are already run by the company (some farmers asserted thatchicken diseases could spread through visiting one another)" (Manarungsan et al.,1989, p.27). In this case the company provided farmers with only enoughinformation to control quality and supply, and in part, prevented farmers fromworking together to set up competing enterprises. In addition, costs for the

processors were reduced as farmers bore responsibility for all chicken deaths andassociated losses even though the contracting companies sometimes providedfarmers with unhealthy chicks. In this sort of situation a farmers' association,through extension activities, may be able to provide information and thusempower farmers to establish more equitable relations with contracting firms.

In countries where farmers' associations want to be involved in extension activitiesa range of issues need to be addressed by policy makers and FA leaders andmembers:

How can FAs be encouraged to organise and provide extension serviceswithout too much direct government intervention? This is especially importantin countries where extension and cooperatives have previously been used forgovernment coercion of the rural populace.

Do FAs serving mainly large-scale commercial farmers have any incentive toextend their services to smaller farmers growing the same crops? If so, whatare the options for bringing in smaller-scale farmers? If not, what should thepublic sector's role be regarding smaller farmers?

What kind of changes could be made in the curricula of the agriculturalcolleges and technical institutes that might help develop skills needed forfarmers' association formation and management?

Complementary public and private extension activities

For private extension activities to play a role in agricultural development overall,

it is necessary to consider how they can complement and improve existing effortsin the area of extension. In addition, it is fundamentalto recognize that the objectives of commercial firms'extension activities are not the same as those ofgovernment service or donor-supported extension.However, as stated by FAO's Dr. Maalouf at the 1991Global Consultation on Extension, "The possibilityneeds to be explored of complementing government-funded extension by involvement of cooperatives,farmers' and other community-based organisations, non-governmental voluntary

organisations and private/commercial firms in doing extension work".


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Complementarity between private and public extension is already taking place innumerous industrialized countries. In the US public sector extension in thetraditional crop and livestock production area is increasingly combined withinformation provided by input and equipment dealers and processing firms. Publicand private organisations provide different types of information. For example, a

farmer in the US may want to try out new low input methods on a small area ofhis/her farm and continue with traditional methods on the rest. The publicextension service can provide expertise on low input sustainable agriculturemethods, and the chemical sales representative will provide information on the useof chemicals. Or perhaps a public extension agent and a chemical salesman bothprovide advice, for example on integrated pest management (IPM), but fromdifferent perspectives. The farmer brings all the information into his/her overallfarm management process, and the private information is only one input into thefarmer's decision-making process.

As the private sector role grows, the public sector role changes. In many developedcountries, government agricultural services focus on regulation, the environment,and continued provision of advisory services in collaboration with


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the private sector and to groups left out by private services. Several key elementsunderlie the relationship between private and public extension services: the characteristics of the commodity and associated processing industry;

the policies, infrastructure and political relations in a given country;

the degree to which the information required by farmers can be characterizedas a public good.19

Public sector extension programmes in countries with large subsistence-farmingsectors may need to focus on alternatives for resource-poor farmers. In areas wherethere is no technological package available, public extension and NGOs canperhaps generate the most benefits by focusing on needs assessment and diagnosticactivities, to identify appropriate technologies and programmes (not necessarilyincluding traditional extension) for helping resource-poor populations. In manydeveloping countries there is no suitable agricultural technology package formarginal areas, for example, in some semi-arid regions of Africa such as parts ofthe Sahel. It may be unreasonable to expect this type of needs assessment of publicextension when it is constrained by the elements mentioned earlier: lack of funds,bureaucratic inefficiency, inappropriate strategy, and the lack of a meaningfulrelationship between extension implementors and clientele i.e. accountability.However, in general, the public sector should concern itself with those extensionactivities that the private sector undersupplies because there are no appropriablebenefits.

It is important to recognize that resource-poor farmers, traditionally risk averse, canbe eager to innovate when a clearly profitable opportunity presents itself. Forexample, low income Malawian farmers have been highly responsive toopportunities to grow chillies on small patches of land for export and processing.However, a drawback of private extension for small-scale contract farmers is thatit tends to focus on giving instructions rather than on education, and theinformation disseminated is typically specialized and part of a package. The publicsector, NGOs, and farmers' associations can provide additional information to

compensate for this.

One area where complementary public/private extension efforts may be helpful isin encouraging "spillover" of technologies applied to high-value commodities, ontoproduction of lower value commodities (Watts et al., 1988). For example, whenprivate extension activities reach farmers who produce certain items on contract,the new techniques may "spillover" from the contracted cash crops to food crops.The best possibilities for "spillover" occur when:

there is similarity between the contract crops and those planted in the existing

local farming systems;


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The need for a sure supply of

quality raw materials on thepart of private companies led

to an overall economic boost

for dairy producers in

Argentina

the contract farmer carries out most of the actual cultivation and post-harvesttechniques him/herself;

the techniques are not highly specialized for a single crop.

Examples of "spillover" are the use of fertilizer in Kenyan french bean production(applied to local maize and other vegetable crops); the increased use of fertilizersand insecticides on food crops by highland broccoli farmers in Guatemala; and theuse of animal traction which spread from contract cotton and groundnut farmingin various African countries to a variety of other uses. There is little or no"spillover" are tobacco curing and sugarcane production, and any similar operationwhere contract farmers do little more than weed the crop. "Spillover" may bereinforced through radio, joint farm demonstrations by private and public sectorstaff and so on. Technology and new crops may also spread from the contractfarmers to other farmers if they can bear the associated costs. If new technologiesand crops require expensive inputs to make the yields worthwhile, a reliable supplyof the input must be available or the technology or crop will not spread.

Benefits to private extension may "spillover" beyond those directly appropriableby the private firm undertaking the extension activity in other words benefitswhich are positive externalities of private extension. In the 1970s Argentina's dairyprocessing industry had problems of low productivity,seasonal production, and poor milk quality which ledthem to provide technical assistance services to

producers. When a recession in 1976 caused manyfarmers to move out of the dairy industry, the twolargest dairy plants took action. The dairy cooperative,SANCOR, started a programme to provide technicalassistance and help finance the purchase of inputs. Aprivate dairy processor, La Serenissima, focused onhelping individual medium and large-scale farmers. Both types of services werepaid for by the producers. The technical package disseminated by bothorganisations focused on greater use of artificial insemination, more efficient use

of concentrate feeding and increased forage conservation to generate increasedmilk output during the traditionally low winter months. The result was that between1976-85, SANCOR producers increased annual milk yields per cow by 13%; andbutterfat yields per hectare of pasture increased by 50%. At La Serenissima annualmilk yields per cow increased 65% and butterfat per hectare 111%. Note that thereare multiple contributors to the benefits ultimately generated by private extension in particular research no doubt played a critical role. As discussed below, it isdifficult to separate the benefits of extension from those of research and otherrelated factors.


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In assessing possibilities forcollaboration between FAs

and the public sector it is

important to consider past

experiences as well as issues

of relative power

Farmers' association extension activities may spillover to non-members, asillustrated by the El Ceibo cooperative's cocoa processing plant. The plant wasstarted by the cooperative in the Alto Beni region of Bolivia to help all producers

in the area by providing a nearby processing plant.After establishment of the plant, growers continued to

ferment and dry cocoa at home although this is alaborious, uncompensated task usually done bywomen and children but the plant could not runwithout unprocessed wet cocoa. It turned out that thecocoa was being processed at home to disguise theincidence of blackpod disease which had infectedalmost all of the Alto Beni's cocoa plantings. The

cooperative operates a price penalty for diseased wet cocoa. Because of the needto encourage farmers to sell their cocoa wet, El Ceibo decided to provide a pricepremium for wet beans to farmers who could successfully combat blackpoddisease. Techniques for combating cacao disease were new at the time, and ElCeibo worked in conjunction with the local experimental stations on a smallprogramme to conduct demonstrations. (Tendler, 1983). The Alto Beni's cacaoproducers were initially reluctant to adopt the new package of disease- combatingtechniques, partly in reaction to bad experiences with Ministry of Agricultureoperations in the area, and partly due to the lack of incentive to adopt the relativelycostly remedies. El Ceibo carried out extension activities for all cacao farmers inthe area that were more appropriate than those previously carried out by the MOA.They selected two association members and sent them for a week of training in

Colombia on the new techniques. Afterwards, El Ceibo extensionists workedtogether with researchers from the state extension and research agency (IBTA). Inresponse to the combination of the El Ceibo plant, the price premium programme,and the extension activities, farmers devoted resources to combatting cacaodiseases.

The Bolivia case illustrates the potential problems for cooperation between farmers'associations and public sector organisations caused by producers' groups distrustof public sector agencies. This is based on their experience that many public sector

organisations are:

corrupt and take advantage of producers;

inefficient, and that to get anything from them costs a lot of time, money andself-respect;

that once goods and services are obtained from public agencies it may makeproducers' groups "vulnerable to political meddling and undermine theirautonomy" (Tendler, 1983).


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In addition to doing

diagnostic work itself, publicsector extension may focus on

training farmersand

learning from farmersin

the area of general diagnosis

of problems and farm

management skills

This last point is illustrated by the fact that even after the successful collaborationof Ceibo and IBTA, the Ceibo leadership was unhappy and wanted to take over thecacao research programme themselves with donor financing.

An innovative approach to complementary public/private extension activities is

provided by an adapted version of sharecropping in Ecuador (see Appendix 1).Land and input for labour exchange has a long history in Ecuador. The advantagesare: (a) increased credibility due to shared risk; (b) field staff learn from farmers;(c) farmers have increased access to inputs and information from the field agent.Under typical public extension systems (b) and (c) should already be occurring.Access to inputs is extra under (b) and this is an additional incentive to farmers.The key however, is shared risk point (a). Because of this ad hoc arrangement inEcuador, agents and farmers spend more time together working on the farm andothers nearby get to know the agents as well. The key question is, how can thisapproach be institutionalized to extend the positive benefits to a wider group offarmers? In addition, is a regulatory framework needed to minimize likelihood ofeither side taking advantage of the arrangement?

While the type of technical assistance given to contract growers by processingcompanies or by input supply firms may be adjusted to fit their circumstances, itdoes not generally include broader education aimed at improving farm leveldiagnosis of problems or more efficient allocation ofresources. In the case of contract schemes, firms maynot view helping farmers to become better overall

decision makers as generating appropriable benefits.Because such information is non-rival, there is verylittle private sector involvement in the supply ofinformation on general farm management indeveloping countries. In developed countries, wherefarm management has become a computer-relatedactivity there are software salespeople and computerprogrammeming consultants who provide privateextension in this area. One focus of public extension in developing countries

should therefore be improving farmer diagnostic skills, and empowering farmersto be better managers in a range of areas including: accounting, productiontechniques, marketing, planning investments in equipment, diversification intovalue-added activities and so on.20 This can be done in cooperation with the privatesector. For example, seminars arranged for farmers by public extension staff onmarketing can be co-presented by members of the private sector marketingcommunity.21 Private companies might be interested in co-sponsoring informationon the use of equipment, chemical inputs and so on, through courses or atagricultural fairs, local field days, or on radio. The private companies benefit fromthe exposure and the public sector benefits from sharing the costs of providing

education to farmers.


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There are several obstacles

to public/private

collaboration in the extension

system

Providing information on safe use of pesticides is an important part of public sectoragricultural services in many developed countries and should be a focus indeveloping countries, where excess chemical use is an especially seriousproblem.22 For example, in the case of cotton, IPM technology transfer is neededand should be emphasized by the public sector and farmers' associations who do

not have the private companies' vested interest in chemical sales. Pilot projectscould be contracted out to NGOs to do intensive studies and extension on certainnew techniques in areas suffering from excess chemical or fertilizer use. As arguedby de Janvry et al., (1987), "[a] serious effort to apply and improve integrated pestmanagement techniques for cotton developed in the US, would make cottonproduction in Latin America more sustainable, less hazardous, and wouldcontribute significantly to the balance of payments in most countries [in terms ofdecreased chemical imports]". The Netherlands provides a good example ofleadership in this area (Appendix 1).

A direct role open to the public sector is to "jump start" private sector extensionactivities. In the early stages of development when there is a lack of private capitaland little private business activity in agriculture, the state may intervene as anentrepreneur e.g. to set up agricultural production and processing parastatals to promote regulated economic growth. This "infant industry" argument can alsobe applied to farmers' associations, processing firms and other viable sources ofprivate extension. For example, governments may identify an area of potentialcommercialization in the agriculture sector and make initial investments (especiallyin training and infrastructure) and policy changes to prepare the environment for

private investment. Particularly, in the case of private processors, marketers and/orinput supply companies, government may need to identify and change policies thatare disincentives to private investment.

In some cases the quality of commodity required in developed markets makes itnecessary for large commercial firms to develop technology which is a barrier toentry for most individual farmers.23 This is the case with United Fruit bananas andDole pineapples. When high tech commercial production is required for an industryto remain competitive, governments may prefer to avoid large investments in

extension for small to medium-scale farmers and instead try to attract privatebusiness into the sector. In such a case, the key role for public extension may beto provide transitional education for farmers pushed out of producing a commoditybeing developed for export.

A credibility gap can exist between public and privatesector staff. The extension personnel of privateagribusiness firms are often considered by farmers tobe a more credible source of information thangovernment extension staff. The extent of this

problem depends to a great degree on the training of


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extension staff, the complexity of the technology being delivered, and theinstitutional evolution of the country. In post-Green Revolution Asia "deficienciesin the formal information system have sometimes led to a credibility problemamong farmers and probably discouraged them from seeking information throughthe formal system. Not uncommonly farmers are ahead of the research and

extension system in technology adaptation although this `informal' system is notadequate to keep pace with the complexity and dynamics of post-Green Revolutionagriculture" (Byerlee, 1987). The relative credibility of private and public sectorextension is illustrated by the opinions of silk farmers in Thailand. The farmersexpressed the opinion that the private sector extension (technical field staff) fromthe silk processing firms were the only ones with information worth listening to(Purcell, personal communication).A second problem is that public-sector staff often feel inadequate compared tobetter-supported, private-sector staff and so avoid contact with them, hamperingcooperation in extension activities between private and public-sector organisations.In situations where public sector staff have a relatively high level of education butlow pay and an unmotivating work environment (poor management etc), it may bedifficult to interest them in working with the private sector unless their worksituation is somehow improved by the interaction.

Public/private collaboration on extension must also take into account the need tosafeguard proprietary information. Highly technical and specialised information isoften viewed as proprietary by private organisations and thus protected againstdissemination. For example, some kibbutzim in Israel do not allow anyone

(including extension staff) to enter their farms in specific areas in order to protecttechnological secrets. In general, successful exporters of high value horticulturalproduce are unlikely to share their techniques with competitors or to collaboratewith public sector extension.

An important issue in the privatization of public extension is that of cost-recoverythrough fee-for-service schemes, or farmer contribution to the cost of extension.Such arrangements assume farmer willingness to pay for extension services. Allfarmers value information, but they will pay for it only if the information is

unobtainable for free and the benefit to them is greater than the cost. Relativelysuccessful commercial farmers (including small-scale commercial) are more likelyto meet these criteria. In Bolivia, the USAID mission started a Private AgriculturalProducer Organisation project in the mid-1980s. The project emphasized`private-sector services' without considering farmer willingness to pay for thespecific information offered. Only one private agricultural producers' organisationis successfully supporting private research and extension but it is reaching only anelite group of farmers (Byrne, 1991). If markets or government price-settingpolicies cause relatively low returns to investments in improved practices, farmersare unlikely to be willing to pay for extension. The Netherlands provides a good


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example of a system shifting toward government sharing costs with farmers(Appendix 1).

A clear lesson from the Netherlands for developing countries is the degree ofgovernment intervention. "The government stimulates the role of farmers'

organisations in extension, and where trade and industry take [over] tasks, thegovernment withdraws" (Netherlands Ministry of Agriculture, 1988, p.14). In somecases, the government intervenes strongly. For example, the difficult decision hasbeen made to accelerate the reduction in the active farming population, whilesimultaneously working to reorient rural people towards other activities in ruralareas (OECD, 1989). "The Netherlands example has shown how useful it can bewhen government and farmers' organisations allow each other room to play theirparticular roles, and agree on the rules of the game according to which commercialcompanies can [carry out] their activities."

Assessing extension performance: public versus private extension

As noted at the outset there is a need for a mix of organisations in the overallextension system. However, it is difficult to quantitatively assess the relativeperformance of different organisational types, because of the difficulty of isolatingthe effect of extension activities from other closely-related variables such as qualityof research, availability of inputs, prices, weather, and so on.24 An additionalobstacle to comparing public and private sector organisations is that they typically

have different incentives for being involved in extension and thus differentobjectives.25 Finally, within any country private extension is relativelyheterogeneous compared to public extension. It is difficult to compare theaggregate performance of one with the other. It must be looked at on a case by casebasis.

A direct assessment of extension performance would require the comparison ofprivate and public extension services with roughly the same education level ofstaff, same salary, working with the same crops, type of clientele and agroclimatic

zone. The private sector tends to have higher salaries, more competition for jobs,greater willingness to spend money on programme support (such as adaptiveresearch and training), better transport, easier access to inputs, and greater intensityof coverage. All of these elements reflect the different objectives and incentives ofthe public and private sectors. The public sector wants to have a large number ofpeople in rural areas for purposes of political control. The private sector must haveeconomic results: processors and marketers want their extension efforts to resultin higher productivity of contract farmers, quality of product, timeliness of harvestand so on. Input suppliers want extension efforts to lead to repeat customers dueto proper use of their products.


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It is unreasonable to compare the performance of highly-trained and well-paidprivate extension agents such as those of the Ugandan McCormick vanillaoutgrower scheme in terms of yield, quality of product, and income effect onfarmers with that of Uganda's poorly-trained, poorly-paid public sector extensionstaff working primarily with food crops. If extension has a higher rate of return

when the agents are better paid and motivated, there is a strong market for the crop,and inputs are readily available, it is not possible to extrapolate from this and saythat private extension will have a high rate of return on food crops for homeconsumption. Conversely, public extension may have a relatively high rate ofreturn in a situation where a technology is disseminated which alleviates drought-induced famine because of the value of the food that is produced for homeconsumption. However, that does not mean that more should be invested in publicsector extension for all commodities. Even in the case of a parastatal and a privatecompany working on the same commodity in the same area, the comparison wouldnot be of extension activities so much as private versus public management of acommodity production and marketing organisation.

POLICY ISSUES AND FUTURE RESEARCH

The two previous sections have in turn discussed private extension from theperspective of theory and analysis of cases. This section completes the discussionof the role of private extension in agricultural development by drawing outconclusions for policy, and identifying areas for future research. The

recommendations are intended as practical ideas for both government extensionplanners and staff in development organisations.

Policy Issues

There are policy issues involved in the process of developing a greater role forprivate extension in agricultural development. Market, infrastructural and/orfinancial constraints may prevent private organisations from starting or expandingactivities involving extension. To encourage extension through commercial firms,

governments may need to offer policies such as tax breaks, special financing terms,easier licensing procedures etc., to foster private sector development overall. Theformation of autonomous farmers' associations requires a support for, and toleranceof, such groups which may be lacking in some political systems. Two areas wherepolicy issues may arise related to the earlier discussion of input suppliers andprocessor/marketers are:

Liberalisation of input-supply markets to increase extension through privatechannels as input suppliers respond to demand for their products. However,along with liberalization, policies are needed on which products a country will

allow and on safe-use of agro-chemical products. International groups have


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already developed training materials on the issue of safe-use for both privateand public-sector staff.26

Creation of a positive environment for investment in processing and marketingof agricultural products. Detailed discussion of this is beyond the scope of this

paper but clearly involves the need for adequate infrastructure (especiallytransportation and communications), as well as financial and political stability.In developing countries, joint ventures are a good route to take for bringing inboth technical and managerial expertise as well as sufficient finance toundertake extension activities. A policy of some importance in the high-valueexport sector is to avoid involvement of government parastatals. The export offlowers or fresh fruits and vegetables is best left to entrepreneurs with technicalknow-how, market connections, investment capital and secure sources offinance. Government can, however, encourage exporters to source materialsfrom small- or medium-scale farmers (instead of using only plantation grownmaterial) by offering tax breaks or other incentives. It would not be reasonableto force exporters to use small farmers as there can be costly problemsassociated with managing such an operation.

Policy decisions are also needed on how much government support should be givento extension in areas where incentives for private involvement exist. In developingcountries with limited resources, it may be more cost-effective to shift resourcesfor extension services on cash crops towards rural development programmes forresource-poor areas. In addition, or as an alternative, public extension organisations

may introduce fees-for-service where appropriate. Where well-organised farmers'associations exist for a particular commodity (cotton or coffee for example),extension on that commodity could be handed over to the association. It ispreferable, where possible, for governments to contract-out activities such asproduction of audio-visual or written materials, rather than to maintain high costequipment and staff on the public payroll. However, in some developing countriesthe necessary private services do not exist or are extremely expensive due to lackof competition.

Finally, to enhance incentives for private involvement in developing countries, itis important to invest in improving human capital. This may mean strengtheningdomestic educational institutions and training programmes in the country orsending students abroad. Private companies seek the most highly trained andcompetent people available for all things including their extension activities. Forexample, in Turkey, agribusiness companies generally will not hire staff with longexperience in the public sector; in India ProAgro hires only BSc and MSc for itssales/extension staff); in Uganda private vanilla contract farming extension staffare specially recruited and are not from the public sector; and in Mexico the bestpublic sector staff go to the private sector. This clearly has long-term implications


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far beyond the field of private extension but it is an important part of buildingoverall national competitive advantage.

A key first step for increased coordination of public and private sector extensionactivities is for project designers and implementors to stop perceiving extension as

purely the domain of the public sector. World Bank and other developmentorganisations are just now beginning to recognize the existence of on-goingresearch and extension activities carried out by private companies and to look atthe potential for their greater involvement. In many countries private sectorextension activities still reach only a small number of farmers compared to publicextension services. Bringing private extension into the planning process ofagricultural development programmes will take time as private extension is anunknown quantity for many extension development experts and it is not alwaysclear how it fits in. Finally, there may be resistance on the part of public sectorextension decision-makers to collaborate with, or farm-out extension tasks to,private organisations.

A practical way to begin to change attitudes of extension planners (in governmentor development organisations) is to conduct informal surveys of all extensionactivities of the private and non-profit sectors as a part of background work foractivities such as project preparation or government planning. A useful approachis to conduct a wide-sweeping set of interviews with managers from as manycommercial firms, farmers' associations and NGOs involved in agriculture aspossible. Discussion of one approach is presented in the further research section.

A way to get commercial firms involved in extension activities with or withoutthe public sector is to organise private sponsorship for farmer service centres andagricultural shows. Private farmer-service centres, perhaps managed by farmers'associations, would be useful in areas where access to agricultural inputs is limited.In areas where private organisations are involved in extension activities with asubstantial group of farmers, government may choose a maximumsupport/minimum staff (MAX/MIN) strategy. This entails reducing public-sectorextension staff numbers but providing remaining staff with adequate training and

support (especially transport) to enable them to play a complementary role. Keyaspects of such a public sector complementary role are to: (a) work with farmersto improve their overall farm management; (b) to act as a resource person to helpfarmers find solutions to problems not addressed by the private extension activities;and (c) to provide an additional perspective on technical questions which areaddressed by the private organisation.

Governments and NGOs may also be able to help existing FAs to start or expandtheir own training and extension activities for members. A possible precursor toFAs carrying out their own extension is to help bring relatively small farmers'

groups together into an association. This can be difficult and requires careful


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coordination between group leaders and facilitators. A valuable activity for FAsalready underway would be to conduct study exchanges between farmers'association members from countries where FA extension is not yet working. Theparticipants should include both farmers' association members (leaders and rankand file) and relevant government officials. It is not always in the interest of

government or the private commercial sector for farmers to be organised, andnon-political NGOs need to be especially cautious in undertaking farmers'association strengthening activities.

Future Research

There is need for further study of the private extension experiences of differentcountries and presented below are some possible approaches. In addition, there areideas for "things to try" and cases to follow-up on. Hopefully, this section and thepaper overall will provide some grist for creative thinking on extension optionsin agricultural development.

Field work is needed to attain an overall picture of extension systems in developingcountries including private extension and interactions between public and privatesectors. However, it is possible to use this framework for a short-term study as partof project preparation or the assessment of a specific sub-sector.

In addition to collecting the information necessary to complete the dummy tables

shown below, field work should address the following questions:

What is the type of organisation and what are its incentives for undertakingextension (to sell a product, assist association members, etc.)?

What are the objectives of their extension activities? How successful areprivate sector extension efforts in terms of yield increases, qualityimprovement or other relevant measures?

What are the specific methods used? What level of expenditures are devoted

to extension?

What is the content of the extension activities (technical messages, feedback,assistance with input supply or marketing etc.)?

Who is the target audience? What groups are actually reached, how manypeople, how often?

What is the relationship between the public/private mix and other elements likemacro-economic policy, political system, commodities produced in the

country?


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DUMMY TABLE 1.

Basic Information on Private Extension Activities

Universities Public Contract

Farming

Schemes

Documents

Role of Private Companies in Agricultural Production