Supply security concerns, potential savings on raw material costs and managing reputational risk are just some of the reasons why a growing number of global food & agribusiness (F&A) companies are taking steps to engage with farmers at the upstream ends of their supply chains. This is especially the case in chains that depend on smallholder farmers for products, such as coffee, cocoa, nuts, spices, and certain vegetables and tropical fruit. Rabobank’s report Joining both Ends of the Supply Chain; Reaching out to Smallholder Farmers, identifies three factors that can improve success in engaging with farmers.
“Supply chains have faced unrelenting pressure in recent years. Consumer demands for more information on where food and ingredients come from as well as recent food safety scandals, have highlighted the need for F&A companies to increase the transparency of their supply chains” says Rabobank analyst Justin Sherrard. “One response to enhancing supply chain security has been for companies to engage particularly with smallholder farmers in developing countries.”
Rabobank has identified three key areas that can make a difference to companies looking to connect with farmers.
F&A companies should focus on engagement at aggregation points in the chain, rather than directly with farmers. This is something Nespresso has achieved through working with existing cooperatives that have been certified by Fairtrade International. This has strengthened the company’s connection with coffee farmers in eight countries, including in Brazil, Colombia, Ethiopia and India.
Multi-year agreements can also offer many benefits to global F&A companies, such as ongoing co-operation to lift production, improving quality and investing in local community development. These agreements can also offer companies a measure of control in safety requirements, as well as giving farmers more certainty on future demand and pricing.
The third area is supporting technical assistance, to help smallholders improve productivity and reliability. For example, Mars uses a hub-and-spoke model in Indonesia where ‘cocoa doctors’ visit groups of 100-200 cocoa smallholders to promote best practices.
Rabobank believes that these three areas can also catalyse smallholder financing schemes, therefore enabling farmers to further increase production volume and quality, lifting incomes and improving livelihoods.
However, joining both ends of the chain is far from straightforward. Connecting with smallholders comes with considerable challenges, and there is no ‘one solution fits all’ approach. Success depends on patience and a long-term commitment from F&A companies.
Despite these challenges, the trend for F&A companies to reach out to smallholders will continue in order to meet the increasing demand for agricultural products. The benefit to companies will be seen in strengthening security of supply, improving traceability and stimulating sustainable production.
For information please contact the report’s author:
Justin Sherrard, Justin.Sherrard@Rabobank.com +3130 7123182
For other information, please contact Rabobank press office:
Madelon.Kaspers@Rabobank.com +31 610887244
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Feeding nine billion people requires a vision and solutions that do not stop at the gate of a farm or the turnstiles of a supermarket. Accordingly, the Banking for Food vision of Rabobank, encompasses all links in the food chains, in and outside the Netherlands: from farmers and horticulturists and their suppliers to businesses processing agricultural products and transport businesses and supermarket chains. You can read our entire vision here.