This paper provides a synthesis of a study in Latin America that forms part of a major initiative within FAO called "Strengthening linkages between the farmer and agribusiness". This initiative stresses the search for alternatives in developing and strengthening just and efficient relationships between farms and agribusinesses. Agribusiness stakeholders may include all commercial firms involved in the production, distribution and processing of agricultural products, as well as firms offering services, including extension, research and/or business administration. Building farmer- agribusiness linkages refers to improving farmers' capacities to add value to their products, converting their subsistence agriculture into commercial agriculture, through the processing of their products, and by establishing raw-material supply contracts with national and international processors and distributors. Strengthening also means improving the regular and timely supply of agricultural products needed by agribusiness enterprises, according to the specifications of the quality desired.
The constantly growing visible integration of world markets has enormous consequences on efforts to boost the agriculture sector in the least developed countries. In this situation, there are serious concerns for the survival of small-scale farmers and other agribusiness firms in the medium term. Marginalization by and exclusion from national and international markets could become a reality.
Strengthening the relationships between producers and processors as well as between producers and traders could be promoted by international support organizations such as FAO. In order to bring benefits to both actors, stronger and more trusting relationships are essential. These can bring benefits to both in terms of risk reduction and cost savings through better production planning and business management. Among the direct benefits obtained through solid relationships between the actors are: (i) a better understanding of the requirements of exogenous quality by processors and final consumers; and (ii) more stable incomes when a market guarantee exists for their products. Furthermore, long-term benefits are derived from converting to farming and agroprocessing in more efficient, effective, responsible and sustainable sectors. Other advantages could be: substitution of raw-material imports; currency savings; enhanced competitiveness at national and international level; employment generation; and sustainable rural development.
This paper on strengthening relations between agribusiness and farmers in Latin America complements similar work developed by FAO in Africa and Asia, where case studies were prepared and meetings held with experts. The results and lessons learned confirmed the basic goal of this FAO initiative, i.e. to promote and support the development of agribusinesses as a strategy for assisting transformation of the agriculture sector. The development of income generation and employment are then promoted, food security improved, and competitiveness in regional and international markets increased.
FAO's concern and commitment to supporting the development of agribusiness originates from some simple observations. First, the major growth in the agriculture sector took place some time ago in post-production activities. This was explained mostly by the growing number of consumers with a middle income, even in low-income countries, and their demand for food of a higher quality and greater value added.
Second, the agrofood systems are dominated at international level by coordinated or vertically integrated organizations. A high concentration and vertical conditions are now realities in high-income countries. A similar trend has emerged in developing countries, particularly in Latin America and Southeast Asia.
Third, the lack of agro-industries and agribusinesses, which hinders adding value to agricultural products, has been one of the main causes of the stagnation in rural incomes. On the other hand, in a large number of countries and regions, a robust agribusiness sector that adds value to agricultural raw materials correlates with a higher agricultural GDP and higher rural incomes.
In sum, promoting the development of agribusinesses becomes crucial and inevitable. The question is not if but how to expand the sector rapidly while ensuring that the maximum benefits are obtained in an equitable and just manner in the context of necessary changes.
The Agricultural Support Systems Division of FAO initiated work on the development of agribusiness and its linkages in 2000, following similar activity in support of commercial farmers in Asia and Central Europe. In line with the new model of the programme that began that same year, a technical project was created that provided support to the development of agribusinesses, focusing on small and medium-sized enterprises. Activities within this project have four main areas of technical support:
policies for the development of post-production systems.
Although it must be seen in regard to all the areas mentioned, this study focuses on the third area. It does so particularly in reference to the strategies to improve negotiation capacities and fulfil the needs of small-scale farmer markets and other rural entrepreneurs. In carrying out this study in various regions and times, FAO has attempted to evaluate the main trends, opportunities and training needs based on specific real-life cases and expert opinions related in some way to agribusiness development. In consultations and regional workshops, FAO has sought to take into consideration the greatest number of stakeholder voices and build awareness on these aspects, the possibilities and constraints. Its aim has been to stimulate discussion and debate, and to develop a consensus on future strategies and actions.
Doyle Baker
Chief
FAO Agricultural Management,
Marketing and Finance Service
Agricultural Support Systems Division
