The agricultural value chain can be defined as the series of activities necessary for an agricultural product to move from the farm to the final consumer or customer. A major aspect of value chain development work is concerned with ways of connecting the farmers to the consumers such as the market and companies. Although there are examples of fully integrated value chains that do not involve smallholders or small farmers e.g The tea Estate and tea processing facilities of Unilever at Kenya which produces the basic raw material for Lipton and the Stanmark Cocoa company of Cadbury Nigeria which provides the company’s Bournvita basic raw material of Cocoa. These companies do not requires purchase from farmers as they own their farms and processing facilities, apart from this arrangement the great bulk of agricultural value chain system involves sales to companies from independent farmers and these might involve an arrangement called contract farming.
In contract farming the agricultural production is carried out on the basis of an agreement between the farmers and the buyers- usually companies and it sometimes involve the buyer specifying the quantity, the price, the physicochemical attributes of the products etc. The farmer then supply the raw materials based on the agreed specifications.
But in the Inclusive system there are major players in the agricultural value chain system they are: the input suppliers, the primary producers, the middlemen, the processors or manufacturers and the consumers. The input suppliers most times in Nigeria are the government agencies representatives such as the Local government agricultural extension agents that distributes farm inputs such as fertilizers, pesticides etc to the farmers but though the supply of these subsidized inputs from the government is quite small, the little being supplied is often boycotted by corrupt government officials who collect these inputs and resell to farmers at exorbitant prices thereby increasing their cost of production.
In 2012, the Agricultural Transformation Agenda (ATA) was introduced to improve farmers income, increase food security, generate employment and transform the country to a leading player in the food market but the ATA is reported to have only increased the agricultural output by 11% between 2011 and 2014, there is also a recent launch of the Agricultural Promotion Policy (APP) which is aimed at resolving the food shortages and improving output but despite these interventions the sector is still not developed. This might be due to focus on production rather than on value addition across all segment.
The middlemen are not left out in the corrupt dealings as they issue exhorbitant prices to buyers of the products while bargaining with the primary producers for a smaller amount.
Then how can we solve this menace, according to the World bank in her report on Agriculture for development, said that organizations of key stakeholders in agricultural development in general and value chain system in particular is essential for the development of value chains. The report stated that organizations form a major part of institutional reconstruction and can use collective action and links to strengthen the position of smallholders in the markets. Organization can contribute to value chains by strengthening their bargaining power to reduce transaction costs and give poor and vulnerable groups a voice in the policy process,to do this the organization must be able to act as vehicles of change and be able to network through well developed links but institutional governance will be needed to promote member’s confidence and solidarity and also to build capacity for activities such as credit management.
To develop the agricultural sector of this nation, the primary producers must be well encouraged and be made to reap bountiful harvest of their labour in form of profit through strong and functioning value chain system that gives all its stakeholder a plain ground.
For further information on this subject I strongly recommend the article on transforming the Nigeria Agricultural value chain system by Price Waters Corporation (PWC).