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Producers’ organizations in business: Trends and challenges. Roldan Muradian Agriterra / Center for International Development Studies (CIDIN). Radboud University Nijmegen.

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Producers’ organizations in business:

Trends and challenges

Roldan Muradian

Agriterra / Center for International Development Studies (CIDIN).

Radboud University Nijmegen

Note: This is not an institutional presentation. Therefore, the statements presented do not necessarily reflect Agriterra’s institutional vision


Outline of the presentation

  • Global trends in the agri-business sector. Implications for small-scale farmers
  • 2. What is the role of producers’ organizations in coping with the new challenges?
  • 3. How are the development and private sectors coping? Is there hope for mainstreaming unusual business?

1.Global trends in the agri-business sector. Implications for small-holders

  • A turning point, due to market liberalization and rapid globalization, took place in the 1980s, setting a new stage in the transformation of the agri-food industry
  • 1950’s – 1980’s; pre liberalization/ globalization stage
  • Major role played by the state in steering rural development, allocating resources to the agricultural sectors and intervening in input provision, extension, commercialization, price setting, etc.
  • The advocacy capacity of POs towards the state was a key element in achieving better conditions for producers
  • Defensive approach: cooperatives are there to solve market failures (e.g. non-competitive markets)

1980’s - Liberalization/globalization phase

  • Mutinationalization: global value chains, transnational corporations as importance players
  • Specialization/differentiation: convenience products, niche markets; quality as salient feature of products
  • Vertical coordination: tailored business relationships
  • Private grades and standards: certification schemes, products specifications
  • Supermarket revolution: emergernce of superpowerful supermarkets (from spot-markets to concentrated markets)

In the academic and development sectors:

Emergence of the value chain thinking (a new level and logic of intervention)


2005 -Globalization of price instability, crisis and uncertainty

  • Short worldwide boom and bust cycles in the agricultural sector
  • A new phenomenon: Agriculture for feeding cars
  • High inflation in input prices
  • Food crisis, also hardy hitting small-scale producers

Implications for agricultural producers

  • A shift in power relations along the value chain, favoring downstream agents (traders, retailers)
  • The ability to meet private standards becomes a critical competitive tool
  • Quality, consistency, volume and product specifications become very important elements in the transaction with buyers
  • High degree of uncertainty in the business

To what extent will small-holders benefit?

  • … It depends basically on
  • Who will remain on board
  • The conditions of participation
  • Price / Access to technology/knowledge, inputs and credits / Risk

Bargaining power and market relations


2.What is the role of producers’ organizations in coping with the new


  • From the point of view of small producers: Collective action as a tool for meeting standards, achieving product differentiation and tailoring transactions , reducing risk, while also gaining bargaining power
  • b. From the point of buyers: Cooperatives may hold some competitive advantages derived from lower transaction costs (particularly in sectors dominated by small-scale producers)

What are the challenges?

  • A mindset change: From defensive measures to “collective entrepreneurship”
  • Unusual business: building innovative partnerships
  • A trade-off between entrepreneurship and inclusiveness?
  • To face the main barriers for innovation in agricultural cooperatives in developing countries

Example of unusual business:

  • Cafedirect:
  • 4th U.K. coffee company
  • US$ 47 annual sales
  • Founded by development NGOs
  • It grants to producers’ groups stock shares and representation in the company board
  • Commit 90% of the profits to the producers-owned NGO Twin Trading (specialized in supply chain management) . It has a constituency of 24 farmer cooperatives in eight countries.

3.How are the development and private sectors coping?

How usual unusual business will be?

  • Private sector
  • Corporate social responsibility is becoming a matter of competitiveness
  • New wave of CSR: bottom of the pyramid approach/ inclusive business. Is the private sector discovering poverty?
  • Will the crisis lead to re-think business models?
  • Emerging markets require new models
  • It is not only a business but also an ethical issue: is there scope for a more human capitalism?

Development sector

  • Pre-liberalization/globalization vision still prevalent (emphasis on advocacy/representation/empowerment/generic institutional strengthening) . Entrepreneurship, in general, still a neglected issue
  • Why is adaptation so slow? Why projects dealing with innovative partnerships and entrepreneurship still unusual?

Example of innovative models:

BRAC in Bangladesh (the world’s largest NGO in one of the poorest countries, to a large extent self-funded through economic activities)


What are the main barriers for innovation in the development sector?

  • …Basically a matter of lack of incentives
  • Overabundance of resources (too much, too easy money?).
  • Loose conditionality by donors
  • Execution (expenditure) becomes a goal in itself (the tyranny
  • of the project cycle)
  • Partnerships need time, donors want short term execution,
  • practitioners want the money from donors
  • Prevalent risk-aversion attitude: business involves risk,
  • practitioners prefer achievable goals

The future of international cooperation in the agricultural sector is about innovative business models

How usual unusual business will become?

... Donor policies have a major role to play

… the lead is not in Europe…the drivers of change are abroad (time to learn from them)