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Sector Strategy

Market Based
Agricultural
Development
Swedish Cooperative Centre

Swedish Cooperative Centres strategy for

Market Based
Agricultural
Development

Adopted in connection with the Board Meeting 13 February 2007

Swedish Cooperative Centre (SCC)/Kooperation Utan Grnser


Box 30214
S-10425 Stockholm, Sweden
info@utangranser.se
www.utangranser.se
www.sccportal.org
Cover photos: Gustav Thunqvist
Layout: Press Art
Printed by: tta.45 Tryckeri AB, Solna, Sweden, April 2007

SCC and Agricultural


Development
The Swedish Cooperative Centre (SCC) has been involved in agri-

cultural development since our organisation was founded in


1958. Agricultural development and support to smallholder
farmers and their organisations has always been the major area of
work for SCC.
SCCs Strategy for Market Based Agricultural Development is
the first attempt to formulate a joint strategy for our work in all
countries where we are involved in agricultural development. The
strategy has been elaborated in a participative manner with broad
involvement from our staff and partners in Africa and Latin
America and with representatives from our member organisations
in Sweden, particularly LRF. This process, in which the Logical
Framework Approach has been used as a method for strategy
development, has provided room for comprehensive discussions
and analyses. As a result, this document is based on a joint understanding of the focal problem, its causes and effects and the
defined strategic objectives and result areas to effectively address
the identified problem areas.
This strategy forms an important part of the key guiding
documents of SCC. The overall policy framework is outlined in
New steps in the right direction 2007-2011. It also relates to
SCC policy papers on gender, youth and environment. In addition
new regional strategies have been elaborated for Africa and Latin
America.
This strategy also links up with other overall policies and
strategies such as Swedens Policy for Global Development with
its focus on poverty reduction and a rights based approach, the

SCC Strategy for Market Based Agricultural Development

Millennium Dwevelopment Goals, Sidas policies for civil society


and for market-based rural poverty reduction.
Market Based Agricultural Development is a platform on
which interventions under this strategy will be planned and
implemented. Development of access to gainful markets through
business development for smallholder farmers and their organisations is in focus. Positive results for the smallholder household is
the goal and well performing member driven organisations at different levels is the tool to achieve this goal.
The SCC Strategy for Market Based Agricultural Development will be the guiding document for agricultural projects supported by SCC. The continuous monitoring and evaluation of a
few important key indicators will enable SCC to measure the
impact of the strategic objective and result areas at programme
level. This kind of information is increasingly demanded by funding agencies which are keen to have a dialogue at programme
level regarding impact at household, organisation and society
level.
Since 2003 SCC is closely working together with Vi Agroforestry. As a result of policy decisions both in Vi Agroforestry
and SCC, policies and operations in both organisations are gradually being harmonised and integrated with each other.
Lennart Hjalmarson
Managing Director of Swedish Cooperative Centre
and Vi Agroforestry

SCC Strategy for Market Based Agricultural Development

1. Contextual Analysis
1.1 The Rural Poverty Challenge

The 800 million poorest in the world are smallholder farm households who live in rural areas and are left without basic livelihood
opportunities. They depend on agriculture for survival. The
majority of poor farmers are women. They barely survive on
incomes that are less than one dollar per day.
This sombre fact is nowadays widely endorsed by the main
development actors such as FAO, UNDP, the World Bank,
IFPRI, Sida, DFID, NGOs etc. Any organisation that is seriously
engaged in poverty alleviation has an obligation to engage in
rural poverty and the situation for smallholder farm households.
For these extremely poor households, survival is a daily
struggle. Unpredictable events such as a serious illness, a drought
or flood, or a slump in the market price for cash crops can bring
extreme suffering and, at times, death.
Economic history teaches us that almost no country has managed a rapid rise from poverty without increasing agricultural
productivity. Yet in many parts of the developing world, particularly in Sub-Saharan Africa, agricultural productivity is actually
declining.
1.2 More people are hungry

The annual FAO report, The State of Food Insecurity in the


World (2006), states that there are more hungry people in the
developing countries today 820 million than there were in
1996 when the World Food Summit in Rome promised to reduce
the number of undernourished people by half by 2015.
FAO further states that there is no downward trend as regards
the number of hungry people in the world at present. The sad fact

SCC Strategy for Market Based Agricultural Development

is that there is an increasing trend at the rate of four million a


year. FAO calls for immediate action in support of agriculture and
rural development and stresses that business as usual is not
enough if world leaders still stand behind their promise from
1996. Substantial efforts have to be undertaken to achieve the
goal of eradicating hunger.
1.3 The Role of Agriculture in Development

A great deal of research identifies agriculture as the key driving


force for growth in rural economies. The Overseas Development
Institute, ODI, has summarized the research state of the art
regarding the role of agriculture in developing countries in the
paper: Why Agriculture is Important; the Conventional Wisdom. According to ODI, five key-conditions are required for agriculture-led growth to succeed, as quoted below.
First, agricultural growth needs to be technologically driven
so that output prices can fall while farm incomes increase. It is
not enough to simply use more farm inputs like fertilizer and irrigation waterthis leads to more output but at constant or higher
prices. Investments in productivity enhancing agricultural R&D
are critical for success.
Second, farmers need favourable incentives if they are to invest
and produce efficiently. Policies that distort the terms of trade
against farmers hold back the entire economy, not just agriculture.
Third, agricultural growth needs to be broad based (or equitable) so that it puts increased purchasing power into the hands of
the rural populations and not just a privileged few. This conclusion followed from work showing that small and medium sized
farms are typically more efficient producers than large farms in
low income countries and have better consumption and investment patterns for stimulating growth in the non-farm economy.
Broad-based agricultural development in turn requires

SCC Strategy for Market Based Agricultural Development

equitable access to land, modern farm inputs, credit and markets.


Fourth, adequate levels of public investment in rural infrastructure are essential for promoting growth of the non-farm
economy and rural towns as well as agriculture, and for strengthening rural-urban demand linkages. Work at IFPRI shows that
these investments still give high returns and help reduce rural
poverty, even in countries like India and China that have already
invested heavily in their rural areas.
These four conditions are required to achieve an agricultural
revolution with the right kinds of growth linkages to the rest of
the economy. But if the agricultural revolution is to translate into
rapid and sustained national economic growth, then a fifth condition must be met: Markets and trade must gradually be liberalized.
1.4 Smallholder Farmers and Trade

Some basic characteristics of the smallholder sector include:


85% of the worlds 460 million farms are small scale with
less than 2 hectares.
This picture is most accurate for Asia and Africa, and the
size of holdings tends to be even smaller.
In middle and high-income countries medium and large
farms are predominant and the average size tends to gradually increase.
The smallholder farm sector in developing countries is
largely left without necessary support arrangements (infrastructure, extension, local processing capacity, basic health
care, education) including policies to enhance their business in a liberalised market context.
The international rules governing agricultural trade are generally unfavourable for the smallholder sector in developing coun-

SCC Strategy for Market Based Agricultural Development

tries and do not facilitate the anticipated equitable outcome of


the aborted WTO Doha-round. However, even if the international market is important for farmers focusing on exports, the greatest potential for market growth for smallholders in the developing world lies in domestic markets, with USD 50 billion in domestic potential compared to USD 8 billion in export potential.
1.5 Liberalisation and Farmers Organisations

Smallholder farmers are many in numbers but small in relation to


the increasingly sophisticated food markets with global value chains
controlled by a few big actors. Globalisation of economies, emerging
political pluralism and attempts to combat corruption have swept
away most of the state-controlled structures and opened up a new
spectrum of opportunities and threats, with small-scale farmers now
having to develop and rely on their own ability, creativity and
organisational strength. The challenge for small-scale farmers is now
to find ways and means to develop their own sustainable organisations which can assist them to find links to gainful markets.
1.6 Smallholder Farmers and Supermarket Chains

In 2006, SCC published a report called Small Farmers Big


Markets with focus on the rapid worldwide expansion of super
market chains. It is concluded that supermarket chains now count
for more than 60% of the sales in Latin America and the trend
continues upwards. The same pattern can be found in Asia while
the development in Africa is not yet that dramatic and basically
not driven by the multinational chains but by regional, in most
cases South Africa based actors.
The report reveals that what took 50 years of change from
small shops and local markets to supermarkets in USA and
Europe is now about to happen within a period of ten years in
many parts of the world.

SCC Strategy for Market Based Agricultural Development

It is inevitable that smallholder farmers, even in Africa, must


relate and respond to these development trends in the retail sector. The dynamics in the market provide substantial challenges
but also opportunities. To tap these opportunities farmers need to
become more professional, organised and focused on the market
and its demands.
The overall picture presented in the SCC report is supported
by the conclusions made in a big international research programme; The Regoverning Markets Consortium supported by a
number of key international donors.

SCC Strategy for Market Based Agricultural Development

2. Relevant Stakeholders
2.1 Clusters of most important stakeholders

In order to take on the task of providing the smallholder farmer


sector with improved support for its development, a wide network and broad contacts with stakeholders from different sectors
are required. This strategy does not provide a detailed list of who
are the most relevant stakeholders for the task at hand but more
of an indication of the nature of the most important stakeholders
as presented below and listed in five different clusters.
Cluster one: Development Agencies

National donors such as Sida, DFID, USAID, DGIS


National northern NGOs, e.g. SCC, Agriterra
Multilateral Organisations, e.g. World Bank, UN agencies
Multilateral NGOs, e.g. Care International, Plan, Save the
children

Cluster two: Service Providers

Extension organisations (both government and private)


NGOs (local and international)
Input suppliers
Retailers
Financial institutions
Farmers organisations
Research organisations

Cluster three: Policy Makers

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Parliaments
Governments (relevant institutions)
Trade organisations
Central Banks

SCC Strategy for Market Based Agricultural Development

Cluster four: Civil Society

Social movements
Social economic enterprises, cooperatives
Farmers organisations (FOs)
NGOs
Churches
Trade Unions
Private-Public-Partnership organisations
Local, regional and national political movements

Cluster five: Target Group/Beneficiaries

Smallholder farm households


Farmers groups
Commodity associations
Farmers cooperatives
Farmers interest organisations (unions)

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3. Strategic
Considerations
3.1 The Focal Problem

The contextual analysis together with SCCs long experience of


support to agricultural development and the fact that most poor
people in the world live in rural areas and are farmers provides
support for a problem definition with its focus set on increased
incomes for smallholder farm households. The following definition of the focal problem has been used to prepare the SCC Strategy for Market Based Agricultural development:

)
X

Insufficient incomes for smallholder farm households that are


members or potential members of SCC partner organisations

The main causes and effects of the focal problem are defined as
follows:
Causes:

Urban political bias and lack of political interest in agriculture


Inaequate national policies for rural and agricultural development
Poor knowledge of new agricultural technologies
Insufficient training and extension
Inadequate farm productivity
Insufficient land and insecure land tenure
Low profit margins
Environmentally unsustainable agriculture production
Poor development of local and export markets
Unfair competition from subsidised products

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SCC Strategy for Market Based Agricultural Development

Lack of value added to agricultural production


Inadequate access to financial services
Weak farmer organisations
Poor infrastructure (roads, telecom)
Poor health and education facilities
Gender imbalances
Low participation of youth
HIV and AIDS (mainly Africa)
Deterioration of natural resources
Climatic change

Effects:

Low adaptation of new technologies


Low investment levels
Low levels of education
Increased health problems
Increased mortality
Social decline and increase in violence and crime
Low levels of organisational influence
Lack of democratic participation in society
Limited innovation and adaptation to changes in society
Increasing poverty
Food insecurity
Environmental degradation

3.2 Development Hypothesis

This development hypothesis regarding market based agricultural development is based on a scenario of what rural societies in
developing countries could look like in another 25-30 years. It is
based on a general knowledge of economic history and developments in countries that have progressed from poverty, both in
Europe and on other continents and on a positive view of the

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13

expected effects of technological change and substantial economic


growth.
Looking at rural societies in Africa, Asia, Latin America and
Eastern Europe in the long term, subsistence farming is likely to
be disappearing. Farming is primarily a profession that is exercised by motivated and well-trained women and men who possess
essential professional skills. Unlike now, only a minority of rural
people are involved in farming activities, around one third of the
rural population. Most people, including farmers, buy their food
in a local supermarket also in rural areas.
Rapid technological changes, particularly regarding information and communication, together with increased productivity of
agriculture has brought about a broad general economic development in the local society, particularly in the service sector and the
food processing sector.
The professional farmers are now organised in strong farmers
organisations and they are increasingly improving their negotiation
skills based on control of their own production. Farmers organisations have a strong position in society and are able to influence
national policies and their implementation. Regional and international farmers organisations have been able to achieve more equitable world trade conditions. Increasingly farmers organisations
have addressed gender imbalances and now have a more equal distribution of men and women in decision making bodies.
The local private service sector provides many jobs in the
retail business, tailors, local blacksmiths, cafs, restaurants, hair
salons, mechanics, builders etc. The spending power in the community has consistently grown around 5-6% annually for 30
years which means that people have 5 times more money than
what they had in 2006.
Some of the increased incomes are paid in taxes as wellmanaged decentralised tax systems have been able to increase the

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SCC Strategy for Market Based Agricultural Development

tax contributions from the informal sector and private individuals


in the rural areas. The development of transparent local democratic institutions with real decision power and non-corrupt
management has also empowered the rural population.
This has meant that the public sector has again become an
important provider of employment which is reflected in better
public health and education services and improved road infrastructure which facilitates the movement of agricultural commodities. Generally the rights of the poor are addressed as a result
of successful lobbying activities of civil society organisations.
The phenomenal growth in mobile telephone and internet
connections has brought a number of new products to the rural
population, particularly regarding financial services and market
information.
The threat of climate change eventually became a global
stimulus for local economic development and for local adaptation
and business development. The dependence on petroleum products is minimal and electric energy is generated locally through
production and oil extraction of various oil seeds. Most vehicles
run on locally produced ethanol or bio-diesel. The plantation of
energy crops has provided work opportunities to those that previously survived on subsistence agriculture. Production of energy
crops is however subordinated to food security policies and
exports are limited.
The above scenario is based on an optimistic view of future
developments. There are many external risks that could result in
slower development or even decline of rural areas such as
increased dominance by northern countries regarding trade conditions, continued deterioration of the environment, conflicts and
wars about natural resources, deficient policy frameworks, lack of
investments in rural infrastructure, health and education, failure
to address gender imbalances, human rights, HIV and AIDS etc.

SCC Strategy for Market Based Agricultural Development

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3.3 Priorities and Delimitations


Farm based activities

Considering the contextual analysis, the problem analysis and the


development hypothesis, SCC should give priority to support
smallholder farm households primarily through the strengthening of supportive structures such as Farmers Organisations
(FOs), (farmers unions, farmers cooperatives, farmer groups and
commodity groups/associations), rural finance institutions and
extension agents. Such support should be provided within six
main areas of interventions;
1. Market information and analysis
2. Sustainable agricultural production
3. Market access and sales
4. Organisational and business development
5. Financial services
6. Policy development and advocacy
Both the Contextual Analysis and the Development Hypothesis suggest that the number of smallholder farms will decrease.
Such a process is likely to result in increased off-farm income
generation opportunities. Already today off-farm income is on the
increase in most developing countries and there are no reasons to
believe that this trend will change.
The conclusion with regard to off-farm income activities is
that SCC should limit its support for such activities to what is
being initiated by the farmers organisations being partners to
SCC. This in turn means that the development of farm based
activities should be given priority. A recent thorough analysis
made by FAO shows that generally off-farm income generation is
more important to the better-off and educated rural households.
For the poorest households, farming and farm-based activities are

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SCC Strategy for Market Based Agricultural Development

by far the most important source of income. Thus, this priority


has a clear poverty reduction profile.
In summary SCC should prioritise:
1. Support to farm based activities
2. Support to smallholder farm households primarily through
the strengthening of farmers organisations
3. Support to be extended mainly to six areas of interventions
as indicated above.
3.4 Target Group

The ultimate beneficiaries of SCC supported activities should be


the members, men and women, of SCC partner organisations.
Members should in this case include the whole household. This
means that the expected improvements in productivity and net
farm income will be of benefit for the social situation of the
smallholder farm household as regards health, education,
improved habitat etc.
Farmers organisations such as national farmers unions, cooperatives and commodity associations, are considered as the main
tool for small farmers to improve their situation and therefore
most of SCCs assistance is provided to such organisations. It is
therefore logical that both the smallholder farm households as
members and their organisations are defined as the SCC target
group in the strategy for Market Based Agricultural Development.
It is our experience that the smallholder farmers in developing
countries that are active members of farmers organisations are
normally not to be found among the poorest of the poor although
they still belong to the group of 400 million poor rural households.
We assume that the farmer-member element of the target
group mainly consists of farmers, men and women, with a

SCC Strategy for Market Based Agricultural Development

17

potential to develop economically. This means that (s)he has, or is


able to develop and access, sufficient land, knowledge, techniques, information and networks needed to increase her/his competitiveness in production and that (s)he is able and willing to
access the market. The focus of the strategy is thus not on support
to subsistence farmers but on support to emerging professional
farmers that see farming as a business.
The target group in SCCs Strategy for Market Based Agricultural Development is defined as follows:

Smallholder farmers (men and women) that are members of


SCC supported Farmers Organisations and
Farmers Organisations supportive to smallholder farmers
interests in market information and analysis, sustainable agricultural production, market access and sales, organisational- and
business development, financial services and policy development
and advocacy

3.5 Partner Organisations

SCC currently works with a wide range of partners in the agricultural development sector ranging from farmers and commodity
groups and associations, farmers cooperatives, different kinds and
levels of farmers unions and also with a number of different
NGOs, mainly as service providers.
SCC emphasises the strengthening of civil society and democracy as crucial components in development cooperation which is
also in accordance with Sida policies. In addition to what is stated
above under Target Group it is therefore an important criterion
that a farmers organisation being partner with SCC should be
democratic, accountable to its members and managed in an open
and transparent manner.

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SCC Strategy for Market Based Agricultural Development

3.6 Crosscutting Issues

Support to smallholder farm households and their organisations is


a broad undertaking that touches on many aspects of human life.
SCC will pay particular attention to the following issues during
the strategy period.
Democratic participation
Gender equality
Environmentally sustainable development
HIV and AIDS prevention and mitigation
SCC policies regarding the cross cutting issues referred to
above are described in the main guideline document: New steps
in the right direction 2007-2011. These SCC policies will guide
all interventions under this strategy.

SCC Strategy for Market Based Agricultural Development

19

4. Objectives, Results
and Indicators
4.1 Development Objectives

SCC defines its development objectives as:

1. Support women and men to increase their incomes, improve


their livelihoods, defend their rights and organise themselves
2. Strengthen the democratic and economic development of our
partner organisations
3. Contribute to the development of democratic and just societies

SCCs Strategy for Market Based Agricultural Development is


subordinated the above overall development objectives
4.2 Strategic Objectives

In accordance with the Main Problem as defined in chapter 3.1 and


the Target Group as defined in chapter 3.4 the SCC Strategic Objectives for Market Based Agricultural Development are:

20

Increased incomes for smallholder farmer households that are


members or potential members of SCC supported organisations;
Increased sustainability and accountability of SCC supported
farmers organisations
Influence of SCC supported organisations in local and national
policy making as civil society actors

SCC Strategy for Market Based Agricultural Development

4.3 Strategic Result Areas

In line with what is suggested in chapter 3.3 Farm based activities, the Strategic Result Areas are the following six areas of
intervention:
1. Market information and analysis
2. Production
3. Market access and sales
4. Organisational- and business development
5. Financial services
6. Policy development and advocacy
The Strategic Results are summarised below;
Intervention area
Market information and analyses

Strategic Results
Local and export markets identified
and developed

Production

Productivity and production improved


and greater profits obtained

Market access and sales

Market access improved and sales


increased

Organisational and business


development

Farmers organisations strengthened to satisfy members needs

Financial services

Access to financial services


improved

Policy dev.elopment and advocacy

Sector policy and strategies


developed and participation
in decision making enhanced

SCC Strategy for Market Based Agricultural Development

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4.4 Strategic Indicators

In order to facilitate a results-based monitoring and evaluation of


the strategy, the following strategic indicators are guiding examples and should be applied to the extent relevant at the strategic
objective level:
Increased incomes

Increased agricultural productivity


Increased net income per unit sold
Access to gainful markets
Improved household food security

Organisational sustainability and accountability

Increased number of members


Number of member benefits and services rendered
Member satisfaction regarding services and democratic functioning
Fulfilment of statutory stipulations
Degree of self-financing of core functions
Solidity (equity/total assets)
Influence in local/national policy making

Number of proposals elaborated and presented


Number of policy fora in which represented
Number of successful interventions
Possible Sources of information:

1) Baseline data
2) Farmer notebooks
3) Staff monitoring
4) Special surveys
5) Assessments and evaluations
6) Government statistics
7) Research institutions, official reports

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SCC Strategy for Market Based Agricultural Development

It is the intention that projects/programmes under the SCC


Strategy for Market Based Agricultural Development shall
address the strategic objectives identified above. The above
strategic indicators are recommendations and should be used to
the extent relevant. A coherent reporting based on common programme indicators and on reliable monitoring systems will facilitate a programmatic approach to our work. Such a result-based
reporting system will provide a solid and credible basis for our
internal analysis and management and for our dialogue with our
member organisations, partners, funding agencies and other
interested parties.

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Acronyms

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DFID

Department for International Development (UK)

FAO

Food and Agriculture Organisation of the United Nations

IFPRI

International Food Policy Research Institute

LRF

Federation of Swedish Farmers

NGO

Non-Governmental Organisation

SCC

Swedish Cooperative Centre

Sida

Swedish International Development Cooperation Agency

UN

United Nations

UNDP

United Nations Development Programme

WTO

World Trade Organisation

SCC Strategy for Market Based Agricultural Development

This strategy document provides information about how Swedish


Cooperative Centre wishes to support poor smallholder farmers to
improve their livelihoods. The main objective is to assist smallholders to increase their productivity and income from agriculture. The
means of achieving this objective is working in partnership with
farmer organizations that support member farmers through training
and education, marketing of agricultural produce and through lobby
and advocacy in order to influence policy and legislation in favour of
smallholder farmers.