Agriculture is quite an ambiguous word that rings many bells in one’s mind by a mere mention of it; and when we factor in “human perception”, the degree of ambiguity widens. To most people, agriculture is merely growing crops and rearing animals. Times have changed. 10 years back, media was all about print and digital media. But with the mainstream production of tablets and smart phones, social media kicked in. This scenario is not any different from what’s happening in the agricultural world.
Gone are the days of merely uniting seeds with soil particles and getting rewarded at the end of the season. In this era, if one is to reap a fortune out of agriculture, one has to dig deeper and get well versed with the fundamentals of the latter with Value Chain Analysis as being one of them.
Human instinct dictates (of course keeping other factors constant) that before one accepts hence takes up a new challenge; there is need to weigh one’s options in order to know what one is getting oneself into and that’s exactly what Value Chain Analysis entails-clearing the fog.
Depending on the geographical location, we all have very many options of crops to indulge in but from which one of all those shall one be able to maximize utility. Utility could be subsistence or commercial. The purpose of exhaustive Value Chain Analysis therefore is to; assess and ascertain the viability of selected crop value chains, value addition development and identification of existing barriers and opportunities.
There is therefore an impending need to;
- Identify and conduct analysis of viable agricultural enterprises (top 3-4 crops with high economic values/profitability
Consultations can be held with the value chain key players such as the collectors/bulking groups, input suppliers, processors, wholesalers and retailers to ascertain the most economically profitable crops grown in a given geographical area under question. One would assess the crops rated as the most profitable by obtaining information on prices for each crop in order to determine the viable agricultural enterprises. In the assessment of profitability, one would examine the following areas carefully:
- Buyer power: the ability and availability of buyers for the crops produced
- Supplier power: the ability to provide the needed produce/crops
- Barriers to entry: factors that are limiting production and meeting available demand
- Threat of substitute products: what crops are preferred over the ones that other farmers are growing?
- Rivalry: competition from other farmers within the same geographical area.
- Generate relevant market information about priority crop enterprises
The purpose here is to determine the market potential of the crops grown in a particular area in order to establish the priority crops. One would be required to ascertain whether the niche market for the crops grown can generate enough coinage for oneself and is also profitable. The analysis would also aim at examining the consumer base and potential market for the crops grown by other farmers. Additional necessary information could also be obtained from the producers about which of the crops have high market and are of high value. The consumers, wholesalers, retailers, bulkers could also be consulted.
- Broadly identify the level of market demands for the identified crop products and the associated impediments in the Supply Chain
Determining the market information related to demand is key in the processes of planning and decision making. A new entrant would therefore be required to; assess in detail key issues related to the market size/demand for the crops and the growth in demand; assess the underlying trends and factors influencing demand for certain crops against others; the leading customers and their buying practices (how often do they buy the crops); competition (from other producers/farmers of the same crops within the area/region) among others would also be assessed at this stage.
- Identify strategies that one could use to build better commercial relationships and linkages with actors through all components of the value chain
It is important to determine the current commercial relationships existing between the young farmers and key value chain actors such as input suppliers, bulking groups, processors, wholesalers, retailers). Therefore through brief interviews with the key value chain actors one would be able to determine the working relationships so far forged, what benefits have resulted for all parties involved and where no relationships, establishing reasons why. Generally, there is need to identify the Strengths as well as identify the Weaknesses of the commercial relationships existing, Opportunities that can be taken advantage of and Threats to these relationships (SWOT analysis). It’s against this informed point of view that one draw out strategies that are applicable and practical and could be used to enhance the commercial relationships and linkages with value chain actors.
- Identify current gaps that affect both quality and quantity of production that have direct effect on Value Chain Development
- Identify the business and policy environment influencing the products development, distribution and marketing and assess whether this is likely to hinder development of more competitive identified crops supply chains and make appropriate recommendations
Very many models do exist which one can use assess the policy environment with my favorite being the PESTEL Analysis model. This particular model facilitates analysis/assessment of the Political, Economic, Social, Technological, Environmental and Legal (policies) factors that have a direct or indirect effect on farming and general value chain development including production, marketing, and distribution of crops while also taking into consideration their likelihood to constrain development of a more competitive crop supply chains. The analysis would further examine strategies that should be adopted to minimize the negative effects under the different factors and practical recommendations can be made accordingly.
