CHAPTER 7. ENHANCING FORAGE SEED PRODUCTION IN SMALLHOLDER
7.5 Forage seed business development
7.5.1 Potential business models for forage seed in smallholder systems
In the study sites, there have been a number of activities taking place in the marketing of forage seed, initially the forage being meant for livestock feeding and to sustain those initiatives, produce seed for use in the following season.
Farmers indicated that contract farming (Figure 7.1) is a viable option for forage seed production. They indicated that in contract farming:-
The market is assured, so they do not have to look for forage seed markets. Since markets for forage seed are scarce, farmers need assistance and guidance on where the market is;
Payment for forage seed sales are guaranteed, thus assuring them of income generation from the activity;
Inputs can be offered by the seed buyer and this eases pressure on farmers on where to source the inputs for forage seed production;
There is diversification of farming activities, thus guarding against food insecurity within the home. If food crop production fails, income generated from sale of forage seed will then be used to buy household necessities;
There is building of relationships with different stakeholders, from input suppliers to the seed buyer; and
There is capacity building and trainings offered in order to improve on forage seed production.
According to Lundy (2012), business models start as simple market linkages which may be initiated by actors along the value chain (Figure 7.8). They could be initiated by a change in consumer needs, growth in the agricultural sector, technological advancement, the need for specialised service providers and the need for increased food safety and delivery services. This is the case with farmers in the study sites.
They have their product which is seed and there are some actors such as seed companies they are linked to, both formally and informally. It can be that these linkages may have been in existence for some time for other products or commodities.
Therefore, as a remedy to improve or develop new business models in the study sites, it may be appropriate to engage an independent entity (individual or organisation), sometimes called “Ethical agent” From the study, it was revealed that there is need for the agent who in this case facilitates the engagement of value chain players. The agent may be in the form of Innovation Platforms as an approach or development partners who are the facilitators in the engagement process. This may also comprise an organisation or individual who is not directly related to the producer and the buyer. As mentioned by Lundy, (2012), the purpose of the ethical agent is to create an environment for dialogue between the farmers and the buyer who is the seed company. The ethical agent could be a development organisation or innovation platform committee. Innovation platforms in nature allow dialogue between value chain actors so that they understand each other and build strong and viable relationships. The ethical agent encompasses every value chain actors, be it farmers who are the producers, service providers, buyers, processors, even transporters. Innovation platforms have been proven to be effective in coordinating and facilitating dialogue (Duncan et al., 2015). Forage seed market is a niche market where market information is still scarce and no one knows how to go about it in enhancing competitiveness of that seed sector.
For this model to be effective and sustainable, the ethical agent needs to have very good facilitation skills. They play the role of mediator, identifying any constraints and develop strategies to overcome them. They create a fair field of play for the value chain actors. With time, these ethical agents need to wean off the actors so that they conduct business on their own.
Figure 7.8: Different business models. Source: Adapted from Lundy et al., 2012
Thus, an exit strategy needs to be developed by the agent. However for forage seed business, costs for ethical agent activities maybe limiting. Lundy, (2012) and FAO, (2015) also asserts that the role of the NGOs might be unclear as it is a non-profit making organisation. The NGO might also want to meddle in the affairs of both parties, which is an undesirable attitude. It also takes courage and time to convince especially the private sector to engage and deal with smallholders who may have different ideologies on forage seed production and marketing, and level of appreciation. The current economic environment also plays a role in decision making for both farmer producers and market players.
The ethical agent model needs to be supported by a number of factors for it to be effective. These include:-
Thorough selection of participating farmers (FAO, 2012). This will ensure success and sustainability of interventions.
Training of farmers on all aspects including farming as a business
Financial inclusion – involvement of financial institutions to offer tailor made credit facilities will increase the chances for success
Engagement of private sector who will offer technical advice besides assuring farmers of the markets available.
It should be noted that business models for smallholder farmers are not a one-size fits all. Thus there is need for due diligence on how to structure the models and mode of support for their sustainability taking into account the diversity of smallholder farmers and their environment. For the producer-driven model, success depends on farmer self-motivation to produce and market the product. Buyers of seed would be attracted by quality, quantities and storage. Farmers in this category have niche markets, where there are not many suppliers. Seed producers also have the advantage of bargaining for better prices.
In the buyer-driven model, seed companies would look at engaging farmers in their activities including forage seed production. Various arrangements can be made between the company and the seed producer that is, with or without inputs. Farmers in this model may not be very innovative to venture into other seed markets, they only rely on the seed buyer.
However, challenges may arise when the buyer is no longer interested in the product and the farmer gets stuck with the product without a market for it. Contractual agreements then come into effect to make buyers commit themselves to buy the product once it is produced. For the various approaches within the ethical agent model, the use of innovation platforms is important. The innovation platforms will pave the way for discussions for the different farmers at different levels along the seed value chain.
There is need for support for the farmers and the ethical agent for the model to prosper. Government
intervention is required to maintain order and adherence to policies and regulations governing seed production and trade.
This can be termed buyer driven as it was the farmers who produced the seed and sold to other customers. Lately, a private seed company has initiated the engagement of farmers to produce forage seed for the company, transforming the model into buyer-driven as the company is now requesting more farmers to produce forage seed. More smallholder farmers are being motivated to venture into mucuna and lablab forage seed production. From FGDs, discussions were that the market is now assured and there is a private company that is willing to contract them to produce the seed. They say forage seed is different from the rest of the food crop seed which can be produced and sold in the retails shops. Forage seed is scarce and farmers are not used to producing forage seed for business. Farmers in Zaka, Zimbabwe managed to establish a successful seed business through collaboration and teamwork after realising that there is shortage of improved seed in their area (Case study 1).
For smallholders, business can be influenced by a number of factors which can be individual or producer groups, private or public buyers. Development organisations can also be potential buyers. It is interesting to note that it is not always the smallholder farmers who initiate business models, although farmers may become catalysts in the functioning of these models.
Initially agricultural inputs were distributed directly to beneficiaries. This was an emergency response initiative to combat food insecurity due to natural disasters like drought and floods in the country.
Prospective beneficiary farmers would gather at a central point within their communities, have their names written down and they in turn receive agricultural inputs available at that time. These included seed of maize, sorghum, groundnuts and millet. Unfortunately, because they were to meet immediate food security they did not include forage seed.
As a way to move away from free agricultural inputs distributions, innovative market-based approaches were introduced. Some of the approaches introduced are paper and electronic based vouchers. Vouchers are a mode of payment that can be redeemable in exchange for the stated goods or services at designated points. The voucher scheme started as free inputs and farmers did not have to make any contributions.
However, as they became more innovative, the voucher schemes included an element where a farmer contributed a proportion (range was between 5.0 % and 10.0 %) of the value of the inputs. The supply and access of inputs by farmers included the engagement of agro dealers, input suppliers, transporters and other stakeholders like financial institutions who would provide swipe machines to redeem electronic vouchers. Electronic vouchers had pin-swipe cards and farmers would use these at Point of Sale machines to redeem the vouchers.
These have been successful to revive the agricultural sector in Zimbabwe (FAO, 2011; Mazvimavi, Murendo, Minde and Kunzekweguta, 2013). However, suggestions on improvement are that there should be stronger coordination among the stakeholders so that farmers access inputs on time for the benefit and success of the initiatives.