Farming Business · Uncategorized

Value Chain Analysis in Agriculture

9jaSavvyFarmerA value chain is the full range of activities – including production, design, marketing and – in agriculture. It can be defined as a strategic partnership among interdependent businesses that collaborate to progressively create value for the final consumer resulting in a collective advantage. The basic characteristic for a value chain is that different business enterprises working together to produce and market products and services effectively and efficiently by allowing businesses to respond to the marketplace by linking production, processing and marketing activities to meet demand.

Agricultural Value Chain
An agricultural value chain schematic (courtesy

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Agricultural food value chains are designed to increase competitive advantage through collaboration in a venture that links producers, processors, marketers, food service companies, retailers and supporting groups such as transporters, research groups and suppliers. In agriculture, a value chain can be interpreted in a narrow or broad sense. In the narrow sense, a value chain includes the range of activities performed within a business to produce a certain output. This is when a producer is not only involved in production but also in processing and marketing the produce. For an average farmer in Nigeria, he will rather produce the seeds he needs for planting, grow and harvest the crop on his farm, process the harvested crops, market the processed produced and sell to his neighbours and/or even be the final consumer. That way, there can’t be adequate specialization, it turns out to be a case of the popular saying, ‘jack of all trade, master of none’. No room for healthy competition, improvement and good output.

The broader definition looks at the complex range of activities implemented by various actors (linking input suppliers, primary producers, traders, processing enterprises, wholesalers, retailers, etc.) to bring a raw material to the final consumer. This approach looks not only at the activities implemented by a single actor, but at the linkages between the direct actors in the value chain: the organisation, coordination and power relations between them. The sustained efficiency in the agricultural industry of the developed nations is hinged on the principle of specialized diversification through the value chain. Whereby each of the producers, processors, marketer and researchers focuses on his enterprise as one’s output is another’s input, ensuring quality delivery of resources to the next link without encroaching into other production niches is key.

In agricultural value chain, goods and products flow up the value chain (from seed to table) and money flows down the chain. Each of the direct actors performs one or more specific function, thereby incurring some expenses and gaining some income and thus “adding value” to the product.

Value Chain in agricultureThe unending stream of the agricultural value chain (courtesy

Direct value chain actors include:

  • Input suppliers (seed, compost, equipment);

  • Producers (primary production & post-harvest handling);

  • Traders (transport, storage, cooling);

  • Processing industry (cleaning, processing, packaging & labelling)

  • Shopkeeper (retailing); and

  • Consumers (consumption).

There are lots of spaces in the agro-allied chain in Nigeria that is still very much vacant. The chain is a long one, from the seed form (for crops) or a day-old livestock (for breeding), to the processing of the produce which entails the cultivating, takeoff from the farm and transforming of the raw

materials (ingredient) by physical or chemical means into food. Then to the packaging of the processed food which is to provide protection, tampering resistance, and giving it an added value to appeal to the final consumer. It is well branded by the company and information about the product is given with its nutritional facts label that could be added. Then distribution of the packaged product to the market is another area of importance. As briefly as this chain has been explained, a lot of energy and activity has gone into it. In there is the transportation and storage facility for the produce right from the farm to the companies then to the final consumers.

Value Chain Finance Flows AnalysisValue chain mark-up analysis (courtesy

For a country like Nigeria, internal and external support for agricultural value chains is an important option for agricultural development, because higher financial returns can be realised through value-enhancing inputs. Improvements in the effectiveness and efficiency of agricultural value chains can also enhance benefits to all participants in the value chain, and contribute to the food security and poverty reduction.

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