Feed the Future
This project is part of the U.S. Government's global hunger and food security initiative.

4.3.2. Applying the Value Chain Approach to Food Availability

Introduction

Ensuring availability of food may require a combination of increasing production, reducing post-harvest losses, improving market efficiency of staple foods, and strengthening regional trade flows to link areas of surplus and deficit. It will in some cases also include improving the ability to acquire food provided by donors, though this should be a last resort given the negative consequences for markets and its unsustainable nature. Ensuring adequate availability of food also implies that an appropriate mix of sufficient food is available to individuals. Selected examples of the application of a value chain approach to addressing food availability are given below.

Increase Production of Staple Foods Important to Food Security 

Where there is inadequate supply of nutritious food, increasing domestic production may be an appropriate solution. Reducing the yield gap is critical to achieving increases in production.  In many countries, this gap is substantial.  For instance, in Mali newly introduced high-yield hybrid sorghum varieties may produce up to 3.5 to 4.0 MT of raw product per hectare as compared to the current Sakoika variety which produces only 1.5 MT over the same area. It is estimated that widespread adoption of the new variety in Mali could lead to more than a two-fold increase in sorghum availability.1  A strength of the value chain approach’s focus on incentives is its capacity to identify the root causes underlyinglow yields and underinvestment by farmers and other value chain actors.  Yields often remain persistently low due to a range of tangible and intangible constraints.  In Ghana, for instance, the ADVANCE program's design phase identified that farmers lacked the incentive to invest in aquaculture because of relatively low returns due to the high costs of production. As fish is the main source of animal protein for Ghanaian households, the ADVANCE program saw that raising the productivity of aquaculture is very important for increasing overall protein intake.  Fish feed was identified as the main input cost for aquaculture, so the program provided capacity building to feed mills to develop a lower-cost method of fish food production.  As a result, the return on investment increased, providing an incentive for investment in aquaculture.

Reduce Post-harvest Losses 

It is estimated that in developing countries post-harvest losses account for 15 to 50 percent of the harvest in many areas.2  Reducing post-harvest losses results in more to consume or sell. However, investment in storage an other post-harvest infrastructure must be well planned with the right incentives in place fo sustable management to avoid white elephants left behind at the end of a project. One method of reducing losses is to support upgrading of processing equipment.  Improved milling equipment, for example, can reduce losses by significantly improving the conversion ratio from paddy to rice.3   A second solution is to improve post-harvest handling (grading, sorting, packaging) and storage methods.  USAID’s Post-Harvest Handling & Storage (PHHS) project in Rwanda conducts Sell More For More trainings, in partnership with the World Food Program’s Purchases for Progress (P4P) program. These trainings provide information to 24 cooperatives on technical and business practices in post-harvest handling, storage and management. After receiving the training, farmers of the COACMU Cooperative reported post-harvest losses decreased from 15 percent to 1 percent.4   

Improve Marketing Efficiency 

Before intervening, it is first necessary to understand the drivers of market inefficiency and the associated impacts on transaction costs. While they have been designed to improve national food security, many trade-related policies such as export bans have demonstrated dubious effectiveness at improving national food security.5   A value chain approach can assist in the following ways:   

  • Calculate and reduce transaction costs.  Value chain analyses should include data on transaction costs and margins throughout the value chain.  This information can be critical to improving food availability by quantifying the losses caused by gaps and bottlenecks in the marketing system, as well as the gains of lowering the transaction costs incurred in producing and transporting food.  The West Africa Trade Hub, for instance, has conducted detailed analysis on the transportation networks of that region that includes benchmarking performance globally and linking inefficiencies to differences in food prices.6   Bolstering support markets (e.g. transport, finance, storage) and value chain relationships can also have a strong impact upon market efficiency.  Land o’ Lakes's Zambia Title II Development Assistance Program dramatically lowered the costs of inputs for smallholder farmers by encouraging horizontal linkages among farmers through diary cooperatives. The bulk purchases made by these cooperatives lowered the per unit cost of inputs, thereby increasing profitability and the incentives for use.  As a result, food production increased and local-level availability expanded.  
  • Understand food marketing and distribution flows.  The market flows of food products sometimes worsen food availability. In many contexts, surplus staple grains from farmers in food deficit areas are brought to surplus areas for milling, where equipment is better, markets are more liquid and returns may be higher.  If it is then shipped back to deficit areas, which are often avoided given the greater risk of losses, the transportation costs add significantly to the price.  It is also common for suprlus food to be transported for sale in urban centers because of the readily available market information in these areas, in spite of the fact that there can be higher prices in rural deficit areas. The emphasis of the value chain approach on understanding market flows can aid significantly in determining whether additional production is likely to reach food insecure consumers.  In Malawi, the Market Linkages Initiative program aims to increase food security by integrating smallholder farmers into national and regional markets.  One activity to improve market efficiency is the promotion of a cellphone-based market information system that provides traders and farmers with food commodity prices (maize, soy, and ground nuts) and enables them to post bids and offers. Traders almost instantly found the new system helpful.  One trader stated, “through this system, I have managed to link up with buyers from [near] and far. It was not possible for me to do this previously as I did not have such information.” The system provides traders with the information to respond to market signals to buy in areas of surplus, where the price is low, and resell in areas of deficit where the price is high.  As a result, food is moved from areas of surplus to areas of deficit and food prices decrease in areas of deficit.
  • Analyze and address barriers in the business enabling environment.  Supporting a clear marketing structure that is transparent to all market actors can have enormous benefits for food security.  Informal markets, which the food insecure often rely upon for their food, often face discrimination by policy makers.7   In 2003 the governments of Malawi and Zambia imposed export bans on maize because of concerns about possible maize exports. The private sector predicted that there would be surplus production and recognized that they could get a higher price through regional exports. They petitioned the RATES project, which conducted maize production estimates and presented a “Maize without Borders” concept and facilitated a dialogue between government and the private sector. As a result, the government began issuing maize export permits and that year Zambia exported 23, 993 MT of maize while Malawi exported 105, 000 MT of maize.8  As food policy decisions are often made with relatively little information, governments have a need for reliable and trustworthy data. Some external agencies have addressed this need by forming national stocks committees. These committes, which may consist of private sector, government and UN agencies, can improve assessments of food stocks and become a platform for policy dialogue on how and when to take important food policy decisions such as releasing government food stocks.

Improve the Effectiveness of Food Aid

Food aid, a traditional food security strategy, can have positive or negative effects depending upon how it is implemented. While food aid can be effective in the short-term in emergency contexts, market mechanisms are better able to address food availability in the medium to long run.9  Below are some ways a value chain approach can assist in improving food aid’s effectiveness:   

  • Understand and improve the market impacts of food transfer programs.  Using a market-oriented approach can help to reduce the potential disruptions caused by food transfer programs by shedding light on potential displacement of local production in markets.10 The Bellmon Entitlement Studies for Title II (BEST) is an example of such market analysis, which is required by USAID prior to any food distribution. 
  • Design local procurement strategies that link to small-scale producers. Food aid can support multiple objectives when it is procured locally, by creating a market and incomes for farmers.  The food that is provided to severely malnourished individuals, known as Ready-to-Use Therapeutic Foods (RUTFs), is usually difficult to procure within the countries where it is distributed for various reasons, including cost and problems with aggregation. Yet where it can be procured locally, the benefits to smallholders can be substantial.  HILINA, a company in Ethiopia that specializes in the production of RUTFs, wanted to avoid the high costs of food imports by increasing its procurement from local farmers. When it began, it was difficult to procure the primary ingredient - groundnuts - given low returns for farmers, inadequate availability of quality seeds and the prevalence of a carcinogen in much of the local product.  Over a period of several years, HILINA invested in increasing supply by providing its own extension and inputs, offering a premium price for quality product and information to farmers on whether their production was contaminated.  These investments have resulted in a significant surge in local groundnut production, higher-quality food purchases by groundnut-producing farmers, and a quadrupling of farmer income from groundnuts.  The model is now being replicated as HILINA expands into the production of soy-based foods.
  • Consider cash for work.  Cash for work is an alternative to food transfer programs that can build markets by increasing effective demand of those not normally able to access food from markets and build market or agricultural infrastructure such as feeder roads, storage facilities, or market sheds. 

Footnotes

  1.  AGRA, Breakthrough in Sorghum's Yield Barrier, 2011. 
  2.  Food and Agriculture Organization of the United Nations, Post Harvest Losses Aggravate Hunger, November 2, 2009
  3.  Campbell et al, Global Food Security Response:  West Africa Rice Value Chain Analysis, 39
  4.  Carana Corporation, Rwanda: Post-Harvest Handling and Storage Project (PHHS), 2009-2012.  
  5.  Jayne et al, Patterns and Trends in Food Staples Markets in Eastern and Southern Africa:  Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivity Growth, 2010.
  6.  http://www.watradehub.com/taxonomy/term/68/all
  7.  Jayne et al, Patterns and Trends in Food Staples Markets in Eastern and Southern Africa:  Toward the Identification of Priority Investments and Strategies for Developing Markets and Promoting Smallholder Productivity Growth, 2010.
  8.  USAID Sub-Saharan Africa, Maize Without Borders, 2004. 
  9.  Del Ninno et al, Food Aid and Food Security in the Short and Long Run: Country Experience from Asia and sub-Saharan Africa, 2004, 87-97.
  10.  Jayne et al, Market-Oriented Strategies to Improve Household Access to Food:Experience from Sub-Saharan Africa, 1994, v-vi