Improving Institutional Capacity:

Strengthening Farmer Organizations in the OIC Member Countries

1.3.3.

Processing and Retail & Consumption

FOs operate in the processing phase by providing processing capabilities for their members,

particularly in agricultural markets where primary processing is required before the produce

is sent to market.

FOs are also pivotal in helping farmers capture more value in the retail and consumption

phase. In plant production, livestock and fisheries, smallholder farmers are often at the bottom

of the value chain, and their product is often a fraction of the value of the final product.

As the

World Bank notes, ‘acting alone small farmers cannot produce the volumes necessary to satisfy

buyers who want to reduce transaction costs, increase economies of scale and obtain a reliable

supply’.

Farmers’ best option, then, is to produce higher-quality output, for which they can

demand higher prices. FOs can help farmers on both fronts: For example, they can offer

training in the health and sanitary standards of markets that members wish to access. This will

lead to a higher-quality and more-valuable output. Additionally, FOs give producers the

bargaining power necessary to amplify their value against the interests of agribusiness, which

dominate the retail stage.

This kind of FO impact is exemplified in the global coffee market. In coffee-producing

countries, farmers retain, in general, only 10% of the value of the coffee retail sales. However,

in countries where FOs have promoted and trained farmers in green production practices,

farmers tend to earn about 15% of the final value of instant coffee and 25-30% of the final

value of ground and roast coffee.

1.4. Common Capacity Challenges Faced by Farmer Organizations

Section 1.3 identified when and how FO intervention can improve farmer livelihoods.

However, their capacity to do so, regardless of stage or service, is currently inhibited by a

variety of challenges. The need to build FOs’ capacity to provide services to members is urgent,

as innovations in information and communications technology (ICT), infrastructure

improvements, domestic market growth, and new seed technologies are combining to rapidly

expand farmers’ opportunities in key regional and global markets.

FOs are integral to

ensuring these opportunities translate to livelihood gains.

While the potential impact of FOs is vast, they face significant challenges in becoming

sustainable economic units that can ensure the income and productivity gains envisaged. In

OIC member countries, the first hurdle to surmount is the current, relatively weak degree of

general farmer organization. The following reasons, to some extent, explain the low

participation rates:



Vulnerability to state intervention for political gain:

In many countries, FOs are set up

by governments as a conduit for the delivery of public, agricultural services, and as a

result, governments exercise a great deal of control over them. For example, in Ethiopia,

FOs and, in particular, co-operatives have been used to extend government control to the

Ibid.

The World Bank LCR Series,

Value chains and small farmer integration.

World Development Report 2008

African Centre for Economic Transformation (ACET)

Kickstarting agro-processing value chains

. African Transformation

Report 2014

Bill and Melinda Gates Foundation, Farmer Organization White Paper, 2009.