Promoting Agricultural Value Chains
In the OIC Member Countries
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1. Conceptual framework
Global value chains have become a dominant feature of the world economy, involving
countries at all levels of development, from the poorest to the most advanced, and enterprises
of all sizes, from small-scale producers to large multinational companies (OECD et al., 2014).
Understanding agriculture in terms of value chains draws attention to the interconnectedness
of production and consumption, and moves away from a narrow focus on separate links in
isolation. Consequently, the small-scale farmer at the beginning of the chain is closely
connected to a series of off-farm activities involving a variety of actors and processes with
larger businesses of traders, food processors and supermarket chains at the end (KIT & IIRR,
2010). Such an understanding is necessary to identify and open up new opportunities for
economic growth and value creation for countries and businesses around the world.
1.1 The concept
A value chain is the entire system of production, processing and marketing of a particular
product, from inception to the finished product and its end use. A value chain consists of a
series of chain actors, linked together by flows of products, finance, information and services
(KIT & IIRR, 2010). Actors are connected across space, both to each other and to world
markets, turning value chains into the infrastructure of international trade (Bair, 2009). As
they operate globally, competition between chain actors, countries and entire value chains is
also global. Coffee producers from Vietnam compete with producers from Uganda, sugar
growers from Malawi compete with growers from South Africa, and cotton producers from
Pakistan compete with producers from Mali.
A value chain is not identical to a supply chain. Supply chains indicate the processes of
growing, transforming and manufacturing commodities into products and physically moving
them from producers to consumers. Productivity and efficiency are key determinants of supply
chains. Value chains add another dimension by focusing on value creation, value capture and
value distribution along the chain. At each stage of the chain, the value of a product becomes
higher, as the product comes to resemble more and more the product that is demanded by the
consumer. This can entail processing and manufacturing (the product is cleaned, dried,
treated, blended, processed, prepared, packaged, etc.) or transport and distribution (the
product gets closer to the consumer). At the same time, costs are incurred at each stage of the
chain. For instance, farmers who dry and process their coffee after harvest need to invest extra
work (hence costs) but are also selling a higher value product than if they sold their coffee
directly after harvesting. Costs are also incurred due to losses at each stage of the chain, for
instance, due to spoilage, damage and waste. Costs and benefits are distributed along the chain
by means of business-to-business relationships that connect chain actors to each other.
Therefore, the value chain framework describes the full range of activities that value chain
actors, such as firms and workers, perform in bringing a product from inception to delivery of
a product to the market, and to understand the ways that value is added (or lost) and
distributed along the chain.
1.2 Actors, supporters and context
Chain actors are the individuals or organisations (e.g. firms) that produce the product, or buy
and sell it, and thus own the product at some stage in the chain (KIT & IIRR, 2010).