FPO-Led Small Farm Market Access Models
As the world’s population increases and the demand for agricultural products rises, small farms have an opportunity to play a big role and reap many benefits, if they are able to join together to form farmer producer organizations (FPOs) to increase their aggregate size. TCI is undertaking a two-year study to assess challenges facing FPO models in India and Mexico.
The project aims to create lessons, tools, and resource pathways to strengthen small farm aggregators, while simultaneously catalyzing a community of practice of funders, implementors, and policy stakeholders.
TCI researchers will gauge the results of farmer aggregation globally, highlighting case studies from India and Mexico for comparison, in order to:
- Identify successful and unsuccessful strategies for making FPOs economically sustainable and boosting agricultural growth.
- Assess how FPOs come together to form inclusive agribusiness entities that are integrated into the full production and supply cycle.
- Clarify how FPOs access essential infrastructure and inputs, leverage new marketing opportunities, and reach a wider customer base.
- Evaluate the effect farmer producer organizations have on smallholder market linkages, social/gender inclusion and empowerment, nutrition sensitivity in markets development, and overall welfare.
The project is funded through a $1 million grant from the Walmart Foundation.
Small farms, big opportunities, significant challenges
Nearly 90% of the 570 million farms around the world are less than 2 hectares (about 5 acres) in size. Most are in low- and middle-income countries, where a substantial amount of the population is dependent on the agricultural sector.
Due to their size, small farms have an inherent disadvantage in accessing product markets, credit, management inputs, and technology. These weaknesses have kept small farms from leveraging income-growth opportunities, which have arisen from changing demand for diversified, high-value agricultural products through globalization, population increase, and income growth. By forming FPOs, smallholders can benefit from scale economies, and in the process, aid agricultural development and poverty reduction.
The average farm size in India was 1.15 hectares in 2010-11, a decrease from 1.33 hectares in 2000-01. Considering this downward trend, aggregation models have become critical for the country’s smallholder farmers. In the past two decades, there has been renewed interest in the promotion of FPOs for agricultural development and poverty reduction by philanthropic actors, donors, corporations, and governments. The country continues to promote FPOs in a big way, and in 2017, the government assisted in the formation of over 3,000 such organizations.
Yet, despite increased focus and avenues of support, global FPO success stories are few. Low-financing opportunities and the extended gestation period required for FPOs to become self-sustaining are major factors that impede success. Other challenges include weak market linkages, high coordination costs, government interference, inadequate managerial expertise, low levels of trust among members, and exclusion of women.
Utilizing a data-driven, analytical approach to the challenges facing FPOs, TCI is helping pave the way for smallholder farmers to grow their livelihoods while providing nutritious food to an expanding world.