Added value returned at farm level

In the history of agricultural cooperative development, the creation of added value by the cooperative has often been the key for its success; dairy, sugar, potato starch and fries, etc. And when high tech industries are required and large investments involved, it is probably the only way to create this added value for farmer produce.

However, in some sectors cooperatives have withdrawn from part of the added value process and left it to the farmers. Examples hereof are post-harvest seed potato, fresh fruit and vegetable handling (this is now back at the hands of the farmers, at least in the Netherlands). Also farm level cheese production is a quite popular niche market in The Netherlands. The average farm size increase over the decades has contributed to this development as well as economic reasons (less product transfers, increased waste management costs, more flexibility, etc.). Last but not least, it increased the economic return for the farmer members. On the other hand the cooperatives had to proof that they still produced added value for the farmer members (marketing and sales), or dissolve.

Just this month I came across another example of added value returned to farm level during my Agriterra mission to the Philippines. Small farmers produce cassava (starchy root crop) on request of their cooperative which has a contract for chipped, dried and granulated cassava with a multinational commodity trader. This is a typical large volume, low price and low margin business.
The transport to the central chipping, drying and granulating location, the lower labour productivity, the overhead costs, etc., made this process quite costly, resulting in a low price the cooperative could pay out to its farmers for the fresh produce. Economies of scale were also difficult to realise, since drying had to take place by the sun requiring large facilities.

Low cost sun dryer casava

So, it has been decided to support the farmers in realising the added value at their own farm or at central locations in their villages. Farmers can bring their cassava themselves, the farm family can earn an extra amount in manual chipping and labour required for drying and granulation. The cooperative provides for simple sun dryers made out of bamboo and plastic sheeting and motorised granulators. Now the cooperative is collecting the ready product at the village and brings it directly to the warehouse of the multinational buyer.

All the added value remains at farm level and the cooperative only has to concentrate on the most efficient transport to the warehouse of the buyer. Also tractors for land preparation and harvesting are now handed over to farmers with a loan arrangement. Those local farmers can more effectively manage these tractors, then a cooperative with its bureaucracy and distance to the work spot.

Anton van Vilsteren, Agripooler