Smallholders and Niche Markets : Lessons from the Andes

The Agricultural Research and Extension Network is sponsored by the UK Department for International Development (DFID) The opinions expressed in this paper do not necessarily reflect those of DFID. We are happy for this material to be reproduced on a not-for-profit basis. The Network Coordinator would appreciate receiving details of any use of this material in training, research or programme design, implementation or evaluation. Abstract Research in Bolivia, Peru and Ecuador focused on the extent to which producers of two widely traded crops, bananas and coffee, are able to take advantage of expanding global markets. In Ecuador, banana production is largely in the hands of independent producers while a handful of companies control the export trade. These companies have considerable influence on the prices paid to farmers. The majority of farmers are hardly able to cover their production costs. Coffee producers are confronted with a market where oversupply in recent years has led to a fall in coffee prices. The banana and coffee sectors demonstrate that smallholder producers often find themselves disempowered and unable to benefit from conventional commodity markets. Several non-governmental organisations (NGOs) are working with banana and coffee producers to tap into niche markets, which include organic, fair trade and gourmet markets. These offer greater benefits to farmers, by paying them a higher price for their produce, but demand new skills and forms of organisation. Research findings • Farmers seeking access to global markets have to meet demands for quality of produce as well as for quantity and continuity of supply. • Smallholder farmers need to learn new skills and acquire sufficient business acumen in order to benefit from global markets. • While NGOs have provided farmers' associations with technical advice, their greatest contribution has been working with farmers to overcome some of the transaction costs associated with accessing niche markets. • This contribution has taken the form of facilitating access to credit, providing infrastructure (such as packing sheds and milling machinery), enabling farmers' access to organic and fair trade certification schemes, and establishing trading links between producers and buyers. • Despite some evidence of progress, the degree to which the niche markets will be able to absorb the growing number of aspiring participants is unclear. Policy implications • The skills that farmers need to access niche markets are also the skills that they need to compete more effectively in conventional markets. This has implications for agricultural research …