Supporting small-scale farmers in negotiations with agribusiness
Unequal bargaining power often characterises the relationship between small-scale rural producers and agribusinesses. A recent IIED webinar discussed ways to protect and support farmers when negotiating with companies.
Agribusinesses are increasingly interested in working with small-scale farmers. Commercial investments can bring both risks and benefits for rural livelihoods, and power imbalances and lack of information can be obstacles to achieving sustainable development outcomes. Ensuring that farmers can make informed choices and, where relevant, negotiate the best possible deals with their buyers, suppliers and service providers is key.
IIED’s new initiative – Empowering Producers in Commercial agriculture (EPIC) – is working to address these issues. In the first webinar supported through this project, we discussed two approaches aiming to support small-scale farmers when negotiating with companies in Zimbabwe and the Philippines.
Different approaches to support small-scale farmers
Our speakers outlined two approaches in two very different contexts, namely creating new value chains in Zimbabwe, and renegotiating entrenched relations in well-established industries in the Philippines.
Hopewell Zheke from Practical Action outlined its Participatory Market Systems Development’s (PMSD) approach in Zimbabwe which involves developing value chains in a participatory manner by connecting all actors, including farmers, buyers and sellers and providing capacity support.
Practical Action acts as facilitator, developing market systems that help marginalised farmers get involved with commercial value chains if they so wish. Practical Action is a facilitator because it does not buy products or provide finance. Instead it provides technical support and facilitates links whenever a gap in the market system is identified (for example, a lack of finance).
Hopewell talked about a project in which Practical Action helped farmers produce paprika at the commercial level by providing information about the market and helping farmers understand and negotiate contracts and develop collective action for more effective negotiations with agribusinesses. In addition to supporting farmers, they also engaged with other actors, including micro finance institutions (MFIs) to help them tailor their products and arrangements to suit farmers’ needs.
Our second speaker was Koronado Apuzen who works for the Foundation for Agrarian Reform Cooperatives in Mindanao (FARMCOOP) in the Philippines. About 30 years ago, the Philippines initiated agrarian reforms, as part of which land was redistributed to farmers, who were termed 'agrarian reform beneficiaries' (ARBs). The government then facilitated contracts between ARBs and agribusinesses, including joint ventures, lease agreements and contract farming arrangements. But ARBs in various sectors, including the banana industry, saw the contract farming arrangements as unfair and one-sided in favour of companies.
FARMCOOP has been supporting ARBs by challenging unfair contracts before the courts and helping farmers renegotiate new contracts with better terms which are now deemed to be a new model for the banana sector in the Philippines.
Unlike PA which engaged with all actors in the supply chain, FARMCOOP mainly provided support to farmers.
Challenges: mistrust and tensions among actors
Both our speakers highlighted challenges. As a facilitator, PA had to address the tensions caused by the mistrust between farmers and other market actors such as MFIs. Some of the contracts farmers had with MFIs had to be renegotiated and Practical Action created a platform to facilitate meetings so that all actors could engage with each other and resolve the issues.
FARMCOOP’s efforts to renegotiate contracts faced tensions with companies which were opposed to the renegotiations. Initial attempts to promote dialogue, including with the government, did not resolve the issues. Ultimately the farmers resorted to mobilisation and strikes, including refusing to deliver produce, in order to obtain a renegotiation.
The importance of engaging with multiple actors and scaling up
The two experiences represented different approaches to supporting rural producers: facilitating a constructive dialogue and links among various actors in Zimbabwe; and farmers having to resort to mobilisation and engage in difficult negotiations to reopen uneven arrangements in the Philippines.
But the presentations also outlined commonalities: for example both organisations had to engage with a wide range of actors, beyond farmers and companies. In Zimbabwe, Practical Action worked with MFIs to convince them to adapt their lending instruments to suit the needs of small scale farmers. In the Philippines, FARMCOOP used international advocacy strategies to gain support from consumer groups and trade associations abroad and to put pressure on companies to agree to renegotiate the contracts.
The webinar discussions also highlighted the importance of engaging with governments in order to mainstream good practices and upscale them via policies.
This webinar enabled us to discuss some of the big picture issues in supporting rural producers when negotiating with companies. In the next webinars being organised as part of the EPIC project, we will focus on more specific issues – so as to be able to disentangle the practicalities and highlight in more detail how to effectively protect the rights of rural producers in different contexts.
You can see the slides from the presentations by Hopewell Zheke and by Koronado Apuzen on IIED's SlideShare site.
EPIC is funded by UK aid from the UK government through its Commercial Agriculture for Smallholders and Agribusiness (CASA) programme. CASA seeks to increase economic opportunities for smallholders by demonstrating the commercial viability of businesses with significant smallholder supply chains and by attracting more investment into the sector.