Introduction to Smallholder Commercialization

Smallholder Commercialization is a business/enterprise driven approach by smallholder farmers as he/she grows crops or rear livestock. A commercial farmer focuses on farming as a business, adopt technologies that increases profits, reduce unnecessary cost of production or marketing, join a group to pool up resources, and supply to large buyers collectively.

The development of the African economy greatly depends upon the swiftness with which agricultural growth is attained. The rate of agricultural growth in Africa in turn depends on the speed with which the current subsistence-oriented production system is transformed into a market-orientated production system. Agricultural commercialization usually takes a long transformation process from subsistence to semi-commercial and then to a fully commercialized agriculture. In subsistence agriculture, the main objective is food self-sufficiency by using mainly non-traded and household generated inputs. The objective and the input sources change in semi-commercial farms into generating surplus agricultural outputs using both traded and non-traded farm inputs. In a fully commercialized agriculture, inputs are predominately obtained from markets and profit maximization becomes the farm household’s driving objective (Berhanu et al., 2006)

Low commercialization in African countries have increasingly resulted into decreased returns to farming and weak value chains particularly for mass-market commodities like staple foods. Rwanda, like other countries in Africa, is faced by enormous challenges from subsistent production systems and unstable value chains with some of the threatening challenges being;

• Lack of economies of scale and lack of /low capacity to achieve significant volumes (which drastically reduces the bargaining power of farmers in the marketplace and daily growing food import bill). Smallholders are unable to produce required varieties, products and meet quality requirements by competitive markets.
• Inconsistencies and inability supply to business markets (as well poor products for the informal markets)
• Scattered groups, non-commercial groups and poor organization systems a major impediment to accessing markets and supplying demanded volumes
• Marketing systems dogged by several brokers (who take advantage of disorganized trading system thus denying farmers better prices for their commodities ;)
• Business Support Services and technologies have been inaccessible by both upstream and downstream market players.
• Inputs systems have been found to be weak with majority of farmers using poor inputs or not using any improved inputs while transportation and extension service remains inaccessible due to poor road and communication systems.

a)Key terms used in commercialization

• Commercialization for a group of farmers refers to transitioning a farmer group or association from subsistence farming or disorganized to market-driven farming for increased profitability and better incomes
• Market-driven production entails having market in mind, producing crops or livestock based reliable information on markets, adopting better technologies, reducing cost of production, collective marketing to reduce cost of infrastructures and cost of marketing.
• Commercial Village(CV)is a trading block within a village (constituting commercial Producers ) evolved through the Commercial Village Model
• Commercial Producer Groups (CPGs) are primary units/smaller groups within Commercial Village made up of minimum 15 members and maximum 30 members based on neighborliness. These units form basis for training, aggregation and savings mobilization.
• The Commercial Villages Model ®is a hybrid model through which village are systematically graduated into commercialized competitive trading units
• Sustainability is the ability of a farm enterprise to continue generating profit into the future without support from development organization or government.

b)Why Commercial villages

Farmers needs organized production systems

It is necessary to have structured governance for effective and accountable business partnership

Enhanced business partnership with larger buyers reducing/removing brokers

c)Crop or livestock selection as a commercial enterprise

• Select a crops or livestock with better market opportunities and higher demand
• Select a crops or livestock that can grow in your area especially on climate and soil types
• Select crops or livestock based on net profits rather than gross margins
• Consider labor requirement s and its availability before selecting which animal to keep or crop to grow as a business
• Consider post-harvest requirements and product shelf life

d)commercialization growth path