FPI-I'S ABC Farming Strategy

EXECUTIVE SUMMARY

Agriculture-Based Cluster Development:

An introduction to FPI ABCs?

FPI-i Introduces Agriculture-based Clusters (ABCs), these are strategies used to bring to life, train, encourage and promote participation, and play a crucial role in boosting the collaboration of farming and processing enterprises.

It's All About mindset change, Bringing Farmers Together to Generate Higher Income and Build Generations of Rich People (Hunter)

The ABCs support innovation, Globalisation, internationalization, localization, and competitiveness of agro-based clusters as a sure solution in building bridges connecting different ecosystems, supporting innovation, and competitiveness.

Research proves that most individual landholders across Africa are small. More than 70% of the holdings are marginal, measuring up to one hectare or less, and a few have more than 5 hectares but have the capacity to feed the world if they are well coordinated, as well as technically, and financially supported.

The statement above gives a sure reasorn for the cluster development approach in agriculture eminently suitable for Africa. It has become the only sustainable approach to addressing the higher-income needs of marginalized farming families in Africa and other developing countries.

Cluster Development:

The cluster development approach in agriculture and agri-based industries implies directing funds and other resources to building groups of small landowners collectively. It involves creating horizontal and vertical linkages between local agricultural enterprises.

These enterprises then get linked to facilitating agencies like the local government, non-governmental organizations, etc. These bodies improve the collective capacity of connected enterprises through financial and technical support.

Small and marginal farmers usually gain from connections with other stakeholders in the agricultural value chain. This is the vision guiding the cluster development approach.

Advantages of the Agri-based Cluster:

The advantages of this approach are manifold:

Cluster initiatives facilitate the concentration of resources and funding in specific areas with high development and growth potential.
The collective capacity of merged small and marginal landholdings is considerably greater than what each one of them can achieve individually.
The inclusion of facilitating bodies contributes to that.
The collective is in charge of supplying the inputs and marketing the products. Individual farmers are responsible for production.
This division of responsibilities enhances the overall performance of the cluster.
This approach promotes on-farm productivity and the production of specific marketable agricultural crops and products based on those crops.
The overall marketing capacity of the cluster increases through this approach. Learn more:

ABC

HVPs

FPI-I'S ABC CLUSTER FARMING CONCEPT

Agrifood-based Clusters assist in the implementation of the RUAIPP strategy through mobilization, Identification, Engaging, and Empowering of farming communities through skill and knowledge transfer methodologies that build passion and increase the participation of locals in farming activities and Increase the demand for nutritious food in an economy.

Our cluster success in agrifood production is determined by the following formula:

D = P + 2G

D stands for the Annual Rate of Growth in demand for food.

P stands for Population Growth Rate.

2 stands for Income Elasticity of Demand for Agricultural Products.

G stands for Rate of Increased Per-Capita Income.

Farmer's Pride International's Rural and Urban Agriculture Innovative Production Program (RUAIPP) is a comprehensive strategy aimed at promoting sustainable agricultural development through the implementation of Agriculture-based Clusters Concept. This strategy encompasses various key factors including annual growth rate, population growth, income elasticity of demand for agricultural products, and the rate of increased per capita income:

1. Annual Growth Rate:

The RUAIPP strategy takes into account the annual growth rate of the agricultural sector in order to assess the overall performance and potential for expansion. By analyzing the annual growth rate, Farmer's Pride International can identify opportunities for investment and development within the agriculture sector. This analysis allows the organization to focus its efforts on high-growth areas and implement strategies to enhance productivity and output.

2. Population Growth:

Population growth is a crucial factor in determining the demand for agricultural products. As the population grows, so does the demand for food and other agricultural commodities. Farmer's Pride International's RUAIPP strategy considers population growth projections to anticipate future demand for agricultural products. By understanding population dynamics, the organization can tailor its agricultural production and marketing efforts to meet the evolving needs of a growing population.

3. Income Elasticity on Demand for Agricultural Products:

The income elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in consumer income. As incomes rise, consumers may allocate a larger portion of their budget to agricultural products, particularly high-value and specialty items. By analyzing income elasticity, Farmer's Pride International can identify opportunities for expanding production of products that exhibit a strong income elasticity of demand. This knowledge allows the organization to align its agricultural production with changing consumer preferences and income levels.

4. Rate of Increased Per Capita Income:

The rate of increased per capita income directly influences consumer purchasing power and consumption patterns. Farmer's Pride International's RUAIPP strategy accounts for changes in per capita income to understand how it impacts the demand for agricultural products. As incomes rise, consumers may seek higher-quality or more diverse agricultural products, leading to shifts in production and marketing strategies. By monitoring changes in per capita income, the organization can adapt to its agricultural production to align with evolving consumer preferences and purchasing power.

Farmer's Pride International's RUAIPP strategy on Agriculture-based Cluster Concept is designed to be responsive to key economic and demographic factors such as annual growth rate, population growth, income elasticity of demand for agricultural products, and the rate of increased per capita income. By incorporating these factors into its strategic planning, the organization can effectively identify opportunities, address challenges, and optimize its agricultural production and marketing efforts to promote sustainable growth and meet the needs of diverse consumer populations.

This concept assists FPI-I to determine the type of products to promote for production as it joins the global market on production of High-Value Products (HVPs), which are globally demanded, cross-border, value chain builders done in geographical project areas under the RUAIPP with such areas termed as Agro-Based Clusters (ABCs).

We can all agree that (COVID-19) pandemic left calamitous challenges that accentuated the need for High-Value Products (HVPs), this prompted FPI-I to change its farming strategy to promote value chain development that will generate new income and employment opportunities in both urban, peri-urban, and rural areas. Moreover, the transition toward HVPs-oriented agriculture is essential for achieving Sustainable Development Goals 1 and 2, no poverty, zero hunger, and good health and well-being. Enhancing farm income which is vital for achieving food security and promoting sustainable agriculture. Therefore, the central question is how do we transition toward HVPs-oriented agriculture in African countries?

Agri-based clusters include globalized value creation processes, digital and carbon-neutral transformations as well as sectoral and technological convergences, today’s Agro-based businesses face complex and turbulent environments:

They need to buy affordable quality seeds
They need to sell a stream of new and better products in identified growth markets which are often heavily contested.
They need to take the lead in quality improvement and new technologies.
They need to produce and sell at competitive prices

To reach these goals, farms must innovate successfully through dedicated R&D on a regular and long-term basis.

Agriculture in developing countries is transforming from the production of cereal grains to high-value agricultural products (HVPs) and processing them to meet the standards demanded in the market. The production of HVPs is usually geographically clustered and, hence, such areas may be termed Agro-Based Clusters (ABCs). However, not all ABCs process products to meet high-quality demand. We categorize ABCs into Farming Clusters (FC), where no processing is involved, and Industrial Clusters (IC) where processing, including value addition, is a significant activity to meet the quality requirements of exports and supermarkets. The major challenge for developing countries is to develop ABCs and transform their FCs into ICs.

The World Bank (2007) argues that this transformation provides unprecedented opportunities for developing countries to improve the income of poor smallholder farmers. In order to supply HVPs to export markets and supermarkets, fresh and processed HVPs must be safe and of high quality (Reardon et al., 2005). The safety of food is now considered vital for the growth and transformation of agriculture, which are needed to feed a growing and more prosperous world population, for the modernization of national food systems, and for a country’s efficient integration into regional and international markets (Jaffee et al., 2019).

STARTING AND MANAGING CLUSTER FARMING :

Cluster Farming formation:

Cluster farming is not about grouping people into village farming groups and telling them to plant crops, it's all about promoting mindset change through identifying, mobilizing, influencing, Motivating, Equipping, and deploying to the field, and then offering continuous financial and technical support.

What benefits do agriculture-based clusters bring to members?

Through clustering of small-scale farmers and SMEs can win together on things such as negotiating discounts on inputs, marketing their products, or lobbying policymakers.

To win Research and development (R &D are required to support this transition toward high-value agriculture production through the Agro-based cluster development approach. Although there is a wealth of research and initiatives relating to cluster development in various industries, little attention has been paid to clusters in the agricultural sectors (Gálvez-Nogales, 2010). Therefore, the international research community can contribute to the transition by helping to design an effective strategy to develop agro-based clusters in developing countries. Moreover, governments and donors can contribute by providing support to research programs that aim to deepen our understanding of agro-based cluster initiatives, structure, and outcomes.

The cluster approach will enable smallholder farmers and agro-processors to engage in high-value agriculture through at least two key mechanisms. The first mechanism is knowledge and information spillovers. The vertical and horizontal coordination between actors in the agricultural value chain and supporting organizations will foster trust, reduce transaction costs, and facilitate the flow of knowledge and information. Knowledge and information transfers will then promote the diffusion of technological and managerial innovations. These innovations are important because, in high-value agriculture, good performance by cluster members can boost the success of others. For example, the performance of agro-processors is highly dependent on the crop quality produced by farmers. The second mechanism is collective actions. Organizations within a cluster can be used as a means to consolidate marketing operations, such as market research and crop quality certifications. These collective actions will substantially reduce the transaction costs of individual farmers and agro-processors, thereby allowing each member to enjoy low transaction costs as if it had a greater scale. Moreover, farmer organizations will also enable smallholder farmers to access credit, quality inputs, and machinery (Bizikova et al. 2020).

Otsuka and Ali (2020) propose five strategies for the development of agro-based clusters in developing countries. First, stakeholders within a cluster must be mobilized into various groups, such as farmer cooperatives and agro-processors associations. Second, stakeholders in the cluster must be trained through their groups. Specifically, training for improved cultivation practices must be offered to farmers, seed companies, and nursery operators. Moreover, farmers should be trained in grading, marketing, and management. Besides, managerial training must be offered to agro-processors. Third, the collective actions within each group and the vertical linkages between farmers and agro-processors through contracts must be promoted. Fourth, a regulatory framework to implement quality standards must be set up. Finally, a project management unit must be established to coordinate the interests of diverse stakeholders and promote the cluster-based agricultural transformation approach.

From Planning to Practice:

Clustered agribusinesses can benefit from sharing workers amongst themselves. If these businesses were on their own, they might not have been able to offer full-time jobs individually. At the same time, these jobs provide a solution to rural unemployment and migration, which municipalities struggle to deal with. Local universities and extension services benefit from a growing agriculture sector that employs its students and drives policy dialogue on research and innovation.

A cluster should be composed of 6 to 10 individuals or even more but should remain manageable, these are groups of trained and existing local farmers who are practicing small-scale to commercial agriculture and link them to an FPI-funded Hub Farm, they must organize themselves, have a constitution, a committee with leaders from Chairperson, vice, secretary, vice, treasure, and 3 committee members.
These farmers will become Cluster Farms/ satellite farms or out-growers, together they will form a solid entrepreneurial group capable of sharing both the benefits and burdens.
Satellite Farms must be within a radius of 50 km of Hub Farm and will be set up as a mixed farming company; producing a variety of crops, animals, and other products such as fish, grass, crops, goats, sheep, crops, and others will be poultry farms for broiler and other poultry products, etc.
The Hub farm will supply Satellite Farms with training and inputs.
To match all products that are produced and grown on Hub Farm to ensure quality and sustainability.
Next to this, the Hub Farm will provide the necessary infrastructure such as barns and/or fish ponds.
Satellite farmers will be trained by the Hub Farm in the field of crop production, animal husbandry, preparing feed schedules, identifying diseases, record keeping, accounting, management, and planning in order to promote their independence.
Distribution, marketing, and trading of the products are done by the Hub farm, allowing the Satellite Farms to focus on the production of their crops and animals.

FPI's main focus is on clustering to build the capacity of the urban and rural farmers and open up domestic and international markets for them through the following steps :

Providing funds and incentives for farmers
Finance the Hub farm:
Finance of Satellite Farms:
Investment period of 5 years;
Takes 30% of shares and profits from all sales and investments ;
Annual interest ___ %;
All loans issued out must be paid back at agreed interest and during agreed periods.

We believe that our approach shall support the building of sustainable food systems across the world, besides meeting SDG 1 and 2 Targets, the project shall enable Africa to feed its continent and the world at large.

Clustering is a great way to formally organize a complex sector like agriculture, promote development and accelerate change. To quote the old proverb: if you want to run fast, go alone; if you want to go far, run together. Farmers are encouraged to establish and register clusters in their communities as associations and cooperatives and link them with FPI. Read more: >>>>

FOR TRAINING ON CLUSTER FARM MANAGEMENT, PLEASE CALL FPI-I ON: +26773269606

Cluster Formation

Cluster-based Value Chains

Transformation of ACs into AICs

In order to transform “traditional agriculture,” we must upgrade Agriculture Clusters (ACs) to Agriculture Industrial Clusters (AICs), where the participation of interconnected (not necessarily geographically contiguous) private firms, be it processors, supermarkets, or traders, play a major role in the value chain. To meet changing quality demand parameters, the roles of innovators, researchers, and financiers become very important for the development and survival of AICs. Additionally, mechanisms to assure the quality of agricultural products.

THE ABC, AC AND AIC STRATEGY:

Cluster Strategy Implementation

Agriculture Based Clusters Structure

This emergent business model lays social goals onto the profitability and loss-prevention objectives observed in traditional food supply chains. A successful cluster will return profits for food distributors and agricultural producers, as well as generate social benefits through values-oriented food production and marketing..

Improvement of product quality

The first step to transforming ACs into AICs is to improve the quality of agricultural products. For this purpose, the availability of improved seeds or root stocks of fruit trees is essential. A longer-term solution is to invest in agricultural research to breed improved varieties and select rootstocks suitable for the local climate. High-quality seeds and rootstocks must be certified, and the government must monitor their sale through a robust monitoring system and appropriate infrastructure.

Benefits of Cluster Business Model

1. Better access to research/technical information

2. Better sourcing of good quality inputs/materials

3. Better quality extension services

4. Greater access to markets

5. Better access to financial support, etc

6. Improved negotiating power

7. Lower cost of operations

8. Promotes the establishment of cooperative groups

9. Promotes strategic alliances for agribusiness development

FPI-I clustered establishes Food value chains which can be most effective when the members involved in the cluster projects can agree upon a set of mission values, such as farm viability, farmland preservation, healthy food access, and sustainable production practices, and a set of shared operational values, such as accountability, long-term commitment, open and ongoing communication, and transparency, and use these shared missions and operational values as a means to differentiate and add value to the products they are offering to their customers

To those in the industry, farming is a way of life. Yet as farms consolidate and city populations grow, the farming lifestyle is becoming more and more unique. Investors looking to diversify have multiple options when it comes to investing in farmland. Here are the main options:

Principles

The FPI cluster model contains several guiding principles:

It must be locally owned and aligned with the country's goals
It must be market-driven with projects led by the rural and urban sectors
It must be multi-stakeholder with open and inclusive engagement
It must be Holistic, integrating the full value chain into the agriculture system
It must be globally connected and supported

Framework

In addition, there is an eight-step framework:

Design

Engagement: Identify and engage influential champions
Alignment: Develop a shared partnership agenda
Structured: Establish a partnership structure

Implement

Planned: Define specific goals and action plans
Implemented: Implement action plans
Advanced: Leverage milestones to drive progress

Adapt and scale

Scale: Institutionalized proven models
Review: Assess the partnership strategy and structures

The Great Value of Agricultural Based Clusters:

Key characteristics of cluster farming include:

Coupling economies of scale with sales of differentiated food products that are designed to attract consumer demand and obtain premium prices in the marketplace
Using cooperative strategies to achieve competitive advantages and the capacity to adapt quickly to market changes • Emphasis on high levels of performance, trust, and responsiveness throughout the network
Emphasis on a shared vision, shared information (transparency), and shared decision-making and problem-solving among strategic partners
Commitment to the welfare of all participants in the value chain, including providing adequate profit margins to support the business and its owners, fair wages, and business agreements of appropriate and mutually acceptable duration

Additionally, farmers, ranchers, and other agricultural producers in food value chains:

Know their production and transaction costs and are able to negotiate prices based on acceptable profit margins above those costs.
Perceived contracts and agreements as fair, having been freely agreed to, providing equitable treatment to all partners, and including appropriate timeframes.
Are able to own and control their own brand identity as far up the supply chain as they choose. This may involve co-branding with other strategic partners.
Participate fully in the development of mechanisms to resolve conflicts, communicate concerns about performance, and alter directions within the value chain.

Preparing to Enter a Cluster Arrangement:

Look Before You Leap!!

Before a farmer or business decides to enter into a cluster partnership with other businesses, it is critical to perform due diligence. Conducting thorough assessments of the market, the strengths and weaknesses of prospective partners, and one’s own capacities will go a long way towards making good decisions and building strong, long-lasting partnerships. Know Yourself, Know Your Market Entering or building a value-based food supply chain requires an understanding of how each business fits into the chain and why they are part of it.

Questions that should be considered by the cluster leaders and partners include:

How does each partner/organization contribute to the chain, and how does it help the chain support its core operating principles?
What motivates each partner organization to work within the chain?
What does the chain require of each partner organization?
What does this food value chain look like structurally, and how do the organizations’ structures mesh with this? By coordinating business planning and operational strategies, businesses within the value chain can maximize the benefit they receive from natural synergies resulting from their overlapping scope of activities, needs, and interests.

Know Your Collaborators

The best cluster collaborators are those that have similar values, different competencies, and compatible business structures and scales. They also need to be willing and able to participate fully in information sharing, decision-making, and investment. In short, are collaborators willing to be forthcoming and engage with questions, conflicts, and new perspectives? To answer this question, businesses building value-based food supply chain relationships should determine if potential collaborators have these characteristics:

Commonalities and mutual interests
Compatible values
An understanding of the rights and benefits of each partner
An appreciation of the obligations and responsibilities of each partner
The capacity to interact and consult extensively with others in the chain
A willingness to consider new collaborators and perspectives
Equal risk exposure
A willingness to share brand identity or allow for a separate identity (carrying the farmer’s story through to retail packaging, for example, can be important for the farm’s business but difficult for the marketer’s business to accommodate)

Potential collaborators should be prepared to make the investments and commitments required by answering questions such as:

What resources, infrastructure, or products is each party willing and able to contribute?
How much time is each party willing and able to invest? It is important that all parties are honest and realistic about their schedules and are able to balance available time with the work of maintaining and building the relationship.
How committed is each party to the cluster-based food production supply chain?

Value-based food supply chains require reliable collaborators, the kind who will stand firm by their commitments even when another opportunity or better price beckons.

Do Research To Protect Assets

In a value-based cluster, the greatest asset is business reputation. Customers want to trust that what they see is what they get. Researching business partners is a necessity, just as an individual who is hiring a new employee would perform a background check on the potential employee. Checking into a potential collaborator’s past can uncover warning signs. Sample issues to investigate might include looking at the prospective partner’s record on:

Upholding agreements
Meeting orders and coming through with products
Paying suppliers on a timely basis
Reputation for fair business dealings

The time may come when the relationship is clearly not working. One way to prepare for that possibility is to plan for failure—that is, develop an exit strategy upfront for all collaborators. A third-party mediator can also help parties reach a mutually acceptable arrangement. Another option is to identify other, more beneficial, ways in which the relationship might evolve.

Strong Cluster Relationships: Some Indicators for Success

The business collaborator keeps the triple bottom-line (economic, social, and environmental outcomes) in mind and is consistent with the value chain’s criteria.
Collaborators are able to offer and accept constructive criticism.
Collaborators with more economic power do not wield and abuse it, but check their power in favor of balanced relations with value-chain partners.
The cluster enterprise is flexible enough to quickly make business decisions, adjust to market downturns, and capture new market opportunities.
The cluster scale, structure, and locale fit its purposes (big enough, nimble enough, close enough to key suppliers or buyers).

Weak Cluster Relationships:

What To Avoid

Unmeasured goals and expectations of collaborators
Switching loyalties, such as to outside buyers
Inability to make effective decisions
Inability to accept criticism
A lack of trust, can build resentment and an adversarial relationship
Unwillingness to share risks and benefits
Unbalanced distribution of work, risk, and benefits.

Cluster Funding By FPI:

After the cluster has qualified for funding, which nonally happens after 2 successive successful harvest of one high value crop (HVP), FPI will buy 30% shares in the cluster and fund the cluster for a period of 5 years, below is what will be covered

FPI will finance the first setup for the satellite farmers;
FPI will assist the farmers with the construction of their mixed farms;
The farmers and their families will be trained by the Hub (FPI) Farm in the field of food production, animal care, preparation of feed schedules, and identifying diseases;
FPI will supply the Satellite farms with animal-/ fish feed, young animals, fingerlings, and seedlings.
FPI educates the farmers and their families in accounting, management, and planning in order to promote their independence;
All products are produced and grown on the Hub Farm to ensure quality and sustainability;
FPI takes care of the distribution, marketing, and trading of Satellite farm products across the world.

Cluster Strategy

Farmer's Pride International Investiments

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