Poor integration of smallholder farmers into value chains is the binding constraint on several communities’ ability to participate in the global economy. To address this, we leverage a supportive policy environment in Mexico as well as agrifood companies already working to responsibly procure commodities.
Over the last three years, CIMMYT has connected approximately one thousand smallholder farmers growing maize and wheat on some ten thousand hectares, to companies such as Kellogg’s, Bimbo, and Nestle. From communities across Mexico, these farmers face barriers including poor infrastructure and high costs for inputs and transport. We have tracked farmer income, yield, profit as well as water and air quality on farmers’ plots, and can show how these linkages both support sustainable practices for farmers and sustainably increase income.
However, smallholders have sometimes struggled to provide homogeneous and consistent supply in terms of quality and volume. In addition, intermediaries in the agrifood system rather than the smallholders sometimes capture a lot of the value added. Farmers have limited negotiating power due to gaps in their market knowledge and connections. While we already work with more than forty semi-formal farmers groups, we see the need to establish a formal entity in order to scale and grow this approach. Corporations are also interested in more effective integration with smallholder farmers and the local policy environment is very supportive of such initiatives.
We propose establishing a Special Purpose Entity (SPE) that operates in target Central and Southern target states of Mexico as a not-for-profit organization with a fixed cost and margin structure. This would gather farmers to match market demand (grow products at right scale, use sustainable agricultural practices, support for administrative transactions); minimize farmer transaction costs (logistics and volume); strengthen business relations with buyers (contracts, single “window” for buyer); and share benefits evenly and transparently (and with lower transaction cost).
The SPE will establish an optimal operational environment with low running costs.This includes forming semi-formal groups in 30 km radius to optimize costs, defining logistics and rules of operations, and developing an ICT platform to enable a virtual marketplace for efficient grain management across the value chain (coordinating logistics and payments effectively). We anticipate that in three years, the SPE will be able to demonstrate self-sufficiency, offer farmers equity stakes, and commercialize 100,000 tons of maize by connecting an estimated five thousand smallholder farmers with access to new supply chainsWe will systematically documenting lessons to support replication elsewhere.