Strategy for the development of agro-based clusters

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 as agro-based clusters (ABCs). However, not all ABCs process products to meet high quality demand. We categorize ABCs into agriculture clusters (AC), where no processing is involved, and agro-industrial clusters (AIC) where processing, including value addition, is a significant activity to meet the quality requirements of export and supermarkets. The major challenge for developing countries is to develop ABCs and to transform their ACs into AICs. From the literature review on contract farming, ABCs, and industrial clusters (ICs), we conclude that although a few studies highlight individual components, no attempt has been made to formulate a consolidated strategy for this transformation. This study attempts to demonstrate that in addition to providing improved technologies and basic rural infrastructure, mobilizing stakeholders into various groups, such as farmers’ cooperatives and agro-processors’ associations; providing technological and managerial training of stakeholders through these groups; promoting their collective actions for innovations; and implementing an appropriate regulatory framework are the keys to transform ACs into AICs. Building from the differences and similarities between ABCs and ICs, we also conclude that the role of government support is much more important in the case of the former than in the latter.