Integration of smallholder producers in high value chains: a marketing systems perspective

Changes in the structure of value chains have opened up lucrative opportunities for smallholder producers to increase income as a means to improve their livelihoods. Yet, recent literature argues that smallholder producers are better off in their current markets than when integrated in high value chains on disadvantageous terms. This chapter studies the terms of integration of smallholder producers in high value chains from a marketing systems perspective. Results indicate that because of uncertainty regarding reliability of supplies from smallholder producers, exporters adopt quasi-hierarchical forms of governance to monitor supplies. To enhance production, exporters offer advanced payments or loans and disbursements to smallholder producers and use smallholders� harvest as collateral. In return, smallholder producers offer assortments of deciduous fruit to exporters. To coordinate delivery of fruit to overseas markets, exporters estimate yields and inform markets; they monitor packing, liaise with cold stores, make transport and shipping arrangements and communicate these with the importer(s).While this approach guarantees smallholder producers access to high value chains, it also locks them into these relationships thus creating dependency. These findings imply a need for smallholder producers to learn to perform the functions necessary to integrate in high value chains in order to increase their margins. Key words: uncertainty, quality, deciduous fruit, exporters, perishability