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In considering rural poverty alleviation, proposals to promote high value crop diversification have almost become a mantra. Funds are allocated without hesitation without any definition of what crops are being referred to or for which markets. To cover up the ambiguity, expressions such as 'niche markets' are used as this avoids specifying how big market opportunities are, how valuable and how to market to take advantage of them. Few appear to question disproportionate allocations for high value crops catering to niche markets because the concept itself is so intrinsically attractive.
There is no agreed criteria. At its most basic, it could mean any crop with higher returns to farmers than the one they are growing. If we start with the main crop in a country or region, it is likely to be a cereal or a tree crop. With cereals, they are, in normal years, of low value and account for the poverty that exists but they also provide subsistence and a ready cash market. Tradition and habit enshrine these basic values into established patterns that afford security of whatever meagre livelihood small farmers do have. It does not help much to regard any crop or activity with a higher return than the main crop as high value diversification.
Instead, an objective criteria is required although it is very likely that the criteria will be case sensitive. After all, a higher value crop can only be considered if it is physically possible to grow it. For example, on coral islands in the Pacific coconuts are likely to be the main crop with some production of taro, kava, maybe cocoa and even maybe coffee, together with seaweed and fishing. Diversification may be limited in scope, particularly when access to markets is taken into account.
Therefore, the factors that need to be taken into account in developing a criteria are:

1 What can be grown,

2 Farm gate value per ton,

3 Farm gate value per hectare,

4 Net Farm gate income,

5 FOB value,

6 Use value.

Assuming rice gives $560 farm gate gross value per ha., the benchmark in a rice producing country is set. Growing something like cauliflowers, may yield $750 or $1,000 per hectare. Such a change may be desirable as it increases income and on farm employment as well as a varied diet but is difficult to view as a high value diversification. A good diversification, probably, and small farmers could be encouraged to set aside part of their land on a season or annual basis for such purposes. The staple crops like wheat, maize, rice and barley play a very important role in the dietary habits of the countries which grow them. The markets are assured even if they are low value. Demand for crops like cauliflower, in contrast, are limited. 
But when we advocate high value diversification, a lrager order of increase in value is assumed. If we advocate oil palm as being suitable, it is because it is, say $1,500 per hectare and that is a significant increase. It would be valid to use a change of that order to be high value on basis of return per hectare or per ton. It is not what is meant by most people to be a really valid high value diversification.
The debate is endless, we have tended to use the criteria that a commodity that sells FOB or wholesale at over $1,000 per ton is very high value and any crop that yields more than $1,000 per hectare high value. It is arbitary to use such guidelines but some criteria must be set at inception.
Of course, prices vary by country and region and thus the value per hectare is case determined. Coconuts may have a fram gate value of US 2 ecnts per nut in some areas of Papua New Guinea, but worth over a dollar in Oman.
Going by $1,000 per ton selling price, the list is pretty restricted but is the ultimate desirable end result. Some crops immediately enter contention like pepper, mangoes, durian, jackfruit, mange tout, and shitake mushrooms,
Using the criteria of over $1,000 per hectare, the list of candidate commodities becomes much longer, bringing in a large number of fruits as well as vegetables like eggplants, capsicums, cherry tomatos, and green beans. In fact, given efforts to increase yield rates are successful, even cereals qualify, but cocoa and coffee fall short.
Once crops have qualified under whatever criteria is adopted, choive from potential candidates willinevitably favour the highest valued. There are some which are very rare and cater to small niche markets. Probably, the most valuable is a fungus that grows on bamboos and is used in high quality Chinese cuisine. If you grew Shitake on a full hectare, the crop can earn phenominal amounts (in theory, millions of dollars per ha). There are mushrooms of far greater value. Even Coca producers in Peru get only $14,000 per hectare from drug barons, who clearly are not generous buyers. Shitake by area is more profitable to grow than coca or opium.
Serious candidates begin with mangoes. The world can never have enough good quality mangoes. While on an EC Mission to Mindanao, my good friend Pete Durano, who is promoting the development, introduced the Team to the Samal Island Mango and took us to the plantations that had displaced coconut ones. Del Monte was buying everything the farmers produced and incomes up to $10,000 per hectare were being claimed. What is a good mango is a delicate question since most mango going countries claim theirs to be in that catagory. Mangoes of unquestioned renown we have come across would include Samal Island and Guimiras from the Philippines and East Java from Indonesia. There are many others. In reality mango farmers can receive anything between $4,000-10,000 per ha and some mangoes are able to command much better prices than others. Retailers in Europe often offer different varieties at very different prices. Large mangos without much fibre or taste, mainly from South America are available all round the year but sell at half the price of Pakistan or Indian mangoes, when available, which are smaller but much higher flavour.
The problem is that a large number of good mangoes get eaten in the regions and countries where they are produced. A scheme we were involved with in the way of 4,000 ha in East Java by the Army Pension Fund led to excellent mangoes but no surplus for exports. Mango prices are, particularly in the off season, often higher in producing countries than potential importers, while in high season there is a glut leading to processing as pulp and juice. The rarity of finding the best mangoes at retail outlets in Europe can be appreciated readily by trying to find them. It is not therefore a marketing problem, more one of producing a good variety at a competitive cost, good post harvest handling, critical mass and freight. Anyone can sell a good mango.
Pepper too can earn farmers between $4,500-10,000 depending on variety and yields achieved, as can Durian. As in the case of mangoes, there is the likelihood that most growers think their produce is exceptional and sometimes it is as in the case of pink Durians or Scheuan or Japanese pepper. Healthy premiums can be earned by particular varieties. Brand differentiation is often a good idea because consumers discriminate according to characteristics. Care has to be taken that the variety being promoted is indeed likely to earn premiums greater than the cost of differentiation.
Access to markets is an important constraint. There are premium markets like Japan, Sweden and Germany, but you have to get your produce there and be admitted to the market. In the end, knowledge of markets helps us to choose between high value crops for diversification. The distribution system developed by Agrexco from Israel to Europe using a fleet of jumbo jets, is still the benchmark to try to reach while their production of varietal variations commands premium prices.
There are cases where consideration has to be given to broad sweeping diversification away from a particular crop or crops. They can be brought about by a change in factors such as declining availability of water (as in the Punjab, India) or a change in market conditions, such as an end use application retracting (as in the case of cassava for ethanol). In either of these relatively extreme cases, diversification has to be on a large scale where farmers are being advised to change their main crops.
The normal situation is that farmers have a portfolio of allocations that includes a main crop for sale but also includes crops for own consumption and activities to supplement incomes. Diversification through moving empahsis within the portfolio often makes good sense. Thus a 2 ha rice farmer may be advised to allocate 0.25 ha of one crop season or even a year to vegetables or farmers may be advised to plant fruit trees around the edges of their fields. Home gardens often point to the options available.
In any case, it makes sense to consider crops that are proven within the region after their commercial viability has been established through market research. That, in turn, means access to markets at viable prices.
The approach we used in Cambodia was:
1 scoping survey to see what was being grown and could be grown,
2 a long list of candidate crops with cost estimates,
3 market check to see what of the long list was viable and where,
4 short list of diversification opportunities,
5 present findings to SMEs and farmer organisations,
6 trade mission to target market/s, in this case Singapore.
A common limitation to diversification towards higher value crops is that the local market may be oriented towards low quality and low prices. Unless there is a growing demand for better quality, a larger range and consumers willing to pay for that, diversification options for the local market are limited.
Production of high value crops for export requires infrastructure as a pre-condition. The first step is that there has to be a supply of planting material. Then there is extension. You have to have critical mass to be viable. A cold chain for most fruit and vegetables. Finally, a distribution system. Again, Israel is able to overcome higher costs of watering through sheer efficiency of organisation.
Planting material has to be selected to ensure optimal varieties required by the intended markets, to maximise yields and suit the planting area. That means there should be local nurseries and often a tissue culture lab for propogation and research. These facilities have tended to suffer in recent years.
Persihables are often of high value but by nature of definition are usually produced close to the market place. Even so, they benefit from a cold chain from farm field to retailer. In the UK, the introduction of a cold chain led to the time from harvest to shop being reduced to under 24 hours. Many mistakes are made with cold chains, in the way of illustration, having cold storage at the wholesale market, as in Bangalore India, without having a cold chain up to that point is of very limited use. Most of the worst damage happens to crops in the first hours. Even leaving produce at field level for hours without due care is a critical weakness. Thus a cold chain has to cover crops from harvest to retail purchase and any gap in that continuous chain renders the chain almost useless.
Cold chains do not have to be on a big scale. Rather, they can be on a very small scale or decentralised. There can be mini refer vans collecting from farm gate to an assembly point where produce can be washed, graded and packaged and transported in large refrigerated containers to the central store for onward shipment.We costed such a system first for Sri Lanka, then adapted it for Cambodia and for the Kygyz Republic.
The ownership of infrastructure is very important since the same system can be used to increase farmer incomes equitably or to ruthlessly exploit farmers.
A large wholesaler/trader can implement a cold chain or controlled environment wholesaler/exporter venture. There are some formidable private sector multinationals which have done just that. But in a particular country, especially a relatively small one where there is no existing pattern, it is very difficult to get private sector investment for the project.
Equally, although donors talk about public/private partnerships, their rules and attitudes do not make that easy. The World Bank country desk officer for the Kyrgyz Republic dismissed out of hand VCA endorsement of the local proposals for precisely such a venture despite a public/private consensus favouring it and overwhelming farmer support. Credit lines are a safer alternative even if they are not taken up by anyone.
One way around this ideological opposition is to award a management contract to a private enterprise such as British American Tobacco (BAT) which we advocated for Cambodia and is again being proposed by Consultants to IFC. The best examples of management of such operations that we are familiar with are BAT and Agrexco. The latter is a more direct example but the beauty of the BAT system is that the company need not own anything, it can contract everything required allowing smaller entrepreneurs to service the operation.
The above is a representation of what we think is required in the way of infrastructure for high value export or import substitution oriented infrastructure. What is proposed owes much to the BAT syswtem but also to the Nucleus Estate System promoted in the past by the World Bank among others in Indonesia and other countries.
It is often assumed that the minimum scale for a high value crops system has to be large. This is not true. It is very profitable to have a large throughput but the chain can be a mini chain or a system of mini chains used as a feeder network into a larger one.
The largest chains are those run by Agrexco, Carmel, Moroc and Cy-cops but we have designed and are promoting a mini chain requiring an nvestment as low as one million dollars although it should be larger, nearer a $3 million investment for a full mini system capable of handling 36,000 tons of produce per annum.
The wholesaler exporter outlined in the chart above is entirely scaleable. It can be undertaken for an investment of one million dollars. It is likely to be extremely profitable and there are serious risks of misuse of power against the interests of farmers.