P. Khuntonthong1, G. Neubt2 , and N. Chakpitak 1
1 College of Arts, Media and Technology, Chiang Mai University, Thailand.
2 LIESP / ESC ST Etienne, 51-53 Cours Fauriel, 42009 St Etienne Cedex –France Abstract— Most of the poor people in the world are
farmers whose livelihoods are based mainly upon agriculture; therefore, agriculture can provide an effective means for reducing poverty and accelerating economic growth. As poverty is the main cause of hunger, an increase in self-reliance with regard to food in the households of farmers in remote areas with scarce resources is as important as increasing income.
In order to resolve the problems associated with this situation; however; access needs to be gained to the entire value chain system for goods. As revealed from a previous survey, an alternative to agricultural practices called ‘the New Theory Agricultural’ process, can help farmers to gain a sufficient income, and become more self-sufficient in food. This paper aims to present a qualitative research method used for analyzing supply chains and identifying effective supply chain redesign strategies. By applying this process, the main goal is to propose a supply chain management strategy for agriculture that can solve the problems arising from external uncertainties and constraints. The process consists of three stages: self reliance - sufficient food for consumption within the household, a small-scale farm’s ability to generate sufficient income from a surplus supply and minimizing the total costs of the supply chain.
Index Terms – agricultural sector; reducing poverty;
supply chain design; Sufficiency Economy Philosophy; supply chain management.
I. INTRODUCTION
Seventy-five percent of poor people in the world live in rural areas, and for the most part, their principal sources of livelihood depend on agriculture, forestry, fisheries and related activities [1]. They depend on agriculture for their earnings, either directly as producers or hired workers or indirectly in sectors which derive their existence from farming.
While the lack of sufficient income to purchase food is clearly a major factor causing household food insecurity, hunger itself contributes to poverty by lowering labor productivity, reducing resistance to disease and restricting educational achievements.
Agriculture is the most likely, potential source of significant economic growth in many developing countries. Historical experience suggests that agricultural growth and increases in agricultural productivity may be a prerequisite to broader based sustained economic growth and development (DFID, 2002: p. 9, cited in Humphrey, 2006)[2], and agricultural development is normally used as a tool to reduce poverty in developing countries. Many
documents reveal that poverty reduction is an effective method for tackling hunger and promoting development [3]. In agriculture based countries, increasing agricultural production boosts rural incomes, which helps to reduce poverty and assists in development, since people depend on agriculture as their main source of income.
In order to sustain benefits for small-scale farmers, some different points of view argue that to solve the problem of poverty and hunger, the problem that should be addressed is the gaining of access to the high-value market chains for goods as well as for labor, not just setting up farmers’
cooperatives and leaving the farmers to fend for themselves in a complex marketplace. The new rural reality requires more comprehensive, market-oriented and context-specific approaches, in which rural stakeholders, private investors and donors actively participate.
The aim of this paper is to address the issue of poverty and hunger reduction by proposing alternative ideas that help the rural poor gain access to value chain markets, as well help improve the level of production for household consumption and for generating cash income. Based on the “New Theory Agriculture” process developed in Thailand, a process designed to make small farmers more self-reliant, this paper proposes a methodology for designing the food supply chain in this context. This methodology is based on the identification of all the uncertainties and constraints within the supply chain for small farmers, including products, production, demand management, sourcing and distribution.
II. AGRICULTURE, FOOD SUPPLY CHAINAND
POVERTY
Agricultural markets play an important role in economic growth, but the main problem is the welfare of small-scale farmers, those who live in remote areas and have access to scarce resources.
Since marketing system of agricultural products has changed due to the globalization, as Taylor (2007) said that globalization and market integration are a fact of life that will continue regardless of whether or not the rural poor are prepared for it. Globalization and integration, marked by the WTO and regional trade agreements, have increased agricultural producers’ access to foreign markets while exposing them to greater competition from abroad. This
exposes agricultural producers to international price gyrations but brings potential benefits as well as threats. In most countries agricultural markets are being transformed because of the new demands of exporters and supermarkets.
As Dixon (2001) reveals [4], agricultural development provides an effective means for both reducing poverty and accelerating economic growth, due to it being the principal driving force of the rural economy in developing countries, and its aim is not just to increase the incomes of producers and farm workers, but also to create a demand for non-tradable goods, services and local products. With a large population of small-scale farmers, agricultural growth can reduce urban poverty more rapidly than urban growth itself. The main reasons for this is are the reduction in food costs in urban areas and the lower rates of outward migration from rural areas.
There is strong evidence to suggest that productivity based agricultural growth, especially by small producers, has an overall positive economic impact on rural areas. In order to gain these advantages though, small-scale and artisanal food processing techniques may need to give way to more organized, capital intensive processing plants, and a similar scenario may apply for other activities up- or down-stream of the primary agricultural base. However, the
“new agriculture” requires high levels of skill and capital inputs. The rapid change in agricultural marketing systems, from traditional markets to markets associated with large-scale supermarket retailing and wholesale operations, is the cause of the reduction in outlets available for small-scale producers. As a result, the risks of falling into poverty for these producers and in the rural community as a whole are increasing.
This change affects the value chain of agricultural products for consumers, retailers, wholesalers, processors and producers, and with enormous implications for the competitiveness and future viability of small-scale producers. Obstructions can be overcome with the right sort of support and the presence of good business partners; small-scale producers can be efficient and reliable providers of quality products. In order to enhance the opportunities available for small-scale producers in the new business world, the ability of them and their organizations to access modern and traditional markets has been a concern, as has the anticipatory public policy framework and the involvement of the agri-food business in the development of the market (Vermeulen,2008)[5].
As stated by Humphrey (2006), Gustavo Anríquez and Kostas Stamoulis (2007)6, and Anríquez et al., agriculture is an engine for growth and an effective means to reduce poverty in rural areas. Agricultural growth is most effective at eradicating poverty, particularly in countries that are not characterized by high levels of income inequality,
because it provides a direct link to the poor. The phenomenon of hunger and famine might occur even there is no food shortage, and as Sen (1981) states
“not by food shortage[s] but by the shortage of income and purchasing power” which, in turn, depends on “a person’s ability to command commodities in general and food in particular”. Also for Sen (1999), certain groups of people, if they lack purchasing power, can starve in a society, even though there is no problem with the aggregate availability of food, the markets are well stocked and prices are low. (Sen, 1981 and 1999, cited by Dowlah, 2006)[7]. As hunger and poverty are closely related; therefore poverty eradication is one of the methods that can be used to help solve the problem of food insecurity for the poor.
For small-sale farmers, improving production for household consumption and income generation purposes is crucial (Taylor J. E et al., 2009).8 Similar to Taylor, as Vermeulen (2008)9, Cobb et al. (1999, p. 209)10, and Cobb et.al. (1999, p. 209) recognise
“the food chain as a whole is the ultimate framework for a scrutiny of sustainability”. The emphasis on sustainable food chains is an important departure;
because, in this context, sustainability is seen in terms of the wider agro-food system, especially the vertical linkages in the food supply chain, including the farm.
For the food industry, the supply chain for agrifoods, as in any other supply chain, is a network of organizations working together on different processes and activities in order to bring products and services to the market, with the purpose of satisfying customer demands(Christopher, 2005 , cited in Ahumada, 2009)[11].
To improve performance of the supply chain in the food industry, Vorst (2006)[12], identifies uncertainty and several improvement principles in the food chain in which a simulation model help quantify the effects of alternative configurations and operational management concepts. The identified sources of uncertainty in his study are: order forecast horizon, input data, administrative and decision processes, and inherent uncertainties. The results of the case study suggest that uncertainty reduction can help to improve service levels significantly, although current supply chain configurations restrict the possible benefits. In addition, Sternet al. (Stern et al., 1996, cited by Vorst, 2002)[13] propose a method to redesign the value chain by laying out a marketing channel planning approach that permits there orientation of distribution systems in order to be more responsive to customer needs. Stephen J.
New[14] outlines that not only the domain of supply chain management research (such as, how many links are there in the chain?) and the range of methodologies deployed, but also the scope and social/ideological constitution of supply chain innovations and their ethical and political
implications; such as perspectives on the social, political and ethical aspects of supply chain management, compressing advantages into
“efficiency”, doing better with the same or less amount of investment in resources and driving the logic of the supply chain, suggest that a holistic approach is more efficient than the alternatives.
III. CASE STUDYOF SMALL-SCALE FARMERSIN
THAILAND
In Thailand, 40.05% (25 million) of the population works and lives in the agricultural sector (in 2006) and most of them live in the northeast and northern regions of Thailand, where the percentage of those below the poverty line is equal to 18.9% and 9.8%, higher than other regions. An article in the Human Development Report of Thailand states that the highest percentage of poor people, by comparing the occupation of household heads (1988 to 1996) is the farmer. Furthermore, the debt per household of Thai farmers has increased dramatically, from 43,415 Baht in 2002 to 68,158 Baht in 2008, a rise of 36%.
In recent years there has implicitly been only one blanket policy for rural or agricultural development for the whole of Thailand; the farmer has to specialize and to produce commercial crops in response to market demand. Under the market-oriented economic policies, the rural sector in Thailand has contributed to economic growth by generating many agricultural commodities which can compete on the world market, but not all farmers have received these benefits, especially the small-scale farmers in rural areas. Due to a variation in farm characteristics, the correct approach to developing the agricultural sector should be to tackle poverty problems, and not merely depend on the same blanket growth oriented policies. There are two main types of farmland in Thailand: the irrigated fertile areas and the rain-fed infertile areas.
The minority group of farmers lives in irrigated fertile areas, and enjoys a high productivity of exported crops, have lower supply risks and experience lower transportation costs due to their short distance from a major port. The ideal approach to developing this group should be to focus on the competitiveness of the exported crops on the world market. However, the majority group of farmers who live in rain-fed infertile areas have difficulty in producing and marketing due to high risks on the supply side, such as weather uncertainties and long distances from a major port. The aim of a development approach for such a group of farmers should be to focus on the agro-system, shielding it from instability by spreading and minimizing the risks involved [15]. Furthermore, as every farmer is unique, an approach which takes the diversity of opportunities, the problems facing small farmers and their resources into account, is crucial when dealing with poverty and hunger. Economic growth is not the
only factor to be considered when looking at poverty reduction. Shifts in the amount of production made available for consumption (shifts in the Consumption/GDP ratio) and shifts in the distribution of consumption among a population (Lorenz curve shifts), can also have a large impact on poverty levels [16].
An alternative approach to agricultural development, one which aims to sustain and balance the development of farmers in Thailand, has been guided by His Majesty, King Bhumibhol, and is called the “Sufficiency Economy Philosophy”. In 1974, The Sufficiency Economy Philosophy1concept was first mentioned, calling for balanced and sustainable development at all levels. The Sufficiency Economy concept is a philosophy which serves as a “guide for the way of living/behavior of people at all levels, toward the middle path”. The system of agriculture under the Sufficiency Economy Philosophy, commonly known in Thailand as ‘New Theory Agriculture’, suggests for small-scale farmers a new sustainable style of agriculture which moves towards self reliance for the rural household. The main purpose of New Theory Agriculture is to make farmers more self-reliant through holistic management of their land, while living harmoniously with nature and within society.
This is different from previous agricultural development strategies, which put more emphasis on specialization and mono-culture cropping, producing in response to market demand. New Theory Agriculture has three stages: (1) sufficiency at the household level, allowing farmers to be at least self-sufficient in terms of food, and creating a proportionate income from selling extra crops and products beyond the necessary consumption of the household; providing a basic self-immunity to farmers against a diverse range of adversities, (2) sufficiency at the community level by encouraging people to seek benefits by cooperating with neighbors in order to reduce the costs of raw materials and to carry out marketing activities, as well as to increase the community’s bargaining power when selling surplus products to the market.
These activities should lead to more self reliance
1“Sufficiency” means moderation, reasonableness and the need for a self immunity mechanism against the impacts arising from internal and external changes. To achieve this, the application of knowledge with due consideration and prudence is essential. In particular, great care is needed in the utilization of theories and methodologies for planning and implementation at every step. At the same time, it is essential to strengthen the moral fiber of the nation, so that everyone, particularly public officials, academics and businessmen at all levels adheres first and foremost to the principle of honesty and integrity. In addition, a way of life based on patience, perseverance, diligence, wisdom and prudence is indispensable to create balance and be able to cope appropriately with critical challenges arising from extensive and rapid socioeconomic, environmental and cultural changes in the world.
among communities, while enhancing the capacity of community members to reduce living costs, increase income, and create a community social safety net.
This approach can be compared to a cluster of businesses developing in the same locality, with similar activities, in order to achieve economies of scale as well as economies of scope, and (3) sufficiency at the national level; communities are encouraged to expand their activities by reaching out to co-operative firms, banks and other outside sources. The expansion across different levels of organizations or activities can be compared to developing a value-chain in production [17]. The aim of this New Theory Agriculture is for farmers to become self-supporting by dividing the land into four parts, according to the proportions 10-30-30-30. The first 10% of land will be used for housing, perhaps with a small amount of livestock and poultry. The remaining parts, at 30% each, are: paddy fields for self-consumption, with a likely surplus that can be sold on the market, reservoirs, with a depth of four meters to be used for water supplies and with the possibility of raising fish, and other crops such as vegetables, fruit and flowers.
A study from 59 farm households has shown the benefits of the New Theory Agriculture process when compared to extensive mono-cropping. The challenge, when wishing to implement the New Theory Agriculture efficiently, is how to identify specific agricultural and rural development needs and opportunities, and to focus investment in areas where the greatest impact on food insecurity and poverty will be achieved. This identification and resource allocation process can be facilitated by analyzing farming systems, the linkages to markets, as well as the welfare of the farmers, in order to develop an understanding of local factors and linkages.
IV. RESEARCH METHODOLOGY
This study suggests a re-design of the value chain for small-scale producers in the agricultural sector, in order to solve the problems of poverty and hunger, through implementation of the New Theory Agricultural approach in rural communities. As part of its full scope, the New Theory Agricultural consists of three stages. The first stage aims to create self-reliance and self-sufficiency at the household level, addressing food security for small-scale farmers and their farming systems. The purposes of the second and third stages are to create sufficiency at the community level and expand activities across different organizational or activity levels, a concept in line with the value chain model. This chain can be shown as follows:
The functions of the chain include: economic aspects such as farmers’ incomes and costs, social perspectives in the community such as food security, nutrition security, poverty and debt, and environmental aspects such as natural resources and chemical residues in the environment.
The core methodology of this approach:
1) State the value chain objectives
2) Map the existing value chain; the flows of products to provide an accurate description of the current distribution system
3) Define the uncertainties and constraints
4) Define the causes of supply chain uncertainties and constraints, drivers and trends, current constraints and threats posed by internal and external factors. To do this use cause and effect analysis, and
5) Redesign the chain by applying the New Theory Agriculture; to give an ideal distribution system.
Although the definitions of poverty vary substantially from one point of view to another, this
Although the definitions of poverty vary substantially from one point of view to another, this