FarmWorks - Food for thought Vol.1
FARMWORKS Food for Thought is a newsletter that shares our insights, perspectives and learnings from building a mission-led integrated agricultural company in Kenya.
Production first or market led?
Over the last 14 months, FarmWorks has been through quite a journey: we quickly developed our farms, then realized we needed to invest in our market access … and now we’re back to realizing it all starts with the farms.
Over the last10 years, the development narrative for agricultural transformation is that it must start with the market. This makes sense. Without market access, farmers have no where to sell their produce. But the facts, and our own experience, tell a more nuanced story. Half of processing capacity in Kenya is not utilized. This because they cannot get access to consistent, quality produce. Kenya imports USD 1bn of basic food a year. Many fresh food distributors are moving away from working with mid-sized and small-holder farmers and transitioning to large-scale commercial farming. This is because it is difficult and expensive working with farmers with inconsistent production. So the market logic fails if we do not achieve signﬁcant improvement in production, driving down costs, improving consistency and quality.
We are experiencing this first-hand at FarmWorks. We invested in our market access infrastructure and are able to sell almost every kilo of produce we grow. The real challenge is ensuring that we can lower the cost of production and be consistent players in the market. This is far easier said and assumed than done. The common belief is that if the markets are organized, farmers will change their practices, invest in their farms and ﬁx their production. Actually, no! To make the markets work for farmers, the production needs to be right in the first place.
Our belief is that you have to simultaneously work on building both ends of the equation:
production and market access.
So the question for us is, how do you make a 5-acre farm as productive as a 500-acre farm? You cannot use the same technology and levels of mechanization. But you can change your crop types, adopt appropriate technologies and support correct practices. China’s agricultural transformation was small-holder led and achieved levels of efficiency far ahead of where we are today.
This is what FarmWorks is out to achieve – on our own farms and with our out-growers.
The role of brokers in fresh food distribution
Just the word ‘brokers’ is generally viliﬁed in the world of fresh food aggregation and distribution. The common refrain is that brokers prey on the inability of the farmer to get access to organized markets, assume very little risk and make the bulk of the margin. Every farmer dreams of a world in which they can put aside the brokers and sell directly to the market, shortening the supply chain and realize their fair share of the benefits of their hard work.
There is certainly truth in this – the brokers do not toil to grow the crop, nor do they assume the risk of the farmer. They also often make equal or higher margins to the farmer, in a much shorter period.
Direct market access is practically impossible for small- and most medium-size farmer. The investment in infrastructure, market knowledge, sales capacity and operational complexity required is significant.
One has to have massive scale to justify the investment. Brokers have a deep understanding of the markets in which they operate: they know the growers in their area, understand their production capacity and deeply understand the markets they sell to. They know what products are wanted where, in what condition and at what price.
Kenya has a graveyard of digital food market-places that have been piloted and experimented with. These don’t work when both production and demand are highly fragmented and quality standards differ widely. There is no ‘return policy’ on fresh food, so until quality and consistency can be ensured, these market-places are unlikely to work. Also, the digital platforms rely on logistics and infrastructure that does not exist.
Even FarmWorks, which is investing heavily in our market infrastructure has found brokers to be an effective part of our go-to-market mix as they are able to move large volumes of produce. But reliance on them has challenges:
you can be left vulnerable the moment a broker moves on, your own market knowledge is limited and so your ability to respond to market needs is affected and you are often left with the produce the broker does not care to take on board.
So the challenge for Kenya is not to do away with the broker- they play an essential role, until distribution infrastructure is significantly improved. It is rather to build farmer-broker infrastructure and relationships that play to the needs of both groups and allows for a fairer allocation of the income. FarmWorks is experimenting to see how to make this work.
Out-growers as a viable commercial model
Many of the leading agricultural players, regionally in East Africa and globally, have been built on the back of out-grower programs.
This is where someone supports and organizes small-holder farmers and provides off-take for their produce. However, we see a trend of larger companies moving away from working with these farmers, in favor of developing their own larger commercial farms. In fact, we often and increasingly hear the view that there is no space in modern agriculture for small-holder farmers.
Not only is this not viable across Africa, we know there are viable commercial models that can and need to be developed around small-holder farmers.
While many of our peers are turning away from working with these groups, FarmWorks is committed to ﬁguring out how to work with them and to thrive. Over the last few months, we have begun our pilot with 300 farmers – and are already learning a number of valuable lessons:
1. If you get it right, this can scale fast. After 14 months of heavy investment, FarmWorks plants ~25 acres of produce a month on our own farms. Within 2 months of our pilot, our out-growers were almost matching our planting acreage
2. Small-holder farmers truly appreciate your efforts, if you are sincere in your spirit of partnership and are able to provide the WHOLE ecosystem of support they need, from inputs (and input financing), on-the-ground education and learning (as opposed to e-extension, which is good but very far from sufficient), access to specialized machinery, technology and services and consistency in off-take and pricing
3. Changing behaviors and practices is not a simple exercise. And often the ‘outsider’ does not really understand the dynamics of local food production systems. Improving practices is a joint effort, not where I come teach you, but where we come and learn together – on your land and working with your reality
4. Many out-grower programs have focused on one or two products, leaving farmers to either destroy their soils by insufficient rotation, or to fend for themselves when they rotate crops. It is important to work with farmers in a program that ensures the long-term health of their soils
5. Farmers are skeptical: they have been involved in numerous projects that come and go, with no real long-term commitment. By being a farmer in their communities and committing to working with them in the long-term, we at FarmWorks are able to gain credibility and trust that allows us to work together in developing the optimal working relationship
Again – our goal needs to be to work with these farmers to become world class, and we believe this is possible. FarmWorks has established 9 Farmer Field Schools in our pilot program, jointly experimenting with new practices and appropriate technologies (a number of which we are
learning about from other parts of the world), creating a technology platform* that enables us to work seamlessly with our out-grower partners.
* we have a basic tech platform, but are building towards an ecosystem that allows our farmers to schedule machinery and other services, perform scouting, ensure input ordering and availability, enhance their own day-to-day operations, improve traceability and coordinate more seamlessly with our off-take logistics.
FarmWorks is a mission-driven, integrated agricultural company that started 14 months ago. We have a dual mandate – to feed Kenyans and to build communities. Achieving this requires 4 areas of activity: (i) developing and operating mid-sized commercial farms with world-class technology, agronomy and operations; (ii) building a world-class out-grower program; (iii) establishing our own market access infrastructure; and (iv) creating agricultural talent through our apprentice-based training institute.
With 400 employees (65% of which are women), we are currently operating on 3 farms and have stared our pilot out-grower program with 300 out-growers. 80% of our produce is for domestic markets. We have graduated over 70 apprentices in our training-program, many of which are working on our expanding farming base. Over the last 4 months, we have increased our sales by 8x, as we continue to invest in our market access infrastructure.
If you share an interest in our purpose, please feel free to get in touch: