For the last 2 months I have been working with a small-scale nucleus farmer in Wa, in the Upper West region. To give a very general explanation, a nucleus farmer is someone who provides inputs to a certain number of outgrowers, who have to repay him in kind at the end of the harvest.
But for this post, let’s focus on equipment. This year, with the help of a big value chains project, this nucleus farmer scaled his outgrowers operations from 100 to almost 400 farmers but with the same equipment as last year. The idea I am trying to bring here is that he is now at a breaking point where his equipment, if used at a full capacity, is just able to support outgrowers needs. That also means that if something goes wrong at the wrong time, there is a direct impact on the outgrowers and by definition on his nucleus farming business. Let’s explore this idea more in depth.
His most important pieces of equipment are his 2 tractors and his pick-up truck, which is used to transport the inputs (seeds and fertilizer bags) to the farms. So let’s assume one of them broke down in a critical moment of the season. What does it mean for his business? We can easily get 2 big impacts out of this potential situation:
- Direct financial impact, resulting in reduced revenues and extra costs from the need to hire other equipment service providers and to repair the broken equipment.
- Impact on outgrower performance, because rain irrigated farming is all about timing and delayed inputs often have a very negative impact on yields.
The end point of all that is simple: this nucleus farmer cannot afford any equipment problems. It is easy to say but when you see the working conditions (terrible land preparation or war-like roads) and the poor condition of this equipment, the risk of breakdown is very high.
So now I am asking the question: what is going to happen if receives a third tractor from a USAID grant? Is he going to increase his outgrowing operation to 500 farmers and stay on this breaking point? Is always increasing the size of the business really the path to success, especially in the case of an outgrower scheme?
I know it is often pretty awkward to end a blog post with questions so I would like, as a closing note, to give my own perspective on the possible answers to these interrogations.
On the project side, I think a grant for a piece of equipment like a tractor should never be delivered without some sort of engagement from the farmer to improve his business management capacities. This could take different forms:
- Cost-shared management training between the project and the nucleus farmer
- Follow-up (financial and technical records) and monitoring of the equipment use
Finally, on the nucleus farmer side, scaling up quickly to more outgrowers is a very short term and unsustainable way of increasing the profit of the business. The challenge now is to try to convince these nucleus farmers that it’s worth investing in the outgrowers they already have. Helping them increase their yields is, in the long run, the best way to sustainably increase income of both the nucleus farmer and the small-holder farmer.