Successful agricultural transformations: Lessons for PH

(Part 1)

Mckinsey & Company, a global think tank and consultancy, published a lessons-laden article, “Successful agricultural transformations: Six core elements of planning and delivery.” It is based on diagnostics of 30 countries from Brazil to Vietnam.

The article focuses on six core elements of a national agricultural plan (“what to do”) that promotes successful rural transformation, and on the elements of the on-the-ground delivery of an agricultural transformation or AT (“how to do it”).

The six core elements are:

1. Prioritized and differentiated strategies

Lesson 1: The Report stresses that successful plans identify goals in a limited number of crop and livestock value chains, cross-cutting supports (such as lower transport costs or irrigation), and specific locations. Morocco’s plan started with seven value chains, expanded to nine, and focused on six geographic areas. Ethiopia’s plan initially prioritized three value chains and five geographic areas. Countries often prioritize a mix of food security crops as well as export or higher-value commodities.

Lesson 2: Successful plans target agri-food systems and geographic areas with tailored strategies. It notes that productive land that is well connected to markets can support large- or small-scale farms. There, agribusiness is easier to scale up. In remote areas, with poor roads, low quality land, and less connected markets, different strategies are needed.

Lesson 3: Trade-offs. Government plans work toward many goals, including reduced unemployment, lower PI, food self-sufficiency and increased exports. The report says: “When the trade-offs among multiple objectives are not explicitly integrated into the AT plan, progress is characterized by under-delivery across too many, sometimes competing, objectives.”

2. Market-driven opportunities for farmers

Lesson 4: ATs often focus too much on production targeting rather than incomes and on productivity of staple crops rather than opportunities for high-value crops, downstream processing, and livestock. “Too often, agricultural plans recommend particular commodities without paying attention to this basic calculus of farmer household economics. Successful AT plans give farmers the opportunity to raise their household incomes.”

3. Change agents identified and mobilized

Lesson 5: AT success “relies on how well millions of smallholders and small- and medium-size enterprises can be helped to change farming practices as quickly and effectively as possible. The critical enabler… is a frontline ‘change agent’ that helps farmers modify their practices. Change agents are people whom farmers trust and interact with regularly. The high-level objectives of a transformation are realized in practice only when they are effectively translated to smaller, on-farm shifts.”

The report claims that change agents can exist in both the public and private sectors.

“Many scholars cite countries’ investments in national agricultural extension services as critical to AT … Agricultural cooperatives can provide technical assistance to farmers but can also fundamentally change the farmers’ risk and potential revenue by providing a mix of services. Small-scale input dealers also have an important influence on the changes required among smallholder farmers…”

Morocco appointed farm managers for a large number of small farmers through contracts as the main category of change agent. This model has similarities to Malaysia’s centralized management of the Federal Land Consolidation and Rehabilitation Authority.

In the Philippines (PHL), managed consolidation of small farms is crucial to achieve scale in mechanization, input supply, credit and marketing.

4. Finding the right starting points for scale

Lesson 6: Mckinsey says: The best AT plans need agility; they selectively focus on the parts of the chain where small changes are likely to cause larger shifts. The focus areas could be in specific locations or within key value chains.

The report believes that overly prescriptive and inflexible strategies in AT fails. Using less comprehensive and prescribed plans with more flexible learning models can also attract champions, additional talent, and more investments.

5. Pragmatic approach with an investor mind-set

Lesson 7: The Report claims that AT with an investor mind-set is critical to the success in kick-starting agricultural transformation. AT plans with an investor mind-set include three strategic planning components:

First, the plan identifies public investments that complement likely private-sector investment. These investments can include typical public goods (such as rural advisory services or training) as well as investments in commodities or locations that are important to AT but unlikely to garner private investment.

Second, a good AT plan lists public investments designed to catalyze private sector engagement. This public investments may be risk guarantees, cost sharing, public-private partnerships, targeted subsidies, or provision of infrastructure conditional on private investment.

Last, AT plans anticipate changes in the enabling environment supports increasing private sector engagement. These policies, laws and regulations are usually cross-cutting in addition to agriculture, including banking, trade and land policies.