LOCAL MARKET DEVELOPMENT

The Local Market Development Project (LMD) successfully promotes market linkages between small vegetable and fruit producers and domestic processing companies in Kyrgyzstan and Tajikistan. Trough trainings from local service providers, the farmers improve the profitability of their production, reduce the use of chemical inputs and enhance the quality of their produce. Based on yearly supply contracts, the farmers sell growing shares of their production to processors and achieve a substantial increase in average income, reaching 35% of the total farm-income in Kyrgyzstan and even 67 % Tajikistan. This allowed a large number of families to escape absolute poverty. In 2012, almost 7’000 farmer families participated in the project, growing and marketing a variety of 15 different crops. Moreover, an increasing number of jobs are being created in the local processing companies, especially for women. Through the new dynamic, the project managed to boost the domestic vegetable and fruit sector: In 2011, the LMD farmers alone produced 2 % of tomatoes and cucumbers in Kyrgyzstan and 4.4 % of tomatoes and onions in Tajikistan.

Context

The Local Market Development Project (LMD) started in Kyrgyzstan in 2005 funded by ICCO and Helvetas and was extended to Tajikistan in 2007. The objective is to improve smallholder incomes through the production of vegetables and fruits for local markets. To achieve this, local fruit and vegetable processing companies are linked to farmer groups who deliver fresh produce in bulk. The processors mainly supply domestic markets, selling processed products such as tinned tomatoes or cucumbers.

Agriculture in post-soviet Tajikistan and Kyrgyzstan is still dominated by low mechanisation and productivity levels. The marketing of fresh and processed agricultural products is not well organised due to the small scale and low quality of the production.

The LMD project successfully stimulated a new positive dynamic in the sector:
  • The project promotes crops of high quality and high value such as tomato, cucumber or cabbage. The gross profit per hectare for tomato and cucumber is about 50 resp. 25 times higher than for wheat.
  • The project successfully introduced Integrated Production Management (IPM), by which the efficiency of input use is increased and the use of chemicals minimised. In 2011, 77% of LMD farmers applied IPM, increasing their productivity by 30 to 50% on average.
  • Farmer groups are linked to local processors who buy the produce from farmers based on contracts. Hence farmers benefit from more economic security, more flexibility, and in peak seasons they can sell produce not absorbed by local fresh markets to processors. The companies also purchase produce of second quality for tinned products. In 2011, 35% of the total produce, 56% of cucumbers, 74% of onions, 92% of cabbage and 100% of vegetables grown in greenhouses by LMD farmers was sold to processors.
  • The farmers receive trainings from local NGOs in quality management, improved farming methods and production planning. It is well in the interest of the NGOs to provide a good service to the farmers as the processing companies pay them a 10% commission according to the volumes delivered by the farmers. This is a promising model since it is demand driven and the NGOs gradually emancipate from their dependence on external funds. By 2011, the project had enabled 23 local organisations to offer this form of support. A challenge of this payment model is that the NGOs tend to select bigger, more experienced and less remote farmers because these are likely to bring in the highest commissions.
  • In the current new phase, the project puts a focus on the following intervention areas:
    • Increase the number of farmers that improve their production methods through IPM.
    • Further increase the overall number of farmers and volumes of sales to processors in order to create economies of scale.
    • Stimulate the supply of seeds to produce crops that are in demand locally and regionally.
    • Stimulate export trading companies to export fruits and vegetables, through the development of exportmarketing plans and market intelligence.
    • Identify foreign traders to import produce and facilitate commercial linkages to export companies and processors.
    • Support processors to improve their performance in terms of quality, quantity, product range and marketing.
Bakir Aitanov, Kyrgyzstan
image description In the past, the conditions of the processing factory were not good, but since we have the supply contracts, I can sell my tomatoes to an attractive price. image description Farmer Bakir Aitanov, 51 years old, Kyrgyzstan
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