Proposed Draft Format for Final Report

Rice and Diversified Crops (RDC) Activity in Bangladesh,

AID-388-A-16-00002

OUTPUT MARKET ASSESSMENTS: DIVERSIFIED CROPS

st December 1 , 2016

Rice and Diversified Crops (RDC) Activity in Bangladesh

Output Market Assessments: Diversified Crops Final Report

December 1, 2016

RDC Activity: Output Market Assessments Report – Diversified Crops Page ii

Table of Contents

List of Acronyms ...... iii

Executive Summary ...... iv

I. Introduction ...... 1

II. Short-Listing and Prioritization of Diversified Crops ...... 2

III. Abbreviated Assessments of Short-Listed Diversified Crops ...... 5 3.1 Vegetables ...... 5 3.2 Maize...... 7 3.3 Oilseeds ...... 8 3.4 Pulses ...... 11 3.5 Onions ...... 14 3.6 Jute ...... 15

IV. Key Smallholder Constraints and Possible Market-Based Solutions ...... 17

V. Illustrative Lead Firm Buyer Initiatives and Next Steps...... 19

APPENDICES: (1) Scope of Work (2) Calendar of Activities (3) Interview Guides (4) List of Persons Interviewed (5) Summary of Related Donor Projects in the FtF Zone (6) Bibliography

RDC Activity: Output Market Assessments Report – Diversified Crops Page iii

List of Acronyms

ADB Asia Development Bank AFE Action for Enterprise A/V ACDI/VOCA AVC Agricultural Value Chains Program (implementation led by DAI) BAU Bangladesh Agricultural University BARI Bangladesh Agricultural Research Institute BBS Bangladesh Bureau of Statistics BD Bangladesh BDT Bangladesh Taka BEOL Bangladesh Edible Oil Ltd. BJMC Bangladesh Jute Mills Corporation (public sector company) DAE Department of Agricultural Extension FAO Food and Agriculture Organization FtF Feed the Future GOB Government of Bangladesh IRRI International Rice Research Institute JDP jute diversified products kg kilogram MSME micro, small, and medium-scale enterprises NGO non-governmental organization RDC Rice and Diversified Crops Activity (implementation led by ACDI/VOCA) RVC Rice Value Chain (implementation led by IRRI) SAFAL Sustainable Ag., Food Security and Linkages (implementation led by Solidaridad) SME small- and medium-sized enterprises USAID United States Agency for International Development USD U.S. Dollar

Conversion: 1 USD = 81 BDT (as of Oct 2016) 1 maund = 37.5 kgs. approximately (may differ by location) 1 decimal = 435.6 square feet 1 Bigha = ⅓ acre

Acknowledgements The principal author would like to extend his appreciation for all the assistance provided by the RDC team. Special thanks and acknowledgement goes to the dedicated private sector buyers, processors, and various value chain actors visited throughout this assignment. Their warm hospitality and willingness to openly share and discuss their activities was greatly appreciated by the output markets assessment team.

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EXECUTIVE SUMMARY

This report presents the results and findings of a short-listing and output market assessments consultancy for the Rice and Diversified Crops (RDC) Activity. As part of its strategy to increase incomes and improve food security and nutrition, RDC will support private sector initiatives to expand purchases of diversified crops, grown in rotation or conjunction with rice, from smallholder farmers in the 19 FtF designated districts in Khulna, Barisal, and southern Dhaka divisions (the “FtF zone”). The specific objectives of this consultancy were to: (i) identify diversified crops with unmet market demand and ability to impact large numbers of smallholder farmers in the FtF zone, and (ii) conduct abbreviated output market assessments of the short-listed diversified crops. Overall, the Team interviewed over 53 private sector value chains actors and key informants across eight districts in the Khulna and southern Dhaka Divisions. Given the time constraints for this assignment, the Team was not able to travel to Barisal Division

A broad list of 14 diversified crop candidates was developed using secondary information from existing reports/notes and preliminary interviews with buyers and key informants. With the participation of RDC staff, the Team narrowed this list down using a short-listing matrix. The six diversified crops short-listed for the output markets assessment are maize, vegetables, pulses, oilseeds, onions, and jute. Most rice farmers choose to grow other crops during rabi season using residual monsoon water, so the diversified crops the Team short-listed are either winter or summer season crops. It should be noted that jute was one of the six value chains short-listed for further assessment but as the Team collected primary data in the field, it became apparent that few opportunities exist to increase smallholder incomes and access to jute output markets. Therefore, an abbreviated assessment of jute is included to reflect the data compiled by the Team but is not recommended for further RDC consideration or action.

Section III contains abbreviated output market assessments of the six short-listed crops and includes a description of: (i) end markets; (ii) supply and demand from the FtF zone; (iii) value actors and relationships; and (iv) other issues including the enabling environment, finance, storage, other donor programs, etc. General crosscutting and crop specific constraints of smallholders in the FtF, as well as possible market-based solutions, are presented subsequently in Section IV, while Section V presents illustrative examples of Lead Firm buyer initiatives to improve the market access and services/support they provide to smallholder farmers, and proposed next steps for RDC consideration.

Based on the findings and analysis of the primary and secondary data collected during this output markets assessment, the Team identified a number of key constraints to increasing smallholder sales and income from diversified crops. Possible market-based solutions, corresponding to the smallholder constraints, are also presented and purposely kept general to allow for further analysis of its economic, technical, and developmental feasibility. Most of the major smallholders constraints identified by the Team were crosscutting and applicable to multiple crops.

It is expected that the first “Invitations for Applications” (IFA) for the output markets will provide an opportunity for Lead Firm buyers and other private sector actors to propose initiatives that can develop or expand one or many of the market-based solutions. In the future, specific IFAs could be developed to address specific market-based solutions listed (or additional solutions that will be identified).

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Given the diverse cropping pattern of smallholders and the variety of prioritized crops, RDC does not need to develop an exclusive strategy for each crop. As the abbreviated output market assessments show, market channels for the short-listed crops included the following: (i) conventional price-based market which is the primary channel for the majority of crops from the FtF zone, (ii) growing domestic market for high-value, quality-based crops and products, and (iii) a small but emerging export market for niche crops/products. Value chain governance describes the commercial relationships between end market buyers, intermediaries and producers and is a useful framework for exploring the relative risks and incentives for Lead Firms and smallholders within those market systems.

Several private sector/Lead Firms were identified/self-selected during the output markets assessment who expressed a willingness to explore collaboration with RDC. In response to the Invitation for Application (IFA) for output markets being prepared by RDC, Lead Firms will propose their own initiatives to address the challenges they face to increase their competitiveness and improve the market access, services and support they provide to smallholders in the FtF zone. Through this process RDC can support the private sector to pilot-test, assess, and promote new and improved business models and innovative market- based solutions..

As RDC begins to develop its overall implementation strategy, it is important to keep in mind the overall risks and challenges to market system development for diversified crops sourced from the FtF zone – ensuring that the market-based solutions and Lead Firm initiatives supported by RDC are somehow addressing or mitigating these risks.

As stated above, jute was originally short-listed but subsequently dropped by the Team. RDC could conduct further output market assessments of other crops – and it is suggested that RDC not limit itself to only the crops identified in this assessment. Two additional crops that showed promise are groundnuts (especially in the Chars lands where soil conditions are ideal) and fruits such as watermelon in the Barisal Division. The Team was not able to travel to the Barisal Division so a follow-up assessment and validation visit to the area by RDC would be advisable.

While there will be some overlap in the FtF zone with existing donor/NGO projects engaged in similar crops or private sector partners, there is still a need for RDC’s private sector focus and market systems development implementation strategy.

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I. INTRODUCTION

This report presents the results and findings of a short-listing and output market assessments consultancy conducted for the Rice and Diversified Crops (RDC) Activity. RDC is a three- year activity funded by USAID Feed the Future (FtF) in Bangladesh and implemented by ACDI/VOCA to catalyze market system changes and promote intensified rice production and higher-value, nutrient-rich crops. As part of its strategy to increase incomes and improve food security and nutrition, RDC will support private sector initiatives to expand purchases of diversified crops, grown in rotation or conjunction with rice, from smallholder farmers in the 19 FtF designated districts in Khulna, Barisal, and southern Dhaka divisions (the “FtF zone”). The specific objectives of this consultancy were to: (i) identify diversified crops with unmet market demand and ability to impact large numbers of smallholder farmers in the FtF zone, and (ii) conduct abbreviated output market assessments of the short-listed diversified crops. See Appendix 1 for the detailed scope of work.

This report is divided into four main sections. Specific activities carried out and methodologies used are described in Section I. The overall process and results of the short- listing and prioritization of diversified crops are shown in Section II, and Section III contains the abbreviated output market assessments of the shortlisted crops. Key smallholder constraints and possible market-based solutions are described in Section IV, while Section V presents illustrative examples of Lead Firm1 buyer initiatives to improve the market access and services/support they provide to smallholder farmers, and proposed next steps for RDC consideration.

Description of Activities and Methodology: Preparatory work began with desktop research on various crops and agricultural development projects in Bangladesh and a review of secondary reports of other relevant USAID FtF activities, especially DAI’s Agricultural Value Chains (AVC) and IRRI’s Rice Value Chains (RVC) projects. In-country fieldwork took place from October 15 to November 6, 2016 and was scheduled to provide timely input to the RDC implementation team on potential support and facilitation activities for diversified crops. See Appendix 2 for the Calendar of Activities conducted. The Assessment Team consisted of the Team Leader from AFE (Henry Panlibuton) and local consultants Mominul Haque, Basudeb Chakrabortty and Touhidur Rahman.

Using AFE’s training materials for value chain/market system program design and implementation, the Team Leader conducted orientation/planning sessions for key RDC staff and assessment team members to ensure a common understanding of the framework and concepts for market systems and value chain development. As per the scope of work, the main issues for the output markets of each prioritized crop included: general market demand and end market analysis, supply and demand issues in the FtF zone, enabling environment factors, key constraints for smallholders in the FtF zone and possible “market-based solutions”, and challenges that buyers face in selling or sourcing from smallholders in the FtF zone. The specific research questions for this assignment were reviewed by the assessment team to confirm that they were adequately addressed in the data collection tools and interview guides (see Appendix

1 A Lead Firm is a firm that has forward/backward commercial linkages with a significant number of MSMEs (including farmers). Also known as “Inclusive Businesses,” they include processors, exporters, traders, input companies, service providers, etc. that play a critical role in moving their industry, and other value chain participants forward. [AFE, 2014]

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3). Before travelling to the FtF zone, the Team completed a preliminary round of interviews in Greater Dhaka with a few major buyers of potential crops and key informants.

Overall, the Team interviewed over 53 private sector value chains actors and key informants across eight districts in the Khulna and southern Dhaka Divisions. Given the time constraints for this assignment, the Team was not able to travel to Barisal Division (see Figure 1).

Figure 1. Districts Visited during Output Markets Assessment Throughout the process, the Team often split into separate sub-groups to increase the breadth of interviews but always reconvened to share and discuss on-going findings. Upon return to Dhaka, additional follow-up interviews were completed. Since the assessment was focused on output markets, the Team concentrated its primary data collection on actors engaged in post-production functions especially: local and wholesale-level trading, processing, retailing, and exporting where relevant. See Appendix 4 for a list of people interviewed.

For the purposes of this assessment, smallholders are considered to be farmers with less than 2.5 acres in total area under crop cultivation. Also as stated above, “diversified crops” are defined as agricultural products grown anywhere in the FtF zone either in rotation or conjunction with rice. Upon conclusion of the in-country fieldwork, the Team prepared and conducted a final de-briefing for the RDC implementation team, including representatives from ACDI/VOCA and AFE.

II. SHORT-LISTING AND PRIORITIZATION OF DIVERSIFIED CROPS

2.1 Short-listing Process: A broad list of 14 diversified crop candidates was developed using secondary information from existing reports/notes and preliminary interviews with buyers and key informants. With the participation of RDC staff, the Team narrowed this list down using a short-listing matrix with the two principle selection criteria: (i) unmet market demand, and the (ii) potential number of smallholders in the FTF zone that could produce or sell the crop and benefit. Each potential crop was placed in the matrix based on its relative rating (i.e., high, medium, low) against the two criteria. Any crops falling within the medium- to high- ranges, especially for unmet market demand, were given greater priority and targeted for further assessment.

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The six diversified crops short-listed for the output markets assessment are shown, colored in blue, in Figure 2: maize, vegetables, pulses, oilseeds, onions, and jute. The Team was focused on these six short-listed crops during its primary data collection.

A few recurring issues were raised and considered during this short-listing process. Where possible, the use of crop categories (such as vegetables, oilseeds, pulses, etc.) rather than specific individual crops will enable RDC to have more programmatic flexibility. Unmet market demand is difficult to accurately quantify and the Team was cautious of using existing smallholder crop sales as a proxy indicator. This is particularly important in a context where annual smallholder sales may be increasing, but in fact only meet a small percentage of total domestic demand due to the predominance of cheaper and more widely available imports.

Figure 2. Short-listing of Potential Diversified Crops in the FtF Zone

mangos n

h • • maize

g a

i potato H m •

e • groundnut [Chars]

t • pulses e

k oilseeds r •

a spices vegetables • onion •

M • jute

• t

m guava

e • u

i • watermelon [Barisal Div.] m

d sugarcane n

e • U

M • tomato

o L

Low Medium High Number of Smallholders (that could benefit) in FTF Zone

2.2 Ranking and Prioritizing Process: While in the field and based on compiled data to date, the Team also completed a ranking exercise of the short-listed crops in order to confirm Table 1. Ranking and Prioritization of Short-listed Diversified Crops and quantify their relative

importance. The ranking table

s e

o includes the two short-listing

n b

e criteria as well as the other

r a

CRITERIA . u

s proposed selection filters:

P O

a a

r presence of private sector

V G

W Lead Firm buyers with Unmet market demand 15 15 9 9 9 9 6 6 9 commercial incentives and interest to expand sourcing Number of producers in FTF 10 8 10 8 8 6 8 4 2 the crop from the FTF zone; zone that could benefit agronomic/ environmental Presence of Lead Firm buyers 10 10 8 6 6 6 4 4 6 benefits of the crop with rice; with incentives in FTF zone nutritional impact; and gender Agronomic/environmental and women’s economic 5 1 2 5 4 2 3 1 4 benefits to growing with rice impact. A total weighted Nutritional impact 5 1 5 5 4 2 0 2 2 score is calculated for each crop with the more important Women’s economic impact 5 3 4 4 3 2 2 2 1 criteria worth more points. Total Score 50 38 38 37 34 27 23 19 24

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The ranking scores of the short-listed crops (see Table 1 in green) confirm their significance for smallholders in the FtF zone. But the Team had serious concerns about the output, and input, markets for jute and its reliance on public sector or government engagement and subsidies to remain competitive. Thus, an abbreviated assessment of jute is included in Section III below but is not recommended as a priority diversified crop. Two additional crops that RDC could consider for further assessment and validation are groundnuts, especially in the Chars areas, and watermelon and other fruits from Barisal Division.

2.3 Agro-ecology and Cropping in the FtF Zone: As shown in Figure 3, the agro- ecological regions in the FtF zone are varied and range from high- [11], mid- [14], and lowlands [12] in the north and central, to tidal [13] and estuarine [18] floodplains in the south Figure 3. Agro-ecological Areas in the FtF Zone and east.

During the monsoon and winter seasons, the southern part of the FtF zone is particularly vulnerable to tidal surges and flooding. As a result of the elevated water table and excessive inundation in the area, salinity levels in the water and soil are high which affects potential crop diversification options and productivity of smallholder rice farmers. It was also reported that some shrimp producers were unilaterally expanding the inlet of seawater into their farms, thereby exacerbating the salinity problem for smallholder agricultural crop farmers.

The three primary agricultural seasons in Bangladesh are rabi (winter), Kharif 1 (summer), and Kharif 2 (monsoon). Throughout the FtF zone, Aman rice is the main crop grown during the monsoon season and harvested in early winter. In Bangladesh, smallholders do not practice fixed mono crop production so a secondary boro rice crop could also be produced in late winter. Most rice farmers choose to grow other crops during rabi season

Figure 4. Cropping Calendar for Prioritized Diversified Crops in the FtF Zone

Rabi: Winter Kharif-1: “Summer” Kharif-2: Monsoon (mid-Oct – mid-Mar) (mid-Mar – mid-Jul) (mid-Jul – mid-Oct) Boro Aus Aman

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep SURGE ------> <------HIGH SOIL & WATER SALINITY ------> <------TIDAL

AMAN RICE BORO RICE AMAN RICE

MAIZE

MUSTARD

ONION

LENTILS MUNGBEAN

VEGETABLES (brinjal, cucumber, etc.) GOURDS (bitter, bottle, etc.)

GROUNDNUT

RDC Activity: Output Market Assessments Report – Diversified Crops Page 5 using residual monsoon water, so the diversified crops the Team short-listed are either winter or summer season crops (see Figure 4).

III. ABBREVIATED ASSESSMENTS OF SHORT-LISTED DIVERSIFIED CROPS

This Section contains abbreviated output market assessments of the six short-listed crops and includes a description of: (i) end markets; (ii) supply and demand from the FtF zone; (iii) value actors and relationships; and (iv) other issues including the enabling environment, finance, storage, other donor programs, etc. General crosscutting and crop specific constraints of smallholders in the FtF, as well as possible market-based solutions, are presented subsequently in Section IV.

It should be noted that jute was one of the six value chains short-listed for further assessment but as the Team collected primary data in the field, it became apparent that few opportunities exist to increase smallholder incomes and access to jute output markets. Therefore, an abbreviated assessment of jute is included in this section to reflect the data compiled by the Team but is not recommended for further RDC consideration or action. There is scope, however, for the RDC staff to explore prospects for meaningful interventions with other potential diversified crops (see Section V below).

3.1 Vegetables

3.1.1 End Market Analysis: The two end market channels for vegetables from the FTF zone are the predominant price-based “conventional” (wet) market channel, and a small but growing “quality-based” channel. Most Bangladeshis regularly buy fresh produce and vegetables through open-air local retailers in the district, sub-district or village-level markets or bazaars. Processed foods are not widely produced or consumed, especially in the rural areas, so fresh vegetables are usually prepared or cooked at home. Approximately 70% of total food purchases in Bangladesh are made via local open-air retailers or small roadside shops and only 2% of food is bought in supermarkets or large organized retailers2.

However, there is an emerging market for higher quality fresh vegetables to meet a nascent consumer segment in Bangladesh that is increasingly concerned about health and food safety. The volume of vegetables sold through quality-based food retailers such as supermarkets is expected to grow as the economy and urbanization expands. The total annual turnover for supermarkets in Bangladesh is BDT 15 billion (approx. USD 192 million) with 15% annual sales growth. By 2021, supermarket sales are expected to grow by 30% annually due to changing demographics and buying habits of the country’s middle and upper classes3. Supermarkets and large organized retailers seek to strengthen and manage their own supply chains for fresh, quality produce direct from farmers.

3.1.2 Supply and Demand in FtF Zone: Approximately 15% of total vegetable production in Bangladesh comes from the FTF zone, primarily during winter season. Among the vegetable crops most widely produced in the FtF zone are bitter gourd, pointed gourd, bottle gourd, sweet gourd/pumpkin, brinjal (eggplant), cucumber, cabbage, cauliflower, green beans, okra, leafy greens, tomatoes, etc.

2 Hussain, Sayed Sarwer & Leishman, David (July 2013). The Food Retail Sector in Bangladesh. 3 Ibid.

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Depending on the production area and local access to water resources and inputs in the FtF zone, some vegetables can be grown year-round. Vegetable prices can be very volatile, especially during the peak winter season, but prices for off-season summer vegetables are generally higher and more stable. The AVC program is promoting local production and marketing of a variety of summer vegetables, particularly planted on raised ridges surrounding rice farms.

3.1.3 Description of Value Chain Actors and Inter-relationships (see Figure 5): For many smallholders in the FtF zone, local traders or collectors (foria) will buy produce at farmgate or along the roadside. Local foria may purchase the production of entire plots based on appearance and site inspection of a farmer’s field before harvest. Local traders purchase from farmers and sell to other large traders or retailers in the sub-district or district markets. Traders do not normally provide any advances to farmers; their relationship is purely price- based with various payment terms (i.e., down payment amount, payment time, etc.). Vegetables are sorted, aggregated, and loaded onto trucks bound for other districts, divisions, or Greater Dhaka markets.

The three major supermarket chains are Shwapno (59 outlets in 16 District towns including Dhaka), Agora (13 outlets), and Meena Bazar (18 outlets). These supermarkets and large retailers usually buy directly from a network of approved and listed suppliers, who source from contracted traders or farmers groups. The larger stores have centralized procurement systems and preferred supplier agreements.

Figure 5. Vegetables from the FtF Zone – Value Chain Map

Retail Local Hawkers/ Small Retail Supermarkets/ Retailers Shops Large Retailers

Wholesale Markets (Bazaar, etc.)

Listed Suppliers Wholesale Large Traders/ [Bashar, RAF, etc.] and Retail Local Bazaar / Aratdars Trading Haat (Dist)

Large Traders Farmers Group (contractors) Collection Ctrs

Local Bazaar / Local Traders / Haat (sub-dist) Foria

Production Smallholder Contract Smallholder Farmers Med/Large Farmers (<2.5 acres) Farmers (2.5> acres) (<2.5 acres)

Input [Quality-based Channel] Supply Key: Formal Agreements [Conventional Market Channel]

3.1.4 Other Issues: As a perishable crop with no cool chain system, transportation to major markets in Dhaka can be a problem for buyers and traders. The post-harvest loss for fresh produce in Bangladesh due to spoilage, transportation, etc. is estimated to be 20-35%.

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3.2 Maize

3.2.1 End Market Analysis: Of total animal feed demand in Bangladesh, maize constitutes 50-60% or approximately 2.7 million MT of maize per year. The largest segments of the animal feed industry for maize are poultry (60%), fish/aquaculture (30%), and cattle (10%). Poultry feed requires higher quality maize than feed for fish or cattle. Local maize production is estimated to be 1.5 million MT so domestic demand is met with imports, especially during the lean Kharif season4. Feed mills procure maize from large local traders and stockists (who store grains year-round) or directly import when local production is not available or stored maize can no longer meet their quality and price specifications.

Total domestic demand for maize has been growing rapidly, from 1.5 million MT in 2012-13 to 2.3 million MT by 2014-15. Currently, the largest maize trader/listed supplier in Chuadanga District alone buys 70-80 MT per year to supply animal feed mills throughout Bangladesh.

Feed mills are the key drivers in the industry and set domestic maize prices through purchase orders with their listed suppliers or traders. Seasonality and local availability also affect pricing, but many other value chains actors base their maize prices on prices set by the feed mills. Moisture content is the main quality parameter with an acceptable standard range of 13.5 to 14%. Prices for maize with higher moisture content will be discounted, while premiums of BDT 0.5 to 1.5/kg are reportedly paid for quality maize (i.e., mature kernels, standard moisture level, unbroken, etc.).

3.2.2 Supply and Demand in FtF Zone: Farmers mainly grow imported industrial varieties of maize for the animal feed market. Most production is in northern Bangladesh but maize cultivation has been increasing in districts in the FtF zone such as Chuadanga, Jhenaidah, Meherpur. Higher elevation regions with loamy soils are good for maize but chars lands in Faridpur and Rajbari are also becoming large maize production areas. Fish cultivation areas can also provide an opportunity to expand maize production since fish feed processors often buy and use lower quality grains.

3.2.3 Description of Value Chain Actors and Inter-relationships (see Figure 6): In the FtF zone, farmers harvest maize mainly in the Rabi Season but do not generally store. Wet grain is sold since smallholders cannot dry due to rain, although some have access to mechanical dryers or similar technologies. Smallholders sell directly to local traders or forias who purchase maize at farmgate and sell on to large traders. Smallholders may also sell directly to large traders at nearby haat/bazar markets. Large traders then sell to listed suppliers who are authorized to supply to large feed processors (e.g. Nourish, CP, Kazi, Quality, Aftab, Paragoan etc.) and may procure maize through contract farming. Support for smallholders through contract farming includes access to inputs, technical training, etc. on an embedded basis. Local traders or forias also extend limited support to smallholders. Large industrial processors have multiple plants across the country, especially where maize production is prevalent. For example, CP has a processing plant in Chuadanga among the highest maize cultivation areas in the FtF zone. Small local feed users (backyard poultry, etc.) source directly from farmers or local traders.

4 Based on primary data collected by Team

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In the value chain map, bolder thick line represents greater trade volume and red colored boxes show importers.

Figure 6. Maize from the FtF Zone – Value Chain Map

Aquaculture Poultry Livestock Feed Feed Feed

Imported Large Feed Mills Maize (Nourish, Aftab, etc.)

Wholesale and Retail Large Traders / Listed Suppliers/ Trading/ Aratdars Traders Processing

Local Traders/ Forias

Smallholder Farmers Med/Large (<2.5 acres) Farmers Production (>2.5 acres)

3.2.4 Other Issues: As stated above, most maize farmers sell after harvesting and drying in order to meet their daily needs or agricultural inputs for the following seasons. Storage is limited to those who have appropriate space or facilities including large traders or major feed processors. Selling stored maize is very risky as subsequent prices may not be enough to offset related costs – especially as imported maize has increased during the off-season. Although maize prices are not as volatile as some other crops, losses on maize speculation by traders and stockists have been significant this year.

Finance is available through numerous financial institutions but smallholders are reluctant to access these facilities due to institutional fear or unfavorable credit terms. The Katalyst Project had a few maize interventions in the FtF zone but all have ended. CIMMYT and BRAC have few on-going project activities with maize.

3.3 Oilseeds

3.3.1 End Market Analysis: Rising income and population in Bangladesh has increased local per capita consumption of edible oils to 11 liters per year (from 8 liters/yr.). Total demand in 2016-16 for edible is approximately 2.3 million MT and growing at 8-11% annually. Domestic production of various oilseeds, especially mustard, has increased to approximately 934,000 MT (2014-15) but is still not sufficient to meet total demand. As a result, Bangladesh must import over 2 million MT per year, especially crude palm and soybean oil, to satisfy 75-85% of the domestic market.5

Oilseed cake is a processing by-product used for protein animal feed and has greater unmet demand than the oil itself. For most local oilseed processors, the returns for oilseed cake far

5 Sources: Parvez, Sohel (Aug 26, 2016) and USDA/FAS GAIN report

RDC Activity: Output Market Assessments Report – Diversified Crops Page 9 exceed those for oil and often provide the best profit margins. Growth of the animal feed market in Bangladesh is fueled by the rise of the poultry industry, which must rely on imports of cake from soybean and other oilseeds to meet its increasing demand for sources of protein feed.

Mustard oil is a traditional product used widely throughout Bangladesh and South Asia for its pungent flavor and taste as well as externally for medicinal applications. According to a leading edible oil company, Bangladesh Edible Oil Ltd. (BEOL), domestic demand for mustard oil is increasing at 15% per year. Mustard oil is not generally used for cooking or frying and has some comparative advantages over crude palm and soybean oil.

Consumption of sunflower oil is growing as purchase power and heath consciousness increase in Bangladesh. Yet a study by BEOL concluded that the current market for sunflower oil in Bangladesh is not sufficient to justify investment in a local sunflower oil extraction and refining plant. Sunflower oil is a high priced niche product (BDT 200- 225/liter) sold in large retailers and supermarkets and imported by BEOL and others.

As summarized in Figure 7, there are distinct health advantages for consumers of higher value and locally grown oilseeds in Bangladesh (specifically mustard, sunflower, and sesame) compared to the unhealthy but cheaper popularity of imported palm and soybean oil. While domestic demand for edible oil has grown overall, increasing incomes, consumer awareness of health and food safety, and other demographic trends in Bangladesh will expand end market opportunities for local oilseeds over time.

Although sesame is an oilseed crop, the unmet regional and global demand for certain varieties of sesame seed itself, as well as oil, is driving local investment in Bangladesh. Sesame is mostly an export-oriented crop, with leading exporters such as ACI and Global Agro, but domestic markets for confectionary/snack food products also exist.

Figure 7. Comparison of Edible Oils – Health Benefits and Retail Price (Bangladesh) 6

230 Tk ($2.90)/lit

130 Tk ($1.65)/lit

85 Tk ($1.00)/lit

95 Tk ($1.20)/lit

6 Sources: Tsang, Gloria (2012) and primary data collected during assessment.

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3.3.2 Supply and Demand in FtF Zone: An estimated 15% of total mustard seed production is in the FtF zone but the majority of mustard in Bangladesh comes from the northern areas and Manikganj-Tangail- Jamalpur region7. On the other hand, approximately 39% of total sesame seeds cultivation in the country is in the FtF zone though in smaller volume than mustard seed. Smallholder support from traders or buyers is limited, with no contract farming of oilseeds.

Sunflower is a suitable crop for coastal areas given its salt/high saline tolerance. BRAC is promoting sunflower in southern areas of the FtF zone through its buyback program. Most sunflower farmers process or sell locally for household oil consumption; commercial scale sunflower seed cultivation or processing is limited.

3.3.3 Description of Value Chain Actors and Interrelationships (see Figure 8): Oilseed production in the FtF zone is predominantly by smallholders. Mustard is a Rabi/winter crop and grown in different pocket areas than sesame, which is a summer crop. Most seed for the next oilseed crop are retained saved seed. Bangladesh Agricultural Research Institute (BARI) has been conducting research to develop improved short duration mustard seed varieties For example, “BARI shorisha-14” has 50% better yields and 20% higher oil content than the local “Tori 7” variety.

Smallholders sell to local traders or farias in local haats/markets, while larger-scale farmers can sell directly to local processors or large traders and aratdars. Traders can collect oilseeds from the local market up to 2-3 months after harvesting. In some cases, large traders/aratdars will also store oilseeds for a few months in anticipation of higher prices during the lean season.

Most smallholders sell immediately after harvesting to repay any outstanding loans or credit used during production. Therefore, local traders and buyers procure most of their oilseeds during the short peak season and need a lot of working capital at that time. Bangladesh Bank offers specific credit facilities for pulse and oilseed crop production at 4% interest but large processors do not provide advances to their listed suppliers.

Local and regional oil processors produce oil for sale in local markets as well as regional markets. Some local mills may also offer processing services on a toll-processing basis. Domestic mustard seed production is not sufficient to meet demand from large-scale commercial oil processors (i.e., City Group, PRAN, BEOL, etc.) who import raw materials, including rapeseed to produce mustard oil. Unlike other edible oils, mustard oil is not refined, bleached, nor deodorized to retain its distinctive taste and smell.

In the value chain map, bolder thick line represents greater trade volume, dotted blue lines depict the flow of oilseed cake, and red colored boxes show importers.

3.3.4 Other Issues: There are no specific GOB restrictions on importing edible oils so inexpensive bulk crude oil can be imported, mixed with various oils, and packaged and sold as “pure” oil throughout the country.

GOB is promoting pulses and oilseed production during the boro rice season to conserve the groundwater level. GOB also distributes mustard seeds to farmers during post flood

7 Year Book of Agricultural Statistics (2014)

RDC Activity: Output Market Assessments Report – Diversified Crops Page 11 rehabilitation programs because mustard can provide quick returns to farmers when aman rice has been damaged due to natural calamities. GOB also provides incentives for processors and exporters, helping to access new export markets and low cost processing technologies.

Figure 8. Oilseeds from the FtF Zone – Value Chain Map

Wholesale Markets Small Retail Supermarkets/ (Bazaar, etc.) Shops Large Retailers Retail

Imported Crude Large Oil Imported Large Feed Oil and Oilseeds Processors Oilseed Mills (>75%) (CityGroup, etc) Cake

Local Bazaar / Haat (Dist)

Wholesale Local Oil Large Traders / and Retail Processors Aratdars Trading/ (Dist.) Local Feed Processing Market Local Bazaar / Haat (sub-dist)

Local Oil Local Traders/ Processors Forias (sub-dist)

Smallholder Farmers (<2.5 acres) Key: Oilseed cake Production

3.4 Pulses

3.4.1 End Market Analysis: Bangladesh is the third largest importer of pulses in the world, with approximately 800,000 MT from Canada, Australia, Russia, Turkey and Nepal that meets over 80% of domestic demand. According to Bangladesh Bureau of Statistics (BBS), local production of pulses is 375,000 MT primarily after the winter season. Approximately half of total national pulse production is in the FTF zone, making pulses a significant food and cash crop for many smallholders. There are a variety of pulse crops grown in Bangladesh but the ones most widely grown in the FtF zone are lentils and mungbean.

The largest local market segment for fresh (i.e., unprocessed) pulses, primarily lentils, is for use in dhal and other popular staple food dishes. Total domestic consumption of fresh pulses far exceeds local supply, so Bangladesh must rely on imports to meet 70% of total demand. There is a smaller but rapidly growing domestic market for processed pulses to make ready- made snacks including dal vaaja (fried pulse), chanachur, etc.

Similar to the market for edible oils, demographic changes in Bangladesh are driving demand for more convenience (prepared) food and “premium” quality pulses marketed to health conscious consumers. Local consumers also prefer the taste of local pulses to imports. Although local mungbean is small in size with low yields, compared to the larger more productive varieties preferred by agro-food processors, market prices are higher than imports.

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3.4.2 Supply and Demand in FtF Zone: Lentil production is primarily in the winter season and longer in duration, while mungbean is a shorter cycle crop that can be grown in multiple seasons. Based on BBS data for lentils and mungbean from 2009 to 2014 (see Table 2), both cultivated area and production volume grew by 63% and 84% respectively in the FtF zone. Similar acreage and production increases were also found nationally. Jessore District is the largest producer of lentils and Barisal District is the major production area for mungbeans. According to AVC project estimates, 575,000 farmers across the FTF zone, both smallholders and medium/large-scale, grow pulses. Smallholders are mostly household subsistence farmers with any excess sold on an ad hoc basis.

Improved pulse seeds and varieties are available but most farmers use retained seeds for their next pulse crop. In fact, smallholders are attracted to growing pulses because they require few inputs and less maintenance than other crops.

Much of the land in the FtF zone suitable for pulse cultivation remains fallow after harvesting of Rabi/winter crops. With short duration pulses, farmers can expand to a three-crop production cycle that could increase household income and improve dietary diversity. Pulses will also enhance soil fertility by fixing nitrogen in the soil, especially in rotation with grain crops that deplete soil fertility.

Table 2. Lentil and Mungbean Production: from 2009/10 to 2013/14 2009-10 2010-11 2011 -12 2012-13 2013-14 Crop/Location Area Prod. Area Prod. Area Prod. Area Prod. Area Prod. (acres) (MT) (acres) (MT) (acres) (MT) (acres) (MT) (acres) (MT) Lentils (BD) 1 90,982 7 1,100 2 05,024 8 0,442 2 13,035 8 0,125 2 22,305 9 3,098 3 07,637 1 57,422 Lentils (FtF Zone) 1 08,825 3 9,073 1 12,588 4 4,979 1 12,996 4 0,586 1 13,635 4 2,852 1 74,520 7 8,796 Avg. Lentil Yield (BD) 37% 39% 38% 42% 51% Avg. Lentil Yield (FtF Zone) 36% 40% 36% 38% 45%

Munbgean (BD) 5 7,462 2 0,177 6 7,779 1 9,445 9 0,825 2 6,240 8 7,223 2 4,764 9 7,078 3 1,610 Mungbean (FTF Zone) 3 2,278 9,270 3 2,383 8,715 5 1,941 1 2,816 5 1,779 1 3,335 5 3,632 1 5,344 Avg. Mungbean Yield (BD) 35% 29% 29% 28% 33% Avg. Mungbean Yield (FtF Zone) 29% 27% 25% 26% 29%

3.4.3 Description of Value Chain Actors and Inter-relationships (see Figure 9): In the FTF zone, the two major wholesale markets for pulse trading are Kaliganj (Jhenaidah District) and Takerhatin (Gopalganj District). There are also over 25 large-scale millers and 25 commercial pulse processors in Southern Bangladesh. Like oilseeds, contract growing of pulses is not done due to fragmented supply channels and low levels of trust and cooperation among smallholders and traders.

The value actors and market channels for pulses from the FtF zone are very similar to those for oilseeds. Smallholders sell to local traders or farias in local markets, which is then sold to dhal mills/local processors or large traders and aratdars. An initial level of grading, drying, and packaging is done by large traders that supply commercial pulse processors in Greater Dhaka or other cities. In the value chain map, bolder thick line represents the greater trade volume, colored lines depict the flow of unprocessed (black) and processed (blue) pulses, and red colored box show importers.

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As stated above, imported lentils meet approximately 70% of total domestic demand. Local small- and large-scale mills crush pulses/lentils into dhal for sale to wholesalers, retailers, or agro-food processing companies. The husk of milled pulses is another processing by-product that can be used as animal feed but is not as highly valued as protein oilseed cake.

Figure 9. Pulses from the FtF Zone – Value Chain Map

Wholesale Markets Small Retail Supermarkets/ Agro-food (Bazaar, etc.) Shops Large Retailers Processors Retail

Large Traders / Aratdars

Large Pulse Large Pulse Lentil Processors Processors Importers (Naranganj) (Savar) Local Bazaar / (Unisun) Haat (Dist) Wholesale and Retail Local Pulse Large Traders / Trading/ Processors Aratdars Processing (Dist.) Local Bazaar / Haat (sub-dist)

Local Pulse Local Traders/ Processors Forias (sub-dist)

Smallholder Farmers (<2.5 acres) Production Key: Processed Pulses

3.4.4 Other Issues: As part of the GOB’s effort to promote pulses and oilseeds in rotation with boro rice, local DAE offices are promoting the importance of quality inputs and balanced fertilizer usage. Yet, rudimentary farming practices including the use of increasingly unproductive retained seed still prevail and smallholder access to information on new farming practices remains limited. Farmers in the FTF target zone acquire most of their technical information from input providers and local lead farmers. DAE lacks the manpower and infrastructure necessary to deliver demand-driven services to farmers in a timely manner.

In Agricultural Research Priority: Vision 2030, the GOB pledged to expand pulse production over the next 15 years: increase the cultivation areas of mungbean (by 9.7%) and lentil (by 42%), and improve productivity to 2 MT per hectare for mungbeans (from 970 kg/ha in 2010) and 2.3 MT/ha for lentils (from 988 kg/ha in 2010). GoB currently allows the private sector to import pulses (lentil, dried peas, chickpea, etc.) into Bangladesh without major restrictions. While India, on the other hand, has effectively banned the export of raw lentils to encourage and protect its domestic production.

The most popular mode of credit in the rural areas is value chain financing provided by input suppliers or merchants (mahajan). At the farmers’ level, however, loans from MFIs are the most popular despite the relatively high interest rates.

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3.5 Onions

3.5.1 End Market Analysis: Onion is traditionally a Rabi/winter crops but there are new early- and late- varieties in the north that enable cultivation during the lean season when prices are higher. Onion prices can be very volatile throughout the year.

Local onion production is insufficient so imports from India, China, Myanmar, Thailand, Australia, etc. meet approximately 60% of total national demand. Domestic production has increased slightly from 2011-2015 but import values jumped significantly over the same period8. According to traders and aratders interviewed, most imported onions are entering Bangladesh via informal cross border trade.

Local varieties of onions are smaller but more pungent and preferred by Bangladeshi consumers who pay premiums compared to the larger, imported onions.

3.5.2 Supply and Demand in FtF Zone: In the FtF zone, onions are normally planted from October to December and harvested in late April to mid June. Farmers cultivate onion for both bulb and seeds. The most popular onion seed varieties with unmet local demand by onion farmers are the “Faridpuri” and “Taherpuri” due to their longer shelf life and higher pungency. These varieties are produced exclusively in the Faridpur and Rajbari Districts of the FtF zone.

According to BBS data, 78,000 acres (or ¼ of total farmland) are currently under onion cultivation in Faridpur District9 and 50,000 acres (or ⅓ of total farmland) in Rajbari District. Other districts in the FtF zone, such as Jhenaidah, Magura, Sahriatpur etc. also have significant onion cultivation.

3.5.3 Description of Value Chain Actors and Inter-relationships (see Figure 10): Smallholder onion farmers sell to local traders or forias who supply larger traders or wholesale buyers. For imported onions, importers sell to large traders and wholesalers/aratders who buy in large bulk volumes. Ultimately, onions are sold to consumers in local markets/haats, small retail shops, large supermarkets, etc.

Supermarkets procure onions via formal purchase orders from listed suppliers who in turn buy from local traders, farmers, or importers. The bulk of onion trade, however, is sold via the informal conventional/wet market channel.

In the value chain map, bolder thick line represents the major channels in terms of volume, dotted lines depict formal agreements, and red colored boxes show importers.

3.5.4 Other Issues: On-farm onion storage of bulbs by smallholders is rare but for those producing higher-value Taherpuri or Faridpuri onion seeds, storage is a necessity. Traders or collectors will store onions but the capacity and skills to maintain quality are often lacking. The volatility of onion prices makes it even riskier to store as a strategy to gain speculative margins.

8 Statistical Yearbook (2015) and Agricultural Statistics (2015). BBS. 9 District Statistic 2011, Faridpur District, page 27, Table 4.01, Statistics and Informatics Division, GoV.

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Figure 10. Onions from the FtF Zone – Value Chain Map

Retail Local Hawkers/ Small Retail Supermarkets/ Retailers Shops Large Retailers

Imported Onions (India) Wholesale Markets Listed 65% (Bazaar, etc.) Suppliers Seed Retailers (formal/informal)

Wholesale and Retail Aratdars Large Traders /Brokers Trading Regional Seed Seed Traders Companies

Local Bazaar / Local Traders/ Local Seed Haat (sub-dist) Foria Traders

Smallholder Farmers Med/Large Farmers Production (<2.5 acres) (>2.5 acres)

Key: Formal Agreements [Conventional Market Channel] [Onion Seed Channel]

3.6 Jute

3.6.1 End Market Analysis: Banglesh is a major exporter of unprocessed raw and manufactured jute products. For the domestic market, jute traders sell to small- and medium- scale enterprise (SME) jute manufacturers. To enhance the growth potential for domestic jute sales, GOB has instituted policies mandating the use of jute diversified products (JDP), subsidizing production, and promoting exports. Restrictions on the use of plastic bags in various countries could offer new market opportunities to export JDP from Bangladesh.

Only 25% of total jute production is consumed locally, the bulk is exported. For exports from Bangladesh, India is the major market with jute exports also sold to China, Turkey, Vietnam and Russia. India is planning to impose an anti-dumping tariff of US $100/MT on manufactured jute products, which may severely affected Bangladeshi exporters. Although this tariff is initially borne my importers it will be reflected in lower prices paid to exporters.

The cost of producing quality jute yarn is 40% higher in Bangladesh than India because of technological and organizational disadvantages. Although there are 250 jute mills in Bangladesh, for example, dyeing and lamination facilities are still missing.

3.6.2 Supply and Demand in FtF Zone: Within the FtF zone, major jute production areas are in Jessore, Faridpur, Magura, and Gopalgonj Districts but small- and medium-scale jute farmers can be found extensively throughout the FtF zone. Still, the main jute cultivation regions are in northern Bangladesh where soil and water conditions are better for production. Specific quality grades and standards must be met for producers to earn premium prices. It was reported that the price for quality jute was 44% higher than lower grades (approximately USD 0.76/kg compared to USD 0.53/kg.). Since lean season (December to January) prices are generally higher, farmers able to store and maintain jute quality can benfit from this market window. Jute is non-perishable and considered an insurance crop for cash.

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Through contract farming arrangements, buyers can arrange training for smallholders on improved cultivation technology and safe use of pesticides, and provide quality seeds. But the limited volume and scale of smallholders restricts their ability to directly sell to jute mills as a contract farmer. Smallholder yields on 2.5 acres of jute can average 1,950 kgs.

3.6.3 Description of Value Chain Actors and Inter-relationships (see Figure 11): Jute is sold through similar conventional price-based market channels as maize, oilseeds, and other cash crops from the FtF zone. Smallholders sell jute to local traders/forias who supply larger traders or aratdars that market to large jute traders or listed suppliers of large private and public sector jute mills such as the Bangladesh Jute Mills Corporation (BJMC). Existing equipment and machineries of jute mills in Bangladesh are old and most of the plants lack the facilities to produce modern, value-added JDP.

Figure 11. Jute from the FtF Zone – Value Chain Map

Raw Jute Manufactured Exports Jute Exports

Export/

Large Jute BJMC Mills (private) (govt.) SME Jute Manufacturers

Large Listed Traders Suppliers

Local Markets Trading/ (District) Processing Local Jute Local Traders Processors (Aratdars)

Local Local Markets Traders/ (Sub-Dist) (Forias)

Production/ Smallholder Farmers Semi- (<2.5 acres) processing

In the value chain map, bolder thick line represents the major channels in terms of volume.

3.6.4 Other Issues: As per GOB policy, benefits are allowed for all direct exporters but in practice the allocation and distributions of cash subsidies are reportedly inconsistent.

Other donor programs in the FtF zone working with jute include AVC, Switch Asia Jute Value Chain Project (an EU-funded project implemented by CARE Bangladesh), and the Agriculture Extension Support Activity.

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IV. KEY SMALLHOLDER CONSTRAINTS AND POSSIBLE MARKET-BASED SOLUTIONS

Crosscutting Smallholder Constraints and Possible Market-based solutions: Most of the major smallholders constraints identified by the Team were crosscutting and applicable to multiple crops. Where possible, the related crops were noted in the description of the smallholder constraints in Table 3.

Table 3. General Crosscutting Smallholder Constraints and Possible Market-based Solutions Crosscutting - Smallholder Constraints Possible Market-based Solutions Smallholders lack access to markets/buyers due to Access to new markets for diversified crops  a lack of collection points  information on specifications required by buyers Access to information on buyer specifications  unreliable and high cost of transportation from the and standards FtF zone to distant markets Provision of collection points to aggregate and improve efficiency of procurement from smallholders (vegetables, maize, oilseeds) Smallholders are not able to get access to high-yield Access to improved quality seeds that increase varieties and consistent improved quality seeds yields and lowers production costs for (vegetables, onions, pulses, and oilseeds), which smallholders in the FTF zone reduces crop income and productivity. Training smallholders in best farming practice Many smallholders are also not aware of the availability and recommended techniques related to the crop of improved seed and related farming practices needed and improved seed used. to achieve the crop yield potential. Many smallholder farmers lack access to proper Access to storage technologies and techniques for technologies and information on improved storage smallholders (maize, onion, pulses) (maize, onions, pulses), resulting in loss of their produce Provision of information about proper storage for Poor on-farm storage facility for smallholders reduces smallholders quality and farm-gate price Smallholders lack access to finance for inputs resulting Provision of tripartite financing arrangements in lower yields and income. Due to the outstanding between buyers, banks, and smallholders credit smallholders have with other value chain actors (input suppliers, local foria, etc,), they often sell Provision of agricultural input loans for immediately after harvest to repay these loans. smallholders using non-traditional sources of collateral Water stagnation during Monsoon season reduces Training in, and promotion of, dyke or ridge crop diversification options for smallholders farming practices to increase crop cultivation area for smallholders Competition from imports at lower prices (and Access to lobbying services to advocate with the sometimes subsidized by export country) reduces GOB to: competitiveness of local production from FTF zone  discourage imports during local harvesting periods  combat unfair subsidies from exporting

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Crosscutting - Smallholder Constraints Possible Market-based Solutions countries Lack of on-farm labor available for cultivation, Access to appropriate and affordable harvest and harvesting, and post-harvest handling among post-harvest mechanization for smallholders smallholders. Increasing migration of youth and others from rural areas to urban centers reduces the availability of agricultural labor and increases smallholder costs. Lack of infrastructure (e.g. collection centers, Provision of collection points to aggregate and reliable transportation, etc.) to distant markets improve efficiency of procurement from reduces market access for smallholders from the FtF smallholders zone. Parts of the FtF zone are high-risk areas for natural Availability of crop insurance or other weather- disasters of high winds, monsoon tidal surges, based mechanisms to reduce risk and exposure of flooding, drought, etc. Smallholders are exposed to smallholders to natural calamities. possible crop failure or loss and may decide to harvest early (reducing yield and quality) or take other risk Availability of stress-tolerant crop varieties that reduction actions. are less susceptible to drought, etc. Price volatility (vegetables, onions) especially during Access to contract farming or outgrowing peak harvest periods, reduces smallholder income and schemes for producers. incentives to invest in expanding production Many smallholder producers lack of access to, and Availability and access to crop specific inputs information about, latest seeds, crop protection and extension advice for smallholders that is products, tools, and machinery for diversified crops relevant for their particular production areas.

Crop-specific Smallholder Constraints and Possible Market-based solutions: The few crop specific constraints were related to vegetables and pulses.

Table 4. Crop-specific Smallholder Constraints and Possible Market-based Solutions

Vegetables - Smallholder Constraints Possible Market-based Solutions Inconsistent quality of vegetable seeds, especially Access to and availability of improved vegetable imported varieties, reduces smallholder yields and seed (with packaging in Bangla) for income. Smallholders are also unable to read the labels smallholders. (printed in foreign languages) and lack knowledge on proper application of seed. Training for smallholders in proper crop management and improved farming techniques. High losses during post-harvest handling and Training in appropriate post-harvest handling transportation of vegetables reduce quality and price and packing of vegetables for smallholders and for smallholders and traders. traders Pulses - Smallholder Constraints Possible Market-based Solutions Smallholders consider pulses to be low input, low Training for smallholders in crop management output crops so may not invest in the inputs needed to and production techniques for pulses, relevant to improve yield. their production area in the FtF zone. Existing local pulse seed varieties are susceptible to Availability of improved, stress tolerant varieties diseases and pest, which can reduce smallholder yields of pulse seeds, and access to low cost seed and income. treatment technologies for smallholders.

Availability of industrial varieties of pulses (mungbean, etc.) that meet large agro-food processor specifications

It is expected that the first “Invitations for Applications” (IFA) for the output markets will provide an opportunity for Lead Firm buyers and other private sector actors to propose

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initiatives that can develop or expand one or many of the market-based solutions listed above (see Section 5.2). In the future, specific IFAs could be developed to address specific market- based solutions listed above (or additional solutions that will be identified).

V. ILLUSTRATIVE LEAD FIRM BUYER INITIATIVES AND NEXT STEPS

5.1 Strategies for Smallholder Output Markets and Lead Firms Incentives: Given the diverse cropping pattern of smallholders and the variety of prioritized crops, RDC does not need to develop an exclusive strategy for each crop. As the abbreviated output market assessments show, market channels for the short-listed crops included the following: (i) conventional price-based market which is the primary channel for the majority of crops from the FtF zone, (ii) growing domestic market for high-value, quality-based crops and products, and (iii) a small but emerging export market for niche crops/products. In accordance with these end market opportunities, RDC’s overall implementation strategy to strengthen smallholder output markets could include the following broad themes*

 Expand participation of smallholders in existing local conventional market channels by facilitating linkages with private sector providers of improved inputs (especially seeds) and technical extension advice.

 Explore new market linkages between smallholders in the FtF zone and higher-value, quality-based markets, including export buyers, food processors, supermarkets, etc. through more directed procurement models (contract farming, collection points, etc.)

 Encourage innovation, investment, and scale of existing or new market channels.

*All of these themes can be promoted through the Market Accelerator Fund by providing private sector market actors the opportunity to upgrade smallholder suppliers, reduce the risk of adopting improved methods, inputs, and technologies, forming innovative business models and relationships, etc.

Figure 12. Value Chain Governance Models Value Chain Governance and Incentives of “Market” “Directed” Lead Firms and Smallholders: Value chain (Conventional Market) (Quality-based Market) governance describes the commercial relationships between end market buyers, Buyers Buyers with intermediaries and producers and is a useful Contract framework for exploring the relative risks and Producers incentives for Lead Firms and smallholders (e.g. Pran, within those market systems. See Error! ACI, Agora, Reference source not found. for the etc.) governance models most relevant in the FtF Price zone.

The majority of raw unprocessed crops from the FtF zone are sold through a “market” governance structure. Relationships between buyers are sellers are strictly transactional and based on price, and there are few incentives Smallholders Smallholders

No Incentive/Higher Risk More Incentive/Lower Risk

RDC Activity: Output Market Assessments Report – Diversified Crops Page 20 for LF buyers to invest in or upgrade smallholder producers.

Smallholder farmers and buyers of differentiated quality-based crops or products tend to have a more directed governance relationship with technical and/or financial support provided by buyers to ensure that farmers are producing what can be sold. In this context, buyers have greater incentives for upgrading and investing in the producers they source from on order to gain price premiums and/or improved productivity.

5.2 Process for Soliciting and Reviewing Lead Firm Initiatives and Structuring Collaboration: Suggested criteria for selection Lead Firms to collaborate with include the following:  Have existing commercial procurement activities with at least 500 farmers/ producers with land holdings less than 5 hectares) either directly or through their intermediaries).  Have been in operation for at least the past two years.  Have commercial interest and incentives to invest in the producers in the FtF zone that they currently (or expect to) purchase from through the provision of inputs, technical support, procurement systems, etc.  Be buying and selling products of acceptable quality to end market consumers.  Make an investment of at least 30% of the cost of the initiative (not including their staff costs which if included would bring the cost share to at least 1:1)  Propose initiatives that support one or more of the following: i) new and innovative business models, ii) new and innovative technologies, iii) expansion into new geographic markets, iv) expansion to new suppliers in rural areas, such as women, youth or small- scale producers, and iv) solutions to systemic market system constraints.

Several private sector/Lead Firms were identified/self-selected during the output markets assessment who expressed a willingness to explore collaboration with RDC. These are presented below in Table 5.

Table 5. Lead Firm Buyers with Expressed Interest in Possible RDC Collaboration Examples of Lead Firm Buyers Diversified Crops (expressed interest in expanding procurement/investment in supply chains in the FtF zone) ACI (input supplier, agro-processor)  oilseeds and pulses Pran (agro-processor)  oilseeds, pulses, and fruit City Group (oil mill)  oilseeds and pulses M&J/Northern Group (start-up oil mill)  oilseeds (sunflower) Global Agro (start-up oil mill)  oilseeds (sesame) Organix (exporter/trader)  vegetables

Collaboration with Global Agro Resources is a possible opportunity for RDC to support a Lead Firm to develop and pilot-test an outgrower scheme for high-value white sesame in the FtF Zone. Global Agro is an innovative local agribusiness company with oilseed processing facilities in Bangladesh for cleaning, grading, and packing of various types of sesame seed for export markets around the world. In 2017, Global Agro will also establish an oil extraction and refinery plant in Khulna to produce crude and refined sesame oil. The company has potential annual sesame seed demand for: brown seed (10,000 MT), white seed

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(10,000 MT), black seed (3,000 MT), yellow seed (3,000 MT), and sesame seed for oil crushing (7,500 MT). In order to meet its unmet demand for high-value white sesame seed, Global Agro is seeking to develop and support a white sesame outgrowing system for up to 5,000 acres and engage 2,000 farmers across 7-10 districts in the FtF zone.10

5.3 Lead Firm Buyer Challenges and Illustrative Initiatives of Lead Firms: Lead Firm buyers face a variety of challenges in expanding their procurement in the FtF zone and in providing the market-based solutions listed earlier. Some of these:  Competition from imports at lower prices, reduces competitiveness of local production from FTF zone  Buyers’ inability to source consistent quality and quantities of local production in FTF zone, forces them to source elsewhere (domestic or imports) to meet demand  Transportation from FTF Zone to Dhaka is limited and relatively high cost  Price fluctuation and volatility reduces net margin for buyers  Some seed is adulterated which reduces germination and yield for smallholders  Smallholder farmers produce products in small quantities and are widely scattered.  Poor infrastructure and long distances to remote markets hinders procurement in those areas  Lack of quality inputs (and knowledge to use them properly) at the producers’ level reduces yield and quality.  Extensive time and expense required to procure products from remote areas.  Producers lack financing for adopting new technologies (plastic culture, drip irrigation etc.).  Traders face difficulties in creating economies of scale for cost effective procurement and transportation of vegetables to end markets.  Traders involved in "informal trust contracting" (contract farming, etc.) and who provide inputs on credit to contracted farmers face difficulties when farmers break agreements and sell to other buyers.  Some vegetable traders are unable to access sufficient fertilizer (at affordable prices) and are compelled to pay high prices in order to procure and deliver fertilizer to their contract growers.  Traders are confronted with road blockades and other impediments during transportation which results in the loss of perishable vegetables.  Improper harvesting and post-harvest handling by producers results in low quality products that are difficult to sell.  Poor road infrastructure and high cost of transportation reduces ability of buyers to purchase from farmers and deliver to end markets.

In response to the Invitation for Application (IFA) for output markets being prepared by RDC, Lead Firms will propose their own initiatives to address the challenges they face to increase their competitiveness and improve the market access, services and support they provide to smallholders in the FtF zone. Through this process RDC can support the private sector to pilot-test, assess, and promote new and improved business models and innovative market-based solutions. See Table 6 for illustrative examples of Lead Firm (buyer) initiatives.

10 From Global Agro Resources Incorporation (2016), Sesame Presentation.

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Table 6. Illustrative Lead Firm Buyer Initiatives Procurement  Development of new / innovative aggregation/procurement models in rural areas  Development, improvement, or expansion of outgrowing (contract farming) operations  Investigation into new areas where products can be produced and sourced from farmers  Develop seed multiplication programs to provide/sell higher yielding varieties to growers Lead Firm is sourcing from  Develop quality control / quality assurance / traceability systems to increase efficiencies and meet market demands Technology  Introduction of new or improved tools/equipment for producers company is sourcing from  Technical support in developing post harvesting techniques to benefit producers company is sourcing from  Technical support for company to develop or improve its final products (quality, packaging, labeling, product diversification, etc.)  Introduction of new methods for post-harvest storage, and/or methods to preserve product freshness/value. Exposure Visits / Business to Business meetings (domestic or international)  Exposure/ learning/ B to B visits for buyers to identify: o sources of tools or equipment o sources of raw materials o new production technologies o innovative ways of organizing procurement between producers and buyers o new techniques for achieving high productivity/quality/lower costs from farm gate through to retail o techniques to identify and eliminate plant diseases, etc. Market access  Technical support to meet requirements of new markets  “Buyer-Seller Meets” (meetings in Bangladesh or another country where companies meet with potential buyers in person)  Gain certifications (organic, ISO, HACCP, Global gap, etc.) to increase sales/exports (and subsequent procurement from farmers)  Company conducts meetings to inform producers about the products they are interested in buying from them  Development of promotional materials, catalogues, web pages, etc.  Trade show participation Finance  Develop business plans for new products/ equipment  Identify sources of finance for new equipment that will enhance sales  Develop tripartite financing arrangements between Lead Firm, banks and producers the Lead Firms source from  Develop crop insurance schemes with insurance companies

The RDC team will be able to build the capacity of, and support Lead Firm’s in the implementation of their initiatives – as well as to organize “cross company” activities that bring together similar firms for events and activities that will help them address common needs. Typical facilitation mistakes to avoid include trying to orchestrate relationships or getting involved as an intermediary between buyers, intermediaries, and producers, imposing or strongly suggesting a particular business model or organizational structure, or insisting on a production package that may not be commercially viable or feasible for smallholders. Instead, RDC should provide opportunities for the private sector to propose the business models and practices that make the most sense for them, that will build their competitiveness and that will improve/expand the products, services, market access and support they provide (either directly or indirectly) to producers in the FtF zone they source from.

As RDC begins to develop its overall implementation strategy, it is important to keep in mind the overall risks and challenges to market system development for diversified crops sourced

RDC Activity: Output Market Assessments Report – Diversified Crops Page 23 from the FtF zone (see Table 7) – ensuring that the market-based solutions and Lead Firm initiatives supported by RDC are somehow addressing or mitigating these risks.

Table 7. Key Risks and Challenges in FtF Zone for Market System Development

Displacing Imports  majority of domestic demand for many crops is met by imports;  local production from the FtF zone is seasonal and predominantly sold through conventional price-based (wet) market channels Low Technical Skills  limited access of smallholders to technical training and horticultural crop advice  limited use of improved inputs by smallholders in the FtF zone  limited access to appropriate technology for smallholders, processors, and other value chain actors Fragmented  low trading volumes passing through multiple collectors, traders wholesalers, Trading and and retailers increases cost and reduces quality; Aggregation  very little vertical integration and lack of incentives for wholesalers, traders, and local collectors to invest in local production in the FtF zone  very little processing or value added of crops; most produce sold raw and unprocessed Poor Soil Quality  limited access and improper application of inputs to improve soil management and Limited land and crop health  limited availability of land to expand production in the FtF zone; will require more intensive and integrated farming systems Poor Infrastructure  high cost of electricity and poor infrastructure compared to other regions  relatively high cost of transportation from the FtF zone to major wholesale markets in Greater Dhaka and elsewhere High Labor Cost  growing rural migration, especially of women and youth, to other areas in or from Migration outside of Bangladesh for full-time/seasonal labor  increases cost of local production Vulnerability to  FtF zone is vulnerable to severe climatic events (floods, drought, tidal surges, Climate Change erratic rainfall, etc.)  limited adoption of climate-smart inputs and improved farming techniques

5.5 Final Comments: As stated above, jute was originally short-listed but subsequently dropped by the Team. RDC could conduct further output market assessments of other crops – and it is suggested that RDC not limit itself to only the crops identified in this assessment. Two additional crops that showed promise are groundnuts (especially in the Chars lands where soil conditions are ideal) and fruits such as watermelon in the Barisal Division. The Team was not able to travel to the Barisal Division so a follow-up assessment and validation visit to the area by RDC would be advisable.

Finally, the “pre-application meeting” with private sector buyers being planned by RDC will provide an important opportunity to share and validate the results of this output market assessment, present information regarding RDC project and explain the modalities of collaboration through the IFA process.

APPENDIX 1

Scope of Work

Scope of Work for International Consultant (Assessment of Diversified Crops)

Background: The Feed the Future Rice and Diversified Crops (RDC) activity is a USAID-funded project designed to catalyze market system changes that promote a diversified farm management approach oriented to intensified rice production and higher-value, nutrient-rich crops to increase incomes and improve food security and nutrition in the Khulna, Barisal, and southern Dhaka divisions of Bangladesh (FtF zone).

RDC’s goal is to increase rural incomes by catalyzing a process that leads to competitive and inclusive rice based market systems. This includes supporting the private sector to expand purchases of diversified crops (grown in rotation with rice) from small-scale agricultural producers in target areas. The purpose of this assessment is therefore to identify diversified crops with unmet market demand and ability to impact large numbers of producers in the FTF zone. This will support the project in the identification and implementation of its market systems facilitation activities.

Orientation/Planning Session with Assessment Team Consultant will begin in-country activities with a two-day orientation/planning session with key project staff/ consultants who will participate in the assessment. This session will assure that all members of the team understand and share similar concepts and tools of market systems program design and the proposed methodology for this specific assignment. Consultant will use AFE’s training materials on market systems development. The themes of the orientation session will be further re-enforced during regular debriefing and planning sessions throughout the activity. The consultant will be paired with 3-4 RDC staff/consultants.

OBJECTIVES The objective of this assessment is to: a) select high priority diversified crops and; b) answer specific questions related to those crops that will support the next steps in RDC’s market facilitation activities. This is described below.

1. Create Short List of Rotational Crops  Using secondary information from existing reports/notes and interviews with several key informants to develop a broad list of diversified crop “candidates” (potentially 10-15) that can be grown in rotation with rice.

 Narrow this down (using ranking matrix) to a list of 6 crops based on:  Unmet market demand  Number of producers in FTF zone that could produce/sell the crop and benefit

“Filters” will be applied to the high ranking crops to ensure that the following exist: o Nutritional impact o Gender and women’s economic impact o Presence of Lead Firm (LF)11 buyers with incentives/ interest to expand sourcing [priority diversified crop] from FTF zone o Agronomic/environmental benefits to growing [priority diversified crop] with rice

2. Carry Out Abbreviated Market Assessment of the Short-Listed (Prioritized) Diversified Crops  Carry out an “abbreviated market assessment” of these short-listed 6 crops (4-5 pages per crop). This would build on secondary information and include a limited number of interviews with buyers, producers and other key informants. These abbreviated assessments will answer the following questions (for each prioritized diversified crop):

11 Small, medium, or large firms that have forward or backward commercial linkages with a significant number of producers. Also known as an “Inclusive Businesses” they include processors, exporters, traders, input companies, service providers, etc. that play a critical role in moving their industry, and other value chain participants forward.

Research questions (1) General market demand (end market analysis) a. What do the marketing channels for [priority diversified crop] look like? (i.e. the chain of market actors from producer to consumer) b. Who are the major end market buyers (firms that purchase the largest quantities) that drive demand in the market system? c. What are the market trends and opportunities? d. What is the growth potential for [priority diversified crop] sales (from RDC target area)? e. From what regions in the RDC area are [priority diversified crop] sourced? f. What are the total [priority diversified crop] imports and exports over the last five years and projections for the future (for Bangladesh as a whole)? During what seasons do shortages exist? g. Where is [priority diversified crop] that is exported sourced from in Bangladesh?

(2) Supply and demand for [priority diversified crop] in the RDC target area h. Are end market buyers (the largest buyers in the marketing chain) purchasing from the FtF zone able to procure all they need? Is there unmet demand for [priority diversified crop]? If so what is holding back producers from producing and selling? i. Do [priority diversified crop] buyers pay a premium (higher price) for [priority diversified crop] that meets specific grades or standards?? j. What opportunities exist for buyers to have more direct relationships with the producers of [priority diversified crop] in order to control the quality of the product and build loyalty? k. What opportunities exist for [priority diversified crop] growers in the RDC target area to increase their sales? Are there seasonal market windows where producers can generate greater profits?

(3) Develop a summary value chain map for [priority diversified crop] and briefly describe the operations, inter-firm relationships, and buying/ selling arrangements of each of the market actors involved in purchasing and selling [priority diversified crop].

(4) Describe the role of the following entities in the output market for [priority diversified crop]: Government agencies, professional associations, projects/NGOs/other development organizations

(5) Describe the enabling environment (policies and regulations) that influence the [priority diversified crop] output market? Are there any opportunities to influence the enabling environment to be more supportive of the [priority diversified crop] output market?

(6) What are the most significant constraints that smallholder farmers in the RDC target area face in selling their [priority diversified crop]?

(7) What are “market-based solutions” needed to address these constraints (market-based solutions refers to products, services, market access or support that market actors can provide in a commercially viable and sustainable manner). What private sector buyers have incentives/interest to provide these in a commercially viable/ sustainable manner?

(8) What are the key challenges that buyers face in sourcing [priority diversified crop] from smallholder farmers in the FtF zone?

(9) What are the key challenges that buyers face in selling [priority diversified crop] that they source from the FtF zone?

(10) What are illustrative initiatives and strategies that [priority diversified crop] buyers could implement (with RDC technical/ cost share support) that would help them to improve/ expand their sourcing of [priority diversified crop] from producers in the FtF zone?

(11) Other areas of investigation should also include (but not be limited to):

l. Is access to finance or working capital a constraint for buyers? Do large-scale buyers provide finance to smaller-scale buyers? What is the potential to expand the use of mobile money payments within the [priority diversified crop] market system? m. Is storage a constraint to producers and other market actors within the [priority diversified crop] market system? What opportunities are there to expand storage services? n. What other donor programs are working in these value chains? What are possible opportunities for collaboration?

Specific Activities To perform the work, the Consultant will lead the RDC team of staff/consultants to carry out the following: - U.S. based preparatory work o Inception meeting to clarify the scope of work o Review secondary reports and deliver a desk research report o Adapt question guides to research questions o Prepare PPT for orientation/planning session o Prepare and populate Dropbox account to use during the assessment - Orientation/planning session with assessment team staff - Identify key informants to interview for the: a) shortlisting exercise, and; b) abbreviated assessments (once shortlisting exercise is complete) - Conduct field interviews in Dhaka and FtF zone (emphasis on RDC targeted Dhaka and Jessore areas but also in Barisal and Khulna if possible) using interview guide (that is adapted to research questions) in the appendix. - Write up interview notes according to interview write-up forms in appendix. - Create a list of interviews conducted (using format in appendix) - Develop and present a PPT summary of results to RDC management - Prepare and submit a draft report (that integrates feedback on PPT presentation from RDC) - Prepare and submit final report (based on agreed-upon outline) that documents the activities described above.

Deliverables Desk Research Report - A brief report of the secondary resource documents that were identified and reviewed (should be submitted prior to conducting field interviews). Report will include general documents consulted for the short-listing exercise as well as documents specific to short-listed diversified crops.

Work Plan – The plan should present a timeline for fieldwork, sampling plan (number of each type of market actor / key informant to be interviewed), and draft of interview guide to be used (an example is provided in the appendix that will be adapted as needed). Interviews should focus on collecting information that have NOT already been answered by the desk research report.

Debrief Presentation – A debrief PowerPoint presentation that summarizes the findings will be made to the RDC after field research and prior to writing the final report. An initial presentation will be made following the short-listing exercise before proceeding to the abbreviated assessments.

Final Report - A final report will be produced that includes the findings, interview notes, desk research report, list of interviewees, interview guides used, and calendar of activities. The outline for this report will be approved by RDC prior to writing the report.

* All reports and other written deliverables must be written entirely in English and submitted electronically in Microsoft Word, Excel or PowerPoint format.

Qualifications of the Consultant The Consultant will have the following qualifications: - Experience working in market development and agricultural market systems - Experience assessing agricultural value chains - Proven experience in similar assignments. - Superior writing and communication skills.

TIMELINE

The assessment will be completed according to the timeline below. The Consultant will lead a team composed of 3-4 local RDC staff/consultants.

Activity Dates* LOE Planning meetings in the US with AFE and ACDI/VOCA market systems Oct.4th to 12th 3 days specialists / finalization of work plan, interview guides, PPT for orientation/planning session, etc. Identification of/ coordination with local staff/ consultants Review of secondary reports and completion of summary desk research report for short-listing exercise. Travel to Dhaka Oct 13th to 14th 2 days Orientation / planning meetings with assessment team (RDC local Oct.16th to 17th 19 days staff/consultants) (based on Key informant interviews for short-listing exercise Oct.18th to 19th six-day Short-listing exercise Oct. 20th workweek) Review of secondary reports for short-listed products. Planning meeting to Oct. 21st identify market actors/buyers and key informants to interview (for each priority diversified crop). Field interviews with market actors/buyers and key informants Oct 23rd to Regular de-brief sessions with team (to develop summary VC maps, Nov. 2nd producer constraints, market-based solutions, LFs with incentives to provide MBS, LF challenges, and illustrative LF initiatives summary results) Preparation of summary results on PPT Nov. 3rd to 4th Presentation of PPT (summary results) to RDC management Nov. 6th Return travel to US Nov. 7th 1 day Preparation of draft final report (based on RDC feedback to PPT) By Nov. 30th 4 days Feedback from RDC on final report By Dec 10th Finalization and submission of final report By Dec. 20th 1 days Total 30 days *dates can be modified upon agreement between AFE and the consultant

APPENDIX 2

Calendar of Activities

RDC Diversified Crops Assessment - Schedule of Activities Conducted

DATE ACTIVITIES Oct 15, Sat  arrival in Dhaka and review materials for training/orientation Oct 16, Sun  briefing and training/orientation with RDC/assessment team Oct 17, Mon  team review interview guides and data collection tools; key informant interview Oct 18, Tue  major buyer interviews; short-listing of diversified crops Oct 19, Wed  major buyer and key informant interviews Oct 20, Thu  major buyer interviews Oct 21, Fri  travel Dhaka to Jessore Oct 22, Sat  data compilation and team ranking of priority crops Oct 23, Sun  Jessore District interviews Oct 24, Mon  Chuadanga District interviews Oct 25, Tue  Jhinaidaha District interviews Oct 26, Wed  Narail District and Magura District Interviews Oct 27, Thu  Jessore/ShaBDTira District Interviews Oct 28, Fri  travel to Khulna; compile data and interview notes Oct 29, Sat  Khulna District interviews Oct 30, Sun  Khulna District interviews Oct 31, Mon  travel from Khulna to Faridpur; Faridpur District Interviews Nov 1, Tue  Faridpur District and Greater Dhaka interviews; travel from Faridpur to Dhaka Nov 2, Wed  Greater Dhaka interviews Nov 3, Thu  Greater Dhaka interviews; team data review Nov 4, Fri  compile data/interview notes Nov 5, Sat  team review and preparation for de-briefing Nov 6, Sun  conduct de-briefing of RDC team Nov 7, Mon  depart Dhaka for Washington DC

APPENDIX 3

Interview Guides

Interview Guide for Private Sector Buyers (Short-listed diversified crops)

Introduction: Presentation of RDC activity / consulting assignment:  RDC is a new USAID-funded activity that is promoting rice and other diversified crops grown by rice farmers in the Khulna, Barisal, and southern Dhaka divisions (Southern Bangladesh).  RDC includes components that will support private sector to expand purchases of Diversified Crops from rice farmers in Southern Bangladesh.  We are gathering information about the challenges private sector actors such as yourself face in growing your businesses and expanding your purchases and supply chain from farmers in Southern Bangladesh.  We are also interested in any initiatives you would like to do to overcome those challenges - and how our activity might support those initiatives  We would like to begin with questions about your company and the commercial market for the Diversified Crops.

Date of interview: ______Interviewer: ______Firm Name: ______Address: ______Type of Market Actor: ______Principal Products / Services: ______Interviewee(s): ______Designation: ______No. of employees: ______Phone: ______Email: ______

Question Guide for Private Sector Buyers A. Business Background (1) When was your business created? What is the size of your operations? (2) What agricultural products do you sell and to whom? (3) Please describe how the market for [priority diversified crop] is segmented? (4) How strong have your [priority diversified crop] sales been? (5) What are the market trends and opportunities for [priority diversified crop]? B. Buying Operations: (1) How much [priority diversified crop] do you purchase per year? (2) Which months do you purchase [priority diversified crop]? (3) Who supplies you with [priority diversified crop] and where are they located? Please estimate the number of suppliers. (4) How much of these products do you purchase (either directly or indirectly) from small-scale farmers? Estimate number of small-scale farmers you source from either directly/indirectly. How many of these are women? (5) What percentage of your total purchases of [priority diversified crop] are from farmers in Southern Bangladesh? Are you able to source all of [priority diversified crop] that you need in Southern Bangladesh? (6) What interest or opportunities do you have to expand your purchases (either directly or indirectly) from small-scale farmers in Southern Bangladesh? Buying Process (7) Please describe how your procurement network operates (can show diagram) (8) Are there opportunities for you (buyer) to have more direct relationships with farmers of [priority diversified crop] in order to control the quality of the product and build loyalty? (9) Do you offer price premiums to farmers or intermediaries for [priority diversified crop] that meets specific grades or quality standards? (10) Do you provide any credit, information or technical support to your [priority diversified crop] suppliers (farmers or intermediaries)? (11) What opportunities exist for [priority diversified crop] farmers in Southern Bangladesh to increase their sales? Are there seasonal market windows where farmers can generate greater profits? (12) Is access to finance or working capital a constraint for you? Do you provide finance to your suppliers? (13) What is the potential to use mobile money payments to facilitate sales of [priority diversified crop]? (14) Is storage a constraint to farmers and other market actors selling [priority diversified crop]? What opportunities are there to expand storage services?

Question Guide for Private Sector Buyers C. Constraints For Farmers and Challenges You Face (1) What are the greatest problems that small-scale agricultural producers in RDC target area face in producing and selling [priority diversified crop] (market access, cost of production, policy and regulations, etc.)? (2) What are the key challenges that you face in sourcing [priority diversified crop] from smallholder farmers in the FtF zone? (3) What are the key challenges that you face in selling [priority diversified crop] that you source from the FtF zone? E. Initiatives and Needed Support (1) What types of investments or initiatives have you made to improve and/or expand your [priority diversified crop] purchases from small-scale farmers and/or intermediaries (in Southern Bangladesh)? (2) What initiatives would you like to undertake to expand your purchases of [priority diversified crop] from small-scale farmers (in Southern Bangladesh) in the next two years if you could? (3) What kind of support does your business need to carry out these initiatives? F. Existing Collaboration and Recommended Additional Interviews (1) Have you ever (or do you currently) work with government or donor-funded agricultural programs? If so, how? (2) Do you know of any large buyers of [priority diversified crop] who source from (directly or indirectly) small- scale farmers in Southern Bangladesh that you’d recommend we speak with?

Question Guide for Key Informants Key Informant Questions (Macro-Level): (1) What do the marketing channels for [priority diversified crop] look like? (i.e. the chain of market actors from producer to consumer) (2) Who are the major end market buyers (firms that purchase the largest quantities) that drive demand in the market system? (3) What are the market trends and opportunities? (4) What is the growth potential for [priority diversified crop] sales (from RDC target area)? (5) From what regions in the RDC area are [priority diversified crop] sourced? (6) What are the total [priority diversified crop] imports and exports over the last five years and projections for the future (for Bangladesh as a whole)? During what seasons do shortages exist? (7) Where is [priority diversified crop] that is exported sourced from in Bangladesh? (8) What is the role of the following entities in the sale of [priority diversified crop]: Government agencies, professional associations, projects/NGOs/other development organizations (9) Describe the enabling environment (policies and regulations) foe the sale of [priority diversified crop]? Are there any opportunities to influence the enabling environment to be more supportive of [priority diversified crop] sales? Other Diversified Crops: (1) What crops that can be grown in rotation with rice have the most potential for growth with small-scale agricultural producers in RDC target area? What are the trends? (2) Which of these are most profitable for producers? (3) Which [priority diversified crop] offer sales opportunities for women?

Interview Guide for Farmers Selling [priority diversified crop]

Introduction Presentation of RDC Activity (see introduction from Interview Guide for Private Sector Buyers)

Date of interview: ______Interviewer: ______Firm Name: ______Address: ______Type of Market Actor: ______Principal Product / Service: ______Interviewee(s): ______Designation: ______No. of employees: ______Phone: ______Email: ______

Questions:

Production 1. What is your cropping pattern for rice and [priority DC]?

2. Why have you chosen to produce/sell priority DC] compared to other crops? 3. What are the risks/constraints you face in producing/selling [priority DC]? 4. What could be done to solve these problems?

Sales and Marketing 1. Have you sold [priority DC]? If yes, to who? 2. How often? Have your sales of [priority DC] been increasing? 3. Describe how you sell [priority DC]. Explain the nature of the business relation with the buyer. 4. What could the buyers of [priority DC] do to improve the support they provide? How much [priority DC] have you sold over the past twelve months? 5. How did you learn about the buyer you sell to and why did you choose this buyer? 6. Who else do you know who buys [priority DC]? (Ask them to describe these buyers and provide their contact information)

APPENDIX 4

List of Persons Interviewed

Interview Contact Information Type of Market Actor Entity Interviewee/ Designation Address Location/District Contact Person Chief Operating Pran Agro Business Md. Mahatab Uddin Officer Processor and Exporter Gulshan, Dhaka Ltd Borun Chakraborty Asst, Mgr/ Liaison for Fund PABL Khandaker Nur-E-Burhan Head of Food 5, Mohakhali C/A, Supermarket Rahimafrooz (Agora) Abu Sayeed Mahmud Category Mgr. Dhaka Abdul Malek Exec. Category Large Trader and Listed Bashar Agro Food Md. Abdul Basher Proprietor Gulshan 1, Dhaka Supplier Products Listed Supplier (pulses), MAK Corporation Md. Abu-Al Kaiyum Proprietor Mirpur, Dhaka Large Trader AGM Marketing Ranjit Debnath Animal Feed Mill Spectra Hexa Farms Sr. Asst. GM Dhaka Sherajur Rahman Procurement Processor CP Feed Mill Enamel Karim Haque North of Savar M&J Group (Northern Processor (start-up oil mill) Mahbub-ul-Alam National Sales Mgr Dhaka Flour Mills) Agro-food Processor City Group Md. Shahidul Alam AGM Sales Dhaka Nadir Paar, Lal Kuthi, Importer, Trader Ajay Traders Mr. Ajit Saha Co-owner Shambazar, Dhaka 8, Forsashgonj Road, Aratder (onion) Rajib Banijjo Bhandar Shwadesh Podder owner Shambazar, Dhaka Mosarraf Hossain Chief Exec Importer (maize, lentils, etc) Unisun Dhaka Sania Alam Deputy GM Input Supplier, Processor, Chief Strategy ACI Ltd. M. Saifullah Dhaka Exporter Officer partner (Bashar Agro Bachachara Bazaar, Large Trader Mr. Eunes Food) Jessore District Local Processor Satata Daal Mills Mill Manager Sharsha, Jessore Collage road, Mahbub pulses and Local Processor Owner Mobarakpur, Oil mills Jhikargacha, Jessore Hazi Ali Mills Mills at Jessore BSCIC; Trader, Processor Mohammad Mostak owner Jessore Sadar Business Store Trading office at

Type of Market Actor Entity Interviewee/ Designation Address Location/District Contact Person Kaporia Potti Large Trader, Listed Rezaul Islam Rezaul Islam Chuadanga Town Supplier (maize) AzizulHaque Agro School Rd, Sorojganj Large Trader Mr. Azizul Haque Owner Business Bazar, Chuadanga Dist. Andulbaria, Jibonnagar, Trader, Listed Supplier Latif Traders Md. Abdul Latif owner Chuadanga Modhuganj Bazar, Nipa and Shyamoli Large Trader Delip Saha Co-owner Kaliganj Upazila, Enterprise Jhenaidha District Trader, Processor (mustard Datta Traders & Mr. Adhir Kumar Datta owner oil) Ujjal Traders Local Trader Jute Trader Jhenaidha District Anup Kumar Saha Anup Kumar Saha Rupganj Bazar, Mosque Local Trader Owner Birendra Nath Bose Birendra Nath Bose market Narail District Local Processor Moyen Uddin Moyen Uddin Owner Uzirpur, Narail District son of Late Magura Old Bazar, Retailer Bhupen Saha Traders Bhobotosh Saha Bhupen Saha) Magura Sadar Magura Town, Magura Processor District Magura Town, Magura Jute Trader District Tala Upazilla, Satkhira Trader and Oil Processor District Trader/Exporter; NGO Organix Islam Mukto Proprietor Khulna Sabbir Baig Co-Owner Old Market Road, Baig Oil and Dal Mills Gollamari, Khulna Krishno Bhodro Roy Manager Kalibari, Khulna Md. Mosharraf Hossain Deara, DIghalia, Processor Jute Textile Mills Ltd. Executive Director Khan Khulna Mondal & Co. Mohsin School Moor, Trader and Exporter (jute) Md. Nazrul Islam Manager Uttara Pat Sangstha Daulatpur, Khulna Local Processor / Oil Mill Faridpur Dist. (pulse) Kanaipur Bazar, Local processor Zakir Hossain son of owner Faridpur

Type of Market Actor Entity Interviewee/ Designation Address Location/District Contact Person Balia bazar, Saltha, Aratdar A Rob traders Mehedi Hasan Faridpur district Local Trader Faridpur District Producer Md. Jahangir Jessore District Producer Niamat Ali Sardar Uzirpur, Narail Producer Abdul Motaleb Uzirpur, Narail Utpal Boiragi and group Veg. producer Dumuria, Khulna farmers Ag. Value Chain Key Informant Mike Field Chief of Party Gulshan, Dhaka (AVC) project Upazilla DAE Ag. Sharsha Upazila, Key Informant DAE Upazilla Office Hirak Sarker Officer Jessore Asst. Dir. and Key Informant DAE District Office Mr. Khalid Upazila Ag. Jessore Town Officer Key Informant IRRI/RVC Project Tim Russell RVC COP Jessore Town Kasipur Upazilla, Key Informant DAE Kasipur DAE Ag. Officer Jessore District Satkhira Town, Key Informant RVC Satellite Office Satkhira District District Training Satkhira Town, Key Informant DAE Office Officer Satkhira District Department of District Marketing Key Informant Agricultural Abdus Salam Tarofdar Khulna Officer Marketing District Training Key Informant DAE Pankaj Kanti Mojumdar Khulna Officer Sonadanga R/A, Key Informant Solidaridad Md. Atikuzzaman Khulna District Ag. Sandar Upazilla, Key Informant DAE Sandar Upazilla Officer Faridur Dist.

APPENDIX 5

Summary of Related Donor Projects in the FtF Zone

DONOR SUMMARY PROJECT Agricultural Value  The Agricultural Value Chains (AVC) is a five-year project funded by USAID Chains (AVC) under its Feed the Future initiative to improve the food security scenario in Bangladesh by strengthening agricultural value chains.  AVC aims to achieve broad-based economic growth and enhance long-term food security in 20 districts of the Southern Delta of Bangladesh by applying a market systems approach. This will result in increased access to and availability of diverse and nutritious fruits, vegetables, and pulses in local, regional, and national markets and will contribute to improving food security in targeted areas.  active in 20 Districts of the Southern Delta of Bangladesh  ACI Ltd.: working to help develop a branding and marketing strategy for chemical-free veg. for sale in local market.  Bombay Sweets & Co.: in Feb 2015, AVC project signed MoU with Bombay Sweets & Co. to enable them to procure industrial variety potatoes from AVC project farmers in FTF zone, to benefit 600 rural households  SNS Agro Tech Ltd.: in Nov 2014, AVC signed MoU with SNS Agro Tech Ltd., a local agro-based trading company to develop a viable value chain for industrial potatoes in JessoreSadar and ChowgachaUpazilla.  Ispahani Agro Limited: AVC signed MOU to disseminate knowledge on good orchard management for improving overall productivity in the South. Increased yields from orchards under cultivation will also enhance incomes. Sustainable  project started in November 01, 2012 with the funding of the Embassy of the Agriculture, Food Kingdom of Netherland. The objective of the project is to enhance food and security and nutrition security of small farmers and landless workers in Southwest Bangladesh Linkages (SAFAL) with a focus on developing resilient livelihoods through Promoting sustainable agricultural production and market chain development.  Objectives: o organization and capacity building of producer groups o efficient farm management o strengthening of business and market linkages o development of village market chains o development of gender-equitable and socially inclusive business relationships between suppliers and producer groups o improving nutrition o improving coordination between agencies  Active in Jessore, Narail, Khulna, Satkhira, Bagerhat  SAFAL working with ACI, LalTeer, Syngenta, Rahim Agro, and suppliers to Agora International Maize  one of the leading centers of the CGIAR …working in Bangladesh since the early and Wheat 70s…initiating multi-dimensional work for varietal improvement, improved crop Improvement Center management, conservation of natural resources, and human resource development. (CIMMYT) The center’s contributions to the development of high-yielding maize and wheat varieties, wheat-rice and maize-rice systems, whole-family training, small-scale farm mechanization for conservation agriculture, and triticale (a wheat-rye hybrid) for fodder. “CIMMYT’s contributions to agricultural research and development in Bangladesh are highly recognized.”  Work by CIMMYT with researchers, extension workers, policymakers, and farmers in Bangladesh for nearly four decades has helped establish wheat and maize among the country’s major cereal crops, made farming systems more productive and sustainable, improved food security and livelihoods, and won ringing praise from national decision makers in agriculture.  active in Southern Districts of Bangladesh

DONOR SUMMARY PROJECT Switch Asia Jute • project started in March 2013 with the funding of European Union (EU). Goals to: Value Chain Project o increase income levels of targeted jute growers, producers of organic fertilizer and JDP workers; o increase the market share by selected SMEs of green and environment friendly JDPs; o improve social and gender positions of female producers and JDP workers; o increase purchase orders of eco-friendly JDPs from international buyers; o increase production of JDPs by the SMEs; o adopt action plans and regulatory instruments in favour of eco-friendly JDP production • Active in Satkhira, Jessore, Khulna USAID Agriculture  Ag Extension Project is implemented by Dhaka Ahsania Mission (DAM) in Extension Support consortium with CARE Bangladesh and mPower implementing this project. The Activity 5-year project began on October 23, 2012 and scheduled to end October 22, 2017.  project aims to enhance access to and utilization of agricultural (ag) extension services by smallholder farmers – both men and women. It is working for building capacities and creating supports to a farmer demand-driven agricultural extension system, synergized by the use of information communication technology (ICT). It helps to foster a farmer demand-driven extension service system and also helps improving access to quality ag inputs and markets along with access to finance. The six value chain of the project are: Jute, Chilli, Mung Bean, Beef Fattening, Dairy & Fish.  working in 12 districts in the southwest and central areas of Bangladesh Jessore, Magura, Faridpur, Rajbari, Khulna, Satkhira, Narail, Barisal, Bhola, Pirojpur, Barguna, Patuakhali.  Technical partners: CARE Bangladesh and mPower

APPENDIX 6

Bibliography

Action for Enterprise (AFE). (April 2014). Tools and Methodologies for Collaborating with Lead Firms: A Practitioner’s Manual

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