f 2016 IGLS FORUM - ABSTRACT - ALINE REGINA FERNANDES

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Small-scale agro-industry (SSAI) is an option for small farmers to add value to a primary product and increase their revenues. Within agro-industry ...
10th International European Forum (Igls-Forum): System Dynamics and Innovation in Food Networks

10 years later: a comparison between the results of early simulation scenarios and the sustainability of a small-scale agro-industry development program Fernandes, A.R.1; Da Silva, C.A.B.2

Small-scale agro-industry (SSAI) is an option for small farmers to add value to a primary product and increase their revenues. Within agro-industry, food-processing and beverages are by far the most important sub-sector in terms of value added, accounting for more than 50% of the total formal agro-processing sectors in developing countries3. However, experience has shown the vulnerability of SSAIs to the pressures of their competitive environment: many fail in their early years of operations. During the 1990’s, several programs to promote SSAI took place in Brazil and a comprehensive analysis has been undertaken to identify success factors for the long-term financial sustainability of SSAIs. For that, a rapid appraisal was conducted through structured interviews to 35 SSAIs owners and another 27 key stakeholders. The investigated program addressed strategic components that comprise institutional environment; organizational structure; funding; legalization; technological and entrepreneurial capacity building; commercialization and marketing. Following system dynamics (SD) concepts and procedures4 and based on the collected date, critical success factors were identified that include production mix diversification, product differentiation, level of capacity utilization and networking, among other determinants of competitiveness. A SD model was built taking into consideration the interaction between key variables in relation to SSAI raw material supply and product distribution systems, as well feedback mechanisms related to policy actions and internal operations. The model, called “Scenarios”, generated cash flows to calculate the financial feasibility indicators for a number of selected SSAIs 5

and allowed to simulate their performance under alternative scenarios. Ten years after this study’s

conclusion, the case of the “Agreco”6 SSAI network is revisited to compare the simulation results with its current situation. Agreco started its agro-industry network assembling 27 SSAIs with a mix production of dairy, meat7, honey, eggs, vegetable and sugar cane. Between 1998 and 2000, the “Desenvolver”8 1

Food Engineer and Doctorate at Federal University of Viçosa, Depart. of Food Science and Technology, DTA/UFV, BR. Currently, S&T Analyst at MCTI/Brazil. ([email protected] ). 2 Advisor Professor. Depart. of Food Science and Technology, DTA/UFV. 3 FAO. Agro-industries for development. Edited by Carlos A. da Silva ... [et al.].2009. 4 STERMAN, J. Business Dynamics: Systems Thinking and Modeling for a Complex World; Irwin, 2000. 5 FERNANDES, A.R. Dinâmica Operacional e Sustentabilidade de Empreendimentos Agroindustriais de Pequeno Porte. [Operational dynamics and sustainability of small scale agro-industrial firms]. IX Congreso Latinoamericano de Dinámica de Sistemas y II Congreso Brasileño de Dinámica de Sistemas, 2011. 6 Agreco is an agro-ecological farmers association based in the state of Santa Catarina, Brazil, Encostas da Serra Geral. 7 Poultry, bovine, and swine 1

10th International European Forum (Igls-Forum): System Dynamics and Innovation in Food Networks

state program provided business development services to promote access to funding from the government program PRONAF-Agroindústria9. Later, Agreco established a partnership with SEBRAE10 to receive strategic, tactic and operational business management support. Presently, 22 SSAIs are active, where Agreco’s network comprise 16 units focusing on products with extended shelf life and certified organic production, while 6 are now independent11 and 5 failed working with perishable products12 13. Since 2009, Agreco established a cooperative14 reinforcing its sales in institutional15 and traditional retail markets. From an annual gross revenue in 2002 of around R$ 0.7 million, the “Cooperagreco” reached proceeds of R$ 2.8 million in 2012. The “Scenarios” simulation of the Agreco network system under different optimistic, conservative and pessimistic hypothesis related to their operations and business environment indicated the long-term financial sustainability of the SSAI’s associated with it. These results could now be confirmed, suggesting a higher SSAI survival rate for development programs that promote network strengthening and other strategic actions to face the commercialization challenges, such as sharing of common brands and business development services.

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State Program in Santa Catarina, sponsored by Appropriated Technology Program – PTA/CNPq National Program of Family Agriculture for Agroindustry 10 Brazilian small business development agency 11 Two SSAIs are non certified partners. 12 Minimally processed vegetables 13 Guzzatti, T. C. et. al. Cooperagrego: seus desafios e suas conquistas. Cooperativa de Agricultores Ecológicos das Encostas da Serra (Santa Catarina) – Rio de Janeiro: Sociedade Nacional de Agricultura; Serviço Brasileiro de Apoio às Micro e Pequenas Empresas; Centro de Inteligência em Orgânicos. 44 p.: il. (Série Estudos de Caso). 2012. 14 WEBER, D. et. Al. A experiência da COOPERAGRECO: Desenvolvimento regional das Encostas da Serra Geral Catarinense. Cadernos de Agroecologia – ISSN 2236-7934 – Vol. 8, No. 2, Nov. 2013. 15 Food Acquisition Program (PAA/MDA) 9

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