Nepal Vegetable Seeds Value Chain

Domestic vegetable seed sector in Nepal suffers from following issues which have created an environment that is detrimental to the overall growth, sustainability and competitiveness of the sector;

  • Low Knowledge/ Capacity at farm level units, limits upgrading potential
  • Limited Support Markets, dependency on middlemen as the basis of production and trade
  • Vertical and Horizontal Relationships are evolving but still inadequate, input relationships are weak and/ or non-existent
  • Learning and Innovation is not valued at production level, very little change in production practices
  • Benefit structure has not promoted improved relationships or valuing of learning/innovation.

Given the complexities of these situations and systems, additional fact-finding and analysis should be conducted on a location-specific basis for each intervention. First, investigate thoroughly the vegetable seed sector in terms of specific hybrid seeds, such as cucurbits, broccoli, cauliflower, cabbage and tomato and their concurrent OPVs. This assessment should cover activities/ programmes for both the private seed companies and seed-related agribusinesses (such as agro-vets) and the public sector programmes. In addition, it is important to address the key issues of high cost and irregular/ uncertain quality of agro-inputs, and emergence of seed collectors and packers, rather than authentic seed companies. For instance, lead local seed firms could form sales alliances with foreign seed companies in order to guarantee yields, consistent quality and reasonable prices. In addition, these local companies could acquire the mandate, resources, and ability of those partners to manage effective screening trials in major production areas throughout the country. Selected varieties of priority commodities per elevated site would be determined to be the most suitable for the agro-climatic conditions within each major production area/season. Otherwise, farmers must continue to rely on their “trial and error” experiences to learn which variety best suits their specific environment.

Agribusiness entrepreneurs require motivation and tangible incentives before committing and investing resources to substantive, often costly changes. Information on or ideas about new and improved technologies are not likely to be sufficient to create the needed, sustainable value chain changes. First, trust is the prerequisite for effective working relationships between any buyers and sellers, which can be considered to be lacking in case of vegetable seed sector. Effective communications helps build that trust. Since agreements and contracts between farmers and seed entrepreneurs/ firm have not been effective, third party initiatives along with involvement of local institutions, such as cooperatives, can work to bridge a trust relationship between farmers are seed entrepreneurs/ firms.

It is important to note that the motivation and tangible incentives are useful in gaining agreement and bonding the seed firms with farmers through some form of risk sharing. For instance, if seed firms/ entrepreneurs provide the needed source seeds to the farmers, and in case of crop failure in that area, certain portion of loss is shared by the seed firm. This ensures that the seed firms/ entrepreneurs earn trust and goodwill of the farmers by once again providing that critical input (through compensation) for the next cultivation. Information on improved technologies and varieties of vegetable seed, such as hybrid seed, is not nearly as effective as its actual use through a well-informed incentive for collaboration.

Third, some form of pricing agreement and contract, even as a minimum price, for purchasing the entire harvest (pre-defined quality and quantity), engages all parties in the formation of an integrated system. This shared marketing risk is critical for the scheduled flow of large amounts of high quality, uniform commodities. Thus, the common current practice of offering or paying only whatever the “market will bear” at one end, and at the other end, selling to the highest bidder is detrimental to the formation of such integrated systems.

At its currents state value chain of vegetable seeds needs major commercial upgrading to make it a dynamic and sustainable sector which can contribute to the livelihoods of far and remote population and current seed farmers. For commercial upgrading of vegetable seed value chain, one has to look at two key issues; inter-(value chain) actors’ cooperation and collaboration, and enabling supporting service markets in terms of access to finance and sector/ non-sector support inputs and service provisions.

The inter-actor cooperation and collaboration can happen in two ways; vertical and horizontal integration. Vertical integration and directed vertical linkages across the value chain actors can help to provide small holding farmers, financing and inputs (technical, materials and other resources). Additionally, the seed firms (buyers) can also have much larger control over the cultivation, quantity, quality and prices.

Horizontal integration can be organised via a lead firm/ enterprise and can happen at any value chain stage. The lead firm can work towards working with small groups or enterprises to work together in order to limit the transaction cost. Value chain actors at any stage can work towards consolidation of their core strengths and work with same stage actors for cross operational collaborations, so that logistics and transaction costs are controlled. Decreases or control over transaction costs can lead towards increased profitability and makes investment in business feasible. However, this limits opportunities for functional upgrading of each firm or enterprise.

Value chain actors’ collaboration and cooperation have to be supported by enabling supporting services and markets. At its current stage, vegetable seed sector typically requires financial access and support and supporting service markets which are specific to value chain actors.

Typically, the production and intermediaries (specifically the emerging cooperatives) need better access to  financial services, both in terms of the availability and affordability. As with the current state of value chain actors, financial access and support (possibly in terms of establishing rotating credit fund) is very much required for expansion and upgrading of the technology, processes and facilities.

It is important to note that attempts at functional upgrading by the farmers and producers may not be sustainable, because they might be exposed to the removal of support of the lead firm for vital services, such as inputs, technical support and logistics. Thus, access to these support service markets in terms of availability and affordability to the value chain actors needs to be guaranteed. These service provisions could include sector-specific technical resources and services and non-sector (general) services such as general management capacity building services such as management inputs, market information, finance and accounting support services.

As mentioned earlier, vegetable seed sector desperately requires enterprise level upgrades (be it at farmers level or seed firms) and systemic industry specific upgrades. The required environment, the current situation and possible required interventions to ensure competitiveness of the value chain of the vegetable seeds in Nepal. The upgrading strategy could include any number of or combination of upgrading strategies which can be deemed relevant to the current situation of the vegetable seed value chain in Nepal.

  • Process upgrades: which can lead to improving chain efficiency, such as use of good source seeds, improvements in seed threshing from use of hands to small equipments
  • Product upgrades: This can improve product quality, such as use of better packaging, truthful labelling and better storage facilities.
  • Functional upgrading: by changing and adding new functions performed by the value chain actor one can shorten the value chain, such as farmers’ cooperative or groups consolidating produced seeds, carrying out first step grading and directly selling to buyers or seed companies.

These can be carried supporting horizontal and vertical coordination and enabling supporting service markets.

Vegetable Seed Value Chain Report