The Windmill Approach

Abstract

A common theoretical approach for understanding smallholder farmers' choice of sales arrangements is transaction cost economics (TCE), which usually focuses on a single transaction. However, farmers produce different crops and participate in several value chains simultaneously. Based on two case studies in central Mozambique, the authors propose an analytical framework that pays attention to both the production and the transaction strategies of farmers. This Windmill Approach acknowledges that farmers decide on participating in various value chains on the basis of multiple objectives and aspirations. Farmers prioritize the allocation of available resources towards the sustainability of the whole farm. Policy to support smallholder farmers' market access should not focus on single transactions, but on the combination of farming system and value chain costs and benefits.