Enhancing agricultural value chains

Implications of exchange rate overvaluation and world price shocks for PNG

The large inflow of foreign capital to fund PNG investments in natural gas pipeline and processing infrastructure resulted in a surge in inflation beginning in 2011. Costs of production of tradable goods such as coffee and palm oil rose more (in kina terms) than their output prices, reducing the profitability of these sectors. These price distortions have continued to the present day, as restrictions on access to foreign exchange (mainly through delays in the release of funds) as demand for foreign exchange exceeds supply made available to the public. This policy note reviews PNG’s exchange rate policies and uses an economy-wide simulation model1 to quantify the impacts of these distortions. We conclude with a discussion of policy implications, highlighting the effects of a possible devaluation / depreciation of the kina.

Commercialization of Papua New Guinea's vegetable sector: Identifying constraints using quantitative, qualitative, and large language model methods

This paper evaluates the constraints within Papua New Guinea's vegetable sector, drawing on large scale household surveys, extensive qualitative interviews with key stakeholders, and Large Language Model (LLM) methods.

Our survey data reveal that vegetable production is ubiquitous, with almost all households surveyed (91%) growing at least one vegetable. Indigenous varieties, such as leafy greens (96%) and fresh beans (69%), are widely cultivated across regions, while high-value vegetables like onion (17%) and tomato (19%) show more regional concentration. Over half (53%) of PNG vegetable farmers sell their produce, with farmers located in the nonseasonal highlands agro-ecological area leading in market participation (66%), contributing to an overall commercialization rate of 24% (defined as the share of pro duction sold). However, modern input use, particularly improved seed adoption, significantly lags behind output commercialization in all agroecological zones except the islands survey areas.

The quantitative analysis, using the PNG Rural Household Survey 2023, and the qualitative analysis, drawing from both manual review and LLM-assisted processing of in-depth interview notes, consistently identify poor feeder roads as critical bottlenecks for every stakeholder across PNG's vegetable value chain. Beyond transportation, these interviews repeatedly highlighted persistent seed supply shortages and high seed costs as significant hurdles. Since PNG depends on imported vegetable seeds, several structural and procedural barriers contribute to these shortages. These include potentially arduous quarantine procedures, limited foreign exchange for seed imports, and cumbersome permit processes, often leaving major distributors with insufficient stock. These reported bottlenecks may contribute to the low improved seed adoption and use reflected in the household survey analysis.

Poultry value chain and cluster development in Papua New Guinea: Insights from a recent field study

Despite poultry being lauded as a relatively affordable source of protein and micronutrients in many lower-income countries, chicken meat is twice as expensive in PNG compared to nearby Southeast Asian countries. Recent rural household consumption data collected by the International Food Policy Research Institute (IFPRI) suggests that an important share of households do not eat enough protein to meet healthy dietary guidelines (Schmidt et al., 2024). Poultry, along with fish and pork, are the three most important animal-source protein foods in the country, yet these products remain financially prohibitive to a large share of the population.

This paper explores the unique challenges and opportunities within PNG’s poultry sector using a "growth diagnostic" approach (pioneered by Rodrik, 2010). Through interviews with key stakeholders across the poultry value chain, we found that while high feed costs persist as a significant challenge, poultry farmers have yet to adopt additional cost-reduction strategies, such as establishing small-scale regional feed mills, utilizing local feed ingredients, and diversifying feed and input imports. An intriguing puzzle of PNG’s poultry sector is the limited number of small-scale producers successfully transitioning to medium-scale operations. This primarily stems from high transport costs and restricted access to input and sales markets. The challenges of marketing chicken in PNG have received less attention than production. Drawing on the experiences of successful models in other countries and considering the specific situation of PNG's poultry sector, fostering poultry production and processing clusters (e.g., in Lae suburban areas) emerges as a potential strategy to address production, transportation, and marketing constraints. By concentrating production, value chain clustering can enhance access to essential services (e.g. slaughtering and cold storage), improve market access, and reduce overall costs. While clustering holds promise for PNG’s poultry value chain, its success hinges upon joint action between the public and private sectors, as well as NGOs operating within the value chain.

The agrifood system in PNG: Structure and drivers of transformation

Although the economy of Papua New Guinea is heavily influenced by the oil and natural gas sector, which accounts for 30 percent of GDP and most of the country’s foreign exchange earnings, small-scale agriculture continues to be the major source of livelihoods for most of the population. Much of the food crop production (particularly starchy staples such as sweet potatoes, cassava, yams and sago) is not traded internationally; however, oil palm, coffee and cocoa are major exports. A large share of agricultural production undergoes little value-added through processing and much of it is consumed by farm households themselves. Thus, there would appear to be substantial scope for increases in employment and incomes through further development of the broader agrifood system, including agroprocessing, trade and transport, and food services.

Subsistence farming typically dominates agriculture during the earliest stages of development; as agricultural productivity rises; however, farmers start to supply surplus production to markets, thus creating job opportunities for workers in the nonfarm economy both within and outside of agrifood sectors (Haggblade, Hazell, and Dorosh 2007). Rising rural incomes generate demand for more diverse products, leading to more processing, packaging, transporting, trading, and other nonfarm activities. In the early stages of agricultural transformation, the agriculture sector serves as an engine of rural and national economic growth. Eventually, urbanization, the nonfarm economy, and nonagricultural incomes play more dominant roles in propelling agrifood system development, with urban and rural nonfarm consumers creating most of the demand for agricultural outputs via value chains connecting rural areas to towns and cities (Dorosh and Thurlow 2013). The exact nature of this transformation process varies across countries because of the diverse structure of their economies and the unique growth trajectories of their various agrifood and nonfood subsectors.

This paper describes the current and changing structure of PNG’s agrifood system (AFS) and evaluates the potential contribution of different value chains to accelerate agricultural transformation and inclusiveness. We start by offering a simple conceptual framework of the AFS and then compare PNG’s AFS to that of other countries at different stages of development. We go on to disaggregate PNG’s AFS across agricultural value chains, taking into consideration their different market structures and historical contribution to economic growth and transformation. Finally, we use a forward-looking economywide model to assess the diverse contributions that specific value chains can make to each of a set of broad development outcomes. We conclude by summarizing our main findings.

Constraints facing rural poultry production in PNG: The role of input suppliers

Context: The average consumption of protein foods in Papua New Guinea (PNG) remains insufficient to meet nutritious diet guidelines, especially in rural areas. While an expanding literature has demonstrated that poultry is a cost-efficient animal source food to increase protein intake, rural households in PNG face high prices at the market for poultry meat. Similarly, the high price of poultry production inputs constrains greater uptake of rural poultry production. PNG’s heavy reliance on feed (and feed input) imports, as well as high transportation costs and insufficient rural manufacturing and processing infrastructure creates limited opportunities for rural subsistence and commercial poultry production growth. Objective: There is a lack of value chain studies to understand the feasibility of expanding the local mini livestock feed mill model in PNG to increase poultry feed supply in underserved areas. This study builds from earlier work on rural livestock feed infrastructure programs, and aims to fill the knowledge gap on the opportunities and constraints for expanding domestic livestock feed production and distribution via rural mini feed mills. Method: The International Food Policy Research Institute (IFPRI) and the National Agriculture Research Institute (NARI) conducted in-depth qualitative interviews with 8 mini mills and 13 poultry farmers across 4 highland provinces during October and November 2022. We synthesize the interview transcriptions of the qualitative interviews in tandem with quantitative analysis of food consumption and agri-food trade data, as well as the authors’ own field observations in this paper. Results: The in-depth interviews showed that the poultry farmers who purchased from local mini feed mills substantially lowered their feed costs, resulting in greater gross profits compared to rural poultry farmers that only sourced feed from commercial feed suppliers. However, the mini feed mills that we interviewed outlined a series of challenges in sustaining rural feed mills in PNG. The main challenges of running a successful mill included feed mill equipment procurement, electricity reliability, reliable raw ingredient supply, mini mill retailing to secure a client base, and adequate information about feed formulation. We identified two potential approaches that have overcome many of the identified challenges, that could be replicated and adapted to expand mini feed mill operations in the Highlands. The first approach is a farmer cooperative model that incorporates credit and feed delivery services to cooperative farmers. In doing so, they are able to better estimate volume demand for processed feed and accommodate feed production accordingly. The second approach follows a lead firm model, whereby a local farm supply retail outlet is expanding its business to include livestock feed production and supply, overcoming equipment procurement constraints given their previously developed business model focused on farm implement supply. Our evaluation provides detailed costs and benefits of both approaches for potential expansion of these livestock feed producer and distributor models.

Synopsis: Improving agricultural value chain coordination and gender inclusiveness in Papua New Guinea

Maximizing efficiency throughout the entire agri-food value chain is critical to fostering greater economic growth and poverty reduction in Papua New Guinea (PNG). Investments in midstream value chain infrastructure (e.g., improved storage facilities, rural feeder roads, electricity, and cold storage transport) are crucial to strengthen linkages between producers and consumers. These investments should also promote inclusive development that benefits both men and women value chain actors. In this study, we analyzed three key value chains in Papua New Guinea—poultry, sweet potato, and fresh vegetables—aiming to guide policymakers and stakeholders toward ways to improve productivity, increase revenue, and bolster competitiveness and inclusiveness within the agriculture and livestock sectors.

Improving agricultural value chain coordination and gender inclusiveness in PNG

The welfare of Papua New Guinea’s (PNG’s) population depends on domestic agriculture productivity and stability. As of 2019, value-added from the agriculture, forestry, and fishing sectors totaled approximately 17 percent of GDP. However, when considering the downstream value chain activities directly related to the agriculture sector (e.g., agriculture processing, domestic food trade and transportation, and domestic food commodity sales), the larger agri-food system in PNG contributes over 25 percent to the country’s overall GDP (Pradesha and Dorosh, 2022). Maximizing efficiency throughout the entire agri-food value chain is critical to fostering greater economic growth and poverty reduction within the country. Growing a globally competitive agriculture sector also demands investments and capacity strengthening in mid-stream value chain operations such as product aggregation, transport logistics, packaging and processing, and handling. It is important that these investments also promote inclusive development that benefits both men and women value chain actors. Previous research suggests that where women are economically empowered and have access to decent jobs in lucrative nodes (i.e., activities) of value chains, households have higher incomes and are less likely to be poor (FAO, 2011). In PNG, despite women’s greater share of employment in agriculture (60 and 52 percent of women and men work in agriculture, respectively), women participate less in higher-value agricultural production and trade activities (Chang et al., 2016; Omot, Chambers, and Spriggs, 2013; World Bank, 2022).