Supply chain differentiation,contract agriculture,and farmers’ marketing preferences: The case of sweet pepper in Thailand

There is an emerging body of literature analyzing how smallholder farmers in developing countries can be linked to modern supply chains. However, most of the available studies concentrate on farm and farmer characteristics, failing to capture details of institutional arrangements between farmers and traders. Moreover, farmers’ preferences have rarely been considered. Here, we address these gaps by analyzing different market channels for sweet pepper in Thailand. Using data from a survey and choice experiment with farmers, we find that there is a general preference for marketing options that do not involve a contract. Additional provision of inputs and credit can increase the attractiveness of contracts. Yet, the most important factor for farmers is to personally know the buyer they deal with, which may be related to issues of trust. Some policy implications are discussed.     

Collective action initiatives to improve marketing performance: Lessons from farmer groups in Tanzania

This study aims to examine the extent to which certain characteristics and asset endowments of smallholder farmer groups facilitate collective action initiatives to improve group marketing performance. This is approached through an evaluation of a government-led programme in Tanzania, which is attempting to increase smallholder farmers’ incomes and food security through a market-oriented intervention. Findings suggest that more mature groups with strong internal institutions, functioning group activities, and a good asset base of natural capital are more likely to improve their market situation. Gender composition of groups also affects group marketing performance, as an enabling factor for male-dominated groups. Structural social capital in the form of membership in other groups and ties to external service providers, and cognitive social capital in the form of intra-group trust and altruistic behaviour are not significant factors in a group’s ability to improve its market situation.     

Household-level determinants of adoption of improved natural resources management practices among smallholder farmers in western Kenya

Integrated natural resources management (INRM), of which integrated soil fertility management (ISFM) is a component, offers considerable promise for increasing food production in Kenya. It nonetheless remains unclear whether ISFM/INRM techniques lend themselves easily to adoption by smallholder farmers. Using panel data collected in western Kenya in 1989 and 2002, this study finds that resource constraints limit many farmers’ adoption of ISFM/INRM techniques. The size of the farm owned by a household, the value of its livestock, off-farm income, family labor supply, and the educational attainment and gender of the household head all had a significant positive effect on the likelihood of adoption. Similar factors were found to be statistically significant in discouraging abandonment of the practices under study. There thus seem to exist reinforcing feedback between investments in soil fertility management and household wealth, as measured by asset endowments. Our findings raise important questions as to whether ISFM and related techniques are really affordable to poorer smallholder farmers.     

Indian farmers’ valuation of yield distributions: Will poor farmers value ‘pro-poor’ seeds?

Potential poverty traps among the rural poor suggest a need to reduce poor farmers’ vulnerability by stabilizing crop yields and limiting yield losses. Advances in biotechnology will help address this need directly with crops that tolerate climate fluctuation or resist biotic stresses. Evaluating ex ante how farmers will value these ‘pro-poor’ seeds is important for delivery design, but also challenging. This paper describes an experimental economic approach to understanding farmers’ valuation of such seeds. Using data from a survey and experiment, I assess Indian farmers’ valuation of changes in the mean, variance, and skewness of payoff distributions. These farmers value increases in expected value, but seem indifferent about higher moment changes in payoff distributions. Farmer traits such as wealth and risk exposure affect their valuation of these changes only mildly. While various limitations to the experimental approach must qualify practical implications of these findings, the experiment demonstrates the viability of conducting valuation experiments with open-ended questions in developing countries.     

Farmer organization,collective action and market access in Meso-America

Farmer organization and collective action are often seen as key factors in enhancing farmers’ access to markets. Often, too little attention is directed at (a) the most appropriate types of organization; (b) whether organization makes less or more sense in the case of producers of an undifferentiated commodity or a higher value product; (c) whether the public or private sector is best placed to support farmer organizations; and (d) the conditions necessary for ensuring their economic viability. Research in Mexico and Central America explored these issues for commodity maize and high value vegetables, respectively. The benefits of farmer organization are more evident in the vegetable sector, characterized by high transaction costs associated with market access. However, horticultural farmer organizations in Honduras and El Salvador include less than 5% of total horticultural producers. This is possibly due to farmer organizations’ limited business skills and non-replicable organizational models. There is less incentive for maize farmers to organize to access output markets as the transaction costs are relatively low. The benefits of maize farmer organization are clearer when it comes to accessing inputs such as credit, seed and fertilizer. Farmer organization is a critical factor in making markets work for the poor, but the role and timing of public and private investment in these organizations is poorly understood.     

Subsistence production,markets, and dietary diversity in the Kenyan small farm sector

Undernutrition and low dietary quality remain widespread problems in poor population segments, especially among smallholder farmers in sub-Saharan Africa. Hence, the question how smallholder systems can be made more nutrition-sensitive is of particular relevance for research and policy. Recent studies analyzed whether increasing farm production diversity may help to improve nutrition. Most existing studies found a positive but small effect on dietary diversity on average. The underlying mechanisms were not examined in detail. This article tests the hypothesis that the effect of farm diversity on nutrition is small because production diversity is positively associated with dietary diversity obtained from subsistence production but negatively associated with dietary diversity obtained from the market. This hypothesis is confirmed with data from Kenya, using different indicators of production diversity and dietary diversity scores at household and individual levels. The results underline the important role of markets for smallholder diets and nutrition. Hence, strengthening markets and improving market access should be a key strategy to make smallholder systems more nutrition-sensitive.     

Adoption of food safety and quality standards among Chilean raspberry producers – Do smallholders benefit?

The growing importance of food quality and safety standards in international markets is influencing production and marketing conditions of farmers worldwide. The effects of this development on small-scale farmers in developing countries are controversially discussed in the scientific debate. While small-scale farmers may benefit from standard compliance in terms of better market access and technology upgrading, non-compliance may lead to market exclusion and marginalization. The present study aims to identify the factors influencing a certification according to food safety and quality standards and the impact on farm management and income among exportoriented raspberry farmers in Chile. Survey data from 57 certified and 169 non-certified Chilean smallholder raspberry producers is analyzed. The analysis of the certification decision shows that small-scale farmers are less likely to implement food safety and quality standards. Once farmers are able to overcome the barriers and implement a food standard, we find that this has a positive effect on their quality performance and net raspberry income.     

Smallholders' perceptions and preferences for market attributes promoting sustained participation in modern agricultural value chains

Connecting smallholder farmers to modern agricultural value chains (henceforth high-value markets [HVMs]) represents a credible pathway to improving the welfare of farmers in developing countries. Smallholder exit rates from HVMs remains high, raising concerns about their sustained participation of smallholders in HVMs. We conduct a Best-Worst Scaling choice experiment with horticultural farmers in Kenya to understand their perceptions and preferences for market attributes that could promote sustained participation in HVMs. A unique feature of our study examines smallholders' best or worst choice consistency as means to further understand their thought process. Our results reveal that smallholders mostly expressed preference for a flexible incentive-based pricing option and long-term formal relationships with their buyers. Delayed payments and high investment requirements were the worst market attributes chosen by smallholders. Preference heterogeneity was driven by the farming experience, gender, income and location of the farmers. We find that smallholders are well aware of conditions that might motivate exit from HVMs relative to conditions that facilitate participation in HVMs. Our findings demonstrate the relevance of various key market attributes central to participation in HVMs, while teasing out the various coordination roles cooperatives, non-governmental organisations can play in facilitating sustained smallholder participation in HVMs.     

Shadow vs. market prices in explaining land allocation: Subsistence maize cultivation in rural Mexico

Prices may fail to explain farmers’ land allocation if the relevant decision prices are “shadow prices” that deviate from market prices. This may be the case for farmers who attach significant non-market values to their crops. I theoretically explain why land allocation may not respond to market signals even if transaction costs are not binding. I use nationally representative rural household data from Mexico to show that shadow prices better explain the land subsistence farmers allocate to traditional maize in this center of maize diversity. I discuss the importance of non-market values in understanding supply response and on-farm conservation of traditional crops.     

Evolution and challenges of dairy supply chains: Evidence from supermarkets,industries and consumers in Ethiopia

In developing countries the demand for products of animal origin is expected to grow rapidly in the coming years. Using data collected from 200 urban households this study examines the evolution of the dairy market in Ethiopia. In particular, this study suggests that although the Ethiopian dairy market remains extremely thin and volatile, the commercialization of processed dairy products through supermarkets is expanding and is expected to keep doing so in the foreseeable future. Increasing urbanization and corresponding changes in consumer preferences, behaviour and purchasing power are the identified causes for the rise of supermarket-processor dairy chains. This study shows also that emerging dairy chains provide new market opportunities to Ethiopian farmers, but the existence of retail-industrial monopolies and monopsonies jeopardize farmers’ economic benefits to a great extent. The study concludes with some implications for policy and further research.     

Consequences of a coexistence policy on the adoption of GMHT crops in the European Union

This article examines the adoption of genetically modified herbicide tolerant (GMHT) crops in the European Union (EU) prior to its commercial release. A set of potential drivers including the implementation of coexistence measures by farmers, farmers’ own motivational factors (e.g. economic, environmental and technical factors) and perceived social pressure to accept or reject adoption may influence European Union farmers’ willingness to adopt GMHT oilseed rape and GMHT maize. The analysis includes economic and sociological factors. Results show that coexistence measures may hamper GMHT adoption in the EU.     

Collective action for market chain innovation in the Andes

The Papa Andina network employs collective action in two novel approaches for fostering market chain innovation. The participatory market chain approach (PMCA) and stakeholder platforms engage small potato producers together with market agents and agricultural service providers in group activities to identify common interests, share market knowledge and develop new business opportunities. These forms of collective action have generated commercial, technological and institutional innovations, and created new market niches for Andean native potatoes grown by poor farmers in remote highland areas. These innovations have benefited small farmers as well as other market chain actors. This paper describes Papa Andina’s experiences with collective action for market chain innovation. It then discusses the implications of these experiences for the understanding of collective action and the policy implications for research and development organizations.     

Can biotechnology reach the poor? The adequacy of information and seed delivery

The paper examines the expectation that biotechnology can provide significant benefits for smallholder farmers. It uses evidence from current seed systems and variety choice in developing countries. In particular, it examines the adequacy of information flow and the performance of seed markets. Many of the biotechnology innovations proposed for use by smallholders feature qualities that may not be immediately obvious to farmers; implications are drawn for the potential demand for these transgenic varieties. The adequacy of seed systems is also examined, including the characteristics of local seed diffusion and the experience of commercial seed enterprises. The paper concludes that investments in public biotechnology must be accompanied by policies that encourage commercial seed system development and that empower farmers to be able to take full advantage of new technology.     

Measurement of competitiveness in smallholder livestock systems and emerging policy advocacy: An application to Botswana

Farm level cross sectional data of 556 randomly selected livestock producers were used to investigate the competitiveness of smallholder beef farmers in Botswana. The results show the presence of inefficiency, with about 74% of the variation in actual profit from maximum profit (profit frontier) between farms mainly arising from differences in farmers’ practices rather than random variability. Further the mean profit efficiency level of 0.58 suggests that there is a substantial scope to improve beef profitability in Botswana. Significant profit efficiency drivers include, among others, education, distance to market, herd size, access to information and access to income from crop production. Considering the importance of livestock sector for wealth creation and poverty eradication in the rural areas where poverty is more pronounced, there is a need for appropriate development strategies and policies directed towards addressing these factors. In particular there is need to invest in market infrastructure in order to improve market access, hence profit efficiency of smallholder livestock farmers.     

Government regulation and quality in the US beef market

We show how government regulation played a critical role in shaping the beef industry over the past century. Technological developments in the late 19th century led to a highly concentrated meatpacking industry and fostered a national market for beef in the US, and the development of a national market for beef led to regulations to ensure quality uniformity, especially USDA grading. We explain the problems with beef quality created by USDA grading using tools from information economics. Because USDA’s fairly coarse grading system failed to measure significant aspects of beef quality, beef production suffered from the multi-tasking problem, which led producers to focus on producing larger quantities of beef while ignoring quality issues. We show that producing high quality beef requires either ex ante input controls or ex post sorting. In turn, we show how newly developed programs such as USDA quality certification and branding are incentivizing production of higher beef quality and dealing with information problems arising under USDA grading. We conclude with the implications of the regulatory history for current regulation of beef markets.     

Why is the food traceability system unsuccessful in Taiwan? Empirical evidence from a national survey of fruit and vegetable farmers

Food traceability systems allow the consumers or administrative authorities to trace the origins or ingredients of food products. Given the expressed concerns for food safety, the promotion of food traceability systems has occurred in many countries. Although a considerable body of literature has examined the consumer responses in regard to food traceability, relatively little is known about the producers’ adoption behaviors. To fill this knowledge gap, this paper investigates Taiwanese farmers’ participation decision in relation to the Taiwan Agriculture and Food Traceability (TAFT) program; special attention is paid to understanding the roles of the farmers’ program awareness and pesticide residue testing adoption in regard to TAFT participation. Using a national representative sample of the fruit and vegetable farmers in Taiwan, the results indicate that program awareness and pesticide residue testing adoption are the significant determinants of TAFT participation. An awareness of the government’s promotion of the TAFT program and adoption of pesticide residue testing has significantly reduced TAFT non-participation by 28.2% and 21.9% points, respectively.     

Smallholder market participation: Concepts and evidence from eastern and southern Africa

This paper reviews the evidence on smallholder market participation, with a focus on staple foodgrains (i.e., cereals) in eastern and southern Africa, in an effort to help better identify what interventions are most likely to break smallholders out of the semi-subsistence poverty trap that appears to ensnare much of rural Africa. The conceptual and empirical evidence suggests that interventions aimed at facilitating smallholder organization, at reducing the costs of intermarket commerce, and, perhaps especially, at improving poorer households’ access to improved technologies and productive assets are central to stimulating smallholder market participation and escape from semi-subsistence poverty traps. Macroeconomic and trade policy tools appear less useful in inducing market participation by poor smallholders in the region.     

Farmers’ preferences for supermarket contracts in Kenya

With the modernization of global agri-food systems, the role of contract farming increases. This also involves smallholder farmers in developing countries. While previous studies have looked at economic impacts of contract schemes on smallholder farmers, little is known about farmers’ preferences for contracting in general, and for specific contract design attributes in particular. Better understanding farmers’ preferences and constraints is important to make smallholder contract schemes more viable and beneficial. This article builds on a choice experiment to analyze farmers’ preferences and preference heterogeneity for contracts in Kenya. In the study region, supermarkets use contracts to source fresh vegetables directly from preferred suppliers. However, farmer dropout rates are high. Mixed logit models are estimated to examine farmers’ attitudes towards critical contract design attributes. Having to deliver their harvest to urban supermarkets is costly; hence farmers require a significant output price premium. Farmers also dislike delayed payments that are commonplace in contract schemes. The most problematic contract attribute is related to unpredictable product rejection rates, substantially adding to farmers’ risk. Designing contracts with lower transaction costs, more transparent quality grading, and fairer risk-sharing arrangements could enhance smallholder participation in supermarket procurement channels.     

Aid,collective action and benefits to smallholders: Evaluating the World Food Program's purchase for progress pilot

Agricultural commodity markets in developing countries often operate in a constrained environment of prohibitive transaction costs. Consequently, smallholder farmers are only partly integrated into these markets, a situation that keeps them in a lower level of development equilibrium (poverty trap). Although cooperative institutional alternatives such as Farmers’ Organizations (FOs) may reduce transaction costs and revitalize agricultural production and commercialization, they rarely have been successful in fully delivering on these promises. Against this backdrop, the World Food Programmed (WFP) has recently implemented a multi-year and multi-country pilot to increase smallholder participation in commodity markets. The projects involved investing in physical and human capacities of Farmer Organizations (FOs) to aggregate commodities and add value, as well as locally purchasing food aid from the same. The combination of interventions was expected to increase the relative price of agricultural products, particularly staple crops. In this study, using Ethiopian panel survey data, we estimated the causal income and investment effects of the Ethiopian P4P intervention among smallholders. Using an entropy balancing (EB) model and semi-parametric difference-in-difference (DID) model, we show that the P4P intervention has increased per capita consumption by smallholders. Our additional analysis confirms that this effect is heterogeneous owing to elite capture within Farmer Organizations. We also find evidence of increased food consumption scores, increased investments in child schooling, and increased asset holding among program-participating smallholders relative to comparison farmers. Policy implications are discussed.