Vertical Linkages in Agri-Food Supply Chains: Changing Roles for Producers, Commodity Groups, and Government Policy

Market developments arising from closer vertical linkages in agri-food supply chains have given rise to a variety of issues. This paper outlines key issues and discusses possible responses by producers, their associations, and government. A vision of the future organization of agricultural production serves as a basis for discussion. The continued increase in contracting between producers and processors is accompanied by issues of contract transparency, terms, negotiation, and dispute settlement. Other ramifications include producer access to supply chains and the decline of spot markets. Furthermore, the development of agricultural biotechnology products may force a rethinking of the rationale for public investment in agricultural research and development. Evaluation of market power needs to account for efficiency gains from nonstandard forms of organization to achieve a balanced appraisal of the public interest. Agricultural economists are urged to evaluate new forms of firm and industry structure on the basis of how they work in practice rather than in comparison to an ideal form.