Transformation of the Agrifood Industry in Developing Countries - The Oxford Topic of Food, Politics, and Society - page 812

dairiesinPoland,Brazil,Argentina,Zambia,Russia,withlargelourandricemillers
inIndia,withlargemeatpackersinCentralAmerica,andsoon.Justemergingisthe
evidence of supermarkets moving to dedicated wholesalers to dis-intermediate from
traditionalwholesalemarketsinfreshproduce—withemergingcasesasrecentlyas
theearlytomid-2000sintheirst-/second-wavecountrieslikeMexico,Indonesia,
andBrazil.
Impacts on Farmers
hedirectimpactonfarmersofmodernizationacrossthethreesegmentsisacomplex
subject. Assessment would require a review of contract farming of a wide variety of
products by processors, and direct sourcing of produce by supermarkets and their dedi-
catedagents.Arecentreview(Reardonetal.2009)indsthatefectsdiferdepending
onavarietyofconditioners,suchas:(a)ifcompanieshaveaccesstomediumandlarge
farmersandhaveanoptiontoeschewsmallfarmersiftheywant;(b)iffarmsaremainly
small, the distribution over farms of nonland assets such as irrigation and education or
training(suchasinGuatemala,seeHernandezetal.2007);(c)iffactormarketsfunction
well or there are idiosyncratic market failures constraining small-farmer access to credit
andinputs.Inthelattercase,companiesmayresortto“resource-providingcontracts”
(Austin1981)thathavebeenfoundtobecommoninexportagricultureordomestic
markets, in which a processor is sourcing from small farmers.5
Given that supermarkets in developing countries have so recently started to sell pro-
duce and even more recently to source produce in ways other than through the use of
wholesalemarkets,theliteratureonimpactsisonlyemerging.Itissomewhatmore
established for contract farming with processors.
Intermsofparticipation(inclusionversusexclusionofsmallfarmers),studiesshow
mixed results. Supermarkets and processors are found to source from large and medium
farms where available. (Studies on the latter relationships tend to be case studies given
thesmallsamples.)Wherelargeandmediumfarmshavebetteroptions(suchasexport)
or are judged to have too much bargaining power, and companies or NGOs are willing
to resolve idiosyncratic market constraints of small farmers, or where only small farm-
ers are available, companies source from small farmers. Evidence tends to point to their
sourcing from small farmers with more nonland assets or “threshold investments” req-
uisite for consistent and quality supply, such as irrigation, road access, education.6
Intermsofimpactonincomes,manystudiesreportfrommoderatetosubstantial
gains in incomes comparing participants in modern supply chains versus traditional
arrangements,eitherbetweentreatmentandcontrolgroups,orbeforeandater.But
there are relatively few studies that control fully for the asset and liquidity situations
of farmers so as to isolate the effect of the relation with modern channels per se. This
relationshipissomewhatdiicultinacross-section;itisideal(butrare)tohaveapanel
datasettotest.AnexampleofthelatterisMichelson(2010)showingstrongimpactson
net income of farmers supplying Walmart in Nicaragua relative to traditional markets.