Modern agrifood markets: Marginalising small producers even further?
National agrifood markets in emerging economies are being ‘regoverned’ by the private sector, as domestic food retail and processing modernises and restructures, and as the state withdraws from managing markets. These trends are thought to reward scale, capital, organisation, technology and formality and to penalise informality, dispersion and seasonality.
The Regoverning Markets programme - a multi-party research initiative focusing on corporate concentration in the global food sector and its consequences for sustainable development -sought to:
- test this theory of change – is it true that poor people are excluded as food systems restructure?
- investigate best practice for inclusive market development
- understand the policy implications.
The theory of change was shown to be far from universal. The rate of downstream modernisation is indeed rapid in many emerging economies, although regional variations are large. But the programme also showed resilient ‘upstream’ smallholder participation.
Putting a dedicated procurement network together that bypasses existing traders and wholesalers is expensive. It seems that the level of market ‘regovernance’ has penetrated less deeply into the countryside than was first thought. From the outset, there was a struggle to fit the theory of change to the situation in sub-Saharan Africa, where assisting the informal sector to upgrade, especially in terms of food safety, would seem a much higher priority than managing the incipient ‘supermarket revolution’.
Empirical studies showed that modernisation does not always lead to exclusion and can proceed in a relatively pro-poor direction. The key variables are structure of land ownership and non-land assets, such as irrigation (for vegetable production) or cooling tanks (for dairy). Their interaction can broadly give rise to three different outcomes: inclusion, differentiation or exclusion.
Case study research demonstrated the difficulty of deliberate attempts to include smallholders in a chain. Successful new market linkages require a mix of organised producers, receptive business partners, a supportive policy environment, and a broker or intermediary to bridge the worlds of small-scale producers and modern markets. This is a complex and often costly task to establish and to sustain. The main conclusions of the research were:
- Exclusion of small-scale farmers is not an automatic outcome of modernising food networks – land and non-land assets, and wholesale markets are major determinants, and food safety is a important driver.
- Inclusion of small-scale farmers into modern food networks is a huge challenge: multiple elements are required to progress beyond boutique projects, especially in the face of differentiated distribution of land and non-land assets.
A research focus on incipient retail modernisation can lead to risks of:
- overstating and generalising the degree of market ‘regovernance’ penetrating into the countryside
- projecting trends from emerging economies to the whole of the developing world, especially sub-Saharan Africa, where the informal sector is dominant but more resistant to ‘tidy’ research.
What does this mean for sustainable livelihoods and pro-poor market frameworks?
- It is not just assets that are important, but their distribution: land and non-land assets are key to explaining the differential impact of market modernisation.
- Unpacking the policies, institutions and processes is necessary.
- Diversity needs to be maintained in distribution channels, including competitive and dynamic wholesale markets.
- Implementing food safety and traceability can rapidly accelerate differentiation.
- Resistance to change may be entrenched in core business models, including management of risk, costs and corporate social responsibility via few intensive supplier relationships.
Bill Vorley, Head, Sustainable Markets Group
A report based on proceedings of an internatoinal conference held in Beijing March 2008
Regoverning Markets project page
Regoverning Markets website