The 10% or the 90%?

Bill VorleySeas of Change: What works when scaling

inclusive agri-food markets?11-13 April 2012The Netherlands

Harvest time.. Projects 2002-12 on market governance and inclusive business

• Modernisation of domestic markets in emerging and developing economiesRegoverning Markets programme 2002-7 (global research consortium; focus on domestic markets)

• Linking small-scale producers to modern food business (exports)Food Lab New Business Models for Sustainable Trading Relationships, 2008-12

• Producer agency in globalised marketsHivos-IIED Knowledge Programme Small Producer Agency in the Globalised Market (with global learning network) 2009-12

• Environmental and social risk management in supply chainsIFC Good Practice Manual: Assessment and Management of the Environmental and Social Risks in Agro-Commodity Supply Chains (with Proforest) 2011-12

• Public policy as shaper of investments and marketsOxfam-IIED project Policy options for agricultural investments and governance of markets in support of small-scale agriculture 2011-12

Policy priorities: dealing with reality• The majority of small-scale producers are not formally

organised in the market• The informal market remains the most important for the

majority of small-scale producers• Many modernizing agrifood markets still have their feet in

informality• ‘Modern’ markets are not always the best option for

producers• Much producer organisation in modern markets is driven by

the food chain, not by producers• The largest number of the rural poor are in countries with

rapidly transforming economies• Food safety and risk management is and will be the no. 1

driver of formalisation and rural differentiation• Risk management is pushing in the opposite direction than

‘inclusive’ business• There are good reasons to work with the top 10-20 % of

smallholders

Many modernizing agrifood markets still have their feet in informality (Huang et al.)

Example of China: Farmers’ cucumber market channels, Shandong, 2006

11%

16%

0.02%

1%

Small brokers 6% Wholesalers

1%Modern channels

2%

Wholesalers

Supermarkets

Farmers

Small brokers

66%

12%Wholesalers

Modern channels

Small brokers

Trade is dominated by small brokers and wholesalers

Processors

0.6%

80%

Specialised suppliers

Access for small-scale farmers to tomato markets in Limpopo and Mpumalanga Provinces, S Africa, 2007

Chikazunga et al.

Small-scale farmers

Agro-processors

Wholesale market

Small brokers/hawkers

Supermarkets

Local market

4%

8%

11%

63%

14%

Processors + contract buyers

Wholesalers

Informal trade

Chain stores

Retailers

10%

30%30%

32%

6%

21%Tshw

ane

Fres

h Pr

oduc

e M

arke

t

Food safety is no. 1 driver of formalisation and rural differentiation: Policy directives to move the small

backyard farmers into concentrated production complexes where the marketing is centralized

Share of written contracts for dairy farmers who sold milk by channels in Greater Beijing in 2004, 2008 and 2009 (%). 2004 2008 2009

Without contracts 89 91 32

With contracts 11 9 68

Direct consumer 0 0 0

Mobile brokers 1 4 0

Milk stations 10 4 0

Dairy complexes 0 2 68

Source: Luan et al, 2011

Priority of inclusive formalisationChinese industry is moving to integrate SCM to ensure

SC integrity and food safety• “Small farms cannot meet the rapid growth of demand in

China”. Following the frequent food safety incidents in China, the big companies are “taking the lead with fully integrated value chains” around international GAP standards.”.. “This model lowers costs, raises production and competitiveness, reduces price fluctuations and raises food safety. Wan Zaotian, VP of Cofco addressing the IDH Congress in Amsterdam December 2011

Scale and inclusiveness requires differentiated approaches to rural worlds

Private sector priorities Policy Priorities

RW 1 Inclusive business models in value chains

Support vertical trading relationships in value chains, such as enforcement of contracts, payment terms

RW 2 Horizontal sector wide and territorial approaches (including PPPs)Attention to unorganised producers

Horizontal improvement in the performance and inclusiveness of a whole sectorUpgrading the informal sector, especially food safetyProcess of inclusive formalisationCompetitive wholesale sector, diversity of marketsBreak up cartelsQuotas for small/family farmsSelective use of trade measuresEmbed core elements of sustainability standards into legislation

RW3 Labour standards Labour legislation and implementation, especially as relates to women.

Policies to support rather than harass the informal sector

Hooton and Omore (ILRI), 2007• Alternative models of dairy development, relevant to

local conditions -- bridge the informal-formal divide• Traditional milk markets from ~800,000 small-scale

dairy farmers through small-scale milk vendors supply > 85% of the market

• Previous government policies unsupportive /harass farmers, traders and consumers who make up these channels . SSMVs could not acquire licences or access training in milk handling

• New Dairy Policy -- acknowledges the role of SSMVs in the development of the sector, including development of low cost appropriate technologies, training on safe milk handling, improve processing standards in the informal sector, and provision of incentives and establishment of a supportive certification system.

Modern coordinated markets are not always the best option for many smallholders

• Modern sector is not necessarily ‘high value’ – Example: supermarkets in Nicaragua

Source: Jennifer Wiegel