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Wholesale markets in Brazil and its link with rural advisory

services

By Cristina Sette

August 29, 2014

Introduction to CEASA

Wholesale markets provide the infrastructure for food distribution within the food supply chain, as

illustrated in Figure 1 below

Figure 1: Food Supply Chain Schematic (Dani and Deep, 2010)1

Wholesale markets were implemented in Brazil during the 70’s to attend the expansion of urban

centers, and as part of the Brazilian Strategic Development Plan. The markets, called mainly CEASA

(Centrais de Abastecimento – State Supply Center) in most parts of Brazil, or similar names in other

States, were established by the Federal Government in most State Capitals and also near large

populated cities. Its model and implementation used examples of existing wholesale markets in different

countries, and also received guidance from the Food and Agriculture Organization (FAO).

During the 80’s and 90’s, the administrative control of most units of CEASA was decentralized, being

transferred from the Federal Government to the State or Municipal Government. Some markets are still

under the Federal Government administration, as is the case of wholesale market in São Paulo, called

Entreposto Terminal de São Paulo (ETSP) – Terminal Warehouse of São Paulo, which, among other 12

markets within São Paulo State, is part of CEAGESP (Companhia de Entrepostos e Armazéns Gerais de

São Paulo – São Paulo General Warehousing and Centers Company). CEAGESP is under the Ministry of

Agriculture, Livestock, and Food Supply. ETSP is one of the largest wholesale markets in the world,

commercializing 280 thousand tons of fruit, vegetables, legumes, fish and flowers monthly2.

The last Brazilian agricultural census, from 2006, does not include the number of smallholder farmers

supplying horticultural products to CEASA, but data from CEASA Acre estimates that around 70% of the

products commercialized in CEASA Acre are produced by smallholder farmers3. The numbers may vary

1 Dani, S., & Deep, A. (2010). Fragile Food Supply Chains: Reacting to Risks. International Journal of Logistics: Research and Applications, 13(5),

395-410. 2 Source: http://www.ceagesp.gov.br/acessoainformacao/institucional/historico 3 Source: http://www.riobranco.ac.gov.br/index.php/noticias/noticias-itens/ultimas-noticias/7426-4-anos-de-ceasa-%E2%80%9Cela-chegou-

para-mudar-a-realidade-do-abastecimento-de-rio-branco%E2%80%9D,-diz-marcus-alexandre.html

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from regions to region, but it is estimated that the majority of smallholder farmers’ production is

commercialized in one of these wholesale markets.

ETSP/CEAGESP São Paulo (2006), by Ricardo Motti. Flickr: Image used under its Creative Commons license

Over the past years, according to CONAB (2009)4, three important institutional changes affected

CEASA’s structure: a) emphasis on family agriculture, due to the creation of the National Program for

Strengthening Family Agriculture (PRONAF); b) the creation of a set of initiatives on food security; and c)

the creation of the Brazilian Program on Modernization of the Horticultural Market (Prohort).

According to a diagnostic of wholesale markets in Brazil, carried out by CONAB in 20095, most CEASA

markets include social programs related to food security, or support social policies, such as food banks,

school feeding, training, technical assistance to farmers, and nutritional guidance, among others.

According to the same source, over 21,000 producers are registered with the 72 CEASAs in Brazil, which

commercialized in 2007 a total of 15.5 million tons of horticultural products. There is no disaggregated

data of the type of producers, but the literature suggests that the majority are family farming.

In our days CEASA is a mix capital investment, public and private, where wholesalers purchase a

license/permission to commercialize products delivered by farmers or middleman/traders. Besides,

licensees are responsible to share the costs of maintenance of the market. CEASAs administration and

infrastructure are not homogenous among its 72 units, varying from region to region. Some receive

more public support than others.

To understand better the reality within one of these markets, the next section presents an interview

with an agronomist, Mr. Marcio Alexandre Alberto, who spent years as a horticulture producer and

4 Companhia Nacional de Abastecimento (CONAB). (2009). Diagnóstico dos mercados atacadistas de hortigranjeiros. Brasília: Companhia

Nacional de Abastecimento (CONAB). 5 Companhia Nacional de Abastecimento (CONAB). (2009). Diagnóstico dos mercados atacadistas de hortigranjeiros. Brasília: Companhia

Nacional de Abastecimento (CONAB).

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technical adviser to smallholder farmers, before becoming an entrepreneur with CEASA Campinas, the

fourth largest CEASA in Brazil (http://www.ceasacampinas.com.br/novo/Institucional.asp).

Views from an insider

Phone interview with Mr Marcio Alexandre Alberto, a 44 years old agronomist and wholesalers, who

spent the last 20 years at CEASA Campinas, commercializing fruit and vegetables.

Mr Alberto, what are the usual interactions with smallholder producers who supply horticulture to

CEASA? And what are the benefits and risks of working with smallholder farmers?

First of all, let me say that the middleman/trader plays a crucial role in the success of CEASA, and I

believe, in supporting the income generation of smallholder farmers. From what I have experienced,

smallholder farmers cannot keep with the demand of wholesale markets the size of CEASA, not in

quantity, and not in quality. The middleman, which often is a former smallholder farmer, is able to offer

a constant supply, and are able to manage the logistic, the high risks and market demand volatility. The

trader is well remunerated, but also deals with high risks.

For farmers to succeed in supplying products to CEASA, one needs to identify a wholesaler interested in

the products offered, and develop a relationship with the buyer. For the wholesaler in CEASA, he/she is

looking for steady and long-term supply, and not an occasional supplier, except when a product is in high

demand. It is the market rule of supply and demand.

There are farmers that are more ambitious and engage in trade as well, bringing to CEASA not just

his/her products, but from neighboring farmers as well. Other farmers prefer to concentrate on

production only, leaving the market to traders. But if farmers want to, they can sell directly to CEASA. In

addition, there are government incentives, such as micro-credit at low interests, for farmers to buy trucks

or improve production.

We, at CEASA, are interested in investing in the farmer, to receive the best products, and keep the

constant supply. We see the relationship with farmers and traders as a true partnership, with mutual

trust and benefits. Many CEASA licensees and traders invest in providing production inputs to farmers

(e.g. fertilizer, herbicides) or discussing innovation technologies (e.g. hydroponic production). And what is

working is copied by others, either by farmers, traders, or CEASA staff.

Regarding remunerations for their products, smallholder farmers are not treated differently than larger

producers, since in our days farmers are well informed about prices using mainly cellphones, and also

have the transport facilities to sell their productions to traders and directly in CEASA. In the past,

smallholder farmers were perceived as poor uninformed and marginalized groups, but with the advent of

technology, this has changed. Sometimes farmers know the market prices before the sellers in CEASA,

being in a much more powerful position to negotiate their stock.

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In relation to rural advisory services, what services have you seen offered, or promoted, by CEASA as a

wholesale market, specially targeting family farming?

I have seen very little offered or promoted. I saw some short-term courses offered to farmers on cheese

production, or production in greenhouses, but whatever I have seen is very weak.

The real learning happens between individuals, as an informal exchange of information and knowledge.

From our side, we provide constant feedback to farmers on the quality of the product, for example, or

the packing. We receive feedback from customers on what types or varieties of products they want, and

we pass this information to farmers.

There is an issue with time and distance as well. Farmers bring their products to CEASA and wanted to

return quickly to their farms, and not spend the whole day away from the field. Or others cannot travel

to CEASA.

It is not the role of CEASA to provide advisory services per se, but of CATI6 (public organization

responsible for public extension services in Campinas area). An alternative to improve advisory services is

a better dialogue between CEASA and CATI. A possible presence of CATI in CEASA gives the opportunity

to extensionists to understand the market dynamics and better target assistances to farmers. CEASA

could support farmers and CATI by doing the quality control of products (e.g. level of chemicals) and

providing statistics on production.

Less interventions in CEASA, less bureaucracy, better for the market, and consequently, better for

farmers.

There are currently several public policies designed to assist smallholder farmers from production to

commercialization. Have you observed these policies being discussed in CEASA, or among farmers?

The microcredit policy was an initiative that several farmers benefitted from. Same for other

infrastructure policies, such as ‘light for all’, which brought electricity to rural areas.

On other policies, such as the policy for school feeding, I am not aware of. I am skeptical of such policy,

because the school needs constant supply as we do in CEASA, and if smallholder farmers cannot provide

the necessary products the school needs, the school will look for a trader, the same as we do.

I am not aware of CEASA working closely with the government on implementing these policies. Even if

there is a discussion at the level of the administration of CEASA, farmers do not participate, as they want

to return home quickly.

6 Coordenadoria de Assitência Técnica Integral (CATI) http://www.cati.sp.gov.br