small-scale producers in modern agrifood markets

Inclusive Business inAgrifood Markets: Evidence and ActionA report based on proceedings of aninternational conference held in BeijingMarch 5–6, 2008

Anticipating and managing changes in local and regionalagrifood markets for small-scale farmer inclusion

www.regoverningmarkets.org

Regoverning MarketsSmall-scale producers in modern agrifood markets

Inclusive Business inAgrifood Markets: Evidence and ActionA report based on proceedings of aninternational conference held in BeijingMarch 5–6, 2008

Compiled by

Bill Vorley and Felicity Proctor

www.regoverningmarkets.org

Inclusive Business in Agrifood Markets: Evidence and Actionii

Acknowledgments

Funding for the international conference“Inclusive Business in Agrifood Markets:Evidence and Action” was made available by the UK Department for InternationalDevelopment (DFID), the InternationalDevelopment Research Centre (IDRC), theGovernment of Canada provided through theCanadian International Development Agency(CIDA), and the Dutch Ministry of ForeignAffairs – Development Co-operation (DGIS).The wider donor group for the wholeRegoverning Markets programme also includedICCO, Cordaid and the United States Agencyfor International Development (USAID). Theviews expressed are not necessarily those ofthe funding agencies.

This conference was organized through a coregroup from the Center for Chinese AgriculturalPolicy (CCAP) – Jikun Huang, Huayong Zhi andYuxian Lin, and the International Institute forEnvironment and Development (IIED) – FelicityProctor, Bill Vorley and Frances Reynolds withsupport and guidance from the Office ofAgricultural Vertical Integration, Ministry of

Agriculture, PRC. Sincere thanks are due toLiangui Huang, Yuanyuan Yi, Hengshan Deng,Beinan Zhang, Kun Yang, Zhijian Yang, YingLiu, Yunhua Wu, Lijuan Zhang, Kate Lee andBen Garside. Special thanks are also due tothe master of ceremonies, Julio Berdegué, aswell as the speakers, chairs and rapporteurs ofeach session. We are grateful to the leadershipof the Beijing Xinfadi Wholesale Market involvedin the market field trip: Yuxi Zhang, HongkaiYang and Songxu Wu; also Gangliang Wang,Store Manager of Huixin Store branch of Wu-MartStores, Inc. Thanks also go to the panellists ofthe question and answer session on producemarketing – Tao Huai, Peixuan Jian, Lin Li, Dexi Li, Liangui Huang and Qizhou Zhao.

The research presented here from theRegoverning Markets programme represents thecollective endeavours of the Regoverning Marketsconsortium (www.regoverningmarkets.org).This report was prepared by Bill Vorley andFelicity Proctor, with layout by Meg Palmer.Images belong to the Regoverning Marketsprogramme unless otherwise stated.

Inclusive Business in Agrifood Markets: Evidence and Action iii

Contents

page

Acknowledgments _______________________________________________________ ii

SECTION 1: Background to the international conference_________________ 1

SECTION 2: Why market inclusion of small-scale farmers?_______________ 3

SECTION 3: What is inclusive business? ________________________________ 7

SECTION 4: Is there evidence of small-scale farmers being excluded from modern markets?_____________________________________ 9

SECTION 5: What makes for successful linkages between small-scale farmers and emerging modern markets?____________________ 12

SECTION 6: What is the role of the private sector? ______________________ 13

SECTION 7: How can producers organize to deal with modern markets?__________________________________________________ 20

SECTION 8: What is the role of governments?___________________________ 24

SECTION 9: Concluding remarks _______________________________________ 33

Annexes:

ANNEX 1: Conference programme____________________________________ 35

ANNEX 2: List of participants_________________________________________ 42

ANNEX 3: Posters ___________________________________________________ 48

ANNEX 4: Key resources _____________________________________________ 49

ANNEX 5: The Regoverning Markets Consortium ______________________ 50

1 Background to the internationalconference

Inclusive Business in Agrifood Markets: Evidence and Action 1

Over 130 world leaders from 31 countries,representing farming, policy, agrifood business,research and civil society met in Beijing,People’s Republic of China, to assess howmodernization of the food system can includeand benefit small-scale farmers.

The international conference sought to answerthe following questions:

● Can the new food giants, includingsupermarkets and food companies bepartners in the economic growth of rural areas?

● Can small-scale farmers meet the highexpectations for food quantity, quality andsafety?

● Can policy help to make successful marketlinkages between business and small-scalefarming?

This international conference, which was jointlyhosted by the Center for Chinese AgriculturalPolicy (CCAP), the Office of Agricultural VerticalIntegration, Chinese Ministry of Agriculture, andthe Regoverning Markets programme, wassomething of a first. It was the first time thatrepresentatives from the public sector, theprivate sector, farmers’ organizations,academia, civil society and the media have met to share evidence and develop ideas foraction in this topic. It was a unique opportunityto take advantage of this diversity ofperspectives to forge new understandings, asknew questions, begin new partnerships, andcraft new answers and courses of action.

Providing insights to the challenges facingsmall-scale producers in restructured domesticand regional markets, based on evidencerather than anecdote, is a big step towardspolicies that can anticipate rather than runbehind change; if we understand the process,we can design policies to shape the way itdevelops. The conference thus provided anopportunity for sharing insights, especiallybetween countries at different levels ofrestructuring, while appreciating that there will be no one silver bullet.

It is not a coincidence that China was the hostcountry for this international conference. Chinaexemplifies well the opportunities and thechallenges faced by small-scale producers andbusinesses in a context of rapid and deeprestructuring of agrifood markets.

There were three parts to the conference. On Day 1 the participants visited the BeijingXinfadi Wholesale Market, one of the world’slargest wholesale markets with daily trading insome 2 million tonnes of fruit and vegetables.This was followed by a visit to a modern retailstore: the Huixin supermarket of Wu-MartStores, Inc, one of China’s biggest grocerychains. There was also a question and answersession on produce marketing in China, withWu-Mart managers, their suppliers, and leadersfrom national and municipal policy. On Day 2,delegates were presented with global evidence,some of which came from the work of theRegoverning Markets programme. On Day 3,the focus was more on action, with theopportunity to discuss what each stake inagrifood – business, public policy andproducers – can do in the future to promoteopportunities for small-scale agriculturalproducers and small- and medium-scale ruralentrepreneurs in this demanding new world ofdynamic agrifood markets. There were specialsessions on India, China and on the formercentrally planned economies of Central andEastern Europe.

The conference was an opportunity tocommunicate findings from the RegoverningMarkets programme, summarized in briefingpapers and syntheses of empirical and casestudy work, but powerfully supplemented withother information from the delegates. It wasalso an opportunity to test the appropriatenessof the programme’s findings and to develop acommon agenda for business, policy makers,farmers and researchers.

The Regoverning Markets programmerepresents a global consortium of 15institutions worldwide, coordinated by theInternational Institute for Environment andDevelopment (IIED). The consortium carried

out state-of-the-art empirical research,commissioned case studies of innovativepractice and conducted policy consultationprocesses, all of which involved dozens ofpartners. Over 40 case examples with a globalcoverage have been documented onconnecting small-scale producers with modernmarkets. Thirty of these case studies,conducted by national institutions includingthrough a competitive grants programme,focused on innovations by chain actors thatsupport greater inclusion of small-scaleproducers at domestic or regional levels.“Innovation” refers to the actions and policiesof private companies, public institutions, farmerorganizations or non-governmentalorganizations that resulted in enhanced marketparticipation of small-scale producers.

This report is built on briefing papers,presentations, posters and discussions (in plenary and working groups) from thatconference. It seeks to capture key points andis not intended as an exact or chronologicalrecord of the proceedings. The fullpresentations, posters and records of plenaryand working group discussions are available atwww.regoverningmarkets.org/global/beijing_conference_2008.html .

Inclusive Business in Agrifood Markets: Evidence and Action2

2 Why market inclusion of small-scalefarmers?

Agrifood markets are in an unprecedentedstate of flux, and are generating intense policydebate worldwide. Market liberalization, foreigndirect investment, a reduced role for the stateand a shift towards market-driven policy,changes in consumer preferences andpurchasing power, urbanization and themodernization of food processing and retailingare primary drivers. On a global scale, theconference took place after the point when a40-year decline in food prices went into reverse,providing a vivid backdrop to the conference.Growing concern about food prices and therapid increase in oil prices are prompting newquestions about agricultural productivity andreliance on trade for domestic food security.

Emerging markets have become increasinglyattractive for the major grocery retailers,wholesalers, food manufacturers and foodservice companies. Domestic markets areundergoing rapid but uneven modernization,with large supermarket chains and brandedmanufacturers growing alongside the informalmarket. The international supermarket chainCarrefour reports that two-thirds of itsacquisition capital expenditure since 2005 hasbeen spent in emerging markets. In theconference host country, China, supermarketshave increased in number from one in 1990 toover 53,000 today. Similarly in India, anothermajor emerging market, growth is also veryrapid. The consumption profile of urban Indiaand rural India is undergoing a significantchange where agricultural productivity has notbeen able to keep pace with the requirementsin the economy. The Indian urban population isprojected to exceed 500 million by 2025.

In his opening address to the conference, theVice Minister of Agriculture of the People’sRepublic of China, Chaoan Wei, explainedhow Chinese agriculture, which has succeededin generating rapid growth and balancingsupply and demand from a huge smallholderbase – 240 million farm households, with mostholdings less than half a hectare – is now facedwith the serious challenge of achieving scaleand value-added, to link smallholders tomodern markets. Notwithstanding a strong

policy push for support to vertical integrationorganizations, he called for frank and in-depthdiscussions on how this can be achieved andsecured for the future.

Jiayang Li, Vice President of the ChineseAcademy of Sciences, echoed the fact that,although there have been great achievementsin rural development since the adoption of theagricultural policy reforms in the late 1970s, notall farmers can participate to the same extent.Thus an important challenge is to improveorganization and active participation of small-scale producers in modern markets.

The need for an informed policy was taken upby Ashraf Hayat, Additional Secretary at theMinistry of Commerce in Pakistan. Hedescribed how his country has undergonepolicy reform and liberalization over the past 20 years, which had raised concerns thatmodernization of the food system may havemarginalized some parts of the rural economy.


“In the past more than half acentury, with the deepening ofthe market-oriented reform of the world economies, tradeliberalization and globaleconomic integration, agrifoodmarkets and supply chainstructures have been changing

globally in unprecedented ways. It has now only takenemerging economies ten years to carry out agrifoodmarket restructuring. However, small-scale farms,which support the livelihood of the majority of the poorin the world, are not well prepared for these changes.While the rapid changes in agrifood market chainsbring great opportunities for agricultural development,they also raise great challenges for thousands andthousands of small farmers. Without appropriateactions, it is likely that these small farms will bemarginalized and excluded from the expansions of both domestic and international markets, which hasattracted global attention.”

Chaoan Wei, Vice Minister, Ministry of Agriculture, PR China, Opening address

In South Africa, agriculture is faced with thehuge challenge of creating 6 million jobs in thenext ten years, halving poverty and achieving a 6 per cent economic growth. TshililoRamabulana, Chief Executive of the NationalAgricultural Marketing Council, set out thequestions confronting countries like South Africa:

● What are the appropriate institutionalarrangements to prevent the continuedmarginalization of small-scale farmers?

● How does one increase farmer capacityand decide who should be selected tobenefit from assistance?

● Five million hectares of white-ownedagricultural land will have been distributedto 10,000 new agricultural producers byMarch 2009. How will these new farmersfind a market?

● Where in the supply chain do you need toassist players to improve performance?

● How can policy makers be assisted inadopting the best strategies and to utilizetheir resources in the most efficient way tomeet specific goals?

In setting the context for the conference, Bill Vorley of IIED, the Regoverning Marketsprogramme manager, pointed participants tothe latest 2008 World Development Report(WDR2008). According to this report, 1.5 billion of the world’s 1.9 billion rural poorlive in “transforming” countries, whereagriculture contributes less to growth, yetpoverty remains overwhelmingly rural.

In China and India – the two most populous“transforming” countries – between 43 and 60 per cent of the workforce are engaged inagriculture, over 640 million people in all. Even in countries such as Thailand, Turkey andMorocco, 40–50 per cent of the workforce isinvolved in agriculture, and in Romania andHonduras agriculture still accounts for a thirdof employment. The development of a modernagrifood market and its restructuring process ina country such as Indonesia, which proceededrapidly after the liberalization of foreigninvestment in 1988, may not be matched bylocal production capacity. Local farmers canlose the opportunity to be a part of therestructured agrifood system.

Another 280 million of the world’s 1.9 billionrural poor live in “agriculture-based” countriesof which most are in sub-Saharan Africa. Inthese countries agriculture still contributessignificantly to growth, and according to theWDR the key policy challenge is to helpagriculture play its role as an engine of growthand poverty reduction. The RuralStruc


“In the last 15–20 years, we haveopened up our markets andliberalized the economy.Concomitant to that is theinevitability of modernization ofagricultural food market systemswhich means that there is theconcern about leaving out a

section of the producing population… The developmentand the integration of the rural communities inPakistan’s economic growth is really key to our nationalobjectives and priorities because for us the two mostimportant objectives of the country are povertyalleviation and social stability. Therefore this conferencehas direct relevance to our national agenda… We lookto learn and to integrate ideas into our national plan.”

Ashraf Hayat, Additional Secretary, Ministry of Commerce, Pakistan

Photo: Matt Logelin

Growing side-by-side: traditional and modern fresh produce retail in India

Photo: Planet Retail

programme, a multi-donor initiative hosted bythe World Bank and represented at theconference, is addressing the stark reality thatduring the next two decades, in a mediumsized sub-Saharan African country, the yearlycohort of young people looking foremployment activities will be around 200,000to 300,000 (15 million for the entire sub-continent) yet the potential for jobs outsideagriculture is limited. What happens within theagricultural sector will significantly influence thecountry’s future and the dynamics of regionaland international migration.

There are multiple policy challenges inagriculture-based countries in ensuring thatagricultural growth and agribusiness can playits part. In Uganda, Peter Ngategize, NationalCoordinator of the Competitiveness andInvestment Climate Secretariat of the UgandanMinistry of Finance, Planning and EconomicDevelopment, reported multiple interlinkedconstraints. At farm level (small farm holdings,low technology base, poor planting and stockmaterial, inadequate farm level handling

facilities); inadequate market standardsinfrastructure; increasing exports standardsrequirements; and high cost of borrowing.

Producers and small and medium-sizedenterprises (SMEs) also face competition fromhigh quality low price imports, ushered in bystructural adjustment and demands of WTOmembership. There is a close link between chainmodernization and liberalization; supermarketchains, in particular the multinationals, areimportant importers of foods.

Even in urbanized countries, where the WDRput the figure of urban poor at 91 million, thereare still huge challenges from agrifood marketrestructuring. Csaba Csáki of CorvinusUniversity in Hungary described the situation inCentral and Eastern Europe, where almost 30million small farms were created by privatization.Most of these small-scale farmers are newfarmers, whose lack of assets is reflected inthe limited competitiveness of the region.

The small-scale farmer issue is relevant notonly for agriculture but to other sectors of thesociety which are likewise fragile and riskexclusion as changes occur for which they arenot prepared.

Nevertheless, market modernization offersincreased economic opportunities for small-scale producers and SMEs, consumers, andother actors in the food chain. New buyers inthe countryside are competing for farmers’produce. But there are also risks of domesticbusinesses being bypassed and of costlymarket entry requirements which favour thebetter-resourced. Small-scale producers oftenhave trouble exploiting the new opportunitiesbecause of an absence of economies of scale,limited access to critical assets, high transactioncosts, and limited negotiating power.

It should come as no surprise that themodernization of the agrifood sector has beenaccompanied by intense policy debate,especially in India, where local traders – butalso farmers – feel a threat to their livelihoodsfrom the growth of modern organized retail.The food industry is assessing its “realm ofresponsibility” in the supply chain; producerorganizations are debating appropriateresponses and strategies; governments aredevising new forms of market governance topromote private sector investments whileensuring social inclusion; public and privatesector organizations are joining forces in novelalliances; and donors are revisiting their


Where are the rural poor?Agriculture’s three worldsThe World Development Report 2008 paints a pictureof a rising urban-rural income gap in transformingcountries, accompanied by unfulfilled expectationswhich create political tensions. Those political tensionsare especially visible in India, but have also bubbled tothe surface in recent years in SE Asia and CE Europe.Growth in agriculture and the rural non-farm economyis needed to reduce rural poverty and narrow theurban-rural divide. The WDR2008 calls for action inresponse to the modernization of procurementsystems in integrated, modern supply chains, wherebysmall-scale producers can share in these growthopportunities. The work of the Regoverning Marketsprogramme responds directly to this challenge.

(adapted from WDR 2008)

support to agriculture in the context of theMillennium Development Goals (MDGs). If theMDGs are to even be partially met by 2015,then agriculture and SME development intransforming as well as agriculture-basedcountries must deliver equitable growth.Market modernization and restructuringchallenges the expectation of a growth andequity “win-win” derived from agriculturaldevelopment.

Disproportionate attention has been paid toexport markets, despite the far greaterimportance of the domestic market for themajority of small-scale farmers. Plenty ofattention has also been applied to publicpolicy, even though the levers wielded by thestate in food and agriculture markets havebeen steadily weakening. Not enoughconsideration has been paid to the role of theprivate sector, especially “downstream” buyersof farm products but also the food processorsand retailers as partners in inclusive ruraldevelopment.


3 What is inclusive business?

The way in which agrifood business createsand captures value within a market network of producers, suppliers and consumers – inother words its business model – is based on high standards for safety and quality. A number of presenters introduced the trendsof competitive dynamics in agrifood markets,driven by a need for quality, as well as areduction in risks and transaction costs. The supply chain and its coordination istherefore a vitally important source ofcompetitive advantage to food retailers andmanufacturers. Suppliers must be ready toprovide consistent quantity and continuity ofsupply, traceability and bookkeeping, soundpackaging and bar coding.

Development is not the primary purpose of for-profit business. But the business model haspotentially such fundamental implications –both positive and negative – for the position ofsmall-scale farmers and suppliers that thechallenge of “inclusive business” is rising upthe development agenda. Transferringprevailing business models from urbanizedcountries, where less than two per cent of theworkforce may be engaged in agriculture, totransforming and agriculture-based economies,overlooks the huge differences in the structureof the economies, and thus the challenge thatit poses to the business model.

Agrifood investors in these transforming andagriculture-based countries – processors,retailers and intermediaries – need a strategy of involving rural people, including the small-scale farmers, to be partners in nationaldevelopment. The role of business as a partner in development has been activelydebated, especially as a result of the WorldSummit on Sustainable Development (WSSD)in 2002. This has since been taken up by theWorld Business Council for SustainableDevelopment (WBCSD) and by a number of UN agencies. But the contemporary CorporateResponsibility agenda, with its emphasis onsupplier standards for environment, workerwelfare and community relations, has generallybeen poor at addressing issues of marketinclusion of primary producers.

The big question then is how to make inclusivemarket development work for mainstreambusiness, as well as meeting the MDGs.Tshililo Ramabulana reported that SouthAfrica has a low engagement level betweenagribusiness/retailers and small-scale farmers,because of perceived higher levels oftransaction costs incurred by agribusinesswhen they engage small-scale farmers assuppliers. However Kushal Pal Singh of theInternational Federation of AgriculturalProducers (IFAP) warned against bypassing themajority of farmers.


“‘Inclusive business’ is highlyappropriate because if privatebusiness or the governmentbusiness in agrifoods could stickto the spirit of inclusivity then allthe problems of India and theworld at large in povertyalleviation, in rural development,

and in sustainable development problems in terms ofgreenhouse gases will be resolved.

“The definition of inclusiveness according to a farmer iswhen you have taken care of the legitimate interests ofall stakeholders: the farmers, the consumers, your ownshareholders in the private company and the society atlarge. If the agrifood business can bring about harmonyand maybe resonance in reconciling these three or fourmutually conflicting interests, I think the agrifoodbusiness/ private sector would have done a great job…

“Private business should not be seen to be exploitativebecause India is a viable democracy and even now twothirds of our population is in the rural sector – thefarmers. So a private business should not be seen tobe exploitive in their own interests because if they wantto have a long term business success they should beseen as genuine friends of the people and of thesociety. If farmers agitate against you no governmentcan afford to ignore their protest and the rough andtumble of Indian politics at the ground level …comeinto play to the mutual destruction of all players.”

Kushal Pal Singh, Vice President, National Institute ofAgriculture, India and Asia Representative of the

International Federation of Agricultural Producers (IFAP)

The business case for corporate engagementin rural development described by KushalSingh is primarily one of community goodwill.His implication was that the political importanceof supporting national development goalscannot be understated within the context of acompany’s “licence to operate”, and not justthe debates such as those currently ragingaround liberalization of retail FDI in India, or inthe quest for black economic empowerment in South Africa. A policy backlash againstorganized domestic or foreign-owned retail ispossible anywhere, and can translate intorestrictive legislation.

Yet there are other parts to the business case forworking with small-scale producers, as presentedby Felicity Proctor, consultant to IIED. First,small-scale producers can have a comparativeadvantage in terms of quality, innovation, costsand farm management for certain products. Thisis the case where there is a scarcity of alternativesuppliers either due to the characteristics ofthe product (seasonality, labour requirements,locality), a shortage of land for large-scaledomestic or own-business production, or alack of a medium-large scale supply base (forexample the dairy sector in India or Poland).Where demand is called for in more remoteareas away from main distribution channels, thenthere can be an even stronger business casefor linking with small-scale producers and SMEs.

Securing supply is especially important in thecurrent tightness in global supply which isshifting the market from a buyer’s to a seller’smarket. Retail buyers and processors may alsoseek to work around markets where largetraders have a hold. This was the situation inPakistan where a milk processor, Haleeb FoodsLimited, worked around the large and wellestablished milk traders and secured a smallfarmer supply base.

Small-scale producers are themselves a newbusiness opportunity. In India, now thatretailers can buy direct from farmers ratherthan operate through the government-controlled Agricultural Produce MarketingCommittee (APMC) markets, new models ofrural retail are emerging – such as the HariyaliKisaan Bazaar which combines a “bottom ofthe pyramid” approach to both the input andoutput sides of the farm-to-consumer valuechain. This is an extension of the approachadvocated by Prahalad and Hart (2002)1 whichargues that corporations can makeconsiderable profits by designing new businessmodels and products to target the 4 billionpoorest people who make up the base of theeconomic pyramid.

Small-scale and artisanal producers are alsosources of produce for niche markets foralternative trade.


1 Prahalad C.K. and Stuart L. Hart (2002). “The Fortune at the Bottom of the Pyramid”. Strategy and Business, Vol.26pp54–67.

4 Is there evidence of small-scale farmersbeing excluded from modern markets?

Restructuring and modernization come withrequirements for quality, quantity, consistency,and traceability. The large fixed cost elementshould favour farmers with assets andcapacities to access the necessary finance,information, and technology. Is this true? Whatdetermines whether farmers are included orexcluded from markets in restructuredmarkets? What are the effects of participationin modern markets on incomes and farmtechnology? Detailed country studies within theRegoverning Markets programme generatedevidence from nine chains in eight countriesundertaken by national research institutions:

● China, Indonesia, South Africa and Turkey– vegetables

● India and Poland – dairy

● Mexico – strawberry, fresh and processed

● Zambia – red meat and poultry

Cross-cutting analysis of these country studieswas presented by Tom Reardon of MichiganState University. This analysis shows that, whilemarket structure is changing fast, substantialrestructuring downstream at the retail level isnot always matched by upstream (farm-level)restructuring. There is uneven restructuringmidstream of the chain. Overall land distribution,and the presence of non-land assets (such asirrigation for vegetable producers, or cooling

tanks for dairy farms) are factors that can makea huge difference in whether modernization offood retail and processing leads to a bigimpact in the countryside.

In countries with a dualistic farm structure suchas South Africa and Zambia, buyers seek outlarge suppliers and also seek out areas that arealready favoured by agribusiness, for examplethose already engaged in export production.Where supply is dominated by small farms, thenbuyers show more willingness to include them.

In vegetable production in China, land structureis dominated by small farms with little variationin non-land assets among the farmers. At thesame time the wholesale markets are evolvingand improving in order to keep trading withsupermarkets. Liangui Huang of the Office ofAgricultural Vertical Integration, Ministry ofAgriculture and Jikun Huang, Center forChinese Agricultural Policy, reported that therapid restructuring of downstream retail marketsin China and the gradual evolution of midstreamwholesale markets and food processing haveyet to penetrate into the realm of changedfarm-gate procurement and marketing.Although markets at all levels are competitive, in a small farm dominated system. They foreseegreat challenges to transform the system intoone that is modern, vertically integrated andable to meet the nation’s increasing demandfor safe, traceable and reliable food.


Photos: Regoverning Markets

Researching the chains in the Regoverning Markets programme: Shandong, China; Limpopo, South Africa,and Bangladesh


Scott Rozelle of Stanford University andCCAP stressed the importance of getting theevidence right before designing policies insupport of small-scale farmers. Presentingempirical evidence from the Chinese fruit andvegetable sector, Scott Rozelle furtherelaborated on the system still dominated bysmall-scale farms, 15 years into the retailrevolution, with little or no sign of exclusion inthe countryside. Brokering and wholesale in the fruit and vegetable markets is however a dynamic trade that connects 50 million small-scale farmers with both traditional andmodern markets via some five million small-scale traders.

There is also evidence that horticultural cropsare being increasingly grown by poor farmersin relatively remote communities. The vastmajority of this latter group of farmers areneither organized nor vertically integrated intothe market. Supermarkets do not procuredirectly because of this lack of marketingorganization in the countryside and becausethe wholesale markets have to date beendynamic in responding to supermarkets’demands.

This highly competitive market works well forconsumers in terms of price, but Scott Rozellealso noted that it cannot necessarily respondto demands for safer food. How can China fullymake the transfer to an integrated system withsafer, more reliable food without losing theinherently pro-poor characteristics of theChinese market? What is needed are catalystsfor farmers to organize, with better access tocapital and the ability to access more of thesupply chain, both to gain better returns tomarketing and to meet future requirements.

In contrast to China, most small-scale tomatofarmers in the dualistic farm structure of SouthAfrica supply the informal markets and freshproduce markets, which are reasonablylucrative. A poster by Andre Louw, DavisonChikuzunga and Leah Ndanga of theUniversity of Pretoria showed how more than80 per cent of small-scale tomato farmers selltheir produce to hawkers (informal traders) and

“Several key policies flow directlyfrom the findings for inclusion.First exclusion is least whereland is most equally distributedover farmers … so to minimizethis exclusion, land policiespromoting this equality areneeded. Second, to help many

small farmers strategically position themselves formodern channels, policies should promote collectivemarketing in producer organizations. Third, a keyfinding was the widespread importance of productivenon-land assets for small farms to be included – thatthreshold investments and thus policies that promoteaccess to these are crucial. Fourth, a key finding isthe importance of competitive developed wholesalemarkets to maximize inclusion of small farms. Fifth,food safety is and will be a challenge in small farmerdominated systems in the midst of restructuring foodmarkets … policy makers should keep careful watchthat regulations to promote these standards are alsocombined with increasing and assuring the feasibilityof the application amongst small farmers.”

Tom Reardon, Michigan State University

Photo: Scott Rozelle

“Fifty million farmers all individuals, selling to five milliontraders and almost all on their own, one farmer versusmillions around them. … [fruit and vegetables] used tobe produced near the city are now produced furtherand further away… This used to be done by richfarmers who are moving away, now replaced by poorerand remote farmers… We interviewed thousands offarmers, not one farmer had credit from their supplier…Prices were determined by contracts zero times…everything is done on a spot market basis. So thequestion is… is it good or bad for poor small farmers? Is it good or bad for consumers and what can policymakers do?”

Scott Rozelle, Stanford University, USA and CCAP, Beijing


less than 20 per cent supply to formal marketswhich include agriprocessors or supermarkets.Location, education, farm size, access togreenhouses, collective action, and marketingstrategies determine smallholder farmers’market channel choices. Thus, to date, thesupermarkets in South Africa are mostlysupplied by large-scale farmers.

Photo: Davison Chikazunga

Poster: Smallholder farmers’ participation in restructuring food markets:the case of the tomato subsector in South Africa (Andre Louw,Davison Chikuzunga and Leah Ndanga)

5 What makes for successful linkagesbetween small-scale farmers and emerging modern markets?

Lucian Peppelenbos from the Royal TropicalInstitute (KIT) in the Netherlands outlined someevidence from the Regoverning Marketsprogramme of the key success factors inlinking small-scale farmers with emergingmarkets. This begins with the need for somekind of internal or external driver sometimesincluding political or social pressures.

The key success factors are: farmers who aretrained, organized, empowered to deliverquantity and quality in a consistent and costefficient way; a public sector with a conducivebusiness environment including infrastructure,contract enforcement mechanisms, financialintermediation; and a receptive businesssector. In between these different sectors thereneeds to be partnership facilitation. This doesnot always have to be a third party; it can be achain champion but there needs to besomebody in or outside the value chain who

facilitates and bridges the worlds of farmersand of business. All these elements need to bepresent. If some of these elements are missingthen the business case will hit an early growthlimit, and the sustainability of the marketlinkage may be jeopardized.

Each of these success factors was discussedin detail in dedicated conference sessions.

Lucian Peppelenbos felt that the field of market linkages is in its infancy and that thereare few proven approaches or models and still a lot of work to be done. That said, thereare many valuable innovations taking place atthe interface of profit and not-for-profit sectors.What is needed are smart public policies to make use of these innovations, and toupscale and replicate them. Also required is a financial sector that takes advantage of these opportunities.


Facilitating public sector

Partnershipfacilitation

Organized/empowered

farmers

Receptivebusiness

sector

6 What is the role of the private sector?

The conference presentations by businessleaders and the agribusiness working grouphad a common theme of “new businessmodels”, which are emerging to bringagribusinesses into partnerships with small-scale producers.

New business models

Many agribusiness speakers commented onthe high distribution costs of servicing small-scale farmers in rural areas. The big challengeis the fragmented supply base and how toorganize production in units that can sensiblybe dealt with on a commercial basis.

For retailers, contract farming has somefeatures that can solve current problems, suchas how small-scale farmers can deliversufficient quantity and meet standards for foodsafety and quality. But there are still someshortcomings to deal with, including how to getmore economic benefits to farmers. Otherconference participants spoke of the need forcontracts to be negotiated properly andcollectively including with transparency inmargins along the value chain, the need to findways to ensure that farmers benefit from risingmarket prices and to help farmers to managemarket risks. Contract farming does notremove the need for producer organizationsand market intermediaries.

Sanjeev Asthana, President and ChiefExecutive of Reliance Retail Ltd., felt that giventhe fundamental tenets of contract farming, it is virtually impossible to undertake directcontracting with individual small-scale farmersdue to the constraints in legal enforcement ofcontracts between individual farmers and afirm. The solution lies in contracting with farmercooperatives or other business entities such asintermediaries that represent farmers. The needfor some form of intermediary between thelarge agribusiness and the small-scale farmeris seen as critical to minimize the unevennessof the relationship. There is a need for businessand product traceability within such newbusiness entities.

The share of contract agriculture withinChinese agriculture is still very small. In thequestion and answer session on producemarketing in China after the conference fieldtrip, Tao Huai, Senior Purchasing Manager ofWu-Mart Stores, spoke of the benefits as wellas high costs and risks of forging directrelationships between producers andsupermarkets.

Anton van Gorp, General Manager of CTAMakro Commercial Co. Ltd in China, reportedthat the biggest success in supply chaincoordination in China has been in milk andmeat, where large production companies havebeen established. Because retail in China isvery competitive and barely profitable, andbecause of weak consumer demand for topclass produce, no company will commit thetime and costs to integrating backwards, whichis extremely expensive. He felt the only chancefor success was if farms can increase farm sizeto at least 20 ha, coupled with investment andtraining. He echoed the finding that it isphysically and organizationally impossible todeal with individual small-scale farmersbecause of the transaction costs includingcosts of invoicing, logistics and quality checks.Small-scale farmers are not able to fulfill therequired needs of the major retailers. Thelimited power of supervision authorities onstandards and quality means that deliveredproducts do not adhere to standards andrequired quality.

With regard to business support for farmers,there is a competitive issue to also beconsidered. If a retailer invests in supportingsmall-scale farmers and consolidating a supplychain, how can it ensure that competitors arenot profiting from it?

Instead of building its own support services,agribusiness can better use collection centresor other intermediaries, which act as platformsand can also provide an anchor to specializedservice companies for providing integratedfarmer support. These intermediaries can beset up both to procure agricultural produce andretail inputs and farm services.


In India, new business models are emerging,with large wholesale distribution companiesmoving into the market. Reliance Retail andHariyali Kisaan Bazaar, both part of largedomestic conglomerates, are developing newbusiness in India’s dynamic retail landscape,including the rural areas which have typicallybeen seen as backwaters.

Rajesh Gupta, President of Hariyali KisaanBazaar, stated his company’s belief that onlycommercially sustainable business models willbe able to create a long-term impact on therural economy. The private sector shouldcreate multiple revenue streams based ontransparent and effective participation in inputas well as output value chains. The Hariyalimodel is seen as an example of a commerciallysustainable business venture that triggersinclusive growth. Each Hariyali store has acatchment radius of 20–25 km, comprisingabout 15–20,000 farming families. They aim toprovide producers with “urban amenities inrural areas”, easy availability of qualityproducts at “city-like” fair prices, and throughIT provide commodity prices and commodityfutures, as well as ATM access and weatherforecasts. On the procurement side, theycreate linkages between producers andprocessors, exporters and retailers.


Conference field trip to Huixin Store of Wu-Mart Stores, Inc.

Supply chain representatives take questions from conferenceparticipants, following market visits

“Major production-related concerns for Wu-Mart include meeting standards (asproducers do not grade and sort), producerstorage capacity, and transportation.Intermediaries therefore provide greatadvantages in bridging production andsupermarkets. But Wu-Mart is now developingdirect links between large-scale producers andthe supermarket. Wu-Mart is trying to takecosts out of the supply chain by procuringdirectly from farmers. Direct relationshipsbetween producers and supermarkets have ahigh risk for both sides, including maintaininga stable supply and maintaining a reputationwith consumers for availability, against verylarge variation in demand. Promotions canincrease sales tenfold.”

Tao Huai, Senior Purchasing Manager, Wu-Mart Stores, Inc.

“The whole idea is that you create a newgeneration of intermediary in the market place,which is built on trust and reliability with twostakeholders – one on the farm side and one onthe market side which helps to bridge the gapbetween the two.

If you can impact on the cycle of low income, lowrisk and therefore a vicious circle that is moving inthe same loop, if you are able to break that, thenthe integration with the consumer market and theurban market begins to happen and the aspirationsand the ambitions of the rural community whichare unfulfilled, can be addressed.”

Rajesh Gupta, President, Hariyali Kisaan Bazaar,Division of DCM Shriram Consolidated Ltd, India

A Hariyali Kisaan Bazaar store Photo: Hariyali

Rajesh Gupta reported that in three yearsHariyali has been able to reach close to 4 millionfarmers in one form or another. Given that thefarming population is some 128 million farmers,he saw plenty of room for more players, morecompanies, NGOs and cooperatives to enterthe market “so that a larger number of farmerscan benefit from this process.”

Sanjeev Asthana of Reliance agreed that someform of intermediary between large agribusinessand the small-scale farmer is critical to minimizethe unevenness of the relationship. There was a need for business and product traceabilitywithin such new business entities. He describedhow his company is creating a US$ 5 billioninvestment plan – one of the largest in theworld – around a retail venture which is beingrolled out in multiple formats.

Reliance is also creating a two-way platformwhere the company buys as well as sells.

These rural business hubs with rural collectioncentres create a well-invested supply chainincluding distribution centres as well asprocessing locations and logistics. SanjeevAsthana saw this type of action from multipleprivate companies as “bringing about a very

decisive shift in the way agriculture and the small-scale farmers are dealt with in the country”,characterized by “demand-driven productionthrough direct procurement from farmers via a transparent marketing system”, and withavailability of high quality farm inputs and locationspecific farming advice. The results for retailersare “better quality products at a fair price.”

Sanjeev Asthana also noted that thetelecommunications explosion in India hasmade its telecom services the cheapest in theworld, thus users in rural areas are rapidlyincreasing. This makes possible a diversity ofinformation platforms such as that operated byReuters through cell phones. This can informfarmers on market prices and weather. It alsopermits the development of electronic forms ofmarket exchanges, which can havetransformational impacts on rural markets.

These new roles of rural retailers in serviceprovision raise a central question in the balanceof roles between private and public sector. Are the new rural retailers in India in effect usingtheir own resources to provide services andinputs to fill a gap in public service provision?Does the role of governments and donors inservice provision need to be reshaped?


“A new agriculture supply chain isemerging in India removing non-valueadding intermediaries, and formingpartnership with value addingintermediaries, for technology transfer,streamlining of processes, andmaintenance of quality.”

Sanjeev Asthana, President and ChiefExecutive of Reliance Retail Ltd

Another new generation of intermediary isexemplified by the Bimandiri company inIndonesia, and was presented in a poster by the Company Director Achmad Rivani.There is also a documented RegoverningMarkets case study of a similar commercialintermediary in Honduras, with a specialprogramme to include small farmers in theirsupply schedules for retailers.

A differentiated approach to small-scale suppliers

The conference Working Group on“Agribusiness partnerships for smallholderinclusion” concluded that small-scale farmersshould not be seen as an impediment tocompetitiveness. For emerging farmers tobecome part of a supply network, there is aneed to modify purchasing relationships suchas listing fees. There are very different ways ofworking depending on the intermediary in thesupply chain. Even if retailers can commit topreferential conditions, such as payment inadvance, there is still a huge need for technical

and business knowledge building. Education isneeded to tackle the problem of reliability ofthe smallholders and is seen as both a publicand private sector function.

Supermarkets can implement a differentiatedapproach to procurement, such as makingpayment terms more conducive. In Africa, theKenyan-owned supermarket Uchumi has anadapted procurement policy. Jonathan Ciano,Chief Executive of Uchumi, noted that small-scale producers are always ready to replenishat any time and thus allow the retailer to havethe best fresh produce, while competitorsworking with a centralized distribution centrecannot be so responsive.

The perspective of a dedicated retail supplierworking in Africa was provided by Johan vanDeventer, Managing Director of Freshmark.Freshmark was established in 1991 as anindependent business unit in the Shoprite Groupof companies. Within South Africa, they procurefrom some 800 suppliers and whilst this couldbe reduced to 100 larger ones, the companyhas taken a business decision not to reduce itssupply base. With the expansion of Shopritefrom South Africa into the rest of Africa,


Bimandiri, Indonesia Photo: Thomas Reardon

Bimandiri has changed from a traditional wholesalerto a specialist wholesale supplier of vegetables andfruit, mainly to Carrefour, and is an example of a newgeneration of intermediary. Bimandiri encouragesfarmers to cooperate in producer organizations andworks with those groups on the basis of agreedquantities and assured quality standards for theirretailer client. The growth of these organizations intogroups that can run the business activity, includingproduction, packaging and selling, has allowedBimandiri to move away from a close extension role.They have maintained preferred suppliers lists andthey continue to operate a transparent negotiatedproducer price.

“You accept that [small-scalefarmers] are not doing you afavour, you are not doing them afavour – you are partners inprogress. In the final analysis, itpays to support the small playersin the agrifood sub-sector – thisis what has given us the pace.”

Jonathan Ciano, Chief Executive, UchumiSupermarkets Ltd, Kenya

Uchumi believe that it pays both for producers(economic growth, sustainable rural development) andthe company (freshness of produce) to have direct andjust-in-time sourcing.

The methodology of procuring from small-scalefarmers is through:

● Directly engaging small farmers/distributors withsupermarkets and branches

● Recognizing financial exposures of the smallfarmers/suppliers through settling at shorter periodthan market credit periods

● Dedicating specific branches for specific suppliersto manage quality

● Encouraging farmers through site/field visits.

Freshmark is today located in 17 neighbouringcountries with some 70,000 employees and anannual turnover of US$ 6 billion.

Johan van Deventer described the policyconstraints facing successful small-scaleproducers who want to move up to the nextmarket level. These include problems at theintermediary/procurement stage as well asoutdated sanitary regulations and duties. A private company alone cannot foster thetransformation of the market structure – in thiscase the fruit and vegetable sector. The poorlydeveloped and limited regional trade reducesthe opportunity for farmers to sell residualproduction to channels alternative to themodern retail. Gareth Ackerman, Chair ofSouth Africa-based Pick ’n Pay Stores Ltd.,and member of the Board of Directors of theFood Business Forum (CIES), presentedexperiences of the company in investing inemerging suppliers and their communities.

Another successful supplier company workingwith small-scale producers is the HikmahFarms Group. Operations Manager WildanMustofa described how Hikmahfarm hasgrown to be a major supplier of seed and freshpotatoes to traditional and modern markets inIndonesia, and has become a trading house forproduce of farmer groups. The partnership withsmall farmers was initiated in 1999 aroundseed potato production, and was extended in2003 to some vegetable crops which farmersgrow in crop rotation after seed potato, andextended again to some farming families whichhave home industry scale food processing. TheGroup has developed processing facilities touse under-grade produce and they sell highquality potatoes to supermarkets. Farmer

suppliers can still supply their traditionalmarkets; Hikmahfarm does not demandexclusivity.

Financial services

The Regoverning Markets programmes’empirical research shows the importance ofnon-land capital assets as major determinantsof market access. An obvious policy messageis therefore improving access to financialservices. The world of financial services andthat of market development are still largelyseparated. This finance gap is a key barrier tosmall-scale farmer participation in dynamicmarkets. It is crucially important to bridge thatgap, developing innovative financial productsthat cater to the needs of the small-scalefarmer and rural entrepreneur.

Such clients remain underserved by financialinstitutions, despite increased commercialbanking and microfinance investment. There isa “missing middle” of producer organizationsand rural SMEs that lack access to financialservices and therefore hit critical growth limitsin an early stage of their development. SMEfinance is particularly problematic in ruralareas, as rural, including agricultural, finance isconsidered more risky, and services are fewer,


Photo: Pick ’n Pay

Emerging farmer supplier to Pick ’n Pay

“Pick ’n Pay is continually investing in the communitiesaround the locations of the stores… To enhance themultiplier effect further the group has committedcapital to an enterprise development fund. This fund isproviding loaned capital at zero interest to projectsthat provide goods and services to the group. We’reendeavouring to tie one project to each newlyconverted family store; the store will commit topurchase the goods from the project for as long asthey meet the correct quality standards at marketrelated prices. The group further has committed addedresources in the form of technical assistance. Webelieve the secret of the success of these projects isthat we’ve shifted from a supply to a demandrelationship with the producer. We try in each projectto have a consolidator such as a cooperative to supplythe Pick ’n Pay system as well as a qualifiedagronomist to ensure quality products and productionefficiency. This enables small-scale farmers to takeadvantage of value added opportunities supplyingdirectly into a major retailer.”

Gareth Ackerman, Chair of Pick ’n Pay Stores Ltd.

less convenient, and more costly. The casestudies show a need for increased access toworking and investment capital to finance thetechnological, managerial and organizationalinnovations required for market participation.

The concept of new business models canextend to finance. There is a potential role foragribusiness to work with finance institutionsso that purchasing contracts with small farmerorganizations can work as collateral. The spacewithin credit structures for innovation in financialinstruments which are more conducive to chain-wide development and inclusive business wasoutlined by Sahaschai Yaowapankul, Directorof the International Co-operation Division of the Asia-Pacific Rural and Agricultural CreditAssociation (APRACA), a regional associationwhich promotes cooperation and facilitatesmutual exchange of information and expertisein the field of rural finance.

Drawing from the experience and insights ofthe conference, Sahaschai Yaowapankul notedthat quantitative data was collated aroundsectors, such as agriculture and fisheries. Hefelt that there was a need for better informationon the specificities of client type (such assmall- versus large-scale farmers), and on howthe bank is (or is not) supporting marketlinkages within categories and client type.There was felt to be a lack of data onalignment of investment by market type andclient and thus new and deeper data sets werecalled for. There was a willingness to sharedata with academia to help to betterunderstand who is being reached.

Collective business action

New business models provide a means to deal with the question raised by the conferenceof how to move from Corporate Responsibility(CR) to a systematic way of doing inclusivebusiness, in situations of intense competition.The conference Working Group “Action to bringagribusiness into partnerships for the inclusionof small-scale producers” called for greatercollective action from agribusinesses, such ascodes of best practice and contribution to thesetting of local standards. Examples of goodpractice include smallholder-friendly paymentpractices, modification of listing fees, faircontracts with farmers’ organizations; preferentialbuying of products of farmers’ organizations; andreserving a special space in the supermarketsfor products of farmers’ organizations.

The group proposed that best practices needto be adopted at industry level and be adoptedat the different levels within each stage of thesupply chain. There will be very different waysof working depending on the interlocutor in thesupply chain. Agribusinesses need to encouragesuppliers to be equally good at working withand understanding backward chain processes,and to possibly push for legislation to reinforcethis. Businesses should also work collectivelyto give direction to public policy.

Links with knowledge centres,NGOs and other support agencies

Supply-side constraints to the development ofthe modern agrifood sector give an incentive to the private sector to partner with localknowledge institutions to share resources todevelop the sector. Businesses can benefitgreatly from linkages with knowledge centres,such as universities, to collaborate on themeans to get small-scale suppliers and modern


Modern grocery retail calls for high andconsistent product quality, Indonesia

In September 2007, Padjadjaran University andCarrefour Indonesia signed a memorandum of strategiccooperation, that involves developing a supply chainmodel involving small-scale suppliers, developmentof new agricultural products, transfer of know-how, andchannelling of products to the Carrefour quality lineprogramme. Carrefour Indonesia has an ambitiousplan to expand its business sustainably, with thestrong connection and support from local productioncapacity. Indonesia, with unique tropical fresh products,has strong potential to support the company’sinternational network, specifically the quality line. The main challenge is how to make the collaborationremain interesting to both parties in the long run.

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agribusiness interests aligned. An excitingexample of a link between agribusiness andknowledge centres was presented by RonnieNatawidjaja of the Center for AgriculturalPolicy and Agribusiness Studies CAPAS) atPadjadjaran University in Indonesia.

In addition to embryonic experiences in theprivate sector becoming a “partner indevelopment”, the Regoverning Marketsprogramme uncovered some valuableinnovations at the interface of private sectorand support organizations. Supportorganizations (NGOs) can assist farmers toaccess credit and access the market, build the institutional capability of farmers’organizations, and negotiate fair contracts. It was generally agreed that working withsmall-scale producers and entrepreneurs offerin many cases real business opportunities andsuch engagement should not be seen as athreat to business practice.


7 How can producers organize to deal with modern markets?

The conference focused as much attention on the role of producers and their organizationsas it had on private sector roles. There isevidence and widespread support in producerorganizations for the conclusion that producersneed to organize and partner with other chainactors, to meet market requirements andexercise countervailing market power. Workingas individuals, with low volumes and dispersedproduction, puts farmers in a weak negotiatingposition and limits capacity to upgrade andmeet formal market requirements.

Cooperating to compete

Evidence from the Regoverning Marketsprogramme and related research, presented byEstelle Biénabe, CIRAD researcher working inthe University of Pretoria, shows that despitethe potentially huge benefits from cooperation,producer organizations (POs) have a verymixed record of successfully connecting farmermembers to modern markets. Efficientmarketing POs are rare and of those that aresuccessful many have been instigated by largefarmers, by producers and retailers, or byNGOs and other support agencies. There werefew examples of successful POs which hadbeen instigated by small-scale producersthemselves.

A primary success factor in POs centresaround management models that balancemember inclusion and group competitiveness.These models usually involve differentiation ofmembership to cope with the range of landholdings, wealth, education etc. For instanceclustering of smaller suppliers around a largewell-capitalized farmer, or differentiatingbetween year-round core suppliers andseasonal “top-up” suppliers. Any memberdifferentiation can be a challenge to thecooperative ethos of equality and equity.

There was a lengthy debate on the perceivedmultiple and often conflicting roles of producer organizations in the face of marketrestructuring. Issues raised include the welfarerole of POs versus economic and productive

engagement. It was felt that the image of theproducer organization as a welfare organizationshould be re-thought. Where farmers seek tocooperate as a business enterprise in acooperative or farmers’ association, successmay depend on a separation of the welfarefunctions from the marketing functions.

The issue of specialization of production wasraised as this was seen as one way thatfarmers can add value to their produce at theproduction level. Investing in specializedfarming systems increases yields, productivityand farm incomes. However, suchspecialization can be a risky strategy, becauseof the increased investment and market pricefluctuations, and this should be taken forwardideally within a more integrated market chain.

Market inclusion is not just about marketaccess. Sustained market inclusion is muchmore difficult, and requires better linkagesbetween consumers and producers. Beingresponsive to what the market wants mayrequire POs to develop crop-specificproduction clusters and planned production.Adopting a chain vision, engaging in multi-agent cooperation, and acquiring new businessexpertise can build trust between agents in the chain.

Much attention is now focusing on a newgeneration of intermediaries to bridge theworlds of small-scale farming and modernagrifood. Thus another PO success factor isinnovative models of intermediation, asalternatives to the more familiar (but oftenunsuccessful) investment of POs in verticalintegration to “cut out the middleman”. The so-called “doubly-specializedintermediary” such as NorminCorp in thePhilippines – which is both business-driven and development-motivated – provides bothupstream capacity support and downstreamclient satisfaction.

There is also a documented RegoverningMarkets case study of an organization thatmatches tomato producers in the Himalayanregion in the north of India to a national


retailer. They mobilize and train the farmersafter having identified the market demand ofthis retailer. Again, in the Philippines, there is a producer-controlled intermediary company which owns the brand of “healthy”rice, and delivers it to the supermarket underthe conditions that the supermarket wants, but they also organize the farmers into supply clusters.

Another example of a specialized marketingarm is that of the Mórakert Cooperative inHungary, presented by Réka Pónyai-Pisurnyi,Marketing Manager of Mórakert. Thecooperative was established in 1995 with 52original small farmer members, in a countrywhere small farms struggled to deal withprivatization and market restructuring. Now,there are more than 750 members and a netsales turnover of EUR 32 million. Specializationis one source of the success of thecooperative. Other success factors are thescreening process of potential members, thestrict rules to enforce the high quality andappropriate quantity of products, an efficientprivate contract enforcement mechanism, andthe trust between management and members.Mórakert have thus been able to adjust theiractivity to the opportunities provided by theever changing retail sector.

The Mórakert example demonstrates thateffective POs are not only market facilitatorsbut also service providers, giving support onquality assurance, technical provisions etc. The value of PO service provision was amplydemonstrated by Dingshun Li, President of the Beijing Aojinda Bee Product Cooperative. He reported that the establishment of thecooperative reformed a situation of a poorlyregulated market, whereby beekeepers’interests could be maintained and their incomeincreased. The cooperative reduced the cost ofinputs through group purchasing, helped tradedirectly with distributors and processing firmsto shorten the chain and gain more revenue,implemented processing projects to increasethe added value, and organized marketing toenhance competitiveness in modern markets.

From the rural areas of China, Han Zhenghuiof the Green Association of Nanqu reportedhow important it is to learn from experiences offarmer organizations in other countries. He is amember of the “Global learning network ofproducer organizations engaged in restructurednational and regional markets” and participatedin an international study tour to Chile.

Lobbying for facilitating public policy

A number of conference speakers addressedthe need for producer organizations andfederations to pay attention to exerting politicalinfluence in support of an enabling andequitable legal and policy environment


NorminCorp facilities, Mindanao Photo: Larry Digal

The Normin Corporation (NorminCorp) was set up by the Northern Mindanao Vegetable Producers’Association, Inc. (NorminVeggies), an association ofvegetable farmers in the Southern Philippines. Theassociation saw the need to organize and implementstrategies and innovations to access dynamicmarkets in the Philippines, particularly fast foodoutlets, supermarkets and vegetable processors.

NorminCorp was established as the marketing armof the organization and is tasked to facilitate thetrading of the vegetables produced by the members.As a market facilitator rather than a trader,NorminCorp charges a transparent service fee forevery transaction.

The conference pointed to the many dilemmasfaced by these new generation intermediaries.The majority of initiatives are still dependent on donors and NGOs. As long as they aresupported by external resources, questions willbe raised about their comparative advantageover traditional intermediaries. Are real costs ofintermediation being subsidized? Is there anexit strategy that leaves behind a healthy andintact chain?

(infrastructure, land tenure, etc.) for linking POs and modern markets. This can includesupport to group marketing, support toequitable trading relationships, promotion ofincreased competition between differentcontracting firms, appropriate technologygeneration, technical and business advisoryservices, and upgrading of traditional retail andwholesale markets.

A strategy of policy influence can extendbeyond national boundaries. The Polishresearch team, as a result of their investigationof the dairy sector, recommended in theirposter that farm organizations, dairyassociations and other stakeholders of thefood chain in Poland should more activelyengage in the process of shaping the EU dairymarket organization and the WTO negotiations.

In China many cooperatives are established in the country following the decision of the10th National People’s Congress (October2006) in which a law on farmer cooperativeswas adopted. This decision was followed up by Presidential Order 57 of President Hu Jintao(effective July 2007). Funds for verticalintegration were dispersed through localgovernment units. While government policystrongly supports the formation of POs andvertical coordination, that support has yet todeliver its full outreach. Even the mostsuccessful PO may feel isolated from policyand from global best practice, as articulated byHan Zhenghui of the Green Association ofNanqu in Shaanxi Province, China.

Promotion of strong and more equal partnerships withagribusiness

Considering the limited leverage of publicpolicy over agrifood, the conference alsoremarked that producers should use policyinfluence on business strategy, in demands forinclusive and pro-poor business models.Agribusiness and producer organizations must try to share views and jointly develop new models.

Ajay Vashee, President of the Southern AfricanConfederation of Agricultural Producers (andsince June 08 the President of IFAP) presentedexperience of how contract farming can workbetter for small-scale farming. Producerorganization is still essential in contract farming,as enforcement of contracts with individuals is

not viable. Contract farming is widely used insouthern Africa: more than 700,000 smallholderfarmers in Malawi, Zambia and Zimbabweproduce cotton through contract farming, and100 per cent of cotton and tobacco inMozambique and 60 per cent of tea and sugarin Kenya are produced through the system.Through contract farming, smallholder farmerscan access high value markets for theirproduce, inputs on credit, new technology, andtraining in farm management. But smallholdersbear higher risks compared to the contractingfirms. Producer organizations needstrengthened capacity to promote strong andmore equal partnerships between farmers andcontracting firms.

The problems of contracts under conditions of power imbalances were highlighted byKoronado Apuzen of the Foundation forAgrarian Reform Cooperatives in Mindanao,Philippines. The beneficiaries of the 1988Agrarian Reform Law, which transferredownership of 12,000 hectares of bananaplantations to former plantation workers, led to


“In future, it is necessary tocontinue to do a better job in ouroriginal work. Second, we shouldreinforce study, in particular onthe experiences of farmerorganizations in other countries”.

Han Zhenghui, Chair, Green Association of Nanqu, China

Since its foundation in 2001, the Nanqu GreenAssociation has grown to 1,690 members producingmore than 38,500 tons of high quality bagged Red Fujiapples per year, which are sold to medium-large cities,as well as exported to Korea, Vietnam, Russia, Japanand other countries. Through the coordinated servicesprovided by the Association during production, supplyand distribution, the production, quality and price haveall improved steadily.

The difficulties facing the Association are:

● The lack of operational funds: members are notrich; the government does not provide financialsupport; all the work done by the Associationcadres is provided free of charge.

● The Association lacks experience in modernmanagement.

● There is little external exchange and theAssociation lacks information from other parts ofthe country and the world.

a situation where the “partnership” of small-scale farmer cooperatives with agribusinessonly perpetuated their poverty. The smallfarmers were poorer as small landholders thanbefore as paid farm workers. Terms ofcontracts were either too long or indefinite, the produce price was below production cost,and as a result the cooperatives were heavilyindebted to the banana corporations. It wasonly after a strike by four cooperatives thatcontracts were abrogated and replaced by fair full cost growers’ contracts negotiated with the help of an NGO, which after anotherstruggle were also applied to other small-scalecontract growers.

Koronado Apuzen described a model contractinvolving the highland organic banana projectof indigenous people in a remote villageoutside of Davao City, southern Philippines.The contract involves four parties, namely: theindividual small-scale farmers, the farmers’cooperative, a coop-based trading firm, and anNGO. The individual farmers, who are themembers of the cooperative, grow the bananasand sell them to the cooperative. Thecooperative manages the project, buys thebananas and sells them to the tradingcompany. The NGO provides the followingservices to the coop: business lending for farm

development and capital expense, institutionalcapability building, technical assistance,research and development, input provision,and market linkages.

Articulating national farmers’organizations with researchers

The capacities of farmers’ organizations toempower their smallholder members inmarkets, and the enabling policy environment,can be built through bringing farmerorganizations and researchers into practicalpartnerships for collaborative research, learningand reflection. This is the purpose of theEmpowering Smallholder Farmers in Markets(ESFIM www.esfim.org) project – a partnershipwhich is coordinated through the InternationalFederation of Agricultural Producers.


IFAP conference delegation Photo: IFAP

A strong delegation from the International Federationof Agricultural Producers (IFAP) participated in theconference, reflecting the importance IFAP places on theissue of market restructuring and the position of small-scale farmers. The IFAP delegation concluded that “It is now important that the conclusions reached as aresult of this long-term research are implemented onthe ground so that small farmers can benefit from thegrowth of global markets through the inclusion of small-scale farmers in modern supply chains. In particular:

● actions to have a more inclusive business model,especially procurement systems which buy fromsmall-scale farmers;

● actions to help subsistence farmers becomesmall-scale entrepreneurs;

● actions by governments to give a higher priority to agriculture and programmes to help small-scalefarmers organize themselves in the market; and

● actions by researchers to transform researchresults into tangible policies and programmes tostrengthen the participation of small-scale farmersin markets.”

Across the conference and working groupsthere was a broad appreciation of the role ofpublic policy in building inclusive markets.Governments are faced with very toughchallenges of prioritization and resourceallocation. And there is deep uncertainty in localand national government about how to intervenein markets and how to inject incentives to bringlarge companies into contact with small-scalefarms. Where primary producers and ruraldevelopment has been a primary policy target,government focus has traditionally beenupstream, in rural poverty eradication rather thandriving and accompanying the changing foodchain. From a perspective of inclusive markets,it is felt that primary production is not alwaysthe best or sole entry point for intervention.

The role of the state in inclusive markets

Speakers including Loek Boonekamp, Head,Agricultural Trade and Markets Division of theOECD, addressed the market-enabling role ofthe state to provide the economic framework(tax system, social safety net), deal with marketfailures, foster development, and guideadjustment, while being wary of “one-size-fits-all” solutions. Government needs to set therules of the game, such as cooperative laws,and provide infrastructure and agriculturalextension for small-scale farmers.

Lack of basic infrastructure is a dominantproblem, as it can make marketing costs sohigh that final prices are not competitive. There were statistically significant positiveimpacts of road and market infrastructure onfarmer’s participation in modern channels infive of the nine Regoverning Marketssupported empirical country studies. Landpolicies also have profound market accessimplications; exclusion is lowest where land is most equally distributed between farmers.So to minimize exclusion, land policiespromoting this equality are needed. The publicsector also comes into the research dimensionto ensure that small-scale farmers can upgradetechnical aspects of production such as seeds, as well as product handling. Credit iscrucial to small-scale farmers’ inclusion in modern markets and there remains a needto liberalize credit policies for small-scalefarmers.

Beyond these roles, conference workinggroups considered what possibilities there arefor governments to have special programmesto incentivize smallholder inclusion by retailers.This is discussed later in this section.

From a producer perspective, Raul Montemayor,National Business Manager of the Federationof Free Farmers Cooperatives and IFAP, sawthe role of government in markets as providingopportunities, promoting fair play, setting aframework for competitive markets andensuring a level playing field between domesticand imported products. Levelling the playingfield for small-scale farmers means addressingbarriers faced by them (risks, monopolies, lackof market choice, intermediaries) as well as theeconomic shocks (high input costs, climatechange, price volatility). Small-scale farmersmust be protected from unfair deals, ensuringthat competitors do not take advantage of orexclude the small-scale producer throughpreferred suppliers’ requirements or unrealisticcontract conditions.

Within an overall framework of “pro-marketpolicies”, the Regoverning Markets programmerevealed that there is significant room for


8 What is the role of governments?

“What is clear is we have to goback to basics. Is there spacefor government? Is there apolicy issue? If yes what is it?And where will the innovationcome from? … We need moreof those best practices, weneed to share those bestpractices and find opportunities to informgovernment of what to do.”

Lindiwe Sibanda, CEO of the Food, Agriculture and Natural Resources Policy Analysis Network

(FANRPAN), in summing-up the public policy session

more specific “pro-poor policies”. LucianPeppelenbos pointed to the followingexamples reviewed by the programme:

● Promotion of contract farming (India)

● Farmer-controlled phytosanitary lawenforcement (Mexico)

● Local public procurement (Bolivia)

● Adaptation of law to the informal sector(Kenya)

● Budget-neutral market regulation (Brazil)

● Tax holidays for coops (China)

● Special status in competition policy(Australia)

● Black empowerment (South Africa).

Understanding drivers of market change

Failure in policy can be due to a poorunderstanding of the political, social andcultural environment in which small-scaleproducers operate. Policy intervention impacts on different scale producers indifferent ways. The first step is to understandthe drivers of market change and the reality ofsmall-scale production and to recognize thespecificity of small-scale farmers’ exclusionfrom markets.

A poster from the RuralStruc programme(http://go.worldbank.org/3RRZVRZX90)described its aims of improving the definition ofnational priorities and better policy making,looking at the interaction between populationgrowth, economic transition and agricultureabsorption capacities. This two-yearcomparative research programme involvingseven countries focuses on understanding theprocesses of structural change related to theglobal restructuring of the agrifood marketsand their consequences for rural economies. It seeks to identify opportunities, constraints,and risks of impasses related to thedemographic and economic transition.

With open markets, shocks are transmittedthrough the entire system. Jerzy Wilkin of theFaculty of Economics, Warsaw University,Poland stated that policies must take intoaccount the likely evolution of the economicenvironment at the national, regional andinternational levels. This means that policiesmust be constructed with an awareness of aliberalized trade environment, as well as otherglobal issues, such as global warming.

The Undersecretary at the Ministry of Agricultureand Rural Affairs, Vedat Mirmahmutogullari,outlined one of the constraints facingpolicymakers in Turkey, namely the lack ofinformation on global trends and drivers and theneed to link an analysis of such trends with acoherent rural development strategy. Externalfactors impact on domestic policy development.For example, WTO regulations may meandomestic policies cannot be constructed norobjectives achieved independently. It isimportant to look beyond the domesticboundaries as to why marginalization is created.Policies may want to prepare actors to beready to meet new market challenges such asfood safety, quality and traceability regulations.

A differentiated policy for small-scale farms

There was broad support across the conferencefor governments to ensure that the issue ofexclusion of small-scale farmers from marketswas not left off the agenda. It was noted thatthis failure of policy occurred for instance inRussia with very negative outcomes for this setof farmers. But at some point governmentsmust balance equity and efficiency, despite thecompelling case to support the huge numbersof small- and micro-scale farms. The costs of


“I was intrigued when I heardthe term Regoverning Marketsand I asked who will governthe market? Now it is clearer.We are not talking ofinstitutions that will controlmarkets and set up rules butmore of an interplay of actors,governments, private sector, farmers organizations,change agents who will work this out. But of coursegovernment has an important role – the cost ofgovernment neglect of agriculture, for example,results in inefficiency in the system and the costs ofthat are eventually borne by the farmers in terms oflow prices.”

Raul Montemayor, Federation of Free Farmers Cooperatives and International Federation

of Agricultural Producers

inclusion and exclusion must be evaluated inconsidering policy options.

Evaluation of future scenarios should attemptto include estimates of these costs in order toprovide additional insights into the real costsand benefits of the policy options. Case studyevidence suggests that inclusion into restructuredmarkets may be unsustainable for the “poorestof the poor”. There is a lack of data to informresource allocation and thus, for example, thethreshold for support. Such thresholds can bea minimum size of farms, but may also includenon-land triggers such as completion of training,or membership of a producer organization.

Mohamed Jaouad, Adviser to the Farmer’sConfederation (COMADER) in Moroccoreported that Morocco has been opening up itsmarket to new actors. He said there is anurgency to develop the right policies andinstitutions to help the small-scale producers,or they will be condemned to poverty.

The viability of connecting the smallest andsemi-subsistence farmers to modern marketswas questioned by a number of speakers, andfor these most marginalized groups social safetynets and coherent rural development strategieswere presented as the preferred strategy. In thecase of Turkey, Vedat Mirmahmutogullari,described how policies must account for thefact that some 3 million farms or 65 per cent ofthe total have less than 5 hectares of land, and85 per cent less than 10 hectares.

A step in the direction of informed policymaking is Uganda’s establishment of a nationalcompetitiveness and investment climatestrategy, which is an instrument to guide policy development and resource allocation infavour of Uganda’s national competitivenessagenda. Peter Ngategize, the NationalCoordinator of the Competitiveness andInvestment Climate Strategy, outlined theattributes of this approach.

First, it provides useful information onUganda’s competitiveness rating in relation toaccessing markets and attracting investments.Second, it highlights Uganda’s productivesectors, given their importance in being thesource of exports, jobs and income generation.Third, it provides a framework for harmonizingthe objectives of other programmes such asthe Plan for Modernization of Agriculture, theRural Development Strategy, the AgriculturalZoning Programme, and the Prosperity for AllProgramme. Finally, it recognizes the pivotal

role of the private sector in driving thecompetitiveness agenda and provides aframework for public private sectorpartnerships through “clusters” in exploitingthe potential of the productive sectors.

In a keynote address, Csaba Csáki describedthe situation in Central and Eastern Europe(CEE), where almost 30 million small farmswere created in the region by privatization.Most of these small farmers are new farmers,without proper assets and without knowledgeof farming and this is reflected in the limitedcompetitiveness of the region. This has givenrise to a strikingly dualistic farm structure. At itsmost extreme in Slovakia, small farms accountfor 90 per cent of farm numbers but less than10 per cent of the sectoral outputs, while at theother end about 1 per cent of the farms give 80per cent of the output. At the same time, thereis huge regional concentration going on in theagriprocessing industry, by both localcompanies and multinationals. They arerestructuring their production, moving productsfrom one country to another. In retail, there iseven more dramatic change; in some countriesthe five leading chains have over 80 per cent ofthe share of the retail sector.

Processors and retailers are trading with small farms if there is an economic rationale.Where small farms dominate in supply andthere are few alternative sources, then there ismore willingness to include them. Compare, for example dairy supply in Poland whereowners of three or four cows can still sell to thedairy industry, with Hungary where there are a lot of big farmers, and the processors are unwilling to procure from farms of less that 20 cows. This exclusion is not the fault of the companies but when small farms are confronted with such a demandingmarket, very deliberate polices and strategiesare needed by producers, policy makers and business.

Csaba Csáki particularly urged governments toavoid a “one-size-fits-all” policy intervention.The differences between farm structure andfarms in CEE countries, and within CEE, aresignificant and it is even bigger within theexpanded EU compared with that of the EU 15,so the same Common Agricultural Policy (CAP) cannot be of benefit for all. This will be an important issue for the health check of the CAP. Further, Pillar 2 of CAP rules are set up in such a manner that small farms can be excluded.


Maciej Fedak, Senior Specialist of the Ministryof Agriculture and Rural Development inPoland, gave the example of how state policyfor dairy has tried on one side to assist in thedifficult process of transformation given thespecific conditions of small farm dominance,and on the other not to close itself off againstfree market economy and gradual tradeliberalization.

The case of selective protection for a sector forthe benefit of long-term involvement ofsmallholders was used in the case of the Indiandairy sector, which is typically small-scaleproducer led. Vijay Sharma, Chair of the IndianInstitute of Management, reported how in the1950s–70s there was a shortage of milkproduction. Instead of importing cheap rawmaterial, policy makers invested heavily inprocessing and marketing in rural areas tobridge the gap between producers andconsumers. They created infrastructure andprovided input services to support production.Today about 13 million farmers are members ofthe cooperatives that were set up. This case

illustrated a wider role of government insupport of the development and transformationof agribusiness.

There was widespread acknowledgment ofproblems of domestic policy incoherence, withdepartments poorly coordinated andgovernment not organized for cross-sectorallinkages and shared best practices. Thebenefits of multi-sector collaboration were seenin a poster by Molefe Mokoene, ChiefExecutive of the National African FarmersUnion, and Bonani Nyhodo and NkgashaTema of the National Agricultural MarketingCouncil, on the wool sector in South Africa,which along with the rest of agriculture has hada highly dualistic structure. The collaborationinvolves all key actors covering the livestockimprovement, training, finance, localgovernment, infrastructure and animal healthsectors. It was reported to have led to adramatic improvement in production, marketaccess and income. Integration of supportservices was also a factor in successful accessby smallholder farmers in Tanzania and Kenya


“What is needed is the removal of policy bias against small farmers. I advocate fordifferentiated policy towards small and large farms – the notion of one agricultural policywhich fits all is a mistake at least in this environment [in Central and Eastern Europespecifically Hungary, Czech Republic, Slovenia]. This is a problem with the CAP [EUCommon Agricultural Policy] – this does not fit with the small farmer”

Csaba Csáki, Corvinus University of Budapest, Hungary

Proportion ofsmall farms andtheir contributionto gross marginin central andeastern Europe2

2 Small farms defined as 0-2 ESU (European Size Unit), based on gross margin rather than physical units of area orlabour. Gross margin is Standard Gross Margin (SGM) which measure the value of gross output less variable costs perhectare (in the case of crops) or per animal (in the case of livestock).

to high-value markets for African indigenousvegetables and horticultural products, linked togroup formation and adherence to qualitydemands and grades and standards.

Quality issues represent a considerable risk forsmall-scale producers being excluded from themarket. There was a call for dialogue betweenbusinesses and government to properly set uplocal standards adapted to national situations.

Regulatory reform is also an important target.The administrative burden continues to be oneof the challenges that many countries face,with numerous licences being required in someinstances before a small-scale farmer can bepermitted to trade with supermarkets.

Encourage stronger market linkages

To what extent can public policy encouragestronger market linkages between small-scalefarmers and agribusiness? What specificpolices encourage the private sector to adoptinclusive policies in an extremely competitiveenvironment? Is there a way to work out thecontradiction between systemic inclusivepolicies and business survival? Are there publicpolicies, besides subsidy policies, that arebroader and would permit upscaling, thatretailers would want?

The evidence – from across the conference –that innovative business models can make apositive difference in terms of inclusion, pointsto room for proactive policies to stimulate andsupport those types of business models whichare more inclusive and that are also goodbusiness. This is not necessarily an issue of“large” versus “small” retail chains or agri-processors. Private initiatives often remain“islands of success” due in part to anunsupportive policy environment.

Some conference participants stressed thatgovernment efforts need to be supplementednot supplanted by the efforts of the privatesector, and the government should remainoutside of the mechanisms of the market. Butthere are forms of public policy instruments todrive reform and fund market interventions thattell of a wider role of government in support ofthe development and transformation ofagribusiness and that encourage strongermarket linkages, in situations where the privatesector is not stepping in.

In China, the establishment of an Office ofAgricultural Vertical Integration (OAVIM) withinthe Ministry of Agriculture is part of a strategyto make China’s agriculture competitive byintegrating production, processing and themarketing of agricultural products. LianguiHuang, Executive Deputy Director General ofOAVIM, reported that the Office seeks to linkfarmers with enterprises through farmers’professional associations or cooperatives, and through production and marketing.

The focus of government intervention isbroadening from mere farmer support to chain-wide support – via both upstream capacitysupport and downstream client satisfaction.China reported the establishment of a specialagricultural vertical integration fund to support“dragonhead” enterprises. A “dragonhead”company is established by governmentauthorities with both commercial and regionaldevelopment objectives. It contracts withfarmers to procure produce with specificattributes, often providing seed, fertilizer andother inputs, as well as operating loans andtechnical expertise. The company processesthe raw materials and sells them under a brandname often associated with the locality. One such enterprise is Fujian SunnerDevelopment Co. Ltd, which is located in avery poor region of Fujian, without modernindustry and very small land holdings averagingless than 0.5 ha. The General Manager,Yanfeng Chen, described how the companyhas grown out of a small chicken operation toone with a turnover of 1.3 billion yuan,supplying restaurant chains and hotels. This case shows how even in isolated areasfarmers can mobilize to participate in modernagrifood systems.

Another approach by government is to set up acommercial intermediary, again with a social aswell as a commercial remit –“a commercialoutfit with a social outcome.” Azizi bin MeorNgah, Chief Executive of the MalaysianAgrifood Corporation, described the MAFC asa policy instrument to spearhead thetransformation of the supply chain in Malaysia.

Another parastatal, Punjab Agro IndustriesCorporation, has a deliberate policy to achieve a less fragmented supply chain, while also underpinning the state’s policy ofdiversifying out of crops which have bigdemands on groundwater resources. Accordingto S. K. Sandhu, Managing Director of PunjabAgro, a long-term relationship between


producers, retailers and consumers is achievedthrough encouraging stronger marketingrelationships with greater volumes available formarketing, integrating small and marginalfarmers into collective farming andshareholding in processing.

Diversification of agriculture is promotedthrough contract farming into cash crops,which have grown from 22,300 acres in 2002,to 250,000 acres today. Some of the privatesector players include Tata and DSL. One ofthe major difficulties is to bind farmers to selltheir production at the contracted price whenmarket prices exceed the contract price.Another state incubation investment in India is“mega food parks” – a central governmentinitiative through which six parks will beestablised, each spreading over 50 hectares atan initial cost of US$ 40 million. The land isprovided by government and the private sectorprovides the investment in infrastructure andequipment. These megaparks are commoditycollection, grading, storage and processingpoints. Farmers can enter into individualcontracts with the private sector and sell their products.

Another role for government which wasdiscussed in the conference is to use policypressure or incentives on agribusiness and retailfor pro-poor procurement, such as requiringsupermarkets to provide adequate space ontheir shelves for small-scale farmers’ products.

Attention to regional exclusion

Modern market suppliers source products fromrural areas that fulfill the necessary conditionsto supply for an extended period of time in theyear, and that are able to produce products thatmeets the quality standards. There is plenty ofevidence (such as from the Mexican empiricalstudy for Regoverning Markets) that exclusioncan take place at the level of whole regions.Policy needs to address this intersectionbetween regional development and marketinclusion, with investment in infrastructure inpoor rural areas to bring up to the thresholdlevels of ICT, transport and energy suppliesnecessary for firms and farmers to invest andoperate successfully. But there is much moreto do, including attention to region-specificprocurement networks, building region-specificinstitutional capital, and region-specificorganizational capital. More needs to be knownon incentives. There remains a need to developcapacity in market-orientated extensionservices and in financial management toensure sustainability of initiatives.

Encourage collective marketing

A clear policy message from the conference is the necessity to support the development of producers’ organizations, but it is alsonecessary to support the reform, upgradingand modernization of POs, through:

● The enabling environment (infrastructure,land tenure)

● Support to group marketing, for equitabletrading relationships

● Appropriate technology generation andtechnical and business advisory services

● Upgrading traditional and wholesale markets.

The Directorate General of Horticulture in theIndonesia Ministry of Agriculture presented aposter comparing the traditional and improvedbanana supply chain. Through producerorganization and a shorter chain with a specializedsupplier, it was possible to deliver high qualityproduce with much less waste, and highermargins for growers, suppliers and retailers.

In China, promotion of professional farmcooperatives has been pushed through animproved policy support system. Between2003–07, the central government has provideda special fund that contains more than 500


“The Malaysian governmentestablished the MalaysianAgrifood Corporation in 2006 tostimulate vertical and horizontalcoordination and to meet thefood safety and traceabilityrequirements of modern foodmanufacturing, retail and food

service. Without this intervention, it was felt that themodernization of the downstream agrifood sector inMalaysia would continue to be biased towardsimports. As a supply chain management companywith a primary focus in the middle of chain, MAFC’srole is to ‘catalyze production by reorganizing andrationalizing the supply side and midstream activities’.These activities include post harvest value additionand cold chain logistics management, distributionand marketing.”

Azizi bin Meor Ngah, Chief Executive of theMalaysian Agrifood Corporation

million yuan to support 2,700 professionalfarmer associations. Local governments have matched funding, providing more than 450 million yuan since 2004. A law onSpecialized Farmers Cooperatives came intoeffect on 1 July, 2007, when the position of thecooperative as a legal entity was made clear.

Upgrade traditional and wholesale markets

A focus on international markets, andsophisticated and high-value domestic marketsshould not detract from the fact that traditionalmarkets remain in most countries the mostimportant part of the market, hence the needto support investment in both modern andtraditional markets. Modern marketingchannels will not be able to absorb theproduction from the total number of producers,and especially those in remote areas. Someparticipants felt that the conference hadindicated that it can take a lot of effort forsmall-scale producers to secure and maintainaccess in modern agrifood markets and thatthis may not be the most attractive option.Raul Montemayor, of IFAP, noted thattraditional markets can be a bridge for small-scale farmers to increase their capacity and toeventually link to modern markets. Farmers seeother benefits within traditional systems thatneed to be better understood, including trustand provision of credit.

Necessary policy reforms include bothimproving the ability of wholesale markets tomeet the new demands of supermarkets andmodern agribusiness, and allowing farmers,processors and retailers to trade directly

without an obligation to trade through localgovernment-controlled wholesale marketmonopolies, such as those found in Morocco,Turkey and many Indian states. Enforcedintermediation through wholesalecommissioners hides the final buyer fromfarmers, who are not aware of the marketingchannel that they are selling into.

Where wholesale markets fail to keep up withchanges in retail – especially the supermarketrevolution – they can fall into decay. The policyin China – of seeing wholesale markets asessential components of the producemarketing system – contrasts with many othercountries where wholesale markets are losingtheir importance. Mohamed Jaouad, Adviserto the Farmer’s Confederation (COMADER) inMorocco, presented proposals for wholesalemarket reform in Morocco both throughupgrading markets and collection centres, andabolishing the obligation on producers to gothrough the wholesale market so thatsupermarkets and other buyers can tradedirectly with farmers.

Upgrading works both ways. Successfulupgrading and modernization of wholesalemarkets and their procurement networks alsorequires upgrading and modernizing of theirprimary clients – the traditional retail sector – if they are to remain crucial players favouringinclusion of small-scale producers.

Convene stakeholders for a shared policy agenda

Defining a shared agenda in relation to policydevelopment is an enormous challenge for


Photo: Felicity Proctor

Chain-wide learning process in Turkey

“Seeing that small and medium farms can have afuture in the modern retail chain provided that theyform a union and have access to input and outputmarkets and they enhance the quality and quantityof their output, Turkey has passed legislation onfarmers unions. This allows an alternative marketingstructure to increase the bargaining power of thesmall farms with agribusiness companies and toreduce transaction costs”

Vedat Mirmahmutogullari, Undersecretary at the Ministry of Agriculture

and Rural Affairs,Turkey

public policy. There is much evidence of thenecessary policies for inclusive marketdevelopment, but little translation into practicalpolicy guidance and options for policy debate,and little funding to support the building up ofthis “demand side” for turning evidence intopolicy. Policy research is an importantingredient but not sufficient. The challenge ofinclusive market development does not fit intosingle disciplines, sectors or institutional levels.

Policy making is a long cycle, and there is arole for government to balance the processesand promote initiatives so that the key parties(farmers, agribusiness and government) cancome together around a shared agenda.Capacity for multi-sector co-operation is key.Participatory approaches help to understandthe local circumstances and gain buy-in. Theuse of multi-stakeholder platforms was seen asan effective way to share learning and, inparticular, to explore what is happening in themarket. This can be undertaken at a national orsub-national level and can be a key process toaccompany market change. The dialogueneeds to be structured, moderated and ideallysupported with evidence.

Larry Digal of the University of the Philippinesin Mindanao presented the work supported by the Regoverning Markets programme in

seven countries (Bangladesh, Indonesia,Morocco, Pakistan, the Philippines, SouthAfrica and Turkey) to foster chain-widelearning. Approaches developed and appliedconsisted of a mapping out of the value chain,defining key policies and institutions as well askey drivers, trends and issues that may affectthe value chain. Using value chainidentification, mapping and action planning, itis possible to locate points of interventionwhere small-scale producers might enhancetheir position. Other steps include the mappingof options for better inclusion of small-scalefarmers and firms as well as strategies forsupporting policy and institutional changeswithin different sectors of society. A resourceguide has been published by the RegoverningMarkets programme for interested practitionersengaged with such multi-stakeholderprocesses. Multi-stakeholder fora to shareinformation and debate options were highlyvalued; in Indonesia a standing committee onhorticulture was launched, with multi-stakeholder representation.

Inter-regional policy networks can assist inbuilding capacity linking research to policy, anddeveloping coalitions among interested parties.The Food, Agriculture and Natural ResourcesPolicy Analysis Network (FANRPAN) insouthern Africa – presented by its Chief


The FANRPAN policy networkmodel brings togetherstakeholders from across theSouthern African DevelopmentCommunity (SADC) region tostudy complex, controversialissues of poverty reduction,improving food security andpromoting sustainable agriculturaldevelopment. FANRPAN is aregional multi-stakeholder platformwhich: (1) provides a platform forlearning, sharing information andexperiences, evidence for decisionmaking and policy development;(2) helps build capacity for policydemand and supply; (3) enablescivil society to participate in thepolicy-making process; and (4) improves the intellectualfoundation for debate offeringpolicy makers a neutral platformto discuss key policy issues.

Executive Officer Lindiwe Sibanda – is a primeexample of this.

As a policy maker, Mohamed Jaouad notedthat the evidence from research papers needsto reflect the characteristics of the specificcommodity market chain and the countryspecificity. Thus, the farm and commoditymarket chain structure within a given country hasto be taken into consideration and be supportedwithin a wider rural development framework.

Under many conditions government may notbe the most suitable convener of multi-stakeholder dialogues on inclusive marketdevelopment. The conference spoke of a needfor honest brokers to act as effectivefacilitators. Differing vested interests betweenpublic and private sectors and farmerorganizations need to be recognized andaccommodated, and the need to identify leadfacilitators and build regional or nationalcapacities was noted. There is also a role forknowledge translation: supporting ways ofbridging research to policy and practice in theappropriate format such as policy briefs,involving key policy actors from the start.

The work of the Sustainable Food Laboratory(www.sustainablefoodlab.org) of the US-based Sustainability Institute, was outlined byDon Seville. The SFL is a collaboration of foodsystem leaders from three continents workingtogether to discuss the future of the foodsystem and to pilot and evaluate newinnovations in value chains and within industrygroups. They have been able to successfullybring together NGOs, producer groups, andmainstream companies. Don Seville shared twoinsights. First, it has been difficult for theirgroup to engage the public sector directly inproactive innovative projects, and he called fornew vehicles to bring the major sector voiceinto solution design. Second, it was felt criticalto have public funding to anchor innovationprojects with the public sector, whose rolemight be to reach out beyond the financialincentives currently in the system for changessuch as engaging smallholders.

Linking research to policy

What are the key issues around bridgingevidence-based research to policy andpractice? What are the best models tocombine/link academics with policy makersand the policy process? Is there indeed aneffective engagement between national centresof excellence and public policy makingprocesses? How can competence bedeveloped within government (including thelink between domestic and regional processes)to utilize evidence from research? Theconference Working Group on “The role ofresearch and knowledge sharing” pointed to alack of understanding of how governments andpolicy processes work. There is a need fornetworks where the environment is conduciveto engagement. Engagement should beevidence-based and not politicized. On thetopic of linking farmers with the evidence andpolicy process, the Kenya Federation ofFarmers noted that although they work withTegemeo University on policy as well as othernational institutions, the overall mechanism forconnecting research with farmers with bothgood practice and evidence is weak. This wasfelt by the conference to be a core issue andmajor challenge.

Much is country-specific, and policy andplanning needs to be based on evidence anddrafted at country level. The relevance ofaggregating country data was questioned, asgeneralization can dilute country-levelevidence. It was further noted that internationaldonors often set the research agenda and thusit is not always demand-side driven, diluting itsvalue and offering weak ownership. In somecountries NGOs have a strong influence on thepolicy process but it was felt that they may notalways understand the wider agenda. Theprocess of linking research to policy andpractice needs to be institutionalized andlocally owned, not projectized and not donordriven. Research and advocacy should widenthe debate, not narrow it, by setting out policyoptions not recommendations.

Building capacity for local research isimportant, as is working with governmentdepartments for translating research resultsinto policy action. Local research capacity was not considered to be being used to itshighest potential.


The issues discussed at the internationalconference were felt by many participants tohave wide-ranging implications. It was agreedthat there is a critical need for good practice tobe widely shared, and to continue to begenerated and developed into new inclusivebusiness models. That is, identifying andcommunicating successful and good practicesfrom around the world, based on experiencesof different policy initiatives, and for eachcountry and region to identify the mostappropriate best practice for their situation.This needs to include financing and insurancepractices.

There was a call for the results of studies of theRegoverning Markets programme to be widelydisseminated and fed back to country level forfurther debate including on how the evidenceand the issue is perceived by local stakeholders:farmers, agribusiness and government.

There was an identified need to build aplatform to maintain debate and promoteknowledge across countries, building on the“knowledge base” of Regoverning Marketsresearch, innovation and outreach. Oneparticipant called this journey of small-scaleproducers’ inclusion in modern agribusiness “a long walk” and called for a centralsecretariat to be formed to collect informationon evidence, innovation and good practice andto enable wide dissemination. He felt that aninternational conference such as this should bean annual feature in order to maintain effortand interest in this critical area.


9 Concluding remarks


Annex 1Conference programme

Tuesday March 4, 2008

05.30 – 12.00 Wholesale and Modern Retail Markets tour

16.00 – 19.00 Registration – Grand Skylight Catic Hotel, Beijing, P.R. China

17.30 – 19.00 Welcome Reception

Wednesday March 5, 2008

Evidence – Market change and good practice for inclusive agrifood businessThis session focused on sharing evidence on changes taking place in agrifood markets indeveloping countries and countries in transition. It explored the implications of the changingmarkets for small-scale producers and rural businesses as well as policy innovations in business,government, producer groups and civil society that contribute to enabling inclusive agrifoodsystems. Governments, policy institutes, retail industry, food manufacturers, and donor agenciesgave their perspectives of why the issues matter. Academics shared evidence on the impact ofchange and emerging good practice.

08.00 – 09.00 Registration

09.00 – 09.30 Welcome and Introduction

Welcome by the Master of Ceremonies – Julio Berdegué, Rimisp, Chile.Introduction to the conference, the programme and objectives

WelcomeChaoan Wei, Vice Minister, Ministry of Agriculture, P.R. China Jiayang Li, Vice President, Chinese Academy of Sciences, P.R. ChinaBill Vorley, International Institute for Environment and Development (IIED), UK

09.30 – 10.30 Keynote address – China’s response to dynamic change in agrifood marketsLiangui Huang, Executive Deputy Director General, Office of AgriculturalVertical Integration, Ministry of Agriculture, and Jikun Huang, Director,Center for Chinese Agricultural Policy, P.R. China

ResponsesYanfeng Chen, General Manager, Fujian Sunner Development Co., Ltd, P.R. ChinaDingshun Li, President, Aojinda Bee Product Cooperative, P.R. ChinaScott Rozelle, Stanford University, USA

Discussion

Rapporteurs – Linda Fulponi, Directorate for Trade and Agriculture, OECD,France. Larry Digal, University of the Philippines in Mindanao, Philippines

10.30 – 11.00 Inclusive agrifood markets – Building evidence and supporting policythrough coordinated international researchBill Vorley, International Institute for Environment and Development (IIED), UK

11.00 – 11.30 Refreshments


11.30 – 13.00 Evidence – Major determinants of small-scale farmer inclusion inemerging modern agrifood marketsBased on the evidence from country and case studies, this sessionpresented the outcomes from the Regoverning Markets programme on keydeterminants of small-scale producer inclusion. It identified some of the keytechnological, managerial, organizational and financial changes that small-scale farmers experience when included in modern agrifood markets and itexplored the net effects (cost-benefit) of this inclusion. It presented some ofinnovations of organizations and policies that support inclusion.

Panel moderator – Bruno Losch, World Bank and CIRAD, USA

Key determinants of small-scale farmer inclusion – Evidence from theempirical country studiesTom Reardon, Michigan State University, USA and Jikun Huang, Director,Center for Chinese Agricultural Policy, P.R. China

What makes for successful linkages between small-scale farmers andemerging modern markets – Evidence from case studiesLucian Peppelenbos, Royal Tropical Institute, Netherlands and Julio Berdegué,Rimisp, Chile

ResponsesMohamed Jaouad, Adviser to the Farmer’s Confederation (COMADER), MoroccoRaul Montemayor, Federation of Free Farmers Cooperatives, Inc.,Philippines and International Federation of Agricultural Producers (IFAP)Gareth Ackerman, Chairman, Pick’n Pay Retailers (Pty) Ltd., South Africa,and Board of Directors of the Food Business Forum (CIES)

Discussion

Rapporteurs – Dominika Milczarek, Warsaw University, Poland. Jerzy Wilkin, Warsaw University, Poland

13.00 – 14.00 Lunch

14.00 – 15.15 Evidence of change and innovation – The role of industry in inclusivemarket development

Panel moderator – Ashraf Hayat, Additional Secretary, Ministry ofCommerce, Pakistan

Business innovations for inclusive agrifood marketsFelicity Proctor, Independent and IIED Visiting Fellow, and Bill Vorley, IIED, UK

How new models and innovation in India can secure agrifood marketinclusion in IndiaRajesh Gupta, President, Hariyali Kisaan Bazaar, Division of DCM ShriramConsolidated Ltd., India

Evidence of change in response to challenges faced by industry tosecure inclusive markets in East AfricaJonathan Ciano, Chief Executive, Uchumi Supermarkets Ltd., Kenya

Innovation in agri-processing for inclusive procurement in ChinaYusheng Chu, Director of Production and Transportation, Longda Group,P.R. China


Discussion

Rapporteurs – Andre Louw, University of Pretoria, South Africa. Davison Chikazunga, University of Pretoria, South Africa


15.45 – 17.00 Evidence of change and innovation in the public sector

Panel moderator – Lindiwe Sibanda, FANRPAN, South Africa

The role of public policy in inclusive agrifood marketsJulio Berdegué, Rimisp, Chile and Jikun Huang, Director, Center for ChineseAgricultural Policy, P.R. China

The changing role of international institutions and agencies insupporting value chain and pro-poor agribusiness developmentJohn Lamb, Agriculture and Rural Development Department, World Bank

Reform of the sector and building new alliances for inclusive marketdevelopment in MalaysiaAzizi bin Meor Ngah, Chief Executive, Malaysian Agrifood Corporation, Malaysia

Reshaping the role of traditional and modern wholesale markets – the key challenges faced by public policyMohamed Jaouad, Adviser to the Farmer’s Confederation (COMADER), Morocco

Trade rules and policy space – The view of OECD on inclusive market developmentLoek Boonekamp, Head, Agricultural Trade and Markets Division, OECD, France

Discussion

Rapporteurs – Lucian Peppelenbos, Royal Tropical Institute, Netherlands.Ronnie Natawidjaja, Center for Agricultural Policy and Agribusiness Studies,Padjadjaran University, Indonesia

17.00 Close of plenary session

17.10 Poster session and refreshments

18.30 Conference dinner

Thursday March 6, 2008

Welcome by the Master of Ceremonies – Julio Berdegué, Rimisp, Chile

08.30 – 09.30 India – The challenges and opportunities for the rural economy in theface of rapid agrifood market change

Agriculture sector reforms in the Punjab – Meeting the challenge ofinclusive agribusiness in modern food marketsS. K. Sandhu, IAS, Managing Director, Punjab Agro Industries Corporation, India


A private sector action – Meeting the business and development challengeSanjeev Asthana, President and Chief Executive, Reliance Retail Ltd., India

Small-scale farmer adaptation and the challenges facedKushal Pal Singh, National Institute of Agriculture and the InternationalFederation of Agricultural Producers, Asia Representative, India

Discussion

Rapporteurs – Linda Fulponi, Directorate for Trade and Agriculture, OECD,France. Abid Suleri, Sustainable Development Policy Institute, Pakistan

09.30 – 10.30 The challenge of collective action by small-scale producers – Evidenceof change in a dynamic environment

Panel moderator – Enrique Dominguez, DG, Confederacion de PorcicultoresMexicanos, Mexico

Farmer innovation – Linking with modern agrifood marketsEstelle Biénabe, CIRAD researcher, University of Pretoria, South Africa andLucian Peppelenbos, Royal Tropical Institute, Netherlands

Innovation in the livestock sector in UruguayGasto Rico Menge, Manager, Federation of Agrarian Cooperatives, Uruguay

Supporting small-scale farmer collective action through business linkagesHan Zhenghui, Chair, Green Association of Nanqu, P.R. China

Adapting to change in South Africa – Facing the challengeMotsepe Matlala, President, National African Farmers’ Union (NAFU), South Africa

How networks of farmer organizations can foster changeAjay Vashee, President, Southern African Confederation of AgriculturalProducers, Zambia

Discussion

Rapporteurs – Christian Gouët, International Federation of AgriculturalProducers, France. Lucian Peppelenbos, Royal Tropical Institute, Netherlands

Action – Managing change for broad-based inclusive growth

The second session developed options and identify policy and interventions by both public andprivate sectors including farmers and their organizations to foster broad-based and inclusive growthin agrifood markets. Key areas for future action were developed.

10.30 – 10.40 Introduction to parallel sessionsFelicity Proctor, Independent, UK


11.10 – 13.00 Parallel SessionsShort warm-up comments to launch the debate to offer new ideas or innovationfollowed by group work to develop options and an agenda for action.


Parallel Session 1 Action to bring agri-businesses into partnerships for rural developmentCan agribusinesses be partners in development? What actions canagribusiness take? What does agribusiness require of public policy? Whatactions can farmers and service support organizations including publicpolicy do to make this happen? Are there models that can be replicated?How best can this be done?

Panel leader – Kam Sang Kok, Strategic Planner Malaysian AgrifoodCorporation, Malaysia

Collective agribusiness action and self regulationGareth Ackerman, Chairman, Pick’n Pay Retailers (Pty) Ltd., South Africa,and Board of Directors of the Food Business Forum (CIES)

Innovation in emerging agrifood markets for broad-based procurement –The experience of Makro Anton van Gorp, General Manager, Makro, P.R. China

Linking small-scale producers to agribusiness – the case ofHikmahfarm, IndonesiaWildan Mustofa, Operations Manager, Hikmahfarm, Indonesia

Proven structures for small-scale producer inclusion in the dairy sector in IndiaVijay Sharma, Centre for Management in Agriculture, Indian Institute ofManagement, India

Rapporteurs – Estelle Bienabe, CIRAD researcher, University of Pretoria,South Africa. Vijay Sharma, Centre for Management in Agriculture, IndianInstitute of Management, India

Parallel Session 2 Action to bring small-scale producers into sustainable partnershipswith agribusinessCan small-scale producers and small and medium enterprises be partners inmodern agribusiness? Are economic organizations of small-scale farmerssuited – are there new business models? What can public policy do to help?What actions can modern agribusiness and service support organizations doto make this happen? Are there models that can be replicated? How bestcan this be done?

Panel leader – Raul Montemayor, Federation of Free Farmers Cooperatives,Inc., Philippines, and International Federation of Agricultural Producers (IFAP)

Innovation for small-scale producer inclusion in the PhilippinesKoronado Apuzen, Foundation for Agrarian Reform Cooperatives inMindanao, Inc. (FARMCOOP), Philippines

Innovation for small-scale producer inclusion in southern AfricaJohan van Deventer, Freshmark/Shoprite, South Africa

How small-scale producer inclusion can work in practice Réka Pónyai-Pisurnyi, Mórakert Group, Hungary

Rapporteurs – Céline Bignebat, INRA, UMR MOÏSA, France. Giel Ton, LEI-Wageningen UR, Netherlands


Parallel Session 3 Action to build an enabling environment: anticipatory public policiesWhat is the core role of public policy (national governments, internationalbodies, donor agencies)? Are there models that can be replicated? Howbest can this be done? How can farmers and the private sector inform thisprocess? What is the role of evidence in informing the process?

Panel leader – Merly Cruz, Assistant Secretary, Department of Trade andIndustry, Philippines

Public policy action in South Africa – Key challengesTshililo Ronald Ramabulana, CEO, National Agricultural Marketing Council(NAMC), South Africa

Public policy action in Central and Eastern Europe – Key challengesJerzy Wilkin, Faculty of Economics, Warsaw University, Poland

Public policy in supporting the structure of collective actionVedat Mirmahmutogullari, Under Secretary Ministry of Agriculture and RuralAffairs, the Republic of Turkey

Linking market chain actors for effective policyLarry Digal, University of the Philippines in Mindanao, Philippines

Rapporteurs – Ali Koç, Akdeniz University, Turkey. Linda Fulponi, Directoratefor Trade and Agriculture, OECD, France

Parallel Session 4 Action to build new public-private coalitions and funding mechanismsWhat key coalitions exist that support this wider objective at national andinternational levels and both for single and multi-stakeholder? Are newcoalitions needed and if so what and how can they be formed and supported?Can the gaps in funding be met? If so what structures need to change/adapt?

Panel leader – Hamish McBain, Tiger Brands Ltd., South Africa

New funding modalities for inclusive markets in UgandaPeter Ngategize, National Coordinator of the Competitiveness andInvestment Climate Strategy, Uganda

Helping business to develop and share new models Don Seville, Sustainability Institute, USA

Inclusive business through new financial mechanisms Sahaschai Yaowapankul, Bank for Agriculture and Agricultural Cooperatives(BAAC) and Asia-Pacific Rural and Agricultural Credit Association (APRACA), Thailand

Experiences of Oxfam in working and learning with the private sectorfor inclusive marketsTak Chuen Luk, Head Centre for Research and Development, Oxfam, Hong Kong TBC

Rapporteurs – Andre Louw, Chair in Agribusiness Management, University of Pretoria, South Africa. James Nyoro, Tegemeo Institute, EgertonUniversity, Kenya


Parallel Session 5 Role of research and knowledge sharingIs social, technical and economic research geared to meet the needs ofinclusive agrifood chains? If not how and who will define needs (allstakeholders private, farmers etc), support work and ensure outputs reachthe user? What are the new models? What is the role of the private sector inresearch and knowledge sharing? What are the education and other skillsrequirements?

Panel leader – Evan Due, International Development Research Centre(IDRC), Singapore

Joint efforts between research and industry: the case of Carrefour inIndonesiaRonnie Natawidjaja, Center for Agricultural Policy and Agribusiness Studies,Padjadjaran University, Indonesia

Policy networks – An opportunity for knowledge sharing Lindiwe Sibanda, FANRPAN, South Africa

Rapporteurs – Shudong Zhou, Department of Management, NanjingAgricultural University, P.R. China. Davison Chikazunga, University ofPretoria, South Africa

13.00 – 14.00 Lunch

14.00 – 15.15 Keynote address – The special challenges of transition from centrallyplanned economies. Insights from Central and Eastern EuropeCsaba Csáki, Corvinus University of Budapest, Hungary

ResponsesMaciej Fedak, Agricultural Markets Department, Ministry of Agriculture andRural Development, Poland

Discussion

Rapporteurs – Dominika Milczarek, Warsaw University, Poland. Csaba Forgács, Corvinus University of Budapest, Hungary


15.45 – 17.00 Feedback from parallel sessions and open discussion

Session moderator – Csaba Csáki, Corvinus University of Budapest, Hungary

17.00 – 17.30 Conference Statement and SummaryBill Vorley, IIED, UK, Liangui Huang, Executive Deputy Director General,Office of Agricultural Vertical Integration, Ministry of Agriculture, and JikunHuang, Director, Center for Chinese Agricultural Policy, P.R. China

Rapporteurs – Lucian Peppelenbos, Royal Tropical Institute, Netherlands.Felicity Proctor, Independent and IIED Visiting Fellow, UK

17.30 Official Close of the Conference

18.00 – 20.00 End of Conference and Cocktails


Gareth AckermanChairmanPick ’n Pay HoldingsSouth Africa

Christopher AnsteyDirectorChris Anstey Ltd.UK

Koronado ApuzenExecutive DirectorFoundation for Agrarian Reform Cooperativesin Mindanao, Inc. (FARMCOOP)Philippines

Sanjeev Kumar AsthanaPresident and CEOReliance Retail LimitedIndia

Benedicto Santiago BayauaSecretary GeneralAsia-Pacific Rural and Agricultural CreditAssociation (APRACA)Thailand

Julio BerdeguePrincipal ResearcherRIMISP-Latin American Centre for RuralDevelopmentChile

Azizi bin Meor NgahChief Executive OfficerMalaysian Agrifood Corporation BerhadMalaysia

Estelle BiénabeEconomist ResearcherCIRAD hosted at University of PretoriaSouth Africa

Céline BignebatResearcherNational Institute for Agricultural Research(INRA)France

Loek BoonekampHead of DivisionOrganisation for Economic Co-operation and Development (OECD)France

Jinghua CaoDeputy Director GeneralBureau of International Co-operationChinese Academy of SciencesPRC

Yanfeng ChenGeneral ManagerFujian Sunner Development Co., Ltd.PRC

Davison ChikazungaResearch AssistantDepartment of Agricultural Economics,University of PretoriaSouth Africa

Yusheng ChuDirector of Production and TransportationLongda Foodstuff Group Co., Ltd.PRC

Jonathan Irungu CianoCEOUchumi Supermarket Ltd.Kenya

Merly Mirasol CruzAssistant SecretaryDepartment of Trade and IndustryPhilippines

Csaba CsákiProfessorCorvinus University of BudapestHungary

Arjan de HaanSocial Development Adviser and Policy AnalystDepartment for International Development(DFID)PRC

Peter de LangeProgramme Officer AfricaThe Interchurch Organisation for DevelopmentCo-operation (ICCO)Netherlands

Larry N. DigalAssociate Professor/South East Asia RegionalCoordinatorUniversity of the Philippines MindanaoPhilippines

Annex 2List of participants


Quoc Hung DoExpertVietnam Bank for Agricultural and RuralDevelopmentVietnam

Enrique DominguezDirector GeneralConfederación de Porcicultores MexicanosMexico

Xiaoxia DongResearcherAgricultural Information InstituteChinese Academy of Agricultural SciencesPRC

Maria Susanna Aletta Du PlessisProject ManagerAgrifica Pty (Ltd) Agricultural Intelligence andProject CompanySouth Africa

Evan DueSenior Programme SpecialistInternational Development Research Centre(IDRC)Singapore

Maciej FedakSenior specialist. Polish delegate to MilkManagement Committee in BrusselsDepartment of Agricultural Markets,Ministry of Agriculture and Rural DevelopmentPoland

Csaba ForgacsProfessorCorvinus University of BudapestHungary

Linda FulponiSenior EconomistOrganisation for Economic Co-operation andDevelopmentFrance

Patrick Wahome GakuruDirector, Kenya Vision 2030National Economic and Social CouncilKenya

Christian GouëtDevelopment Programme ManagerInternational Federation of AgriculturalProducersFrance

Rajesh GuptaPresidentHariyali Kisaan Bazaar, Division of DCMShriram Consolidated Ltd.India

Zhenhui HanChairGreen Association of NanquPRC

Ashraf HayatAdditional SecretaryMinistry of CommercePakistan

Jikun HuangDirectorCenter for Chinese Agricultural Policy (CCAP)PRC

Liangui HuangExecutive Deputy Director GeneralOffice of Agricultural Vertical Integration, MOA,PRC

Zhurong HuangCenter for Chinese Agricultural Policy (CCAP)PRC

Aisha HumariaDeputy SecretaryMinistry of Food, Agriculture and LivestockPakistan

Mohamed JaouadPolicy AdviserCOMADER (Farmers Confederation)Morocco

Chance KabagheChairmanFreshpikt Zambia Ltd.Zambia


Trong Tuyen KieuDeputy General DirectorVietnam Bank for Agricultural and RuralDevelopmentVietnam

David KingSecretary GeneralInternational Federation of AgriculturalProducersFrance

Ali A. KoçProfessorAkdeniz UniversityTurkey

Kam Sang KokStrategic PlannerMalaysian Agrifood Corporation BerhadMalaysia

Xiangzhi KongDeputy DeanSchool of Rural Economics and RuralDevelopment, Renmin UniversityPRC

Sri KuntarsihDirector of Fruit CropsDirectorate General of HorticultureIndonesia

Patrick LabasteLead Agricultural EconomistWorld BankUSA

John LambSr. Agribusiness SpecialistAgriculture and Rural Development DepartmentWorld BankUSA

José LevelinkDeputy Head Projects, Deputy Head Monitoring and EvaluationAgriterraNetherlands

Dingshun LiPresidentBeijing Aojinda Bee Product CooperativePRC

Jiayang LiVice President and AcademicianChinese Academy of SciencesPRC

Roberto LongoPolicy CoordinatorInternational Fund for Agricultural DevelopmentItaly

Bruno LoschSenior EconomistWorld Bank / CIRADUSA

Andre LouwProfessorUniversity of PretoriaSouth Africa

Tak Chuen LukHeadCentre for Research and DevelopmentOxfamHong Kong

Nerlita ManaliliRegional Advisor for AsiaVREDESEILANDENPhilippines

Motsepe Ramotse MatlalaPresidentNational African Farmers UnionSouth Africa

Hamish McBainBusiness ConsultantTiger Brands Ltd.South Africa

Anna Dominika MilczarekAssistant ProfessorWarsaw University, Department Of EconomicsPoland

Vedat MirmahmutogullariUndersecretaryMinistry of Agriculture and Rural AffairsRepublic of Turkey


Molefe Stephen MokoeneChief Executive OfficerNational African Farmers UnionSouth Africa

Raul Quimson MontemayorNational Business ManagerFederation of Free Farmers Cooperatives, IncPhilippines

Mohammed MsabahaAssistant Director – Crop ResearchMinistry of Agriculture Food Security and Co-operativesTanzania

Stephen Vincent MuchiriChief Executive OfficerEastern Africa Farmers FederationKenya

Abdul MunifSecretary to MinisterMinistry of AgricultureIndonesia

Catriona MurrayManager North AsiaAustralian Centre for International AgriculturalResearch (ACIAR)PRC

Wildan MustofaOperation ManagerHikmahfarmIndonesia

John Kanywithia MutungaChief Executive OfficerKenya National Federation of AgriculturalProducers (KENFAP)Kenya

Ronnie Susman NatawidjajaDirectorCenter for Agricultural Policy and AgribusinessStudiesPadjadjaran UniversityIndonesia

Peter NgategizeNational CoordinatorCompetitivenes and Investment ClimateSecretariat, Ministry of Finance, Planning andEconomic DevelopmentUganda

Do Anh Tuan NguyenDirectorSouthern Center for Agricultural Policy andStrategy/Institute of Policy and Strategy forAgriculture and RuralVietnam

James Karanja NyoroExecutive DirectorTegemeo InstituteEgerton UniversityKenya

Lucian PeppelenbosSenior Advisor Sustainable EconomicDevelopmentKIT – Royal Tropical InstituteNetherlands

Réka Pónyai-PisurnyiMarketing ManagerMórakert Producer OrganizationHungary

Felicity ProctorDirectorFelicity Proctor Consulting LtdIIED Visiting FellowUK

Mohammad Abid Qaiyum SuleriExecutive DirectorSustainable Development Policy Institute(SDPI)Pakistan

Tshililo Ronald RamabulanaCEONational Agricultural Marketing Council (NAMC)South Africa

Thomas ReardonProfessorMichigan State UniversityUSA


Gasto Rico MengeManagerCooperativas AgrariasFederadas (CAF)Uruguay

Achmad RivaniDirectorCV BimandiriIndonesia

Scott RozelleProfessorStanford UniversityUSA

Santosh Kumar SandhuManaging DirectorPunjab Agro Industries Corporation LimitedIndia

Abdelaziz SbaiProfessorInstitut agronomique et vétérinaire Hassan II(IAV), and Targa-AideMorocco

Antonio SchiavoneProgramme OfficerGFAR SecretariatItaly

Muhammad Hariyadi SetiawanProgramme Manager, Horticultural PartnershipSupport Program (HPSP)INA – Indonesian Benelux Chamber ofCommerceIndonesia

Donald SevilleCo-DirectorSustainable Food LaboratorySustainability InstituteUSA

Vijay SharmaChairIndian Institute of ManagementAhmedabadIndia

Shuquan ShiGeneral Manager of Exchange CenterChaoda Modern Agriculture (Holdings) LimitedPRC

Lindiwe Majele SibandaCEOFood Agriculture and Natural Resources PolicyAnalysis Network (FANRPAN)South Africa

Kushal Pal SinghVice PresidentNational Institute of AgricultureIndia

Ying SunInstitute of Geographical Sciences and NaturalResources ResearchChinese Academy of SciencesPRC

Elias Takor AyukSenior Programme SpecialistInternational Development Research Centre(IDRC)Senegal

Rashed Al Mahmud TitumirChairUnnayan OnneshanBangladesh

Giel TonResearcherAgricultural Economics Research InstituteNetherlands

Sefer Kaya UzenPresident of Commodity ExchangeThe Union of Chambers and CommodityExchanges of TurkeyTurkey

Johan Gerhard van DeventerManaging DirectorFreshmarkSouth Africa

Anton van GorpGeneral ManagerCTA Makro Commercial Co.LtdPRC


Ajaykumar Manubhai VasheePresidentSouthern African Confederation of AgricultureProducersZambia

Hudson VincentCounsellor Agriculture (Policy)Australian Embassy BeijingPRC

Bill VorleyGroup HeadInternational Institute for Environment andDevelopment (IIED)UK

Zhenyu WangDirectorBureau of International Co-operationChinese Academy of SciencesPRC

Chaoan WeiVice MinisterMinistry of AgriculturePRC

Tri WidjajantiDeputy Director of International MarketDevelopmentMinistry of AgricultureIndonesia

Jerzy WilkinProfessorFaculty of EconomicsWarsaw UniversityPoland

Yunhua WuCenter for Chinese Agricultural Policy (CCAP)PRC

Jinlong XuDirector of Trading Law and TechnicalDepartmentTesco ChinaPRC

Yanqing XuanDeputy DirectorOffice of Agricultural Vertical IntegrationMinistry of AgriculturePRC

Zhaoxi YangVice General ManagerAgricultural Development Bank of ChinaPRC

Zhuoya YangVice PresidentChaoda Modern Agriculture (Holdings) LimitedPRC

Sahaschai YaowapankulDirector of International Co-operation DivisionBank for Agriculture and AgriculturalCooperativesThailand

Huayong ZhiCenter for Chinese Agricultural Policy (CCAP)PRC

Shudong ZhouDeanDepartment of ManagementNanjing Agricultural UniversityPRC

PRESS

Xiaoping Chen21st Century Business Herald

Fang LiPeoples’ Daily

Gongming WeiChina Food Newspaper

Dingding XinChina Daily

Xiuman ZhengFarmers’ Daily


1 Patterns and impacts of market chainchanges on farmers: Case study ofcucumber and tomato in ShandongProvince, ChinaJikun Huang, Zhurong Huang, HuayongZhi,Yunhua Wu, Xianfang Niu CCAP andCAS, P.R. China and Scott Rozelle, StanfordUniversity, USA

2 Smallholder farmers’ participation inrestructuring food markets: the case ofthe tomato subsector in South Africa Andre Louw, Davison Chikazunga and LeahNdanga. Department of AgriculturalEconomics, Extension and Rural Development,University of Pretoria, South Africa

3 Restructuring food markets in the South African region: Dynamics in thecontext of the fresh produce subsector: A synthesis of country findings Andre Louw, Davison Chikazunga and LeahNdanga Department of AgriculturalEconomics, Extension and Rural Development,University of Pretoria, South Africa

4 Restructuring the food markets in sub-Saharan Africa: Dynamics in thecontext of the fresh produce subsector: A synthesis of regional findingsAndre Louw, Davison Chikazunga and Leah Ndanga, Department of AgriculturalEconomics, Extension and RuralDevelopment, University of Pretoria, South Africa

5 The inclusion of small producers inmodern marketing channels: Evidencefrom TurkeyCéline Bignebat, National Institute forAgricultural Research, France

6 Re-governing dairy sector in PolandDominika Milczarek-Andrzejewska, Agata Malak-Rawlikowska, Jan Fal/kowskiand Jerzy Wilkin, Regoverning Markets and Faculty of Economics, University ofWarsaw, Poland

7 Indonesia – Good agricultural practiceMinistry of Agriculture, Republic of Indonesia

8 Comparison of the traditional supply chain and the improved supply chain fromgrower to consumerDirectorate General of Horticulture Ministry ofAgriculture, Republic of Indonesia

9 Joint efforts between University andIndustry: Case of the PadjadjaranUniversity and Carrefour Indonesia inAgrifood Markets RestructuringCenter for Agricultural Policy andAgribusiness Studies, Padjadjaran University,Republic of Indonesia

10 Access to high value markets bysmallholder farmers: African indigenousvegetables (AIVs) production in Kenya andhorticultural production in Tanzania

11 A success of linking resource poorfarmers (communal or small-scalefarmers) to markets: a case of wool inSouth AfricaMolefe Mokoene, Bonani Nyhodo andNkgasha Tema National African FarmersUnion (NAFU) and National AgriculturalMarketing Council (NAMC), South Africa

12 Freshmark: Committed to AfricaFreshmark, South Africa

13 Hikmahfarm: natural from natureHikmahfarm, Republic of Indonesia

14 Bimandiri: Linking Farmers to the MarketAchmad Rivani, Bimandiri, Republic ofIndonesia

15 Uruguay: a Pastoral CountryFederation of Agricultural Cooperatives(CAF), Uruguay

16 Empowering Smallholder Farmers in Markets (ESFIM)IFAP-FIPA, ECART-EEIG HQ, IFAD

17 RuralStruc ProgramCIRAD, The World Bank, IFAD

18 The World Bank Picture ShowThe World Bank

Annex 3Posters


Syntheses

Berdegué, J A, E Biénabe and L Pepppelenbos(2008) Keys to inclusion of small-scaleproducers in dynamic markets – Innovativepractice in connecting small-scale producerswith dynamic markets. Regoverning Markets,IIED, London

Huang, J and T Reardon (2008) Patterns in anddeterminants and effects of farmers’ marketingstrategies in developing countries. Synthesisreport – micro study. Synthesis of Component1 (micro). Regoverning Markets, IIED, London

Proctor, F J and L N Digal (2008) Making adifference. An impact assessment of theRegoverning Markets programme. RegoverningMarkets, IIED, London

Proctor, F J and L N Digal (2008) Opportunitiesand options for small-scale producers’inclusion in dynamic markets in developingcountries and transition economies: A synthesisof findings from country-level workshops.Regoverning Markets, IIED, London

Reardon, T and J Huang (2008) Meso levelrestructuring of the food industry in developmentcountries. Synthesis report – Meso study.Regoverning Markets, IIED, London

Vorley, B and F J Proctor (2008) Inclusivebusiness in agrifood markets: Evidence andaction. A report based on proceedings of aconference held in Beijing, PRC. March 5–6,2008. Regoverning Markets, IIED, London

Conference issues papers

Regoverning Markets (2008) Background to the Regoverning Markets programme.Conference Issue Paper 1. Paper prepared forthe international conference ‘Inclusive businessin agrifood markets: evidence and action’,Beijing, P.R. China. March 5–6, 2008.

Regoverning Markets (2008) Businessinnovations for inclusive agrifood markets.Conference Issue Paper 2. Paper prepared forthe international conference ‘Inclusive businessin agrifood markets: evidence and action’Beijing, P.R. China. March 5–6, 2008.

Regoverning Markets (2008) The role of publicpolicy in inclusive agrifood markets.Conference Issues Paper 3. Paper prepared forthe international conference ‘Inclusive businessin agrifood markets: evidence and action’Beijing, P.R. China. March 5–6, 2008.

Regoverning Markets (2008) Farmer innovation– linking with modern agrifood markets.Conference Issue Paper 4. Paper prepared forthe international conference ‘Inclusive businessin agrifood markets: evidence and actionBeijing’, P.R. China. March 5–6, 2008.

Regoverning Markets (2008) Linking marketchain actors for effective policy. ConferenceIssue Paper 5. Paper prepared for theinternational conference ‘Inclusive business inagrifood markets: evidence and action’ Beijing,P.R. China. March 5–6, 2008.

Annex 4Key resources


The Regoverning Markets programme is builtaround a global consortium of Southern andNorthern institutions. Each programmecomponent is led by consortium members. The programme covers nine regions worldwideand the programme of each region is led by aregionally-based consortium member. An international Advisory Group is in place withmembers from the business sector, the OECD,the International Federation of AgriculturalProducers, research and academia.

Regional Coordinators

Central and Eastern Europe:Corvinus University of Budapest, Hungary –Csaba Csáki and Csaba Forgacs

China:Center for Chinese Agricultural Policy (CCAP),China – Jikun Huang

East Africa:Tegemeo Institute of Egerton University, Kenya– James Nyoro

Eastern Mediterranean and Middle East:Economic Research Centre on MediterraneanCountries, Turkey – Ali Koç and YavuzTekelioglu

Latin America: Latin American Centre for Rural Development(RIMISP), Chile – Julio Berdegué

North and West Africa: Association Interdisciplinaire pour leDéveloppement et l’Environnement (TARGA),Morocco – Aziz Sbai

South Asia: Sustainable Development Policy Institute(SDPI), Pakistan – Abid Suleri

South East Asia: University of the Philippines in Mindanao, The Philippines – Larry Digal

Southern Africa: University of Pretoria, South Africa – Andre Louw

Component Leaders

Component 1: Empirical research to inform policy

Center for Chinese Agricultural Policy (CCAP),China – Jikun Huang

Michigan State University (MSU), USA – Tom Reardon

With UMR MOISA, France – Céline Bignebat

Component 2: Building on innovation and guiding practice

Latin American Centre for Rural Development(RIMISP) – Julio Berdegué

Royal Tropical Institute (KIT), Netherlands –Lucian Peppelenbos

With Centre de Coopération Internationale en Recherche Agronomique pour leDéveloppement (CIRAD), France – EstelleBiénabe

Component 3: Learning and policy dialogue

Felicity Proctor Consulting Ltd and IIED VisitingFellow – Felicity Proctor

University of the Philippines in Mindanao, The Philippines – Larry Digal

With Wageningen International, Netherlands –Jim Woodhill

Team LeaderBill Vorley, International Institute forEnvironment and Development (IIED)

Annex 5The Regoverning Markets Consortium

Regoverning MarketsSmall-scale producers in modern agrifood markets

This report is based on proceedings of the conference

‘Inclusive Business in Agrifood Markets: Evidence and

Action’ held in Beijing, March 5–6, 2008. Over 130

participants from 31 countries, representing farming, policy,

agrifood business, research and civil society met to assess

how modernization of the food system can include and

benefit small-scale farmers. The conference sought to answer

the following questions:

● Can the new food giants, including supermarkets and

food companies be partners in the economic growth

of rural areas?

● Can small-scale farmers meet the high expectations

for food quality, safety, and quantity?

● Can policy help to make successful market linkages

between business and small-scale farming?

The conference was hosted jointly by the Center for Chinese

Agricultural Policy (CCAP), the Office of Agricultural Vertical

Integration in the Chinese Ministry of Agriculture, and the

Regoverning Markets programme. It was a unique

opportunity to take advantage of a diversity of perspectives

from the public sector, the private sector, farmers’

organizations, academia, civil society and the media and to

share evidence and develop ideas for action. It also provided

an opportunity to communicate findings from the

Regoverning Markets programme, to test the appropriateness

of these findings, and to develop a common agenda for

business, policy makers, farmers and researchers.

ISBN: 978-1-84369-720-6

Regoverning Markets is a multi-partner collaborative research programme analyzing the growingconcentration in the processing and retail sectors of national and regional agrifood systems and itsimpacts on rural livelihoods and communities in middle- and low-income countries. The aim of the pro-gramme is to provide strategic advice and guidance to the public sector, agrifood chain actors, civil societyorganizations and development agencies on approaches that can anticipate and manage the impactsof the dynamic changes in local and regional markets. The programme is funded by the UK Departmentfor International Development (DFID), the International Development Research Centre (IDRC), theCanadian International Development Agency (CIDA), Cordaid, ICCO, and the US Agency for Inter-national Development (USAID). The views expressed are not necessarily those of the funding agencies.

● For further information

contact [email protected]

small-scale producers in modern agrifood markets

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