Revolution in Asian Food Supply Chains: Implications for Farmers and Consumers

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Thomas Reardon, IFPRI/MSU Joint Program on Markets in Asia …

Thomas Reardon, IFPRI/MSU Joint Program on Markets in Asia
Bart Minten, IFPRI
Kevin Chen, IFPRI

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  • 1. Revolution in Asian Food Supply Chains
    Implications for Farmers and Consumers
  • 2. Thomas Reardon, IFPRI/MSU Joint Program on Markets in Asia
    Bart Minten, IFPRI
    Kevin Chen, IFPRI
  • 3. 1. Conventional wisdom vs our findings
    1.1. Conventional wisdom as assumptions in Asian food security debate: food supply chains in Asia are
    sleepy/traditional/stagnant
    Where there is change: thought to be induced by government intervention
    … Or by export markets
    And Food Price formed mainly by farm segment costs
  • 4. 1.2. But we found opposite of conventional wisdom for the Asian food economy
    95% = domestic
    … at most 5% are imports or exports
    b) Only about 1% is touched by direct government marketing (procurement and sale)
    c) While food price debate focused on farm, about 50-70% of price is formed by off-farm segments of supply chain – midstream & downstream – as important as the farm for food security
  • 5. d) About 60-75% of food economy is urban (share of population * income factor * food’s budget share)
    e) We find that NOT SLEEPY but transforming very fast, a ferment, a churning
    … rapid rise of modern supply chains
    …. & a quiet revolution in traditional chains
    … not just in “high value ag” (non-staples) but also in staple foods
     We show that transformation by segment of the supply chain: downstream, midstream, upstream
  • 6. 2. Downstream
    2.1. Rapid rise of supermarkets (3x rate of GDP growth)
    a) Mainly in staples and processed and semi-processed
    b) But early penetration of fresh produce (compared with other regions)
    2.2. Food security effects: cheaper staples in Delhi in supermarkets
  • 7. 3) Midstream
    3.1. Modern Sector Midstream
    Rapid growth and concentration of processing
    Symbiosis with rise of supermarkets
    Specialized wholesale, 3rd party logistics, fast-tracking procurement solutions for modern processors and retail
  • 8. 3.2. Quiet Revolution in “traditional” middle segments
    Key role and expansion of wholesale markets – with disintermediation (decline of rural broker role with shortening of chain)
    Mills in China: branding, buying and selling direct, packaging, scale increase
    Cold stores in India (UP and Bihar) & Bangladesh, farm price effect, Food security effect
    “sprayer traders” in mango in Indonesia, Philippines
  • 9. 4. Upstream
    4.1. Farm level
    Quality differentiation, hybrid adoption
    Rapid intensification: herbicides, pesticides, seeds
    Land rental markets booming, China, India
    Water markets between large and small farmers, India
    But heterogeneous farm sector: farm size and/or non-land assets:
     issues of inclusion/access to inputs, subsidies, credit, and markets
  • 10. 4.2. Input Supply
    Rural business hubs in India
    Consolidation in inputs with branding
    Ferment of change in irrigation, seed, tractor sectors
  • 11. 5. Conclusions
    Rapid change and ferment/churning
    Both modern sector, and transforming traditional chain
    Implications for consumer food security and farmer incomes/inclusion
    Importance of off-farm segments of supply chain
    Importance of government indirect role