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
Bart Minten, IFPRI
Kevin Chen, IFPRI

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

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