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Ifad Ifpri Mtk Access


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Ifad Ifpri Mtk Access

  1. 1. Markets access and the IFAD-IFPRI Partnership Nick Minot and Maximo Torero 24 March 2008 IFAD, Rome
  2. 2. Objective of planning session: Identify overlap between IFPRI expertise and IFAD needs IFAD needs IFPRI expertise
  3. 3. Areas of marketing research at IFPRI <ul><li>Global, regional and national trade agreements and market reforms </li></ul><ul><li>Domestic marketing, with focus on diversification into high-value agriculture, diagnosis of supply chains, and transformation of marketing channels </li></ul><ul><li>Role of institutions and infrastructure in market development </li></ul><ul><li>Food and water safety </li></ul><ul><li>Urban-rural linkages (new theme) </li></ul>A B C D
  4. 4. Research focus: Market failure <ul><li>Goal: To make agricultural markets work for the poor at local, regional, and international levels </li></ul><ul><li>Means: By generating information that helps to </li></ul><ul><li>Release constraints to market participation </li></ul><ul><li>Enhancing benefits from market participation </li></ul><ul><li>Premise: Market failures contribute to poverty </li></ul><ul><li>High transportation costs </li></ul><ul><li>Information asymmetry </li></ul><ul><li>Externalities </li></ul><ul><li>Missing input markets </li></ul><ul><li>Policy induced barriers </li></ul><ul><li>Non economic barriers </li></ul>Inefficiency and high transaction costs Lack of market opportunities and poverty
  5. 5. Globalization and trade A <ul><li>Impact of multilateral trade liberalization in developing countries </li></ul><ul><ul><li>Potential impact of Doha Development Agenda with a special focus on Least Developed Countries and on distortionary effects of domestic support policies in rich countries </li></ul></ul><ul><li>Incorporating energy & biofuels into model </li></ul><ul><ul><li>Better understanding of the relation between energy markets and food markets with an implementation in the MIRAGE </li></ul></ul><ul><ul><li>improvement of database on biofuels </li></ul></ul><ul><li>Capacity development on trade issues and modeling </li></ul><ul><li>Technical improvements of the MIRAGE model </li></ul><ul><ul><li>a special focus on the baseline (global factor productivity, labor markets in developing countries, relation between consumers demand and national income) </li></ul></ul><ul><li>  </li></ul>
  6. 6. <ul><li>Potential loss US$ 1.0 trillion </li></ul><ul><li>US$ 336 b of potential trade that would have come by DOHA </li></ul><ul><li>US$ 728 b of trade reduction because of return to protectionism. </li></ul>Globalization and trade
  7. 7. Vision for domestic marketing B Larger overall number of smallholders with marketable surpluses – i.e. movement from net buyers to net sellers 1 Improved state of food security driven by productivity improvements (higher marketable yields) and crop income diversity Small farmers able to participate in growing high-value market channels e.g. for supermarkets, processors, and exports Access to trading and marketing mechanisms including storage, credit, and transportation Enabling policy and regulatory environments, including support for smallholders and trade openness 2 3 4 5
  8. 8. Example 1: Staple crop marketing in sub-Saharan Africa (Gates Foundation) <ul><li>Staple crops represent core food crops that are significant for dietary and caloric intake. In Sub Saharan Africa, the major food crops include: </li></ul><ul><ul><li>Maize, Cassava, Sorghum, Millet, Cow Pea, Yams, Rice, Millet , Bananas, etc </li></ul></ul><ul><li>Production, popularity, and usages vary across regions. </li></ul><ul><ul><li>West and Central Africa: Roots and tubers predominate; largely “multi-staple” systems </li></ul></ul><ul><ul><li>East and Southern Africa: Cereals predominate; “mono-staple” food environments </li></ul></ul><ul><li>Focus Crops: Maize, Cassava, Rice and Sorghum </li></ul><ul><li>Core-Drivers of Crop Selection: </li></ul><ul><ul><li>Percentage of the crop grown by smallholder farmers </li></ul></ul><ul><ul><li>Importance for food security </li></ul></ul><ul><ul><li>Relevance across regions in SSA </li></ul></ul><ul><ul><li>Significance to Agriculture GDP </li></ul></ul><ul><ul><li>Yields per annum </li></ul></ul><ul><ul><li>Contribution to diet and caloric intake </li></ul></ul><ul><ul><li>Potential for value addition and trade </li></ul></ul>1 2
  9. 9. Maize: A Case Study Assembly markets Complex Maize Marketing Channels – Benin Example <ul><li>Maize production aggregated through small traders and trader depots => farmer group development </li></ul><ul><li>Markets offer poor facilities: storage, bagging, weighing, handling etc => warehouse receipt systems + information systems </li></ul><ul><li>Lack of standardized grading and weighing, and bagging => encourage adoption of standardized grades </li></ul>Overview : <ul><li>Maize interventions require regional approach: i.e. West, Central, East, and Southern Africa </li></ul><ul><li>In order to address: </li></ul><ul><li>Policy barriers to trade </li></ul><ul><li>Transportation networks development </li></ul><ul><li>Regional standards adoption </li></ul>International flows Internal flows
  10. 10. Cassava: An Overview <ul><li>Output as a % of the Top Producer </li></ul><ul><ul><li>(Nigeria=46.6 Million Tons) </li></ul></ul>100% 10% Marketing Patterns 1% <ul><li>Sub-Saharan Africa world’s largest producer of cassava at 110 Million MT of fresh root </li></ul><ul><li>Over 90% produced by smallholders </li></ul><ul><li>Over 90% produced for human consumption </li></ul><ul><li>Provides more than 50% of caloric intake for more than 50% of the total urban and rural populations of SSA </li></ul>Production and Usage in SSA <ul><li>Highly commercialized in parts of West Africa, much less so in East Africa </li></ul><ul><li>Fresh cassava highly perishable so marketing purely local </li></ul><ul><li>Dried, chipped, or toaster cassava flour (gari) has longer shelf life that allows for longer-distance marketing </li></ul><ul><li>Dry consumption popular in Benin and Ghana. Fresh consumption preferred in Uganda </li></ul>
  11. 11. Example 2: High-value agricultural marketing in Indonesia (ACIAR) Growth in supermarkets and processing Higher quality standards and minimum volumes raise question whether smallholders will be excluded Commodity focus: Shallots, chillies, mangoes, mangosteen, and shrimp Methods: Farm surveys to understand role and constraints of smallholders, trader interviews to explore quality requirements, and consumer surveys to understand quality requirements and determinants of shift to supermarkets Expected outputs: Improved understanding of 1) rate of shift toward supermarkets, 2) implications for smallholders, and 3) policies and institutions to maintain smallholder participation in high-value agriculture 1 2 3 4
  12. 12. Infrastructure and Institutions C <ul><li>Objective: </li></ul><ul><li>Understand the role of market institutions and public infrastructure in improving market performance in order to reduce poverty among small holder farmers </li></ul><ul><li>Major Milestones </li></ul><ul><li>Development of institutions necessary for reduction of transaction costs, better management of risk and redress missing markets </li></ul><ul><li>Improvement in access to rural infrastructure, better coordination of rural infrastructure investments, and increased number of analysts with skills in market analysis </li></ul>
  13. 13. On infrastructure and Institutions C <ul><li>Major projects: </li></ul><ul><li>Impact evaluation and ways to improve provision of infrastructure: </li></ul><ul><ul><ul><li>Rural electrification (Ethiopia, Mozambique, Tanzania, Peru, Mongolia, and soon in Pakistan) </li></ul></ul></ul><ul><ul><ul><li>Water and sanitation (Tanzania and El Salvador) </li></ul></ul></ul><ul><ul><ul><li>Rural roads (El Salvador) </li></ul></ul></ul><ul><ul><ul><li>ICT to reduce information asymmetries in potato farmers (India) and in health (Per ù ) </li></ul></ul></ul><ul><li>Contract farming experiments: Incentive-based contracts to increase the links of small-holders to growing markets (Vietnam, Tanzania and Peru) </li></ul><ul><li>Cooperatives – Horizontal coordination and strengthening rural producer organization </li></ul><ul><li>Risk management – Weather-index insurance (Ethiopia) </li></ul><ul><li>Information problem: Aspiration failures (Ethiopia) </li></ul><ul><li>Scaling up through profit efficiency frontier typologies </li></ul>
  14. 14. Bangladesh, 2000-2004 Source: Torero and Chowdhury, 2006 <ul><ul><li>There exists complementarities in the provision of different types of infrastructure </li></ul></ul>Peru 2002 <ul><ul><li>Households increase non-agricultural hours of work </li></ul></ul>Electricity 0% 10% 20% 30% 40% 50% 60% % change of PC HH Exp Elec + phone Elec + road Elec + road + phone -25 -20 -15 -10 -5 0 5 10 15 % change in time allocation Ag salaried Non-ag salaried Ag self-empl Non-ag self empl 1 infrastr 2 infrastr 3+ infrastr
  15. 15. Impact evaluation of rural electrification: Finding the causal link <ul><li>Electricity: least accessed and most unequally distributed infrastructure, especially in Africa. </li></ul><ul><li>Few empirical studies addressing location and self-selection biases, indirect and long term effects of electrification on household welfare. </li></ul><ul><li>We use experimental design: vouchers to introduce random variations in the probability that a household will connect to the electrical grid </li></ul><ul><li> Assess optimal subsidies </li></ul><ul><li> Assess the impact of electrification with particular focus on changes in time allocation </li></ul><ul><li>April 2007 : Baseline survey on 1400 households before electrification </li></ul><ul><li>May 2008 : Repeat survey after electrification </li></ul>Random selection …
  16. 16. Food and Water Safety <ul><li>Three major projects: </li></ul><ul><ul><li>Economic impact of avian influenza in select countries/regions </li></ul></ul><ul><ul><li>Best Practices associated with AI compensation </li></ul></ul><ul><ul><li>New initiative on aflatoxin in maize & groundnuts in Africa </li></ul></ul>D
  17. 17. Cross-cutting methods (1): New approaches to identifying recommendation domains <ul><li>In order to scale up projects, need to know what area are similar to pilot area </li></ul><ul><li>Recommendation domains are areas with similar </li></ul><ul><ul><li>Market accessibility </li></ul></ul><ul><ul><li>Agro-climatic characteristics </li></ul></ul><ul><ul><li>Population density </li></ul></ul><ul><li>Use of new methods to identify areas of untapped potential </li></ul><ul><ul><li>Stochastic production frontier analysis </li></ul></ul>
  18. 18. Cross-cutting methods (2): IFPRI Mobile Experimental Economics Laboratory (IMEEL) Purpose Implementation of field experiments to understand behavior of the poor in rural and urban areas, especially in Africa, Central America and the Caribbean, Latin America and Southeast Asia. Benefits of experiments Experiments grant a high degree of control over the manner in which data are generated. They enable us to establish counterfactual scenarios that tend to be otherwise non-existent. Experiments are different from surveys in that they use simple games to observe actual decisions. Equipment 12 laptops, 30 PDAs, solar panels and batteries as back-up power sources What next? Projects * Highly Pathogenic Avian Influenza (HPAI): Pro-poor policy options for controlling HPAI * Contract Farming: Innovative contracts for linking farmers to markets and reducing poverty
  19. 19. Implications for IFAD-IFPRI Partnership <ul><li>What types of activities are promising areas for IFPRI to work with IFAD country programs? </li></ul><ul><li>Value chain analysis </li></ul><ul><li>Survey design and analysis </li></ul><ul><li>Experimentation for key information gaps </li></ul><ul><li>Identification of development domains </li></ul><ul><li>Capacity development </li></ul><ul><li>However, these are tentative, </li></ul><ul><li>pending discussions with </li></ul><ul><li>CPMs and other IFAD staff </li></ul>IFAD needs IFPRI expertise
  20. 20. Next steps <ul><li>Bilateral discussions with CPMs </li></ul><ul><li>Country visits </li></ul><ul><li>3. Revised work plans </li></ul>