Bart Minten “Food Security and Nutrition in an Urbanizing World” June 06, 2017 Brussels, Belgium The International Food Policy Research Institute (IFPRI), SNV Netherlands Development Organization, and Welthungerhilfe are jointly organizing a one-day event in Brussels on the eve of the European Development Days to explore the challenges and opportunities of urbanization from a variety of perspectives.

1. How cities reshape food systems
Bart Minten
International Food Policy Research Institute (IFPRI)
Addis Ababa
1

2. 2
Introduction
• Food value chains transformed worldwide
• Three major driving forces:
1/ Population growth => more foods
2/ Income growth => different foods
3/ Urbanization => market more and different foods

3. 3
Rural-urban food value chains
• Surprising little research/knowledge/data in
developing countries
• Present some results from:
- 3 Asian countries (China; India; Bangladesh)
- 1 African country
• Focus on major cities and major value chains:
1/ Asia: Rice and potato
2/ Africa: teff

4. 4
How important off-farm segment in rural-
urban value chains?
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Dhaka Beijing Delhi
USD/kg
Most common rice
Farmer margin
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Dhaka Beijing Delhi
USD/kg
Better quality rice
Farmer margin

5. 5
How important off-farm segment in rural-
urban value chains?
0
0.1
0.2
0.3
0.4
0.5
0.6
Dhaka Beijing Delhi
USD/kg
Potato harvest period
Farmer margin
0
0.1
0.2
0.3
0.4
0.5
0.6
Dhaka Beijing Delhi
USD/k
Potato off-harvest period
Farmer margin

6. 6
How important off-farm segment in rural-
urban value chains?
0.00
0.20
0.40
0.60
0.80
White Mix Red
USD/kg
Teff
farmer margin

7. 7
Transformation of technologies
• Rice mill segment technology transformation:
- Substantial investments in expanding and
upgrading milling equipment
- Larger mills more expensive equipment; can
polish and double polish; increasing grade
differentiation (and capturing value added of
this)
• More efficient cold storage technologies
became available

8. 8
Transformation of the marketing conduct
• Mill segment marketing transformation:
- Disintermediation, e.g. decline of village traders
(but different over countries)
- Emerging vertical integration (large mills and
large wholesalers)
- Emergence of branded rice (especially by
medium and large mills); If no brands, still shift
from marketing loose to packed rice

9. 9
Transformation of the marketing conduct
• Trader segment transformation:
- Geographical lengthening of value chains (e.g.
Beijing rice market supplied from 1,500 kms
away; Agra potato market has become central in
India)
- Rice wholesalers in urban cities increasingly buy
directly from medium and large mills
(disintermediation and up-scaling)

10. 10
Transformation of value chain finance
- Increased disappearance of “tied output-credit
markets”; share of paddy farmers getting
advances from traders very small in all samples
(0% in China to 10% in Vietnam)
- Advances from clients to mills and from traders
to retailers more common (but still minority)
- Credit from modern cold storages very
prevalent

11. 11
Structural transformation of the value chain
- Transport: Share of small trucks transporting
food declining over time
0 20 40 60 80 100
2001
2003
2005
2007
2009
2011
%
Share types trucks Ethiopia (100% = all trucks)
ISUZU (5-6
tons)
FSR (7-8
tons)
Trailer (20
tons)

12. 12
Structural transformation of the value chain
- Margins between markets declining; better
integrated markets
-300
-200
-100
0
100
200
300
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
Birr/quintalin2011prices
Real maize prices differences between surplus and
deficit markets

13. 13
Structural transformation of the value chain
- Processing – (average) milling costs down
0
0.01
0.02
0.03
0.04
0.05
0.06
200107
200209
200312
200502
200604
200706
200808
200910
201012
201202

14. 14
Structural transformation of the value chain
- Storage: Upscaling to large-scale cold storages in
Bangladesh and India; have replaced wholesale
markets as the centre of trade
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Tons
Capacity expansion cold storages (Bihar)

15. 15

16. 16
Structural transformation of the value chain
- Trader segment: Enlargement of its coverage in
space (longer distance trade becoming more
important); variation over countries
- Retail segment: 1/ Penetration of supermarkets
(e.g. Delhi 7%; however, already 50% in Beijing);
2/ Supermarkets often selling staples more
cheaply than traditional shops

17. 17
Cities and farmers
- Market use (input and output side)
0
20406080
100
0 50 100 150
Transport costs to Addis (Birr/quintal)
herbicides now herbicides 10 years ago
0
20406080
%offarmers
0 50 100 150
Transport costs to Addis (Birr/quintal)
Improved seeds now Improved seed 10 years ago

18. 18
Cities and farmers

19. 19
Conclusions
- Transformation of value chains, driven by
urbanization (different diets, higher income)
- Drives processes of modernization of farms,
upscaling, disintermediation, super-marketization,
branding
- Off-farm segment in food becoming more
important
- Huge challenges and opportunities in guiding this
process
- Some initial results of what to expect but still lots
of unknowns