Presentation by Bill Vorley of the International Institute for Environment and Development, during the Seas of Change Conference in The Hague, april 2012.

1. The 10% or the 90%?
Bill Vorley
Seas of Change: What works when scaling
inclusive agri-food markets?
11-13 April 2012
The Netherlands

2. Harvest time.. Projects 2002-12 on market
governance and inclusive business
• Modernisation of domestic markets in emerging and
developing economies
Regoverning Markets programme 2002-7 (global research consortium; focus on domestic markets)
• Linking small-scale producers to modern food
business (exports)
Food Lab New Business Models for Sustainable Trading Relationships, 2008-12
• Producer agency in globalised markets
Hivos-IIED Knowledge Programme Small Producer Agency in the Globalised Market (with global learning
network) 2009-12
• Environmental and social risk management in supply
chains
IFC Good Practice Manual: Assessment and Management of the Environmental and Social Risks in Agro-
Commodity Supply Chains (with Proforest) 2011-12
• Public policy as shaper of investments and markets
Oxfam-IIED project Policy options for agricultural investments and governance of markets in support of
small-scale agriculture 2011-12

3. Policy priorities: dealing with reality
• The majority of small-scale producers are not formally
organised in the market
• The informal market remains the most important for the
majority of small-scale producers
• Many modernizing agrifood markets still have their feet in
informality
• ‘Modern’ markets are not always the best option for
producers
• Much producer organisation in modern markets is driven by
the food chain, not by producers
• The largest number of the rural poor are in countries with
rapidly transforming economies
• Food safety and risk management is and will be the no. 1
driver of formalisation and rural differentiation
• Risk management is pushing in the opposite direction than
‘inclusive’ business
• There are good reasons to work with the top 10-20 % of
smallholders

4. Many modernizing agrifood markets still have their feet in
informality (Huang et al.)
Example of China: Farmers’ cucumber market channels, Shandong, 2006
11% Small brokers
Small brokers 6% Wholesalers
16%
1%
Modern channels
1% Processors
Farmers
0.6%
Specialised suppliers
0.02% Supermarkets 66% Small brokers
80% 12%
Wholesalers Wholesalers
2%
Modern channels
Trade is dominated by small brokers and wholesalers

5. Access for small-scale farmers to tomato markets in
Limpopo and Mpumalanga Provinces, S Africa, 2007
Chikazunga et al.
63% Small
brokers/hawkers
32%
14% Informal trade
Local market
Tshwane Fresh Produce Market
Small-scale 30%
Retailers
farmers 8%
Agro-processors
6% Processors +
4%
Supermarkets contract buyers
10%
Chain stores
11% Wholesale
market
21% Wholesalers

6. Food safety is no. 1 driver of formalisation and rural
differentiation: Policy directives to move the small
backyard farmers into concentrated production
complexes where the marketing is centralized
Share of written contracts for dairy farmers who sold milk by
channels in Greater Beijing in 2004, 2008 and 2009 (%).
2004 2008 2009
Without contracts 89 91 32
With contracts 11 9 68
Direct consumer 0 0 0
Mobile brokers 1 4 0
Milk stations 10 4 0
Dairy complexes 0 2 68
Source: Luan et al, 2011

7. Priority of inclusive formalisation
Chinese industry is moving to integrate SCM to ensure
SC integrity and food safety
• “Small farms cannot meet the rapid growth of demand in
China”. Following the frequent food safety incidents in China,
the big companies are “taking the lead with fully integrated
value chains” around international GAP standards.”.. “This
model lowers costs, raises production and competitiveness,
reduces price fluctuations and raises food safety. Wan Zaotian,
VP of Cofco addressing the IDH Congress in Amsterdam December 2011

8. Scale and inclusiveness requires differentiated
approaches to rural worlds
Private sector priorities Policy Priorities
RW 1 Inclusive business Support vertical trading relationships in value
models in value chains chains, such as enforcement of contracts, payment
terms
RW 2 Horizontal sector wide Horizontal improvement in the performance and
and territorial inclusiveness of a whole sector
approaches (including Upgrading the informal sector, especially food
PPPs) safety
Attention to unorganised Process of inclusive formalisation
producers Competitive wholesale sector, diversity of markets
Break up cartels
Quotas for small/family farms
Selective use of trade measures
Embed core elements of sustainability standards
into legislation
RW3 Labour standards Labour legislation and implementation, especially
as relates to women.

9. Policies to support rather than harass the informal
sector
Hooton and Omore (ILRI), 2007
• Alternative models of dairy development, relevant
to local conditions -- bridge the informal-formal
divide
• Traditional milk markets from ~800,000 small-scale
dairy farmers through small-scale milk vendors
supply > 85% of the market
• Previous government policies unsupportive /harass
farmers, traders and consumers who make up
these channels . SSMVs could not acquire licences
or access training in milk handling
• New Dairy Policy -- acknowledges the role of
SSMVs in the development of the sector, including
development of low cost appropriate technologies,
training on safe milk handling, improve processing
standards in the informal sector, and provision of
incentives and establishment of a supportive
certification system.

11. Modern coordinated markets are not always the
best option for many smallholders
• Modern sector is not necessarily ‘high value’
– Example: supermarkets in Nicaragua
Source: Jennifer Wiegel