JEAN MONNET CHAIR - RETHINKING THE EU TRADE POLICY. Linking Rich Consumers to Poor Producers: Supply Chains, Trade and Food Security (micro)

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1 JEAN MONNET CHAIR - RETHINKING THE EU TRADE POLICY FOR DEVELOPMENT/ REUTRADE AA Linking Rich Consumers to Poor Producers: Supply Chains, Trade and Food Security (micro) PROF. PIERLUIGI MONTALBANO pierluigi.montalbano@uniroma1.it Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

2 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

3 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

4 Misconception 1: Agricultural markets Microeconomics textbooks continue to point at agricultural markets as standard examples of competitive (spot) markets (Sexton 2012). Example: Thousands of farmers produce wheat, which thousands of buyers purchase to produce flour and other products. As a result no single buyer can significantly affect the price of wheat. Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

5 Misconception 2: Modern value chains and poor farmers Typical argument: Quality standards, and company strategies to secure timely and consistent supplies and to save on transaction costs lead to the marginalization of small, poor farmers with negative welfare and poverty implications. Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

6 Misconception 2: Modern value chains and poor farmers There are many small and poor farmers included in supply chains Even if they are not included, there can be strong pro-poor impacts (food security enhancement) Supply chains play a crucial role in technology transfer, productivity growth and food security through direct and indirect effects (Swinnen, 2014) Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

7 Global agri-food trade (US $) 1,400,000,000 1,200,000,000 World exports of agricultural products in US$ 1,000,000, ,000, ,000, ,000, ,000,000 Source: FAOSTAT Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

8 Income and Poverty Effects Horticultural supply chains in Senegal (Maertens & Swinnen Trade, Standards & Poverty, WD 2009) 7000 Income (1,000 F CFA) total sample Source: survey data nonparticipants estate farm workers contracted farmers Total household income Income from agr. wages Income from farming Income from non-agr. sources P. Montalbano JM Chair REUTRADE Pierluigi Montalbano Università di Roma La Sapienza

9 Share of households Value Chain Employment & Incomes of Poor 50% 40% 30% 20% 10% 0% Year Gandon Ross Béthio Total Average total household income (million FCFA) Total sample Households with members employed in the tomato export industry Households without members employed in the tomato export industry More than 3000 workers employed Almost 40% of households in the region Total income Income from tomato export industry wages Income from farming Income from self-employment Income from other wages Non-labour income P. Montalbano JM Chair REUTRADE Pierluigi Montalbano Università di Roma La Sapienza

10 Gender Effects Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

11 Labor market effects Especially important for the poorest and for women although modern supply chains are gendered, their growth appears to be associated with reduced gender inequalities in rural areas. women benefit more and more directly from [employment in] large-scale estate production and agroindustrial processing, than from smallholder contractfarming. (Maertens & Swinnen Gender and Modern Supply Chains, 2012 JDS) Note that in this perspective indicators that look only at participation of small farmers can be (double) misleading in terms of welfare and poverty effects Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

12 Importance Not A bit Quite Very Reasons why households signed a contract (%) Stable income during the year 0% 2% 32% 66% A higher income 10% 42% 31% 17% Price stability 10% 22% 49% 19% Access to inputs on credit 0% 7% 33% 60% Learning of new technologies 0% 8% 37% 55% No other alternatives for income 8% 61% 19% 12% Access to a source of income during the lean period 1% 2% 25% 72% (Swinnen, 2014) Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

13 Worst Case Scenario? Tomato export chain in Senegal Poor country FFV sector: very tight standards Extreme consolidation Foreign owned multinational Complete exclusion of smallholders FDI of land ( Land grabbing ) (Maertens, Colen and Swinnen 2011 ERAE) Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

14 Empirical Observations: Value Chain Surveys Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

15 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

16 P.Montalbano, A. Federici, ETSG 2009 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

17 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

18 Case Study: Ugandan smallholder farmers FNS Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

19 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

20 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

21 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

22 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

23 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

24 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

25 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

26 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

27 Pierluigi Montalbano & Rebecca Pietrelli & Luca Salvatici (FP, 2018). Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

28 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

29 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza

30 Pierluigi Montalbano P. Università Montalbano di Roma JM Chair La REUTRADE Sapienza