The Rapid Transformation of Food

Systems in Asia: including small farmers

Tom Reardon

Michigan State University &

University of Adelaide

Bali, August 23, 2017

Indonesian Society of Agricultural

Economics

1. Agrifood system transformation is driven by 5 big trends

a) PULLED by Downstream demand (both fed by rising incomes):

a.1) urbanization

a.2) diet change in urban and rural areas

b) “FACILITATED ” by Midstream & Downstream (post farmgate in the value chains)

c) FED by upstream

c.1. farm technology & product change

c.2 input value chain development

2. Food System Transformation “pulled” from demand side: urbanization & diet change

a) Urbanizing fast

… Asia: 24% in 1970, 45% in 2011

… Indonesia about 50% of population

b) Urban share in national food consumption & markets BIGGER than urban share in population

… Southeast Asia: 40/50/60-70% !

75% of Indonesian mangoes are sold in Indonesian cities, 25% sold in rural areas, 5% home-consumed, 0.1% exported

The urban market is the MAIN market Indonesian farmers face

Maybe 5-10% of agricultural output goes to exports (Asia average, 10%)

perhaps 1-2% of small farmers are in export value chain; maybe 3% in next 10 years (mainly in coffee and cocoa)

c) Diet in Asia already heavily diversified

… vegetables/fruit, fish, meat, dairy

… Asia (just like Indonesia): non-cereals in food consumption: 65% in rural areas

… 75% in urban areas

… Indonesia: cereals = 34% of total diet in value terms in rural areas; 26% in urban

Moving into diversification crops “follows the market” and boosts farmer incomes

The biggest issues in inclusion of small farmers in growing markets are including them in:

1) Diversification crops production

2) urban domestic supply chains

3) moving along the “product cycle”

… MAINLY from “niche to commodity” (backyard to small commercial farming for urban market)

… and for a small elite, from “commodity to quality-differentiated products”

3. “Confluence” situations where small farmers included

Important for agricultural economists to understand situations where a “confluence” of changes brought about small farmer inclusion

“confluence”: creating one mighty river (Ganges, India)

… such as combinations of

urbanization,

diet change,

infrastructure change,

agricultural research with new breeds

policy change

supply chain (output and input chains) actors investments,

farming changes & small farmer inclusion

Causing sudden, rapid combination of forces that causes rapid transformation of food system

… if we study them & understand, we can use to guide policy & infrastructure investment & agricultural research

I will discuss three cases, all domestic market

… potato cold storages in India

… “outsourced services” for mango and rice in Indonesia, China, Myanmar

… chicken “supermodular change” in US

4. “Confluence”: Potato cold storages boom in Agra/India (Sunipa DasGupta)

CONFLUENCE

… urban demand

… diet change

… Road

… electricity

… cold storage

… farm product and technology change

Fig.1. Heaps in an open area under the shade of trees. Fig.2. Pit method of potato storage.

Fig.3. Pits covered with hut made up of locally available materials.

Fig.4. Thatched roof at storage site for providing additional protection against hot sun and rains.

Here, potatoes are heaped under· the shade of trees just outside the village. The heaps are covered with a layer of.

available straw material (about 30 em thick). Generally, 6-30 tonnes of potatoes are stored in each heap by the

farmers. Losses in heaps can reach even up to 40%, if they are not properly made and cut, cracked, bruised,

diseased and rotted potatoes were not removed by sorting before storage. The work carried out at Lhe

campus showed that it is possible

a) First wave of public investment & first wave of potato farming

development in late 1980s-early 1990s

• Farmers shift from wheat to potato

• Public investment: NARS research & extension of new potato variety (higher yield, longer storage life, more resistant to transport)

• Public investment: water pump subsidies

• Encouraged by initial growth in Delhi economy

b) Rapid Urbanization as “demand pull”

• Rapid growth in Delhi’s population and incomes in the 1990s/2000s (linked to economic liberalization and public investment in city infrastructure)

• “diffusion” of urbanization effect in rural space: large public investment in rural roads

• Diet diversification into horticultural products in urban areas

c) Rise of the Rural nonfarm sector

• Rural nonfarm sector development especially fast and intense in the “market-shed” of Delhi

• Drives up farm and nonfarm wages

• Fuels private investment in all segments of the supply chain

d) Second wave of public investments in rural areas

• Public investment in energy grid

• Public investment in limited subsidies for modern cold storages

e) Modern Cold Storage Boom in 2000s

• Massive private investment in cold storages starting in mid/late 1990s

• … crescendo over the 2000s

• b) Shifting potato from seasonal consumption in Delhi to nearly-year round (2/3 from cold store)

f) Second wave of potato farm development: capital-led

intensification in second half 2000s

• capital-led intensification

• Land concentration (rental and purchase)

5. Confluence: outsource mobile services for mango & rice farmers

CONFLUENCE

a) rising farm wages & rural nonfarm employment (demand for labor, need for machines)

b) rising demand for more fruit (from skilled labor & machine scarce farmers

& rice (from labor scarce farmers)

c) investments by small enterprises in new rural services

Development of mobile asset-specific

farm support services geared to market

efficiency & quality demands

… e.g., sprayer-trader mobile services for

mango farmers Indonesia (Sara Qanti)

… e.g., mobile combine services for rice

farmers in China (Zhang) Myanmar

(Belton, Slover)

Spraying High

Pruning high

Trading high: Sprayer-Trader services Indonesia (Qanti)

Massive new wave of combine teams, “Fast & early”: Myanmar

(Slover, Belton)

Mobile team China (Zhang)

Combine (harvester-thresher) of

mobile team, Myanmar (Belton)

6. US case: chicken

a) Idea of “supermodularity”

b) Demand rises for chicken in 1960s

c) Need to ship long distance by train in ice

water

d) Waterlogged chicken!

e) Breeding for less porous chicken

f) Impose breed on farmers with rise of

contracts

g) Vast increase of size of market