agrifoodvalue chains: concepts, axes of transformation ... · • rapid growth in delhi’s...

Agrifood ValueChains:Concepts,AxesofTransformation,

illustrationsThomasReardon

MSUFebruary20,2017

ABU,Zaria

OverviewofTalks:20Feb1) ConceptoftheValueChain(VC),“fishimage”,as

clusterofVCswithdendriticstructure2) Evolutionofresearchapproaches3) AxesofVCtransformation:structure,

conduct/behavior,performance…presentedinstructureofVCtypology(traditional,transitional,modern)4)ExamplesoftransformationofVCs:fish(Asia/US),chicken(US) potatoes(India,US),dairy(Brazil),chicken(US)

21Feb.1)“homework”Nigeriapoultry/eggsVC,groupdiscussioncasebasedonanalysisapproach2)Researchquestions(formethodsapplication)…linkingpolicyissues(testingconventionalwisdomassumptions…)withresearchquestions/hypotheses3)Testinghypotheses&Mythbusting…withcerealsexample(fromstackedsurvey)asmotivationforstackedsurveyapproach

4)Rapidreconnaissance/meso study5)Stackedsurveys/microstudy6)Conclusionsandwayforward

1.VCconcept

Pictureafishinyourmind.

a) VCcomposedofprincipal“spine”ofsegmentsb) EachsegmentofwhichsuppliedbyinputVCs

(intermediateinputs&factorinputs)c) Andinputsegmentssuppliedby(1)factor

supplychains/markets;(2)intermediateinputsd) Overall“dendriticstructure”e) Policyissueslinkedtobothoftheabove…examplefromBangladesh

2.Marchoftheliterature2.1.Generalmarchfrom“meso-economics”to“micro-economics”to“businessstrategyeconomics”a) Meso analysis:“Structure-Conduct-

Performance”…structure:industrialorganizationlikespatiallayoutandconcentrationofVC…conduct:technology,institutions(contracts,standards),organization(procurement,marketingstructures)…performance(incomedistributionoversegmentsandwithinsegments,profitability,efficiency)

b)Microanalysis…choiceoftechnologiesbyactors…choiceofinstitutionsbyactorstocoordinatemarketingandprocurement…choiceoforganization…“integrativeanalysis”:innovatorchoosinghowto“implement”innovationtostay“middleman”(volume,make/buy,technology/institutions/organization)

2.2.(Evolutionof)VCAnalysisperspectivescrossedwith“issues”

2.2.1.Traditional:typologyplusmapping costandvalueaddedandcostsacrosssegments,space,actors;linktoPAM

2.2.2.VCManagement:Porter,commodity/”engineering”SCtoVC(productcycle&standards/attributesevolution)…example(is2.2.1.butdifferentiationby“type”ofgivenproduct)

2.2.3.NIE:choiceofinstitutions&organizationalformsascoordinatingmechanisms;functionofTCsèMicro:choiceofmechanismsbyactors(e.g.)èMeso evolutionofA-system(spot),B-System(spotorVI/hierarchy)orC-system(VI/hierarchyornetworks)(discussednext)EXTENSION:GlobalVC– powerrelations– LeadFirm+standard/VA(rents)+ choiceofcoordinationmechanism(linktoNIE)è rent(profits)distributionalongVCsegments(andintra-segmentstrata)

2.2.4.Network/netchain analysis:clustering/de-clustering,networks/functionalfragmentationand“flexiblespecialization”…studyofformationofclusters&inter-actorrelations(conditioners)2.2.5.a.Persegment(andoverscaleshenceinter-actordifferentiation)microandmesodeterminantsandevolution:analysisofmicroa) technologychoice,b) marketchannelchoice,c) procurementsystemchoice

2.2.5.b.UpgradingasInvestmentfunctionsbundlingtechnology+VA/attributechoicesi)(Micro)Investmentfunctionii.(Meso)investmentfunctioniii.LinksofupgradinginVCswithinvestmentfunctions(andpovertytraps,orkinksininvestmentfunctions)…andlinksbacktomicroandmesoconstraints)

2.2.5a.And2.2.5b(micro)_aggregatetomesostructure/conduct/performance…studyshocksofpolicychange,nonpolicychangeviathosetotestandexplainchangeviamicrofoundationsinter-actorinter-temporal

2.2.6.Integrative“innovatorbusinessstrategy”microanalysis:ineraofrapidinnovationandcompetition…exampleoffastfoodchainasinnovation…exampleofTyson’swithcutchicken

3.Structure&Conduct/BehaviorbasedtypologyofVCswithtransformation3.1.ColumnsastypologyofVCsa) “A-System”(local/traditionalandtraditional

rural-urbanVC)b) B-system(transitionalrural-urbanVC)c) C-system(modernruralurbanand

internationalVC)d) SUBCOLUMNSaresegmentsofVCand

“overall”

3.2.VCtypologybasedonstructure,rows

a)Commercialorientation,distributionofVA&leadership• spatially:shorttolong• ProductCycle/VA:nichetocommoditytodifferentiated(commercial)product

• Productcomposition:typesofproductlinkedtoproductcycle

• “LeadFirm”(alaGereffi):upstreamormidstreamordownstream“led”

• DistributionofVAoversegmentsandoversub-stratainsegment:upstreamtodownstream, socioeconomic;

• …alsostructural:Shareofpost-farmgate –smalltolarge

• Capitalownership:domestictoregionaltoglobal;investmentdynamics

b)Structural• Geographiclength:shorttolong• Intermediational length:monotonic:manyhandstofewhands/directsale/directbuy(orUorJcurve);Tanzaniamaizevshortic.

• Shareofpostfarmgate intotalVA• Persegmentconsolidation:fragmentedtoconsolidated

• Netchain/network/clustering:nocluster,clustered,de-clustered,networkedclusters

c)Conduct:Technological• Scaleoffirm:fromsmalltobig• Capital/laborratiooffirms:fromlowtohigh(andvintage&typechange:hammertorollermill)

• Assetspecificity:fromlowtohigh• Laborskill:fromlowtohigh• Productivecapitalattributes (transferredvsindigenousetc.)

d)Institutional&Organizational• Marketorganization:spottocoordinatedtoVI

• Verticalintegration(or“functionalfragmentation”):fragmentedtolinked

• Horizontalintegration:individualtohorizontallinkage(coops,clusters)

• d)Procurementsystemchangebybuyingfirms:distributioncenters/centralized,&specialized/dedicatedwholesalers/agents

• Inter-firminstitution/contracts:spottocontracts(verbaltowritten)

• inter-segmentVCfinance(tied,nottied)• Inter-segmentinstitution/standardsexistence,setter,andtype(e.g.publicstandards;vsGlobalgap horticultureproductstandards)

• Diffusionofbrands(pluspackaging)

3.3.AxesofVCtransformation:performance(changes)

a) Valueaddeddistributionoversegments(exampleofqualityriceinBangladesh)

b) Distributionofparticipation:Exclusionandinclusionbyassetorzone

c) Variability/riskofsupplyandpricesd) Vulnerability/climate/foodsafetye) Incomeandemploymentimpacton

“producers”(upstreamandmidstream)f) Price/accessandnutritionimpactson

consumers

4.Illustrationsofrapidchange

4.1.FishVCtransformation:historicalviewUS,Europe

…andgrowingdemand“shock”toAsiafishsupply

a)LocalfishcaptureUS&Europe,1400s-1700sb)1400s-1600’s:emergenceofextremelyvaluablenicheintoWesternEurope(dried/salted,“bacalao”)c)1700s/1800s:“CapeCod”:USemergestocompetewithIceland withAtlanticcoastcod(dried/salted,soldinEurope&US/Americas)…commoditizationphase1:mainfishconsumedinUS1800s-mid1900s

d)Commoditizationphase2:“Industrialization”ofcod…1929inUKwith“platefroster”(firstquickfreezer);foodfrozeninslimrectangleslabs…riseofprocessed“fishsticks/fingers”1950s/1960sUK,US(cocktailsauce/ketchup/tartarsauce)…CHEAP;childrenliked;nobones;justheat(conveniencefood)…incomes,womenenteringworkforce,eatatschool

…Importantchanneloffoodinnovationisvia“foodservice”sector(fastfoodfish)(incomes,womenenteringworkforce)

e)2phasesofcommodizationè Extremeover-fishing/neardisappearanceofAtlanticcod:1970s-present

f)1970s-present,suddenhugeshiftinUSfish/seafoodconsumptionsource:f.1)riseoffish-farming:50%fromaquaculture,50%fromcapturef.2)91%ofUSconsumptionoffish/seafoodisimportedby2011

f.3)Emergenceof“differentiatedproducts”…firstsafetyofcommodity(HACCPcertified)…quality (“sushigrade”)(consumerswantingtomovebeyondcommoditybreadedproducts)…sustainabilitylabel(consumerreactionagainstover-fishing)…“laborstandards”(consumerreactionagainstfishboatslaveryforexampleinThailand)(socialaudits)…“localcatch”(insomeareas)…issueofscalingup

g)RisetopreponderanceofAsianaquacultureinUSconsumption:…shrimpranked#1,mostofitfromAsianaquaculture (shrimpwastinyNICHE,nowcheapcommodity)

…importedAsianshrimppushesoutUSoysters---tomake“shrimpcocktails”(appetizer/dishintroducedbychefsinUSandUK,1960s-1980s)…nowUSpercapitain2010ofshrimp=USpercapitaofoystersin1910

…cannedtuna(Thailand)&salmon(aquacultureChile(introducedfromNorway;afterover-fishing..)#2,#3(usedtobeAtlanticcod)…PacificPollock/AlaskanWalleye(processedintofilleto’fish)(usedtobeAtlanticcod)

…Asian(aquaculture)tilapia&catfish(pangasius)#4,#5(usedtobeAtlanticcod)…takesustoAsianaquaculturesupplychaindevelopmentnext

4.2.AsianSupplyandDemandevolution

a)TwodriversofextremelyfastgrowthofAsianaquaculture(andshiftfromcapture)• HugeUSmarketgrowingfastè exportmarketà spurringinitialtransformationfromtraditionalsupplychain

• ThenhugeAsiandomesticurbanmarket(extremelyfasturbanization(3/4offishindomesticmarketgotourban),income)àsecondphaseoftransformation

b)Links:exportbasethendomesticmarketexplosion(nichetocommoditytodifferentiated)…GuangdongChinacase(toUS,thentoBeijing)…withfreezing&fastfoodsteps,localinnovations(asinUS)…foodhabitsareCHANGEABLE!

c)Productcycleinnovation:Shiftfromlocalnichecarp&tigershrimptothe“bigthree”commodityspecies

à…AsianTilapia(AfricanfishintroducedtoAsia);superfastgrower

àReplacedalsowithAsianPangasius-catfish(fastgrower&breathesairsocangrowdensely)

PacificWhiteShrimp:growsdensely(volumetricallynotonbottom)

c) Asianaquaculturetechnologychange

• fish/shrimpopen-water(andricefields)capture…

• tovastspreadofaquaculture(ponds)…fromtraditional/extensive(nofeed)…tosemi-intensive(feed)…tocapital-intensive(feed,aerators/pumps,hatcheries)…plusmedicinesforgrowingneedfordiseasecontrol

Semi-traditionalShrimpfarmVietnam

ModernizingtraditionalshrimpfarmJava

Introductionoffeed

Aeratorsforintensification

Fertilizerforponds(forphytoplanktonthenzooplanktongrowth)

Larvaehatcherydevelopment

Vannamei forvolumetricproduction

IntensivehugeshrimpfarmIndonesia(CPhaslargestinworldthere)

NettingstockonJava

Gradingshrimpformarket,Java

Investmentiniceplants

Holdingareashrimponice

Loadingiced-shrimpintrucksIndonesia

Rivericed-transportofshrimp/fishtopackersVietnam

Shrimp and Canned Tuna Industries – packing Thailand

Fish wholesale in southern China 60 years ago

Today: Largest shrimp wholesale market in world south

China

Local supermarket sale Java

d)RapidriseoffishfeedindustryinAsia• ShiftfromlocalfeedSME• toclustersoflarge-scalemills(oftenextensionofchickenfeedmills)

(Nigeriacase,600%!)• ToFDIinfishfeed(NewHope(China)toBangladesh),regionalmultinational

• Riseofvaluechainfinancingfromfeedmillstofarmersas“newtechnology”

• Bigdemandformaize,soy,peanutcake,fishmealà acceleratesingredientmarketdevelopment(USexportsto)

e)Verticalintegration(ponds(ownoroutgrowers),feed,marketing)• ForproductionandsupplychaincontrolgiventheUS/Europe/Japanattributedemand(privatestandards,certification

…tomeetcontractswithconsolidateddemandside(largesupermarketsandfoodservicefirms,e.g.Sysco)

f)“Translation”toourVCanalysisframeworkofAsian(note:Nigeriaastransitionalstage..)fishVC

transformationf.1)Traditional• Structure:short+fragmented+backyard• Technology:capturethenpond+nofeed• Productorientation,productcycle:niche,local• Marketorientation:local,backyard,subsistence

• Performance:seasonal,expensive

f.2)transitional• Structure:longer,town,fragmented+backyardpluscommercial

• Feedindustryemerging,fragmented• Technology:pond&simpleassembledfeed,sinking

• Productorientation:commodity,exotic(tilapia,catfish)

• Marketorientation:city,semi-subsistencetocommercial

• Performance:cheap,lowseasonal

f.3)modernizing• Structure:long,countryintegrated,manybackyardbutdominantcommercial

• Feedindustryconsolidating,FDI• Technology:pond&concentrated/differentiatedfeed,floating

• Productorientation:commodityplusnewwavecaptureintroductionpond

• Marketorientation:city,inter-regional,commercial,foodsafety

• Performance:cheap,lowseasonal

4.3PotatoesinAgraIndia:TheCold-StoredPotatoRevolutioninWesternUttarPradesh,India

CONFLUENCE… urban demand … diet change… Road… electricity… cold storage… farm product and technology change

a)Firstwaveofpublicinvestment&firstwaveofpotatofarming

developmentinlate1980s-early1990s

• Farmersshiftfromwheattopotato• Publicinvestment:NARSresearch&extensionofnewpotatovariety(higheryield,longerstoragelife,moreresistanttotransport)

• Publicinvestment:waterpumpsubsidies• EncouragedbyinitialgrowthinDelhieconomy

b)RapidUrbanizationas“demandpull”

• RapidgrowthinDelhi’spopulationandincomesinthe1990s/2000s(linkedtoeconomicliberalizationandpublicinvestmentincityinfrastructure)

• “diffusion”ofurbanizationeffectinruralspace:largepublicinvestmentinruralroads

• Dietdiversificationintohorticulturalproductsinurbanareas

c)RiseoftheRuralnonfarmsector

• Ruralnonfarmsectordevelopmentespeciallyfastandintenseinthe“market-shed”ofDelhi

• Drivesupfarmandnonfarmwages• Fuelsprivateinvestmentinallsegmentsofthesupplychain

d)Secondwaveofpublicinvestmentsinruralareas

• Publicinvestmentinenergygrid• Publicinvestmentinlimitedsubsidiesformoderncoldstorages

e)ModernColdStorageBoomin2000s

• Massiveprivateinvestmentincoldstoragesstartinginmid/late1990s

• …crescendooverthe2000s• b)ShiftingpotatofromseasonalconsumptioninDelhitonearly-yearround(2/3fromcoldstore)

f)Secondwaveofpotatofarmdevelopment:capital-led

intensificationinsecondhalf2000s• capital-ledintensification• Landconcentration(rentalandpurchase)

g)UScase• Sameasabove…and• 1920s/30sIndividualQuickFrozentechnologyforsmall

• “atlantic”potatovariety• 1950s/60sdeeppressurefryer(KFCtoo)• Frombakedpotatohome,night• nowtofrench friesviafastfood• Samehappenedfishsticks,chickennuggets• Totallychangedconsumptionhabits

4.4.Fast-trackingtechnologychange:servicesVCevolution

“outsourced”mobileservicesforriceandmangofarmersa)mobilecombineharvest/threshingservices(US,China,Burma)b)mobile“sprayer-trader”teamsinIndonesia(“onestopshop”formangofarmers);seedlingVCtooc)ChiFarms&FarmSupport(poultryIbadan)

4.5.USchicken(mirrorsNigeriatraditional&transitional&

emergingmodern)a) Traditional• Structure:short+fragmented+backyard• Technology:capturethenbackyard+nofeed• Productorientation,productcycle:niche,local• Marketorientation:local,backyard,subsistence

• Performance:seasonal,expensive

b)transitional• Structure:longer,town,fragmented+backyardpluscommercial,PERI-URBAN

• Feedindustryemerging,fragmented• Technology:smallfarm&simpleassembledfeed,nomedicines

• Productorientation:commodity• Marketorientation:city,semi-subsistencetocommercial

• Performance:cheap,lowseasonal

b)modern• Structure:long,countryintegrated,dominantcommercial,NOTPERI-URBAN

• Feedindustryconsolidated• Technology:outgrower andlarge,concentrated/differentiatedfeed

• Logisticschange:train,water-logged• Newbreed,contracts• Marketorientation:city,inter-regional,commercial,foodsafety,

• supermarketsupercheapmasspurchasesandsale

• IQF,deepfry,disassembled,frozen(nontraditional)

• Performance:cheap,fastfood

è CONFLUENCE,FASTJUMP

…super-modularityexamplefromUSchicken