Thomas Reardon, IFPRI/MSU Joint Program on Markets in Asia Bart Minten, IFPRI Kevin Chen, IFPRI

1. Revolution in Asian Food Supply Chains Implications for Farmers and Consumers

2. Thomas Reardon, IFPRI/MSU Joint Program on Markets in Asia Bart Minten, IFPRI Kevin Chen, IFPRI

3. 1. Conventional wisdom vs our findings 1.1. Conventional wisdom as assumptions in Asian food security debate: food supply chains in Asia are sleepy/traditional/stagnant Where there is change: thought to be induced by government intervention … Or by export markets And Food Price formed mainly by farm segment costs

4. 1.2. But we found opposite of conventional wisdom for the Asian food economy 95% = domestic … at most 5% are imports or exports b) Only about 1% is touched by direct government marketing (procurement and sale) c) While food price debate focused on farm, about 50-70% of price is formed by off-farm segments of supply chain – midstream & downstream – as important as the farm for food security

5. d) About 60-75% of food economy is urban (share of population * income factor * food’s budget share) e) We find that NOT SLEEPY but transforming very fast, a ferment, a churning … rapid rise of modern supply chains …. & a quiet revolution in traditional chains … not just in “high value ag” (non-staples) but also in staple foods  We show that transformation by segment of the supply chain: downstream, midstream, upstream

6. 2. Downstream 2.1. Rapid rise of supermarkets (3x rate of GDP growth) a) Mainly in staples and processed and semi-processed b) But early penetration of fresh produce (compared with other regions) 2.2. Food security effects: cheaper staples in Delhi in supermarkets

7. 3) Midstream 3.1. Modern Sector Midstream Rapid growth and concentration of processing Symbiosis with rise of supermarkets Specialized wholesale, 3rd party logistics, fast-tracking procurement solutions for modern processors and retail

8. 3.2. Quiet Revolution in “traditional” middle segments Key role and expansion of wholesale markets – with disintermediation (decline of rural broker role with shortening of chain) Mills in China: branding, buying and selling direct, packaging, scale increase Cold stores in India (UP and Bihar) & Bangladesh, farm price effect, Food security effect “sprayer traders” in mango in Indonesia, Philippines

9. 4. Upstream 4.1. Farm level Quality differentiation, hybrid adoption Rapid intensification: herbicides, pesticides, seeds Land rental markets booming, China, India Water markets between large and small farmers, India But heterogeneous farm sector: farm size and/or non-land assets:  issues of inclusion/access to inputs, subsidies, credit, and markets

10. 4.2. Input Supply Rural business hubs in India Consolidation in inputs with branding Ferment of change in irrigation, seed, tractor sectors

11. 5. Conclusions Rapid change and ferment/churning Both modern sector, and transforming traditional chain Implications for consumer food security and farmer incomes/inclusion Importance of off-farm segments of supply chain Importance of government indirect role