Supermarket supply chain for fresh fruits and vegetables: opportunities and challenges for small farmers

Blandon, Jose
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University of Guelph

Agrifood systems are facing dynamic changes in both developed and developing countries. Transactions of food products that were usually made in spot markets (SM) are now increasingly made in coordinated markets. One of the reasons for this change is the influence exerted by retail and food service chains as well as food processors. While this situation represents opportunities for small producers, the high standards set by buyers in terms of quantity, quality, timing, safety, packaging, etc., can prevent farmers from exploiting such opportunities, because of the significant changes required in their production and marketing systems. Further, the associated coordination and transaction costs can drive buyers towards a smaller supply base of large producers. Concerned about such changes in agrifood systems in developing countries, a New Institutional Economics (NIE) framework is used to analyze the supermarket supply chain (SSC) for fresh fruits and vegetables (FFV) in Honduras. Within the NIE framework, special emphasis is put on the role of transaction costs and collective action. The purpose of this study is to assess the level and form of small farmer participation in the SSC for FFV in Honduras. Simultaneously, to identify mechanisms through which access problems faced by small farmers can be alleviated to the betterment of their livelihoods. The main results are twofold. On the one hand, they reveal that important transaction and information costs prevent the direct participation of less endowed farmers in the SSC for FFV in Honduras. On the other hand, small farmer participation in collective action allows the smallest producers to actively participate in the SSC for FFV, suggesting that "institutions matter" to lower transaction costs and facilitate the participation of farmers in new agrifood systems. Nevertheless, small farmers' participation is still minor, and in addition to that there is not conclusive evidence in this research that their participation in the SSC is impacting their livelihoods positively. This challenges the assumption that the rapid rise of supermarkets in developing countries can be used as an engine for generating economic development. The empirical results of this research provide policy, methodological and theoretical contributions consistent with the NIE framework.

Small farmers, Supermarket, Supply chain, Fresh fruits and vegetables, Honduras