Tuesday, January 22, 2013

Food value chains beyond the farm gate

USDA's Economic Research Service has long published a well-known graphic illustrating the food value chain as a dollar bill, with each segment showing a particular industry's contribution to the average consumer dollar spent on food.

A key insight from this graphic is that farmers on average receive only about 10 cents for every dollar of consumer food spending.

It may be more surprising to hear how rapidly value chains around the world are changing, even for staples such as rice and potatoes.  A December report from the International Food Policy Research Institute (IFPRI), by Thomas Reardon, Kevin Chen, Bart Minten, and Lourdes Adriano, describes this change as a Quiet Revolution. Although the supermarket-ization of the food system in developing countries introduces risks and challenges, the report seems to me fairly upbeat.  It emphasizes several ways that economic development of the value chain can offer benefits for poor farmers and consumers, leading to improved food security.  To supply the megacities of countries like China, India, and Bangladesh with sufficient food, we cannot think just about traditional farmers selling raw commodities to a local merchant trader.  Instead, it is necessary to come to grips with modernization even in the food system that serves the world's poor consumers.

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