Source: MICHIGAN STATE UNIV submitted to
TRANSFORMING GLOBAL HORTICULTURAL MARKETS: OPPORTUNITIES AND CHALLENGES FOR THE MICHIGAN AGRIFOOD SECTOR
Sponsoring Institution
State Agricultural Experiment Station
Project Status
TERMINATED
Funding Source
Reporting Frequency
Annual
Accession No.
0212349
Grant No.
(N/A)
Project No.
MICL03461
Proposal No.
(N/A)
Multistate No.
(N/A)
Program Code
(N/A)
Project Start Date
Sep 1, 2007
Project End Date
Aug 31, 2012
Grant Year
(N/A)
Project Director
Reardon, T.
Recipient Organization
MICHIGAN STATE UNIV
(N/A)
EAST LANSING,MI 48824
Performing Department
AGRICULTURAL, FOOD & RESOURCE ECONOMICS
Non Technical Summary
The horticultural economy of the emerging market regions of Asia and Latin America represent both large opportunities in terms of demand (such as in rapidly spreading supermarkets) and large challenges in terms of competition (from formidable horticultural suppliers), for Michigan agrifood industry actors. This project studies through first-hand field research the nature and trends in the horticultural economies of Asia and Latin America, and translates that information into strategic implications for the Michigan horticultural sector stakeholders.
Animal Health Component
100%
Research Effort Categories
Basic
(N/A)
Applied
100%
Developmental
(N/A)
Classification

Knowledge Area (KA)Subject of Investigation (SOI)Field of Science (FOS)Percent
6041099301010%
6041199301010%
6041499301010%
6046099301010%
6046120301010%
6061099301010%
6061199301010%
6061499301010%
6066099301010%
6066120301010%
Goals / Objectives
There are two key objectives. The first key objective is to perform field research primarily on emerging market regions (mainly Asia and secondarily Latin American)horticulture industries and markets, in particular in the supermarket, processing, food service, production, and input supply sectors, in order to understand the current nature of these sectors, and trends in their transformation. The second key objective is to perform outreach with the results of this field research to stakeholder groups in Michigan's agrifood sector (including both public and private actors) in order to derive strategic positioning implications for Michigan's agrifood industry; those implications include understanding the challenges and opportunities implied by the observed trends, and thinking through potential strategic business responses to the trends.
Project Methods
The first element of the approach is to undertake field research and analysis, primarily in Asia and secondarily in Latin America, on horticultural supply chains (from input suppliers to farmers to wholesalers to processors or packers to retailers to consumers), both in terms of understanding the structure and behavior of each segment, and to understand the institutions and organization of the links in the supply chain. This research takes place through case studies, small sample quasi-structured interviews, and large sample structured interviews/surveys. The second element of the approach is to derive from the results of this empirical applied research the specific implications for Michigan horticulture sector actors, in terms of challenges, such as potential and realized competition, and of opportunities, in terms of potential markets for Michigan products and services. The third approach is to disseminate this information via journal articles, briefs, bulletins, speeches and seminars, and discussions with individual groups and businesses as well as government and NGO entities.

Progress 09/01/07 to 08/31/12

Outputs
OUTPUTS: The key outputs in 2008 include, first, research on Asian horticultural economies and markets (India, Indonesia, and the Philippines); second, dissemination of the results from 2008 research and prior research to US audiences in general, and Michigan audiences in particular, in 2008; third, speeches and other interactions I undertook in foreign countries that were, inter alia, the occasion of strategic learning by me to pass along to US stakeholders; fourth, dissemination to undergraduates at Michigan State University of insights on Asian produce markets (and other food markets in Eastern Europe, Latin America, and Asia) to form future generation of leaders; fifth, I put in substantial effort as coordinator from April through September to organize an event joint between Michigan State University and Michigan Agribusiness Association as an outlook workshop on international markets slated for October 1. It turned out finally that for practical reasons the workshop did not occur and was postponed. PARTICIPANTS: The main collaborator in the overall Asia work is the International Food Policy Research Institute, New Delhi Office in India. The Department of Agricultural, Food, and Resource Economics at Michigan State University has a long-term Joint Program on "Markets in Asia" with IFPRI. The main collaborator in the Indonesia work in Indonesia is the University of Padjajaran. The main collaborator in the Philippines work is the University of the Philippines at Diliman. The main collaborator in the China work is the Chinese Academy of Sciences. Students and faculty from the universities noted above, and graduate students at Michigan State University, were trained in these collaborative projects. TARGET AUDIENCES: The target audiences include the following: first, Michigan food and agribusiness companies, commodity groups, and Michigan government and extension; second, United States agrifood companies, commodity groups, and USDA; third, US and foreign academia, donors, foundations; fifth, collaborator countries research organizations and farmers and agribusinesses. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
The research was disseminated to particular businesses as well as general audiences. Several impacts are noted. First, I was able to "matchmake" a large Indian retailer/agribusiness with a key Michigan firm; this opportunity arose from having close contacts with both through the research and outreach activities. Second, my research results were widely discussed and used in strategic thinking by industry in US fora and in key industry communications such as the Perishable Pundit. Third, the research results and observational insights are made known through direct contacts with key Michigan produce companies during 2008 as well as via the speeches and writings, and they use the insights in their strategic thinking.

Publications

  • Berdegue, JA and Reardon, T. 2008. "The Retail-Led Transformation of Agrifood Systems," In CR Farnworth, J Jiggins, and EV Thomas (editors), Creating Food Futures: Trade, Ethics and the Environment. London: Aldershot: Gower. 11-26.
  • Berdegue, JA and Reardon, T. 2008. "Impacts of the Supermarket Revolution and the Policy and Strategic Responses," In CR Farnworth, J Jiggins, and EV Thomas (editors), Creating Food Futures: Trade, Ethics and the Environment. London: Aldershot: Gower. 149-162.
  • Gulati, A., T. Reardon, K. Gangly, and Gupta, K. 2008. "Transforming agrifood systems: role of organized retail in India," Keynote Address, The First Annual Conference of the Indian Society of Agribusiness Management on Emerging Trends in Agribusiness Management. Indian Agricultural Sciences, Bangalore, 25-27 September.
  • Reardon, T. 2008. "Promoting Food Security for the Poor by Developing the Agrifood System, with Implications for the Role of the Modern Private Sector," Brief Prepared for the World Economic Forum's New Vision for Agriculture: Planning Meeting New York City, 23 September 2008
  • Gulati, A., T. Reardon, and Gupta, K. 2008. Private-Sector "Rural Business Hubs": "Getting Rural Services Moving" to Small Farmers in India. Report to the Bill and Melinda Gates Foundation, July.
  • Gulati, A. and Reardon, T. 2008. "The Challenges and Opportunities of Agro-industrial Development in Asia-Pacific: Promoting "Competitiveness with Inclusiveness" and "Customized Competitiveness"", IFPRI/MSU Joint Program "Markets in Asia" Brief presented 11 April 2008 at Global Agro-Industries Forum, co-organized by FAO, UNIDO, and IFAD, Delhi.
  • Reardon, T. and Gulati, A. 2008. The Rise of Supermarkets and Their Development Implications: International Experience Relevant for India. IFPRI Discussion Paper 007, February. Washington: IFPRI.
  • Davis, B., Winters, P., Reardon, T., and Stamoulis, K. 2008. "Rural Nonfarm Employment and Farming: Household-level Linkages," Agricultural Economics (Accepted December 10, 2008, forthcoming).
  • Reardon, T., Barrett, C.B., Berdegue, J.A., and Swinnen, J. 2008. "Agrifood Industry Transformation and Farmers in Developing Countries", World Development. (accepted September 2008, forthcoming).
  • Wang, H., Dong, X., Rozelle, S., Huang, J., and Reardon, T. 2008. "Producing and Procuring Horticultural Crops with Chinese Characteristics: The Case of Northern China," World Development (Accepted September 2008, forthcoming).
  • Haggblade, S., Hazell, PBR, and Reardon, T. 2008. "The Rural Nonfarm Economy: Prospects for Growth and Poverty Reduction," World Development (Accepted July 2008, forthcoming).
  • Neven, D., Odera, M., Reardon, T., and Wang, H. 2008. "Kenyan Supermarkets and Emerging Middle-Class Horticultural Farmers, and Employment Impacts on Rural Poor," World Development (accepted September 2008, forthcoming).
  • Minten, B. and Reardon, T. 2008. "Food Prices, Quality, and Quality's Pricing in Supermarkets vs Traditional Markets in Developing Countries," Review of Agricultural Economics. 30(3), Fall: 480-490.
  • Reardon, T. 2008. "Pundit's Mailbag - Labor Shortages And Globalization Will Soon Lead To Mechanical Harvesting," Jim Prevor's Perishable Pundit, www.perishablepundit.com, August 28.
  • Gulati, A. and Reardon, T. 2008. "Organised retail and food price inflation - Opening the `Black Box'" Hindu Business Line, May 24.
  • Reardon, T., Timmer, C.P., Berdegue, J.A. 2008. "The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional and Technological Change in Agri-Food Systems," in McCullough, EB, PL Pingali, KG Stamoulis (eds.) The Transformation of Agri-Food Systems: Globalization, Supply Chains and Smallholder Farmers. Earthscan. 47-66.
  • Neven, D. and Reardon, T. 2008. "Rapid Rise of Kenyan Supermarkets: Impacts on the Fruit and Vegetable Supply System," in McCullough, EB, PL Pingali, KG Stamoulis (eds.) The Transformation of Agri-Food Systems: Globalization, Supply Chains and Smallholder Farmers. Earthscan. 189-206.


Progress 01/01/07 to 12/31/07

Outputs
OUTPUTS: 1. Activities (includes conducting and analyzing experiments or surveys; teaching; mentoring) a) Conducted survey of fruit and vegetable wholesale markets in India and survey of supermarkets with respect to their fruit and vegetable procurement and retail practices, under the IFPRI-MSU Joint Program "Markets in Asia" launched March 2007. b) Competed for and won and set up project from Asian Development Bank for survey of fruit and vegetable wholesale markets, supermarkets, and growers in Philippines. The project started November 2007. The survey work starts in 2008. The project is in collaboration with the University of the Philippines. c) Competed for and won and set up project from USAID for survey of fruit and vegetable wholesale markets, supermarkets, and fruit and vegetable growers in Nicaragua and Indonesia. The project started in April 2007, with initial fieldwork in Nicaragua in November/December 2007, and continuing surveys in the two countries thereafter. The collaborating institutions are Padjadjaran University Indonesia and Central American University Nicaragua. d) Undertook survey of dry bean and plantain supply chains and cooperatives in Nicaragua, funded by CIAT (The International Tropical Agriculture Center). e)Teaching: I teach the upper level undergraduate course "Global Agrifood Markets" is to 70 undergraduates and focuses on global markets in horticulture, inter alia. I bring in agribusiness speakers from around the state (and beyond) and present the findings of my ongoing work in Asia and Latin America. The students include many that go on to be involved in Michigan horticultural sector. f) Mentoring: I supervise graduate students as well. One is working on horticulture markets in Central America. The other on the same in China. Their doctoral work provides information for my MAES project. 2. Events (include conferences, symposia, workshops). Organizer and Keynote at international workshop (at the International Agricultural Trade Research Consortium (IATRC) meetings in Beijing) on "Emerging links between Modern retail and trade in Asia", July 8/9, 2007 3. Services (consulting, counseling, teaching, mentoring) The "consulting" may be considered to include the MSU projects that I note above, that support the field portion of my work. 4. Dissemination I had given seven talks to Michigan horticulture industry from 2002 to 2006 on emerging markets and supermarkets. But the first year (2007) of my MAES project I mainly gave talks outside Michigan although some included Michigan stakeholders, such as the talks to the Produce Marketing Association, the largest produce association in the world, with many Michigan members. I also had a number of communications directly with Michigan industry persons through my undergraduate course (see above) that features Michigan agribusiness speakers; we meet before each class at which one of the agribusiness speakers speaks, and we discuss insights from my work in international markets. I also regularly email my work and specific messages about Asian markets to Michigan contacts. I will systematize that in 2008. Finally, I gave 8 talks to international audiences on the work. PARTICIPANTS: At Michigan State University, there are two doctoral students involved: Honglin Wang (China work) and Ricardo Hernandez (Central America work). The Indonesian work is in collaboration with University of Padjadjaran, Bandung. The collaborator is Professor Ronnie Natawidjaja. The Philippines work is in collaboration with University of Philippines. The collaborator is Professor Larry Digal, UP Mindanao. The India work is in collaboration with the International Food Policy Research Institute (IFPRI) with headquarters in Washington DC and Asia Office in New Delhi India. The collaborator is Ashok Gulati, Asia Director for IFPRI. MSU has a Joint Program on Markets in Asia with IFPRI. The China work is in collaboration with the Chinese Center for Agricultural Policy, in Beijing. The collaborator is Jikun Huang. The Nicaragua work is in collaboration with Central American University. The collabor is Francisco Perez. TARGET AUDIENCES: The first target audience is the Michigan horticultural industry with interest in understanding market developments in Asia and Latin America. The second target audience is the US horticultural industry with the same interest. The third target audience is the donor and government community both in the US and in developing regions. The fourth target audience is global academia, via journal articles and professional engagement. PROJECT MODIFICATIONS: There are no major changes in approach from the original proposal.

Impacts
The main findings of the work are in a-d as follows. a)The Huge Opportunity in the Emerging Markets. There is a "new," and massive produce market that is emerging, which we can call the "Emerging Markets": the regions of Asia outside Japan, Latin America, and Central & Eastern Europe, some 4.5 billion consumers. b) The Supermarket Revolution in the Emerging Markets. A "supermarket revolution" in developing countries took off in the early/mid-1990s. c) Procurement System Modernization by Supermarkets in Emerging Markets. The first procurement modernization trend in Emerging Markets is procurement re-organization with shift to national, regional, and global sourcing networks. The second procurement modernization trend in Emerging Markets is the emergence of private standards. The conditions of underdeveloped and under-implemented quality and safety standards in the traditional market and supply chains are both a problem and an opportunity for supermarket chains in Emerging Markets. The third trend in procurement system modernization in Emerging Markets is the emergence of direct buying and specialized/dedicated wholesalers. d) Implications for the Produce Industry. The "supermarket revolution" represents a motor of produce market development in Emerging Markets, and a way to access a billion middle class consumers. However, there are substantial challenges for the produce industry. These challenges include consolidation ofthe market and higher demands than the traditional markets. These can be most difficult for traditional wholesalers and producers. But the growth of imports from other Emerging Markets will also pose a strong competitive challenge to developed country suppliers working to market to these Emerging Market supermarkets. I believe that there is ample evidence to show that the above findings, set before producers and commodity associations in the US and foreign countries, have had a major impact on thinking in the produce industry. As a key indicator that this has gone "top of mind" for the produce industry, I note that the above work was featured in two speeches (only 4% of the speakers at this convention do two speeches over the past several decades) at the Produce Marketing Association Fresh Summit in October 2007, arguably the "main event" in the produce industry in the US. The work was also published in December and disseminated to members. Moreover, the CIES Food Business Forum (the most important food industry association in the world, being global in scope) also summarized my work for its members worldwide in its bulletin to members (the top 500 food industry companies in the world). It is difficult to assess empirically how this has affected business in Michigan or in the US in general. I believe that this impact will develop over time as businesses consider how to avail themselves of the new opportunities to which my work points.

Publications

  • Minten, B. and T. Reardon. In Press. "Food Prices, Quality, and Quality's Pricing in Supermarkets versus Traditional Markets in Developing Countries," Review of Agricultural Economics. Accepted December 2007.
  • Neven, D., M. Odera, T. Reardon, and H. Wang. In Press. Kenyan Supermarkets and Emerging Middle-Class Horticultural Farmers. World Development. Forthcoming, accepted November 2007.
  • Wang, H., X. Dong, S. Rozelle, J. Huang, and T. Reardon. In press. "Producing and Procuring Horticultural Crops with Chinese Characteristics: The Case of Northern China", World Development, forthcoming, accepted August 2007.
  • Mainville, D.Y and T. Reardon. 2007. "Supermarket Market-Channel Participation and Technology Decisions of Horticultural Producers in Brazil," Revista de Economia Rural (the journal of SOBER: Sociedade Brasileira de Economia e Sociologia Rural (The Brazilian Association of Rural Economics and Sociology)), 45(3), July-September.
  • Reardon, T., S. Henson, and J. Berdegue. 2007. Proactive Fast-Tracking Diffusion of Supermarkets in Developing Countries: Implications for Market Institutions and Trade," Journal of Economic Geography 7(4): 1-33.
  • Hernandez, R., T. Reardon, and J.A. Berdegue. 2007. "Supermarkets, Wholesalers, and Tomato Growers in Guatemala," Agricultural Economics, 36(3), May: 281-290.
  • Reardon, T. and C.P. Timmer. 2007. "The Rise of Supermarkets in the Global Food System," chapter 6 in J. von Braun (editor) Globalization of Food and Agriculture, and the Poor. Johns Hopkins University Press.
  • Reardon, T. and C.P. Timmer. 2007. "Transformation of Markets for Agricultural Output in Developing Countries Since 1950: How Has Thinking Changed?" chapter 55 in R.E. Evenson, and P. Pingali. Handbook of Agricultural Economics, 3: Agricultural Development: Farmers, Farm Production and Farm Markets. Amsterdam: Elsevier Press: 2808-2855.
  • Reardon, T. and C.P. Timmer. 2007. "The Supermarket Revolution with Asian Characteristics," chapter in by A.M. Balisacan and N. Fuwa (editors) Reasserting the Rural Development Agenda: Lessons Learned and Emerging Challenges in Asia, Singapore: Institute of Southeast Asian Studies, and Southeast Asian Regional Center for Graduate Study and Research in Agriculture.
  • Reardon, T., S. Henson, and A. Gulati. 2007. "Supermarkets and Food Consumption and Safety in Developing Countries," Paper presented at international conference "Trade and Healthy Diets", organized by WHO, McGill, Government of Canada, Montreal, McGill University, 12-13 November.
  • Reardon, T. 2007. The Supermarket Revolution in Emerging Markets: Implications for the Produce Industry. Report prepared for and published by the Produce Marketing Association (PMA). December.
  • Gulati, A. and T. Reardon. 2007. "Connecting Small Producers to Food Industry Companies in Asia: Promoting "Competitiveness with Inclusiveness"", Brief for the IFPRI International Conference in Beijing (Oct 17-19 2007) "Taking Action for the World's Poor and Hungry People," Session: Asia: New Strategies, Actions, and Ways Forward to End Extreme Poverty and Hunger in Main Developing Regions.
  • Gulati, A. and T. Reardon. 2007. Asian Food Market Transformation: Policy Challenges to promote "Competitiveness with Inclusiveness" Brief presented at Asian Development Bank Conference, Brief from IFPRI/MSU Joint Program "Markets in Asia", August.
  • Reardon, T. and A. Gulati. 2007. The Rise of Supermarkets and their Development Implications - the International Experience Relevant for India. Report from the IFPRI/MSU Program on "Markets in Asia", prepared collaboratively for ICRIER and included as chapter in the ICRIER final report on "The Impact of Organized Retailing on the Unorganized Retail Sector" commissioned by the Government of India. October.
  • Natawidjaja, R., T. Reardon., and S. Shetty, with T.I. Noor, T. Perdana, E. Rasmikayati, S. Bachri, and R. Hernandez. 2007. Horticultural Producers and Supermarket Development in Indonesia. UNPAD/MSU Report no. 38543, published by the World Bank/Indonesia, June.
  • Phan, T.G.T and T. Reardon. 2007. Urban Consumer Preferences for Poultry from Supermarkets versus Traditional Retailers in the Era of Avian Influenza in Ho Chi Minh City, Vietnam. Report to USAID and Paper published in the FAO/MARD Proceedings of the Workshop "The Future of Poultry Farmers in Vietnam after Highly Pathogenic Avian Influenza" held on 8-9 March, Hanoi.
  • Reardon, T. J.A. Berdegue, F. Echanove, R. Cook, N. Tucker, A. Martinez, R. Medina, M. Aguirre, R. Hernandez, F. Balsevich. 2007. Supermarkets and Horticultural Development in Mexico: Synthesis of Findings and Recommendations to USAID and GOM, Report submitted by MSU to USAID/Mexico and USDA/Washington, August.
  • Reardon, T. and J.A. Berdegue. 2007. The Retail-Led Transformation of Agrifood Systems and its Implications for Development Policies - A Background Paper Prepared for the World Bank's World Development Report 2008: Agriculture for Development. Rimisp and MSU: January.