Growth in high-value agriculture in Asia and the emergence of vertical links with farmers

Type Conference Paper - “Linking Small-Scale Producers to Markets: Old and New Challenges” The World Bank, 15 December 2005
Title Growth in high-value agriculture in Asia and the emergence of vertical links with farmers
Publication (Day/Month/Year) 2007
Throughout the developing world, the relative importance of grains and other starchy staple crops
is declining, while that of high-value agricultural commodities is increasing. High-value agricultural
goods are generally defined as agricultural goods with a high economic value per kilogram, per hectare,
or per calorie, including fruits, vegetables, meat, eggs, milk, and fish1
. This transformation of the
agricultural sector has profound effects on the nature of agricultural supply channels, the opportunities for
small farmers, and the role of public policy and investment. In particular, the growth in high-value
agriculture implies a greater need for close linkages between farmers, processors, traders, and retailers to
coordinate supply and demand. Examples of institutions for vertical coordination of agricultural supply
channels include grades and standards, price information services, inspection and certification services,
contract farming, farmer cooperatives, professional associations, and vertical integration2
The growth of high-value agriculture, the development of institutions for vertical coordination,
and other structural changes in agricultural supply channels present both opportunities and challenges for
small farmers in developing countries. They create opportunities for small farmers to raise their income
by participating in the growing markets for high-value agricultural commodities. At the same time, the
changes pose challenges to small farmers because high-value agricultural commodities often involve
higher costs of production and greater production and marketing risk. Vertical linkages between farmers
and buyers can serve to overcome these obstacles, but in some cases buyers decide small farmers cannot
satisfy new demands from consumers for quality and food safety, leading to the exclusion of these
farmers from supply chains. These trends raise new issues for policymakers who wish to promote propoor
agricultural growth.
This transformation has been called a “silent revolution,” inviting comparison with the Green
Revolution of the 1960s and 1970s. Although both represent a significant shift in the patterns of
agricultural production, the causal factors are quite different. The Green Revolution was driven by
technological innovation, namely the development of high-yielding varieties of rice and wheat,
particularly in Asia and Latin America. In contrast, the current restructuring of the agricultural sector is
driven not by supply factors but by shifts in consumer demand, both domestic and international. Giventhat the transformation is demand-led, it is important to understand the source of these changes in food
demand (Delgado, 1999).

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