“Private Standards in Developed Countries: Implications for Small Producers in Developing Countries ” MSc. International Agribusiness. Fresh Fruits and Vegetables Seminar. May, SS Supervisor M.Sc Linde Göetz. Cristóbal Urrutia Hoppe.

Overview 1.Introduction 2.Concepts 3.Framework for Analysis 4.Study Cases 5.Conclusions

Introduction Cadbury is set to be prosecuted under environmental health laws after the company allegedly released chocolate for sale that was contaminated with salmonella, (The Guardian, 2007). The demand of high quality fresh vegetable products has increased considerably during the last time mainly because of: –Increasing concern of the consumers due to safety issues. –Changes in preferences. Demand for this products is concentrated in: –Developed countries. –Urban zones of developing countries. Implications of high quality standards on small producers in developing countries ?

Concepts 1.Compliance Costs: Defined as the additional costs necessary incurred by the government and/or private enterprises in meeting the requirements to comply with a given standard in a given external market. 2.Recurring Costs: Time constant and are associated with costs that must incur in order to maintain certain level / standard. 3.Non Recurring Costs: Once time investment, or also called fix, costs e.g to upgrade a facility or investing on equipment. Usually these costs are associated with economies of scale due to their “lumpiness”.

Concepts Source: Jaffe et all, 2005.

Framework for Analysis Source: Chemnitz C., 2007

Study Cases Madagascar (Minten et all, 2006) Smallhoders (10.000) Lecofruit (Export Company) EU Retailers Products Contracts Credit & Inputs Monitoring & Supervising Contracts

Study Cases Madagascar (Minten et all, 2006)

Study Cases Kenya (Asfaw et all, 2007) Producers Small-Med-Large (12.000) Compliance Non – Compliance Recurrent Costs Local Markets EU RetailersEurepGAP

Study Cases Kenya (Asfaw et all, 2007)

Study Cases - Benefits Market AccessPrices and IncomeSpillover Effects Kenya (Asfaw et all, 2007) UK Large Retailers (Sainsbury´s, Tesco, Safeway....) Best prices Timely payments Improved bargaining Productivity increase Workers state health better protected (Hygiene, Pesticide storage) Madagascar (Minten et all, 2006) European supermarkets and restaurants (France, Belgium, Netherlands) Higher price than local market Reduction of the length of the lean period Increase income due to contract farming Increase productivity Compost and weeding; positive use for secondary crops

Study Cases - Costs Non RecurringRecurring Kenya (Asfaw et all, 2007) KSh Buildings, facilities & implementation KSh Protective clothing, record keeping..... Madagascar (Minten et all, 2006) Assumed by export company

Study Cases – Supply Chain Integration Kenya (Asfaw et all, 2007) Medium – Large farms, vertical integration Small farms, little support of downstream actors Madagascar (Minten et all, 2006) Small farms supported by downstream actors (credit, extension and modern input access)

Conclusions Increasing quality food standards affects small producers of developing countries. Based on the available information and empirical cases it is fair to say that quality standards can either benefit or be a detriment for small producers welfare. Different starting points on which the industry is, the capacity of the institutions and the available infrastructure will determine the above.

Conclusions The observed benefits of higher quality food standards on the producer side, are: -Higher product prices and market access, being these the main motivation for compliance. -Secondary benefits are spillover effect over other crops, or on local consumption due to higher income levels. Compliance costs can be an obstacle specially for very small producers, but there are ways to overcome it, associability and integration with down – up stream actor on the supply chain appears to be key on those cases even tough it is not the general rule.

References Asfaw, S.; D. Mithofer and H. Waibel (2007) What Impact Are EU Supermarket Standards Having on Developing Countries Export of High-Value Horticultural Products? Evidence from Kenya, Contributed Paper, 105th EAAE Seminar. Chemnitz, Christine (2007): The Compliance Process of Food Quality Standards on Primary Producer Level: A Case Studie of the EUREPGAP Standard in the Moroccan Tomato Sector. Working Paper 81, Humboldt University Berlin, Institute for Agricultural Economics and Social Sciences. Jaffee, S. van der Meer, K. Henson, S. de Haan, C. Sewadeh, M. Ignacio, L. Lamb, J. Bergovoy, M. (2005) : “Food Food Safety and Agricultural Health Standards: Challenges and Opportunities for Developing Country Exports” Poverty Reduction & Economic Management Trade Unit and Agriculture and Rural Development Department. Report N° Minten, B., Randrianarison, L., Swinnen, J., (2006), “Global Retail Chains and Poor Farmers: Evidence from Madagascar”, LICOS Discussion Papers 164/2006, Leuven, Belgium. The Guardian Newspaper.

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