1. FOOD SUPPLY CHAINS AND COMPETITION ISSUES Paolo Buccirossi St Petersburg 18 May 2016

2. Outline  Structure of the supply chain and market power  Factors that affect concentration  Competition issues

3. Structure of the food supply chain InputsPrimary Production Processing/ Manufacturing Retailing ProductsSeeds, fertilizers, crop protection Grains, fruit and vegetables, meat, diary Bakery, meat, diary, snacks, ready meals, beverages Various retail services (e.g. corner shops, supermarkets, discounters) Geographic markets SupranationalLocal, national, supranational National, supranational Local, national Degree of concentration Moderate-HighLowHighLow-High

4. Determinants of concentration – Inputs  In the crop seed sector and agricultural biotechnology, the CR4 increased from 21.1% in 1994 to 53.9% in 2009 (Fuglie et al 2011)  In the Agricultural chemical sector the CR4 increased from 28.5% in 1994 to 53.0% in 2009 (Fuglie et al 2011)  Endogenous Sunk Costs (Sutton, 1998)  Anderson and Sheld (2013) find that in the markets for GM corn, cotton, and soybean seeds endogenous R&D investments are mainly responsible for concentration

5. Determinants of concentration – Manufacturing – 1

6. Determinants of concentration – Manufacturing – 2

7. Determinants of concentration – Manufacturing – 3  Product differentiation  Endogenous sunk costs: brands  Economies of scale  Bargaining power

8. Determinants of concentration – Retailing – 1

9. Determinants of concentration – Retailing – 2  Endogenous sunk costs: variety  Economies of scale  Bargaining (buyer) power

10. Competitive concerns – 1  Across the board: Price transmission

11. Competitive concerns – 2  Inputs  Market (Seller) power  IPRs as barriers to entry  Innovation  Primary production  Distortive State interventions  Manufacturing  Unilateral effects  Retailing  Market power both downstream and upstream

12. Competitive concerns – 3  Distributional effects  Distribution as an efficiency (growth) driver Competition policy vs. fiscal policy  Distribution (vs. efficiency) as the appropriate standard for competition law enforcement (in agribusiness) Competition policy vs. sector regulation  Unequal bargaining power as the source of allocative inefficiency