1. Climate Change and Developing Country Food Supply Chains
Tom Reardon and David Zilberman
ICABR, May 31, 2017

2. 1. Debate on climate on the food sector
Has focused on farm sector impacts
Impacts on food supply chains relatively neglected
That neglect would be OK if situation was years ago
… farms mainly subsistence
… food security issue main rural (little urbanization)

3. 2. Transformation of the agrifood system in developing countries
But agrifood systems have deeply changed in the past 2 decades
Urban market now the majority of food in developing countries
Rural households buy the majority of their food
Grains only a third of diets
Supermarkets and large processors important
Trade has grown a lot
60% of food costs are from post-farmgate in the supply chain
 Food supply chains now massively important to rural households and national food security

4. 3. Climate impacts on supply chains literature is limited in scope
Current (scant) literature takes passive, “engineering” approach: resilience post farm gate
By contrast, we argue should take an “active” “business strategy” approach:
… business strategies of procurement and marketing increasingly determine supply chain design
… and business decisions will heavily influence how climate impacts farmers and the food system
… decisions from where, from whom, how to source

5. 4. Climate shock on supply chains: scenario
Short term shocks (floods)
Long term heat and drought or humidity increase
Long term increase in risk/variability

6. 5. Impact on food Buying firms’ side (or input suppliers side)
Effect on buyers mediated by their incentives and capacities
5.1. Incentives
Reduce costs and risks: overall objective
Longer supply chain, more vulnerable
More quality/consistency demanding, more vulnerable
 Paradox: bigger & more modern more vulnerable and have more incentive to find supply chain solution when supply zones are climate-shocked

7. 5.2. The capacity side:
Diversified in zone sources already (examples, grain firms, citrus companies)
Access to modern logistics segment to help rapid adjustment (follow sourcing, Brazil)
Capable of resource provision contracts with farmers or intermediaries (Chile example)
Capable of direct supply zone and supply chain investments to mitigate shock or change (again, Thailand CP example)

8. 5.3. Upshot is amplification of concentration trends in agribusiness and food industry … with the paradox that the modern firms are more vulnerable but have greater capacity to adjust procurement systems geographically and technologically

9. 6. Impacts on farmers (supply side)
Farmers hit by double vulnerability:
… to agriculture
… to supply chains to and from farmers (transaction costs, “strand zone”)
b) Double need for adaptability
… for agriculture technology & crop composition to adapt
… but also still meet quality/consistency/volume demanded by supply chains

10. c) Buyer (or input supplier) has already diversified over zones to manage cost and “shorts” risk … but still needs minimum volume and quality … so faces a choice of where and from whom to source .. And how

11. d) Buyer faces three types of zones (and farmer asset groups within zones) … low vulnerability (to climate change) zone … high vulnerability but high adaptability … high vulnerability but low adaptability e) Note that zone vulnerability and adaptability area both double sense: … on-farm … post-farmgate

12. f) Buyer who wants to maximize profit and minimize risk has these options:  resolve asset failure or idiosyncratic market failure of zone (Rabobank/Indonesia & CP/Thailand examples)  abandon the vulnerable/risky or non-adaptable zone/farms

13. g) Upshot is double impact on poor zones/farms … poor zone gets poorer … amplifies concentration in the farm sector (“Piketty” effect)  supply chain context magnify impacts on farms of climate change

14. 7. Conclusions Supply chain perspective on climate impacts:
Predicts amplified impact on most vulnerable zones
Analyzes business strategies to adapt supply chains
Of which one option is to increase the vulnerability of hinterland zones
With acceleration of concentration on demand and supply sides