Millet, Myrrh and Manchester United: Markets for Development, Lessons from Practice - Wednesday 10 June 2015
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Millet, Myrrh and Manchester United: Markets for Development, Lessons from Practice Wednesday 10 June 2015 Professor Ben Bennett Inaugural Professorial Lecture Series
MILLET, MYRRH, AND MANCHESTER UNITED:
MARKETS FOR DEVELOPMENT, LESSONS
FROM PRACTICE
by
Ben Bennett
Natural Resources Institute, University of Greenwich
An Inaugural Professorial Lecture
delivered at the University of Greenwich
Wednesday 10 June 2015
© University of Greenwich 2015 All rights reserved. Except as permitted under current legislation, no part of this work may be photocopied, stored in a retrieval system, published, adapted, transmitted, recorded or reproduced in any form or by any means, without the prior permission of the copyright owner. Enquiries should be addressed to the University of Greenwich. Cover image: Dave Cole University of Greenwich, a charity and company limited by guarantee, registered in England (reg. no. 986729). Registered Office: Old Royal Naval College, Park Row, Greenwich, London SE10 9LS
FOREWARD
“My greatest challenge is not what’s happening at the moment,
my greatest challenge was knocking Liverpool right off their perch.”
Sir Alex Ferguson
Manchester United has, on more than one occasion, saved
my bacon. Football is a nearly universal language. It shuns
elitism (unless you are a player). From the most remote island to
the tiniest outpost of agriculture I have managed to find a ‘Man
U’ fan (or at least somebody who wants an argument with one).
They say that there are more Manchester United fans in London
than Manchester – well, there are certainly more in Nigeria than both put together!
What this illustrates is the universality and influence of brands, the richness of sports
allegiances and the power of individuals to set global aspirations. And aspirations
are what markets are all about. The poorest 10% of the world’s population aspire to
be like David Beckham, or at least to be as healthy as he is. The job of a marketing
economist is to oil the wheels between those that produce and aspire to have a
reasonable life, and those that consume and want their needs fulfilled.
When you pick up those French Beans in a supermarket or look at the label
of your chocolate bar, consider this: there is a chain of actors, actions and
consequences that has ended in that product; real people with real lives whose future
depends upon a fraction of that value having returned to them. The security and scale
of that value is increasingly important in a world of free trade and open competition.
The consequence of your decision to buy or not to buy is probably much more
important than you think; even more important than Manchester United.
SHORTCOMINGS
“That lad must have been born offside.”
Sir Alex Ferguson on Italian footballer Filippo Inzaghi
Reviewing my work for this lecture over the past 25 years I was astonished by its
range and scope. Tropical commodities are many and you can do a lot of different
things with them. For example, I have done a lot of work on marketing of coconuts
and fish in South East Asia. In the rural Philippines, my efforts to develop Market
Information Systems and ‘Marketing Farmer Field Schools’ are not included. Other
absences are work on integrated local market development schemes, efforts to
develop food oil processing sectors in Tanzania and Indonesia, and, more recently,
mobile phone applications for marketing. I have also been privileged to support a
number of efforts to support the use of intellectual property as a means to upgrade
value chains, particularly for natural products, and this work is omitted. Inevitably,
any ‘expert’ in my field, is called upon to judge the work of others through
evaluation, and I have done a lot of this and seen some wonderful work. This is not
covered here.
The nature of research at the Natural Resources Institute is that it is
collaborative, so other scientists or social scientists led the projects I was asked
to work on. The advantage was that this diversity provided me with ideas and
inspiration.
Notwithstanding, any errors, omissions, opinions and quirks in what follows are
my responsibility alone.
CONTENTS Introduction 2 Practical problems with markets: their measurement and resolution 12 Quality control, management and food safety 19 Bringing economics to bear: matching science with social science for greater development impact 21 Marketing the impossible – some things are simply hard to sell 24 Is international market access the solution to driving demand in developing countries: lessons from trade negotiation? 27 Natural product value chains, embedded value and value chain governance – millet, myrrh and innovation systems for market development 29 Issues for the future of agriculture and trade 38 And what of Manchester United? What lessons are there for agricultural market development and practitioners in developing countries? 39 Acknowledgements 41 References 42
2 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
INTRODUCTION
“I’m going to tell you the story about the geese which fly 5,000 miles from Canada to
France. They fly in V-formation but the second ones don’t fly. They’re the subs for the first
ones. And then the second ones take over - so it’s teamwork.”
Sir Alex Ferguson explaining teamwork to goal keeper Fabian Bartez
In 1987, as young economist working at the Overseas Development Administration
(now the Department for International Development, DFID) I was invited to join the
Economist Cadre in a meeting with Robert Chambers whose seminal work on new
and more participatory ways of understanding rural economies (Chambers R, 1983,
1997) was just coming out. I had lived in rural Northern Nigeria in the early 1980s and
I found Chambers’ inversion of the way the world was viewed by donors inspiring. He
took a map of the world, pasted it on the wall of the Minister’s Board Room upside
down and asked the small audience of Senior Economist “what’s wrong with this”?
He was, of course, making a rather trite point about perception which he would follow
up with a scathing attack on the audience for ‘not leaving their Landovers’ and ‘not
seeing beyond the roads when understanding the problems of the rural poor’. The Chief
Economist had obviously partaken of a liquid lunch and did not enjoy being patronised:
he lambasted Chambers. But it left a lasting impression on me and made me reconsider
my worldview. Two years later, I was at the Natural Resources Institute and trying
to persuade scientists that there was a different way of seeing their work: from the
perspective of the invisible rural poor, through the lens of business economics and as
innovations driven by market actors, like traders and brokers, who had hitherto also
been unseen.
This story then, is about a range of approaches and methods, applied to an
assortment of commodities, that have become, over the past 25 years, central to
development thinking and practice to the point where understanding markets and basic
business economics is the normal starting point of development interventions and not
an adjunct used to explain why things did not work.
In this paper I want to review how these changes to practice have come about.
We will consider the application of tools to understand markets and their actors; micro
businesses and their dynamics, commodities and their market drivers; and we will look
at these issues through a great many worked example from the weird and wonderful
world of tropical commodities that kept me enthralled all this time.
OUTLINE AND SCOPE
The methods and approach to understanding agricultural markets and natural
resources businesses in developing countries have, broadly, been through three
phases of development during the past 25 years. Firstly, emerging from the post-
colonial, Fordist, neo-Marxist development economics of the 1960s and 1970s many
countries had agricultural policies aimed at moving towards an industrialised economy.
To achieve this, policies of import substitution, heavy state intervention and ‘market
management’ were implemented almost universally. Countries adopted grain marketing
boards, paid pan-territorial prices and ignored any concept of comparative advantage.
1
The World Bank and International Monetary Fund
Professor Ben Bennett 3
Secondly, in the 1980s, this approach was failing and countries were being forced to
accept a new, reality where the Bretton Woods institutions1 forced the withering away
of state. For marketing economists working in development, this was a period where
the giant agro-processing plants and massive grain silos fell into disuse. The problem
with the Washington Consensus2 and its aftermath for rural farmers was that it left
a vacuum which was not filled by the private sector until much later when urban
markets started to evolve at scale (Williamson, 1990).
The fault lines of geopolitics (a method of studying foreign policy to understand,
explain and predict international political behaviour through geographical variables)
were beginning to have a profound impact on the global agricultural economy. With
the collapse of communism and with it any passing semblance of faith in the ability
of states to ‘manage’ rural economies, new possibilities emerged driven by free trade
and market access. It had become clear that wrong policies resulted in market failure3
and this was now the focus of our attention. Development economists were armed
with participatory and ‘bottom-up’ approaches (Chambers, ibid.) and were sent
forth to somehow match the desires of the rural sociology departments of Western
Universities (i.e. various livelihoods approaches) with the post-Green Revolution
emphasis on new agricultural productivity paradigms.
Thirdly, a new realisation that productivity without growth, market access and,
crucially, market intermediaries, would not achieve the ambitious aims the world had
set itself (i.e., the Millennium Development Goals). It is hard to believe from a modern
perspective that middlemen (for example traders who buy from producers and sell to
retailers or consumers) were universally blamed for market failure until fairly recently.
Agricultural projects in the 1980s all spoke of by-passing middlemen. Speaking to
fish farmers in Romania in the month after the Revolution of 1989, I found that their
primary fear for the future was that middlemen would emerge who would steal all their
profits. This remains a common misconception even today (Oguoma, 2010).
The result of this intellectual journey and evolution of practice is Global Value
Chain Analysis (Kaplinsky, 2000, Gibbon and Ponte, 2005). Actually, as we shall
see, those of us working in markets in rural developing economies have been doing
value chain analysis for decades, but now we have a name for it and it has become
the norm. The important point about different value chain approaches is that they
map the actors, relationships and values along and across chains or ‘filières’. As a
result, we now have a method that allows us to reveal the detail of markets, shows
us where new possibilities for increasing income might lie and gives us a tool to
measure how our efforts have done. Value chain analysis spoke to the narrative of a
globalised world economy where growth was driven by trade. As we now understand,
this new world trade order was built on a house of cards. Financial markets had not
fundamentally changed, regulation and state governance were not part of the global
financial settlement allowing individual states and corporations to shy away from the
2
his refers to the set of 10 specific economic policies identified by John Williamson in 1989 that form
T
the standard ‘package’ of reforms used by the World Bank and the International Monetary Fund to
reform the economies of developing countries.
3
he sub-optimal allocation of goods and services caused by imperfections in the market mechanism
T
(Bannock, 1992).
4 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
democratic deepening necessary to prevent the most recent global crash. As the
World Bank economist Dani Rodrik has said, “if you want more and better markets,
you have to have more (and better) governance” (2011:xviii)4. Recent thought has
focussed on the high costs of global inequality and information asymmetry and we
have seen a heartening return to calls from more radical reforms based on not more,
but better and fairer intervention (Stiglitz, 2012). These latest insights have important
implications for the way we view value chains in the future: they will certainly become
more diffuse and complex and require new methods for their understanding.
To illustrate these phases of practice in the understanding of markets and trade
and what they might mean for future work in the field, I want to explain the challenges
faced by the rural poor in developing countries in the context of where we are now. I
will then describe a number of different examples from my own practice in the field.
These examples look at the evolution of our approach to agricultural markets in
developing economies through the lens of a series of development challenges and
key development questions that are typically addressed by marketing economists.
WHAT ARE THE MARKETING CHALLENGES FACED BY POOR RURAL
FARMERS AND FISHERS?
In the late 1980s the FAO (Abbott and Makenham, 1990) described a world of
tropical agricultural markets where domestic wages were insufficient for consumers to
buy simple value added goods like milk and where the mainstay of most developing
economies were basic commodities exported unprocessed to lead buyers, largely in
the Western developed economies. Authors talked about agricultural market failure
and the dependency inherent in the structure of agricultural economies with a limited
range of exports (Robbins, 2003), despite efforts to win greater income with fair trade
(Daviron and Ponte, 2005). By the last 1990’s and into the crisis of the 2000’s authors
were trying to explain why the hidden hand of neo-classical economics had failed,
either because we had given economists too much power (Kay, 2003), or not enough.
Even the grand thought leaders of that time seemed to focus on the supply side5 and
ignore markets.
A new, more nuanced, and frankly, more alarming, view on the future of
agricultural production and marketing was emerging6 . This view postulates a world
where populations continue to escalate, resources such water becomes more scarce,
cities grow and consumption switches to higher energy foods like meat and vegetable
oils (Searchinger et al, 2013). Such a world, expected to be populated by 9.6 billion
people by 2050 (UNPD, 2014), will, without radical changes in policy, be increasingly
polarised and large proportions of it will be malnourished and without a voice.
We can describe the future challenges by looking in more detail at population
projections, food price projections, urbanisation and land prices and changes in food
habits. These need to be considered in the context of climate change and the rush for
biofuels, water and hunger and malnourishment.
4
For an understanding of the role of governance in global value chains see Gereffi et al (2005).
5
Sach (2005:283) for example in his rightly lauded seminal work on poverty describes the silver bullet
for agriculture as being seed varieties, water and soil management techniques.
6
See for example Lin (2012) who argues for a more interventionist role for governments in markets.
Professor Ben Bennett 5
POPULATION PROJECTIONS
Estimation of the future population of the world, the effective number of mouths
we will have to feed, varies substantially (see figure 1). Constant fertility projected
from today growth rates gives us an unthinkable 27 billion. Most analysts foresee a
levelling off of fertility, based largely on evidence that there is an inverse relationship
between income and fertility. Women with better education, for example, elect to
have smaller families. Children from small families have better nutritional outcomes
(Schultz, 2005).
Figure 1: World population projections showing different fertility rates, 1950-2100
Source: UN (2014a)
PRICE PROJECTIONS
The long-term trend for food prices is upwards (see Figure 2) and the biggest
element of this increase is the cost of fuel.
URBANISATION AND CHANGING LAND USE
By 2050 the world’s rural population will be static (and old). Most people will
live in cities and depend on a smaller area for farms and fewer people to feed them
(see Figure 3).6 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
Figure 2: Global Food Prices 1960 – 2012
Source: Baffes and Denis, 2013
Figure 3: Historic and projected urban and rural population of the world 1950 - 2050
Source: UN (2014b)
RISING INCOMES, CHANGING EATING HABITS – THE MOVE TO MEAT
The evidence shows that increased income will result in a move away from
traditional foods towards a more Westernised diet based on meat protein
(see Figure 4).
CLIMATE CHANGE
Changes in global weather patterns may impact negatively on crop yields
(see Figure 5).Professor Ben Bennett 7
Figure 4: The relationship between per capita income and meat consumption in
different counties
Source: Delgado et al, 1999.
Figure 5: Frequency distribution of the projected mean yield change for Africa and
South Asia to 2100
Source: Knox et al, 2012
Knox et al (2012) show that, in Africa, the crops with significant projected yield
reductions include wheat (−17%), maize (−5%), sorghum (−15%) and millet (−10%).
However, in S. Asia, of the crops reported, only maize (−16%) and sorghum (−11%)
are projected to have significant yield reductions. It is notable that cassava yield
variation was considered not statistically significant suggesting a degree of useful
resilience.8 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
THE RUSH TO BIOFUELS
As farmers convert their land to the production of feedstock for carbon neutral
biofuels food availability may decrease and prices rise (see Figure 6).
Aggressive biofuel growth
Aggressive biofuel growth Cellulosic
scenario with productivity
scenario without technology biofuel
change as well as cellulosic
improvements scenario
conversion
Feedstock
2010 2020 2020 2020
crop
Cassava 33 135 89 54
Maize 20 41 29 23
Oilseeds 26 76 45 43
Sugar beats 7 25 14 19
Sugarcane 26 66 49 43
Wheat 11 30 21 16
Figure 6: Percentage changes in world prices of feedstock crops under different
technology and growth scenarios to 2020, compared with baseline of 2010
Source: IFPRI, 2006 quoted in von Braun and Pachauri (2006:8)
WATER – EVEN MORE SCARCE?
Oh yes – and we are running out of water too….(see Figure 7).
Figure 7: Global Water Demand: projected water use by different user sectors and
economic regions in 2050 compared with a baseline of 2000
Source: OECD (2012:25)
NB: This does not include rain-fed agriculture!Professor Ben Bennett 9
Water demand is growing but the productivity of that water in terms of food
produced is not keeping pace (Rosegrant, 2002:106).
HUNGER AND UNDERNOURISHMENT
We are doing surprisingly well on undernourishment (see Figure 8).
Figure 8: Prevalence of undernourishment, world and developing countries,
1990-92 to 2012-14
Source: FAO SOFI quoted in Maletta (2014:7).
Mainly because extreme poverty is declining (see Figure 9).
Figure 9: Prevalence of extreme poverty in developing countries, 1980-2015
Source: Ravallion (2013), quoted in Maletta H (2014:3).
But this welcomed trend hides pockets of stubborn resistance in declining
extreme poverty, particularly Africa (see Figure 10).10 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
Figure 10: Estimated trends of prevalence of stunting in children under five (MGRS
standard), in developing countries (all, and three regions), 1980-2020
Where: LAC = Latin America Countries
Source: Maletta H, (2014: 13)
Solutions to these challenges, however, are within our grasp. With the application
of new technologies, particularly improved genetic material, we can grow more food
and with a greater nutritional impact with the same land. Education can make us eat
more healthily and temper demand. Food that is produced and never reaches mouths
can be recovered. Food being drawn-off for energy can be replaced with new energy
sources. Farmers, particularly women farmers, instead of being marginalised by
society, can be brought centre stage (Conway, 2012).
Given this narrative then about the state of the world and its agricultural economy,
what role do agricultural markets have to play? The truth is that much of the success
in recent years that gives heart for the future is due to big changes going on in the
rural economies of developing countries. Recent years have seen important growth
in some key economies with large populations, such as India. A lot of this growth
has been driven by a heady mixture of improving agricultural terms of trade, rising
farm prices for key strategic commodities after a long period of relative decline, the
emergence of an urban middle class with spare cash for food and refrigerators to
keep it in, and, a very large decline in global tariffs and reduction of non-tariff barriers,
especially for Least Developed Countries. New markets have opened: notably India
and China. LDCs’ exports to developing countries had expanded more than seven-
fold to account for 52 per cent of their total exports in 2011 (WTO, 2012)7.
If we are to have enough food, farmers need to produce a surplus. This is an
opportunity for food-insecure rural households, but only if they produce the right food,
at the right price and get it safely to the consumer in a nutritious state. Markets and
trade, then, matter.
7
On a cautionary note, whilst agricultural trade from LDCs to Developed countries has grown, the lion’s
share of this trade gain has been in fuels and minerals.Professor Ben Bennett 11
MARKET FAILURE
Despite all the evidence pointing towards under-supply in global food markets,
the persistent question I have received from farmers through many years is: “if we
grow too much who will buy it”? Farmers that have been encouraged to grow surplus
food or to move from subsistence into a cash economy naturally want to address
the massive risk that they have to take that they will not have enough food to feed
themselves and their dependents in the future. You still find farmers respond to the
question of what their problems are with the solution “why doesn’t the government
buy all my surplus”.
Economic theory suggests that supply and demand is intermediated by price.
However, this presupposes all parties have perfect knowledge of the market. In the
context of rural Africa this is never the case for a range of reasons including: isolation
and the absence of transparency8 (the market access issue), the absence of scale
economies and excessive transaction costs. Traditionally, market intermediaries or
middlemen, get the blame for the failure of markets to deliver sufficient incentives to
producers.
Here lies the fundamental paradox of agricultural trade: markets do not work
properly; this is called market failure. Its causes and solutions are the core of NRI’s
work and have been the central theme of my work on agricultural marketing in the
developing world. How do we get more money for existing products? How do we
help to find markets and help organise farmers to meet the new demand? Can more
of the final consumer level value be captured by farmers (up-grading)? What does the
existing value chain look like and how can it be optimised (governance)? How do we
manage over and under supply and the consequent price fluctuations?
In this inaugural lecture I will review some of the work I have done to explore these
questions. I will use a few of the examples of commodities, countries and approaches
applied by me in the past years to illustrate the key challenges faced by those trying
to market the produce of small scale producers in developing economies. In doing
this I will try to show some of the key methodologies that have framed the field in the
past thirty years and highlight hard won lessons.
Firstly, I will look at some of the practical problems with agricultural markets
and the application of science to these that I have addressed and the approaches
that worked and failed. Secondly, I will draw on selected examples from practice to
illustrate the challenges faced by a trade and marketing economist and the range
of commodity possibilities with which one can be faced. Thirdly, I will consider the
interface between agricultural markets in developing countries and those in developed
economies through the lens of trade negotiation with the aim of illustrating the power
of global market access to unlock domestic agricultural value chains to the benefit
of the poorest. Fourthly, I shall consider the unique challenges of marketing products
that are novel or under-valued, such as traditional foods and the wild harvested.
Finally, I will reflect on what the future holds for the marketing economist and value
chain specialist.
8
Often referred to as information asymmetry.12 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
1. PRACTICAL PROBLEMS WITH MARKETS:
THEIR MEASUREMENT AND RESOLUTION
“When the seagulls follow the trawler, it’s because they think sardines will be thrown
into the sea.”
Eric Cantona
In this section we shall look at examples of research into markets and practical
applications that support some of the development economics theories, models and
proposed paradigms in the past twenty to thirty years.
POSTHARVEST LOSSES – IT’S NOT LOST, WE JUST CAN’T FIND IT
NRI’s has a global reputation for research into post-harvest losses (Hodges,
Busby and Bennett, 2011, Hodges, Bernard and Bennett, 2013). It is notable that, in
25 years of working on this issue, we are still debating how to define what postharvest
losses are9. A recent resurgence in interest in this issue, to some extent driven by NRI
(World Bank, 2011, Hodges and Bennett, 2011) has returned us to the challenges of
complexity that we revealed in the early 1990s (Ward and Jeffries, 2000).
Huge market inefficiencies brought about by centralised pricing allied to poor
infrastructure and, so some extent, corruption, brought about grain losses that came
to the attention of the world’s press10. The famine in the Horn of Africa in the early
1980’s that led to live aid, revealed that subsistence farming did not work, food supply
systems based on Marxist maxims could not prevent starvation and, that farmers
were actually better at storing their grain safely than government (Compton et al,
1993). Governments tried to build clever models based on intervention stock which,
with the data management tools of the age, simply did not work and resulted in a
shift of in-chain costs to the consumer in the form of higher prices (Simatupang and
Timmer, 2008).
This large scale and very visible loss of durables (i.e., food grains) led to a burst
of interest in postharvest losses. It was at this time that the infamous 30% of all
food is lost postharvest statement was delivered by the FAO and endorsed by
no lesser global figure than Kissinger in his ground breaking speech to the World
Food Congress in 1974 (Kissinger, 1974:821). This figure persists to this day and is
commonly but incorrectly repeated in policy documents.
It is not that simple, unfortunately. Firstly, there is a crucial distinction between
losses (something that has no inherent latent value) and waste (something that has a
value with another use. Distinguishing between physical loss (i.e., the moisture that
grain loses during storage) and economic losses (i.e., the opportunity cost between
the highest possible value attainable at any stage in the value chain and its next best
value) helps us understand and locate postharvest losses, but the task of aggregating
losses at scale in a way that properly promotes their mitigation and encourages
relevant policy interventions remains out of reach.
9
See for example the Food Loss & Waste Protocol being developed by the World Resource Institute
with help from NRI www.wri.org
10
Summarised in de Waal, 1997.Professor Ben Bennett 13
The challenge of measuring postharvest losses is thrown into particular relief
when perishables are considered. Fresh vegetables, fish products, flowers, meat
and cassava measure their decline in quality and value by hours rather than days or
weeks.
EXAMPLES OF POSTHARVEST LOSSES RESEARCH
a. Fisheries
In the early 1990s I worked as post-harvest fisheries economist on a series of
DFID and FAO projects in Bangladesh, India, Thailand, Sri Lanka and Indonesia
aimed at trying to address the abject poverty of fisherfolk around the Bay of Bengal.
A ‘proto’ value chain approach involving interviews across and along chains of fresh,
frozen, dried and smoked fish delivery showed just how precarious the life of very
small scale fish traders were and how previously unknown groups of intermediaries,
often women, populate elements of the value chain and deliver essential services
(Bennett and Rogers, 1992). In West Africa, for example, middle women, commonly
referred to as ‘market mammies’ were trading marine capture fish across borders
apparently closed to trade and between groups without a common language using
a remarkable system of stone tallies as currency (Bennett and Ames, 1994). The
experience we gained from these many instances culminated in a ground-breaking
piece of research in Tanzania that attempted to measure postharvest losses in the
fisheries (Ward and Jeffries, 2000). The results indicated that absolute loss, while
substantial, was less than believed and this was to become a common theme of
later losses work. It also showed the high degree of differentiation in value chains for
perishables and the risks of crowding out actors inherent in the process of technical
upgrading. In the West Coast if India, for example, we found that women fish traders
were excluded from transport on buses with baskets of fish because of complaints
from other customers. An innovative new, light, spun aluminium ‘patel’ gave these
women access to transport and a huge increase in their marketing range. Today
we would be lauding the potential nutritional impacts of such an innovation. On a
recent mission to the region I was delighted to note that the aluminium ‘basket’ is still
commonly used by tens of thousands of fish traders. In Sri Lanka, a chance encounter
with a man on a bicycle with a wooden box of rotting fish tied precariously to his
cycle-rack, led to the introduction of a new fish cool box specifically designed for a
bicycle. This dramatically increases the number of hours a trader could spend seeking
higher value markets (Clucas and Bennett, 1991).
b. Grains
It is probable that the greatest investment by governments and donors in
developing world agriculture has been in the grain sector. The fundamental
importance of this staple crop to food security and, indeed, social cohesion in most
countries has resulted in it being the focus of attention. Outbreaks of inappropriate
policy (i.e. expensive European style grain silos and failed government grain buying
schemes) seemed to have pervaded the recent agrarian history. The outbreak of the
Larger Grain Borer (LGB) in sub-Saharan Africa in the 1980s and 1990s, said to have
been transferred from food aid shipments, led to a burst of interest into research on
the economic impact of mitigation measures. The burst of interest in food aid and14 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
its misuse following the great famine of the mid 1980’s resulted in much research on
the economically optimum intervention stock (Maxwell, 1986) and experimentation
by countries with bulk storage, much of which was very ill-advised (Coulter, 1994). A
review of government intervention in grain storage in Southern Africa in showed the
damage to livelihoods and enterprise that this had caused (Tyler and Bennett, 1993),
but also revealed the resilience of sound traditional practice. Farmers, it seemed,
were prepared to risk all by only planting High Yielding Varieties promoted by donors,
but in reality were hedging with traditional varieties that had better storage qualities
(a bit like blending home-grown players with bought-in talent in a top football team).
In Namibia in 2005, research commissioned on traditional grain storage practices for
millet and sorghum revealed an extraordinary tradition of long-term storage against
the likelihood of very prolonged drought. Millet in store for more than eight years was
common practice (Hodges, 2005).
c. Fruit
The opening up of global markets to counter-seasonal fruit as a result of cheaper
air travel and greatly reduced tariff barriers has given fantastic opportunities for small
farmers to make good returns. Probably the best example are the Kenyan highlands,
where more than 40,000 of small farmers are now able to educate their children with
money made from selling green beans and cut flowers to Europe (English and Jaffe,
2004). Research on postharvest losses in the Kenyan avocado sector revealed a
dramatic story of how one generation of farmers had been propelled out of poverty
by the combination of hybrid avocado varieties and the safe application of pesticides
(Bennett et al, 2010). The heart-warming story of the farmer able to pay for his
wife’s cataract operation because of avocados formed the central theme of a paper
promoting the social benefits of pesticide.
In the Philippines, postharvest losses in the mango sector were purely economic:
the loss of market access for the delicious Guimaras ‘Carabou’ mango to competitors
in the USA because of a fruit fly outbreak meant that, instead of selling fresh mangos
to the USA, Japan and Korea for premium prices, instead farmers were selling to
local mango drying firms for a fraction of the potential value. Work on the economics
of this difference showed that investment in trapping and regulation of the fruit fly on
the island would be quickly repaid and today Guimaras mangos can, once again, be
found in the best Californian restaurants. This ‘foot in the door’ approach to market
access can be successful – the USA has recently given access to other Philippine
Islands 11 12.
11
See GMA News, (2014), “US to accept fresh PHL mangoes grown outside Guimaras Island – Agri
Dept.” GMA News online, April 29th 2014, http://www.gmanetwork.com/news/story/358860/
economy/agricultureandmining/us-to-accept-fresh-phl-mangoes-grown-outside-guimaras-island-
agri-dept
12
This research was supported by the European UnionProfessor Ben Bennett 15
d. Livestock
Research into postharvest losses in the livestock sector in developing countries
is largely set in the context of trade and the impact of transboundary disease (Naziri
et al, 2015)13. Much less is known and understood about losses of quality and value,
particularly at the level of small-scale farmers with limited livestock. Research on
small stock value chains reveals important pockets of absolute loss where crises
occur (Bennett, 2007), but tends to under-play the enormous effort that can be
involved for individual livestock keepers to reach optimum value at point of sale
(Bennett, 1998 and Hodges & Bennett, 2009). New research is needed to provide
a viable means of measuring postharvest losses in the meat sectors of developing
countries (Bennett and van Zjipp, 2012).
e. Cassava and yam, Nigeria and Ghana
Recent work on postharvest losses in the root and tuber sector has shown that
the location of the loss in the chain makes a really important difference to the overall
economics of loss (Naziri et al, 2014). In Ghana, for example, where cassava is largely
purchased fresh for home consumption, the absolute economic loss from spoilage
is substantially larger than in Nigeria where widespread processing of cassava
occurs to make gari (Quaye et al, forthcoming). Having got a product to the point of
consumption, then throwing it away, means that all the stored up value from the chain
is then wasted. Looking at similar chains for cassava in Thailand and Vietnam showed
much lower economic losses because the main loss occurs in the farmer’s field (Thao
et al, 2013).
Recently completed research on a series of innovations in the cassava and
yams value chain show the scale of benefits available from innovation in reduced
postharvest losses14. In Ghana and Nigeria, simply improving drying and reducing
storage rots leads to €20 million worth of additional value (and food). Innovative
starch extraction from waste in Thailand gives benefits at a suitably industrial scale of
€173 million a year (Bennett et al, 2015:2). The potential converting highly perishable
products like cassava into high value import replacing foods such as High Quality
Cassava Flour (HQCF) opens exciting possibilities of new market niches, for example
the gluten free sector (Bennett, 2014).
Lessons from this body of work on postharvest losses.
The figures for postharvest losses can very quickly become quite large. In our
paper for the World Bank (2009) we estimated a starting annual figure of US$ 48.12
billion (see Figure 11 on page 16).
13
This research was funded by the UK Department for International Development
14
This work was funded under the European Union Seventh Framework Programme,
see www.fp7-gratitude.eu16 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
Figure 11: NRI’s Postharvest Loss Estimate showing annual production and estimated
postharvest losses in Sub-Saharan Africa by value (US$) and volume
(million tonnes)
Source: www.postharvest.nri.org
Generally, physical losses are lower than the research (or people’s beliefs)
suggested. In our paper (Naziri et al, 2014) we see that losses for cassava are
substantial, but lower than we have always believed (see Figures 12 and 13).
This is probably due to value chain adaption to mitigate losses.
Figure 12: Physical and economic losses in the cassava value chain
– Ghana, Nigeria, Thailand and Vietnam
Source: Naziri et al, (2014)post-‐harvest
losses,
in
Thailand
their
relevance
is
minimal
(less
than
5%).
Finally
in
Vietnam
the
worth
of
total
post-‐harvest
losses
is
estimated
at
about
US$
35
million.
retail
and
consumption
stage)
where
it
is
estimated
that
about
20%
of
roots
reaching
that
stage
spoil
and
are
thrown
away.
Physical
losses
at
this
stage
represent
over
three
quarter
In
relative
terms,
the
worth
of
post-‐harvest
losses
in
Ghana
represents
about
22%
of
the
of
total
total
potential
retail
value
of
cassava
products
(net
of
physical
losses).
In
South
losses
(Figure
4).
Other
important
losses
are
incurred
at
the
gari
and
agbelima
West
processing
10).
sites.
Professor Ben Bennett
Nigeria,
Vietnam
and
Thailand
this
is
estimated
at
7%,
4%
and
2%,
respectively
(Figure
17
Figure
9:
Estimated
value
of
post-‐harvest
losses
Figure
3:
Estimated
volume
of
physical
losses
by
stage
of
the
value
chain
Figure
10:
Estimated
value
of
post-‐harvest
losses
as
share
of
potential
retail
value
Figure 13: Physical and economic losses in the cassava value chains of Ghana, South
Figure
4:
Relevance
of
physical
losses
by
different
stages
of
the
value
chain
West Nigeria, Thailand and Vietnam, and their distribution within key actors
in the value chain
Source: Naziri et al, (2014)
Losses that occur between field and farm tend not to be measured but are
subsumed into the farm-gate price. This is a research opportunity.
One persons’ loss is another persons’ opportunity. Women particularly have
found a niche for some losses so changing the way that they are used could have
unintended consequences (Abdulsalam-Saghir,2015). Recent research has shown that
value of loss is key to its gender utilisation therefore changes in value through up-
grading can bring about livelihood degradation.
The definition of what is a loss and/or a 88
waste needs to match the relevant
agricultural economy. Hodges, Busby and Bennett (2010) have shown that
modernisation of agriculture changes the location of losses within the chain. In
83
developed economies, we have seen losses largely removed from the farming system
in favour of huge amounts of waste between retailer and consumer (Parry et al, 2015).
Figure 14: Resurgence in postharvest loss research
– some examples of recent global initiatives
Interest in postharvest losses is returning with new research groups starting, investment
by donors and applications of new methods and technologies to old problems.
Key findings of our work on postharvest losses are that measurement if far more
complicated that is normally thought. Solutions are available, but regulating the
problem almost never works, particularly in countries with high transaction costs.
Turning good postharvest loss information into good policies is rare, but our hope it
that increased agricultural development and new, cheap technologies for information
sharing, will lead to big forward strides in the near term. Our work on cassava has
shown that when losses can be turned into products that are economically valuable,
new enterprises are keen to make the most of the opportunity.18 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
2. QUALITY CONTROL, MANAGEMENT AND FOOD SAFETY
The food economies of developing countries are only beginning to wake up to the
economic costs of quality loss and inadequate food safety. As we illustrated, food
waste has fallen under the radar in the developing world and by donors because, in
effect it does not exist (Hodges, Busby and Bennett, 2010), almost nothing going ‘into
the bin’ as it does in developed economies. In the struggle to provide food of any
kind, it was understandable that the quality of that food took secondary importance.
Feeding dangerous food to the under-nourished or immune compromised is, however,
something that would not be countenanced in our domestic food supply chains
here in developed countries. In the absence of a consumer lobby and legal systems
that favour the consumer (the power of the consumer is untapped in the absence
of choice) the cost of unsafe food has been effectively a producer surplus in most
developing country value chains (Henson and Traill, 2002).
I am going to illustrate the issues of food safety and quality control using the
example of aflatoxins.
Aflatoxins, highly carcinogenic substances, secreted by the fungi (mycotoxins)
called Aspergillus flavus and Aspergillus paraciticus are widely present in some
tropical commodities. The combination of heat and moisture of the tropical
production environment is perfect for them to thrive. NRI was among the institutions
that identified this terrifying substance in the 1960s as government scientists rushed
to tackle the baffling turkey death disease that was devastating turkey farms in the
USA15. Responding to public fear, the European Union introduced strict limits on
its presence in foods, particularly milk, to protect EU consumers. For producers of
produce prone to mycotoxin attack in hot climates this represented the first real
global food scare. Some developing countries completely lost their export markets.
Senegal and Sudan, for example, struggled to meet the new aflatoxin targets
for groundnuts and groundnut cake/meal. In an early example of scientists and
economics working together to address a postharvest problem, NRI undertook a
number of projects in the area.
The key issues for food safety are:
How do we find the problem? In the case of aflatoxin, the toxin is unevenly
spread and so toxic that a very tiny amount can contaminate a massive shipment. A
sampling method that can locate a pocket of mouldy copra meal the size of a tennis
ball in a 20,000 tonne ship full of the stuff means that huge samples are needed to
ensure compliance with international standards (20ppb in the EU). The economics of
sampling start to come into play.
How do we measure it cheaply? Having made a representative sample, the testers
then have to tell whether the toxin is present (or not present). The equipment for
doing this is really expensive. Even with recent advances the costs are prohibitive for
small farmers. Efforts to find proxies for the presence of aflatoxin (e.g., using cheap
moisture meters (Bennett, 1992) and fluorescence (see for example, Carlson et al,
2000) by NRI and others did not prove to be particularly satisfactory.
15
I am indebted to Linda Nicolaides of NRI for showing me the original scientific log-book where this
was noted for the first time.Professor Ben Bennett 19
What, then, are the incentives to improve practices? The solution to the aflatoxin
problem is fairly simple: if you dry your product quickly to a level of moisture below
which the fungus is active then it will not occur. Simple, but frustratingly expensive.
For copra producers in the Philippines and Indonesia, the cost of constructing
copra dryers over and above using the sun proved too much, and their international
markets were largely lost (Bennett, 1992). Recent work on the value chains for
Bambara Groundnuts in East Africa (Hillocks and Bennett, 2012) shows that this
promising legume is largely excluded from trade because safe drying is simply too
expensive for harvesters who are largely poor rural women. It because clear from an
early time in our work on aflatoxin that, if people were to dry adequately, they would
need a financial incentive for the water, weight and value lost. It is always better to
sell cheaper water than product. Developing incentive structures based on quality
proved very hard. Visual scales used for mould cover of copra at first point of trade in
the Philippines never really worked. Similar efforts with grains in sub-Saharan Africa
either led to total rejections (i.e., a yes or no decision by traders) or were dropped as
soon as either a glut or a shortage occurred. What this research revealed was that
regulation of quality in commodity chains commonly led to rent seeking and, if badly
done, almost always increased the power of the intermediary at the expense of the
primary producer.
The greatest challenge for food
safety is probably at the micro-level.
If consumers cannot see or taste the
danger, then how do they know it is
present? Managing the exclusion of
risk for food is expensive, so producers
look to recover this cost with a
premium price. How do we prevent
‘free-loading’ (i.e., producers of sub-
standard products benefiting from
the higher price and undermining the
market)? In a world where consumers
are unorganised or unable to tell
the difference between a safe and Figure 15: a simple visual scale of good
hazardous product and regulations and poor grain
simply never result in compliance, Source: Bruno Tran
preventing unscrupulous actors from
capturing the value of the safer/better product is very challenging. In a review of the
quality and standards regime of Bangladesh we found that the consumer ‘lobby’ for
the entire country was one person and the government inspectorate for counterfeit
goods consisted of 5 inspectors, none of whom had ever issued a fine (Bennett and
Loewe, 2009)! The wonder is that, in developed economies, ‘free-loading’ is not more
widespread considering what a tiny proportion of the final on-shelf price of goods
is committed to compliance and regulation. Over regulation is often seen as a trade
barrier and source of consumer surplus (Thilmany and Barrett, 1997), I would also
contend that the same could be said of under-regulation. The net result of under-
investment in regulation is a race to the bottom of the quality continuum with nobody
incentivised to provide a safe product. Markets in developing countries typically
become defined by the lowest quality over time without some kind of intervention.20 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
The key finding from NRI’s work on aflatoxin is that the solution to contamination
lies largely on the farm. Mycotoxins come from the field. Stressed plants are more
easily contaminated. Produce that is dried quickly and stored well is safe. So, to
produce aflatoxin-free, farmers need to do more work and invest in simple improved
drying methods. How they are to be compensated for this additional effort remains
unanswered.
A lot of research on trade and standards, quality measurement and metrology
(SQAM) has shown that countries need a good standards, accreditation and
regulatory system if they are to function competitively in the global economy and
protect consumers (Bennett, 2009 and 2010). However, it is rarely explained which
actors within the value chain are going to pay for this – and it can be quite heavy
(see Figure 16). Traditionally, farmers and producers find themselves subsuming the
additional costs of meeting standards and consumer expectations as supermarkets
pass back their norms to suppliers on a take-it-or-leave-it basis. Where farmers are
price takers, as with almost all commodity value chains in developing countries, all of
these downstream costs are subsumed by the producer.
What are the key lessons? Absence of food safety and quality management has
a high cost, both for consumer and for farmer. In a world where nutrition and food
security are synonymous much more could be done to make the benefits of quality
more universal.
As markets like the EU strive to protect their consumers and ring-fence their food
economies with aggressive standards, the risk is that a two-tier world food structure
will fix the poor into a world of unsafe food.
National
Measurement
Government System
National
Standards
Body (BSI)
Regulatory UK Patent United Kingdom Conformity
bodies Office Accreditation Assessment
Service Bodies
Trade
Association
UK Business Professional
Bodies
Informal
Consultants Standards Customers
Developers
Figure 16: the UK national regulatory system showing the many actors
and bodies involved
Source: CQI (2015)Professor Ben Bennett 21
3. BRINGING ECONOMICS TO BEAR: MATCHING SCIENCE WITH
SOCIAL SCIENCE FOR GREATER DEVELOPMENT IMPACT.
Reviewing research on agricultural economics and markets in developing
economies in the past 30 years it seems that I have bridged two Green Revolutions.
The first was Norman Borlaug’s initial advances in breeding that led to huge increases
in yield through breeding and fertiliser application. For example, wheat yields in some
countries are fivefold higher than the 1950s as a result of his approach to selective
breeding to reduce lodging (see Figure 17).
The next Green Revolution based on
Norman
Borlaug:
advances in genetic technologies and
things like data management we are now
starting to see a second productivity
•‘burst’.
Breeding
to
is the amazing
A good example
reduce
lodging
flood-tolerant rice which yields more
even when it is submerged for a long
•timeFer3lizer
(Setter et al, 1996). Recent work by
the Generation Challenge Programme
that I have evaluated has applied these
methods to the complex traits associated
with drought tolerance, opening up the
possibility of super foods that resist
climate change.
Figure 17: Developing country wheat yields, 1950 2004
However, despite these wonderful
advances, I find that the disconnect
between natural scientists and social
scientist remains. In particular, the
drive for yield continues to hold the
scientific community in thrall despite the
emergence of so much new value chain
literature in the last decade.
Three examples of well-meant
agricultural research that missed the
marketing ‘point’ and one example of a
market led approach that has failed to
support efforts to increase productivity
on farm.
Figure 18: IRRI flood tolerant rice showing the resilience of the new variety to flooding
Source: Gates Foundation flickr https://www.flickr.com/photos/gatesfoundation/674904300722 Millet, Myrrh, and Manchester United: Markets For development, Lessons from Practice
a. Sesame – you can have any colour as long as it is white.
A review of the value chain for sesame in Mozambique and Tanzania revealed
that the key market was Japan (Bennett, 2008, Bennett & Hillocks, 2008). For twenty
years, Tanzania had been breeding varieties of sesame for whiteness because they
were labouring under the illusion that white sesame had a higher value. The reality,
revealed by talking to local and international sesame traders, is that the global
sesame market is differentiated by end use. White sesame is used for ‘confectionary’
purposes, such as putting on burger buns. Other types of sesame are grown for their
oil content or to be ground into food ingredients like Halva. The sesame in Tanzania
and Mozambique was selling to traders who would then on-sell it to Japanese
sesame oil millers. The key to the success for use as sesame oil is oil content of the
seed and ‘boldness’ because it emerged that rounder seeds give a higher oil yield on
crushing. So the breeding aims had been wrong all this time!
In fact, this story has a happy ending. The newly released white varieties had a
high oil content and were bold. Traders, therefore, were able to distinguish the white
new high yielding varieties from the old brown ones and paid a premium price. This,
combined with much higher yields per hectare has meant almost 90% uptake and
hugely higher incomes from sesame production in Southern Tanzania, the country’s
poorest region.
b. GMO Maize – big heads are better than no heads
(unless you are making tortillas of course)
The Generation Challenge Programme, based at the International Maize and
Wheat Improvement Center (CIMMYT)16 has done wonderful work breeding drought
resistance into globally important crops like rice and maize. I have reviewed it twice
now and am convinced that new technologies like marker-assisted breeding are
likely to bring huge gains in food production (Bennett & Hillocks, 2008a, Paramjit et
al, 2014)17.
Early work on identifying drought tolerant high yielding maize varieties in Southern
Mexico, the origin of maize, had developed a number of really promising lines.
However, when they came to release these lines they found that farmers still kept their
traditional, low yielding varieties in some fields. It emerged that the new GMO wonder
varieties were no good for making tortillas, lacking the elasticity necessary for rolling
and generating crisp bread.
c. Goats – you simply can’t sell the brown ones
Namibia is Africa’s largest exporter of live goats (over 100,000 a year). These
goats go to South Africa. When I joined the Ministry of Agriculture, Water and
Forestry in Namibia in 1998 I asked where all these goats were going and I was told
‘to Muslims in Durban’. This, it seems, had been the received wisdom for decades.
Reviewing the commodities that Namibia could export, we decided to initiate a series
of market studies to suggest investment and policy changes that could increase
16
See www.generationcp.org/
17
In fact, I have long been a supporter of the safe uptake of genetic technologies; see for example
Bennett (1999 and 2001).Professor Ben Bennett 23
demand and value. One of these was on goats. As know body seemed to know where
all the goats were going we got the agreement of a trader to follow his truck 2,500
miles from Mariental in the Namib Dessert to just outside Durban and then track the
goats to their consumers. The result was that we found that in Durban the goats were
being sold to Zulu Priests who then sold them to worshipers with a need to make a
ritual slaughter. The key finding was that Zulu’s believe that a white goat has more
religious power than a goat of any other colour. The size of the goat was unimportant,
so smaller goats are actually better because you can fit a lot more on a truck. Brown
goats are associated with violent crime, and so largely unsaleable. This information
supported a Boer Goat breeding programme and system of delivering vaccination
against pasteralla, a disease casing losses to goats in transit (Bennett, 2007).
What these examples illustrate is the power of fairly straightforward market
research to overcome perceived wisdom and empower research efforts. In all these
cases significant public funds had been expended on well-meaning research and
extension efforts without fully understanding what was driving the markets for these
products.
The lesson we draw from is that multi-disciplinarity and the breaking-down of
academic silos remains key to successful agricultural science development and
uptake.
d. Organising markets – the failure of cooperatives and emergence
of agri-business
Throughout the post-independence era policy makers and donors have sought
ways to address the issue of usurious middlemen and high transactions costs for rural
economies by promoting cooperatives. It has largely failed (Lele & Christiansen, 1989).
Why?
One of the most extreme examples of forced collectivisation in Africa was the
Tanzanian Ujamaa Movement, Julius Nyerere’s experiment in cooperative economics
(Ibhawoh and Dibua, 2003). These systems answer the challenge of high transaction
costs for rural services by moving everybody into giant ‘villages’ and forcing them to
sell everything through community cooperatives. The net result was resource capture
on a mammoth scale by the people running the cooperatives, massive postharvest
losses due to system inefficiency and, to this day, a health distrust of cooperatives
in Tanzania. Despite this bad experience, the cooperative as a means of rationing
inputs and benefits for communities persists. As recently as 2007 (Bennett) the Lindi
Cooperative managed to lose more than a million US dollars18 on sesame trading but
was bankrolled by the Government of Tanzania for political reasons.
I have collaborated a lot with marketing cooperatives in the developing world and
it is a sad indictment of the approach that, even when they are run as businesses,
they always seem to flounder.
In more recent years, I have worked extensively with harvester associations
(in Namibia these are called Producer and Processor Organisations – PPOs). This
approach to collective natural resource management through sustainable harvesting,
processing and marketing of natural products like seeds and tubers is successful
(as we shall see below). However, it opened up a new and unintended issue.
18
Nobody really knows how much – but shocking from a Cooperative that has no assets.You can also read
