Regional Markets

1 Introduction
their borders to food grain exports when harvests fail due to bad weather. This will
reduce the retail price at the national and local level, which will come to detriment of
farmers—even despite the short-term benefits for local consumers.
A framework for studying smallholder-based
food commodity value chains
Food commodity markets are big business, and big business attracts big players.
Certainly in the Western world, most food commodity markets (like most ‘mature’
markets) are characterised by the presence of large corporations. In most mature markets,
the largest five companies usually dominate around 70–80% of any particular
market (whether it is fuel, food, fibre or any other commodity). Food production in
the western world is increasingly large-scale. The small-scale family farm is a phenomenon
of the past there (even though it is making a comeback in bio produce and other
artisanal production). Looking at this development in the North helps put food commodity
markets in developing regions in perspective, as small-scale production is still
very vibrant there. A productive agricultural sector, stable and affordable food prices for
consumers, and positive local economic development can be achieved through different
models: the large-scale agricultural model (e.g., soya in Brazil) or the small-scale agricultural
model (e.g., cassava produced in Thailand as input for the animal feed industry
in the North). The impact of these models depended often on the design of the marketing
system (local marketing to processors in the value chain allowing smallholders to
benefit more due to local transaction costs between them and local consumers). A study
of cases of successful integration of smallholders in the national food commodity markets
will give policymakers the tools to decide on the policies that can support this process.
At present, the overall preference seems to develop towards large-scale production.
A systematic study and analysis of cases selected along the dimensions discussed above
is necessary to see how the various types of food commodity markets impact these
key issues (pro-poor development, gender, food security etc.). Let us, for instance, consider
the distribution of power and value added in the value chain. This depends on the
relative size of the actor and its position in the chain. It also depends on the type of
product, the complexity of the transactions (how complex is the information and how
much knowledge transfer is needed before a sale is arranged), and the ability to codify/
categorise these transactions (how similar or non-specific is the transaction across producers).
Also the capacities of the producers are important (how complex are the transactions
and do the various actors have access to the required knowledge).
A range of possible market models can be developed, but in practice spot markets are
the most common model in agricultural commodity chains. However, when food commodities
need to be processed, i.e. when value is added to the raw produce in a capital-
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