Chandra S.R. Nuthalapati, Rajib Sutradhar, Thomas Reardon, Matin Qaim · 2020
World Development · World Development

Supermarket procurement and farmgate prices in India

Supermarkets have gained in importance in the food systems of many developing countries, with profound implications for smallholder farmers. Several studies analyzed effects of selling to supermarkets on smallholder productivity and income. However, no previous work systematically analyzed effects of supermarkets on farmgate prices, even though prices are important determinants of farmers’ profits and livelihoods. Here, we use data from smallholder vegetable growers in India to compare output prices received in supermarket and traditional market channels. We also quantify farmers’ transport and transaction costs in both channels. Even after controlling for quality differences, prices are significantly higher in supermarket channels. Positive price effects are confirmed through hedonic price models and propensity score matching. Average effects of supermarkets on farmgate prices are in a magnitude of 20% or more. Higher farmgate prices are due to fewer intermediaries and lower transaction costs in supermarket channels. In the absence of binding contracts, supermarkets also need to pay higher prices to ensure regular supply of high-quality vegetables. These results suggest that the rise of supermarkets can contribute to increased market efficiency with positive effects on farmgate prices and revenues.

Full publication is available on: DOI 10.1016/j.worlddev.2020.105034

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Matin Qaim

Matin Qaim
Center for Development Research (ZEF), University of Bonn

Matin Qaim is a food systems economist and Director at the Center for Development Research (ZEF), University of Bonn. Before joining ZEF in 2021, he was Professor of International Food Economics and Rural Development at the University of Göttingen (2007-2021), Professor of International Agricultural Trade and Food Security at the University of Hohenheim (2004-2007), and postdoctoral scientist at the University of California at Berkeley (2001-2003). Qaim’s research focuses on sustainable food systems, agricultural development, and the reduction of poverty, hunger, and malnutrition. He has over 250 academic publications and has been recognized as "Highly Cited Researcher" in 2021. Qaim is member of the German National Academy of Sciences (Leopoldina), Fellow of the American Agricultural and Applied Economics Association (AAEA), and President-Elect of the International Association of Agricultural Economists (IAAE). He has served on different high-level expert committees, including for the Global Panel on Agriculture and Food Systems for Nutrition, FAO, the International Maize and Wheat Improvement Center (CIMMYT), the European Commission, The Royal Society, and the German Federal Government and Parliament.

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