Exporting High-Value Food Commodities: Success Stories from Developing Countries (WB, 1993, 119 p.)

III. Synthesis high-value food commodity system ''Success stories''

Commodity system organization coordination

(introduction...) Competitive structure Institutional arrangements linking producers with processors/exporters Institutional arrangements linking exporters with foreign markets Foreign capital and technology in the case study subsectors

XX denotes the dominant linkage in the industry

3.49 Contractual coordination is important in all of the case studies involving fresh and processed fruit and vegetables as well as in the Thai poultry and shrimp sub-sectors. While the actual contractual arrangements vary, most feature the supply of credit and/or production inputs, a forward or formula pricing mechanism, and specifications regarding the quantity, quality, and timing of producer deliveries. Such arrangements have improved the flow of information, technologies, money, and physical commodities between producers and processor/exporters and facilitated a sharing of production and/or market risks.

3.50 Many of the subsectors feature at least some vertical integration between production and downstream activities. This has normally been undertaken by relatively large processing/trading firms in order to reduce raw material supply risks and costs or by larger farmers seeking to capture a larger share of the export revenues. In both the Thai poultry and shrimp cases, individual firms have developed operations integrating feed supply, production, processing, and trade. In many cases, processors have combined own production with contracted outgrower supplies so to achieve a preferred mix of cost economizing and risk spreading. In general, the export-oriented components of individual sub-sectors have exhibited far more 'intensive vertical coordination than production and trade for domestic markets. However, in many cases the contractual and other coordinating methods used by exporters are being increasingly adopted in the domestic market, especially by producers and firms targeting higher-quality, higher-price market segments.

3.51 Cooperatives or producer and trade associations have played an important marketing and coordination role in several of the case study commodity systems. In the Mexican case, both the National Union of Vegetable Producers and the Confederation of Agricultural Associations of the State of Sinaloa have played important coordinating roles, not only through their assignment of acreage and export quotas, but also in their dissemination of market information, their assistance in agricultural inputs procurement, their enforcement of tomato quality standards, and their liaisons with government water authorities. In Taiwan (China), cooperatives have played a very important role in the domestic marketing of smallholder fruit, vegetable, and pork production and in the exports of fresh fruit and vegetables. The same holds true in the Argentine and Brazilian soybean sub-sectors. Producer and trader associations have been active in establishing quality standards, negotiating producer prices, and settling disputes in the cases of Chilean fruit and fish and Thai shrimp.

3.52 In several cases, government trading or regulatory agencies have played a role in coordinating production and downstream operations. The pattern for Mexican tomato exports has already been discussed. In Israel, the Citrus Marketing Board gave annual supply quotas (specifying quantities, varieties, and delivery times) to a limited number of private or cooperative packing/production companies which in turn had annual supply agreements with many individual farmers. In Brazil, the government periodically intervened in negotiations and disputes between growers and processors, seeking to work out appropriate methods for allocating market risks and determining producer prices. In the case of Thai tuna processing, the Thai government has coordinated government controlled fresh tuna supplies from the Maldive Islands.