Aggregating Smallholder Farmers in Emerging Economies

Abstract

T he agricultural sector plays an important role in emerging economies even though most farmers are trapped in the poverty cycle owing to their smallholdings. Aggregating farmers through formal or informal cooperatives (coops) can enable them to: (i) reduce production cost; (ii) increase/stabilize process yield; (iii) increase brand awareness; (iv) eliminate unnecessary intermediaries; and (v) eliminate price uncertainty. To examine whether these effects will benefit the members of such aggregation when they compete with other individual farmers, we present separate models to capture the essence of these five effects. For each effect, we find that it is beneficial for a farmer to be part of the aggregation only when the size of the aggregation is below a certain threshold. Also, while certain effects are beneficial to the market as a whole, other effects are hurtful due to higher market price and/or lower production quantity.

Supply chain opportunities at the bottom of the pyramid

“…But are these always beneficial for farmers? An et al (2015) find that cooperatives (or other aggregations) of smallholder farmers are not necessarily a silver bullet relative to farmers who choose not to join the cooperative. Tang and Zhou (2012), Chen et al (2013), Devalkar et al (2011), McCoy (2013) and Sodhi and Tang (2014) provide good starting material for further analytical research in this area.…”

An Analysis of Price vs. Revenue Protection: Government Subsidies in the Agriculture Industry

“…Murali et al (2015) determine optimal allocation and control policies for municipal groundwater management. An et al (2015) investigate different effects of aggregating farmers through cooperatives. examine the effectiveness of peer-to-peer interactions among farmers in India.…”

Retail Clusters in Developing Economies

“…A supply cluster focuses on producers, manufacturers, and supply networks. Several important issues have been investigated in this domain, such as cooperation in the supply chain (Schmitz 1999, Deng et al 2016, Akçay and Tan 2008, cost advantages of supply clusters (Wu et al 2006), pricing and quantity policies in coalitions (Granot and Yin 2008, Nagarajan and Sosić 2009, Yin 2010, Huang et al 2015, and policy instruments to promote socially preferred choices (An et al 2015, Bagwell 2008. Logistics clusters are "geographically concentrated sets of logistics-related business activities" (Sheffi 2012); these clusters play a very important role in enhancing international trades (Amonkar 2016), gaining competitive advantages in industry (Sheffi 2010), speeding up global supply chains (Elbert and Schönberger 2009), and planning strategic economics development (Lee and Yang 2003).…”