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ECONOMY: Global Supermarkets Elbow Aside Small Farmers
By Emad Mekay
WASHINGTON, Mar 12 (IPS) - Large supermarket chains from rich nations that are mushrooming fast in Africa, Asia and Latin America are locking small farmers out of their supply chains, a situation that threatens to put millions of already impoverished small-scale producers out of business, says a think tank here.
According to the Washington-based International Food Policy Research Institute (IFPRI), developing countries that liberalised their economies, opening their doors to supermarket chains that compete against traditional food markets, have seen their small farmers drop into poverty as the giant retailers buy from more reliable larger producers.
Small farmers in Latin America, Africa, North Africa, the Middle East and, to a lesser degree Asia, have been hit hard.
"Apparently in much of Latin America the fast growth in the supermarket and the retail food industry, to speak more broadly, has bypassed the small farm sector," said IFPRI Director Joachim von Braun.
"This is due to bad infrastructure and insecure contracts and the more competitive medium and large-scale farming industry."
In the 1990s, as many supermarket chains in Europe and the United States found their domestic markets saturated, they raced to get footholds in the developing nations then liberalising their economies.
Often cash-strapped, those countries were forced to open up under loan conditions imposed by international lenders like the World Bank and the International Monetary Fund (IMF), which bombarded poor nations with a barrage of economic advice, such as removing protectionism and welcoming foreign investments would eventually pay off for their populations.
Supermarkets quickly moved to fast-growing countries with large populations, per capita incomes that were edging toward those of consumer societies and those with a low supermarket presence.
Like consumers in industrial countries, shoppers in those developing nations are avoiding open-door markets and small, specialised grocers for the convenience, quality and attractiveness of one-stop shopping.
The fastest-growing supermarket chains across the globe include Carrefour from France, the U.S.' Wal-Mart, Ahold from the Netherlands, the UK's Tesco and Shoprite of South Africa.
The advent of the supermarkets, with their global procurement systems, has proven disastrous for small producers and dairy farmers in developing countries, who usually deliver their goods directly to open markets or to local wholesalers using their own vehicles.
As part of their operations, supermarket chains often establish centres that procure goods for dozens of stores at one time. Such hubs are often equipped to handle large volumes of consistently high-quality goods.
Small farmers vying to sell to those supermarkets often have to grow what the retailer wants, not what they choose, a dramatic change from ordinary practice. Even when they produce what supermarkets want, farmers risk a large part of their produce being rejected because of sub-standard quality.
If farmers manage to sell their goods to the food giants, they can end up having to wait 60 days or more to get paid, which places yet another burden, a financial one, on their production cycle, says IFPRI.
To complicate the process for small farmers, multinational supermarket chains often use a single set of quality and safety standards for fresh produce, based on standards in their home market. For instance, Carrefour applies the same standards to hundreds of products, no matter where they are produced or sold.
The report says that tens of thousands of small dairy farmers, in particular, cannot afford the investments in equipment they need to be able to sell to the supermarkets.
The chains require mechanical milking equipment, cooling tanks and ultra-high temperature treatment, demands that can close small farmers out of the supply chain, it adds.
In such cases, supermarkets turn to the more reliable large farmers or farmer organisations.
The process is best seen in Latin America, according to IFPRI. "The story in Latin America is, I am afraid, to put it simply a bad story," said von Braun.
Latin America has seen the fastest growth of supermarkets among developing regions, achieving "a rate of diffusion in one decade that took five decades in the United States".
In Brazil, for instance, supermarkets' share of food sales went from 30 percent in 1990 to 75 percent in 2000. And the growth has been striking even in Latin America's poorer countries. Market share for supermarkets in Guatemala rose from 30 to 35 percent between 1999 and 2001, according to IFPRI.
East and Southeast Asia are about five years behind Latin America, but supermarkets in that region are growing at an even faster pace.
Between 1999 and 2001, supermarkets' share of retail food sales rose from 35 to 43 percent in Thailand and from 30 to 48 percent in urban China.
The huge stores still have a relatively small, but growing, presence in Africa, where the largest food retailer is Shoprite, a South African company that has opened outlets in more than a dozen countries, including Egypt, Angola, Ghana and even India.
More bad news could be on the way for smaller farmers across the globe. With populations, incomes and urbanisation all projected to rise in developing countries in the next 10 to 20 years, supermarkets appear set to carry on their rapid growth in these regions.
IFPRI fixes the problem not on the arrival of the free market but on the lack of institutions in developing nations.
"The problem is not really the supermarket but the institutions before that which would facilitate bundling the products from the small farmer so sufficient quantities of reliable and good quality products can reach the more picky consumer," said von Braun, whose organisation is partly funded by the World Bank and the Inter-American Development Bank (IDB).
IFPRI's brief report suggests that farmers need proper information, training and infrastructure to withstand the arrival of the supermarkets. With those in place, millions of small farmers in Africa, Asia and Latin America could find farming more profitable than ever - or they might be forced out of the livelihood altogether.
(END/2004)
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