IDEAS home Printed from https://ideas.repec.org/a/bla/jageco/v73y2022i2p518-540.html
   My bibliography  Save this article

Perishability and market power in Nepalese food crop production

Author

Listed:
  • Thomas Kopp
  • Ashok K. Mishra

Abstract

This study provides empirical evidence for the relation between perishability in vertically coordinated supply chains and the market power exercised over smallholders in Nepal. Using survey data from small‐scale farms of tomatoes, ginger, high‐yielding variety paddy seeds, and lentils, we demonstrate how varying levels of perishability affect the degree of market power exercised by contractors and in cooperative farming. We show how much value‐added is diverted from farmers, compared to the benchmark set by the least perishable good. Results indicate that more perishable crops are subject to a greater degree of market power. A subsequent scenario analysis reveals that the redistributive effects of market power based on crop perishability are substantial: smallholders’ farm profitability increase by 18% as crop perishability is reduced by 50%. We conclude by discussing policy measures to reduce power imbalances due to crop perishability.

Suggested Citation

  • Thomas Kopp & Ashok K. Mishra, 2022. "Perishability and market power in Nepalese food crop production," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 518-540, June.
    • Handle: RePEc:bla:jageco:v:73:y:2022:i:2:p:518-540
    DOI: 10.1111/1477-9552.12463
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1477-9552.12463
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1477-9552.12463?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:oup:apecpp:v:40:y:2018:i:3:p:379-401. is not listed on IDEAS
    2. David A. Hennessy, 1996. "Information Asymmetry as a Reason for Food Industry Vertical Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1034-1043.
    3. Hope C. Michelson, 2013. "Small Farmers, NGOs, and a Walmart World: Welfare Effects of Supermarkets Operating in Nicaragua," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 628-649.
    4. Birthal, Pratap S. & Jha, Awadhesh K. & Tiongco, Marites & Narrod, Clare, 2008. "Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India," IFPRI discussion papers 814, International Food Policy Research Institute (IFPRI).
    5. Shepherd, William G, 1972. "The Elements of Market Structure," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 25-37, February.
    6. Senakpon F. A. Dedehouanou & Johan Swinnen & Miet Maertens, 2013. "Does Contracting Make Farmers Happy? Evidence from Senegal," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 59, pages 138-160, October.
    7. repec:bla:annpce:v:85:y:2014:i:4:p:683-684 is not listed on IDEAS
    8. Masakure, Oliver & Henson, Spencer, 2005. "Why do small-scale producers choose to produce under contract? Lessons from nontraditional vegetable exports from Zimbabwe," World Development, Elsevier, vol. 33(10), pages 1721-1733, October.
    9. Perloff,Jeffrey M. & Karp,Larry S. & Golan,Amos, 2007. "Estimating Market Power and Strategies," Cambridge Books, Cambridge University Press, number 9780521011143, October.
    10. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    11. Thomas Reardon, 2015. "The hidden middle: the quiet revolution in the midstream of agrifood value chains in developing countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 31(1), pages 45-63.
    12. D. Glover, 1990. "Contract Farming And Outgrower Schemes In East And Southern Africa," Journal of Agricultural Economics, Wiley Blackwell, vol. 41(3), pages 303-315, September.
    13. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    14. Goodwin, Barry K. & Grennes, Thomas J. & Craig, Lee A., 2002. "Mechanical Refrigeration and the Integration of Perishable Commodity Markets," Explorations in Economic History, Elsevier, vol. 39(2), pages 154-182, April.
    15. Miyata, Sachiko & Minot, Nicholas & Hu, Dinghuan, 2009. "Impact of Contract Farming on Income: Linking Small Farmers, Packers, and Supermarkets in China," World Development, Elsevier, vol. 37(11), pages 1781-1790, November.
    16. Yuheng Li, 2013. "Agricultural Cooperatives for Urban-rural Interaction in China," SCIENZE REGIONALI, FrancoAngeli Editore, vol. 2013(1), pages 29-37.
    17. Sashi Sivramkrishna & Amalendu Jyotishi, 2008. "Monopsonistic exploitation in contract farming: articulating a strategy for grower cooperation," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(3), pages 280-296.
    18. Peterson, H. Christopher & Wysocki, Allen F. & Harsh, Stephen B., 2001. "Strategic Choice Along The Vertical Coordination Continuum," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 4(2), pages 1-18.
    19. Habtu Tadesse Weldegebriel, 2004. "Imperfect Price Transmission: Is Market Power Really to Blame?," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(1), pages 101-114, March.
    20. Hanisch Markus & Rommel Jens & Müller Malte, 2013. "The Cooperative Yardstick Revisited: Panel Evidence from the European Dairy Sectors," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 11(1), pages 151-162, December.
    21. Ashok K. Mishra & Saleem Shaik & Aditya R. Khanal & Subir Bairagi, 2018. "Contract farming and technical efficiency: Evidence from low†value and high†value crops in Nepal," Agribusiness, John Wiley & Sons, Ltd., vol. 34(2), pages 426-440, March.
    22. Hennessy, David A., 1996. "Information Asymmetry As a Reason for Vertical Integration," Staff General Research Papers Archive 10422, Iowa State University, Department of Economics.
    23. Ermanno C. Tortia & Vladislav Valentinov & Constantine Iliopoulos, 2013. "Agricultural cooperatives," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 2(1), pages 23-36, May.
    24. MacDonald, James M. & Perry, Janet E. & Ahearn, Mary Clare & Banker, David E. & Chambers, William & Dimitri, Carolyn & Key, Nigel D. & Nelson, Kenneth E. & Southard, Leland W., 2004. "Contracts, Markets, and Prices: Organizing the Production and Use of Agricultural Commodities," Agricultural Economic Reports 34013, United States Department of Agriculture, Economic Research Service.
    25. Warning, Matthew & Key, Nigel, 2002. "The Social Performance and Distributional Consequences of Contract Farming: An Equilibrium Analysis of the Arachide de Bouche Program in Senegal," World Development, Elsevier, vol. 30(2), pages 255-263, February.
    26. Glover, David J., 1984. "Contract farming and smallholder outgrower schemes in less-developed countries," World Development, Elsevier, vol. 12(11-12), pages 1143-1157.
    27. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," 2002 ASAE 3rd International Conference, October 18-20, Jaipur, India 294714, Asian Society of Agricultural Economists (ASAE).
    28. Helen Markelova & Esther Mwangi, 2010. "Collective Action for Smallholder Market Access: Evidence and Implications for Africa," Review of Policy Research, Policy Studies Organization, vol. 27(5), pages 621-640, September.
    29. Michelson, Hope & Reardon, Thomas & Perez, Francisco, 2012. "Small Farmers and Big Retail: Trade-offs of Supplying Supermarkets in Nicaragua," World Development, Elsevier, vol. 40(2), pages 342-354.
    30. George Hendrikse, 2011. "Pooling, Access, and Countervailing Power in Channel Governance," Management Science, INFORMS, vol. 57(9), pages 1692-1702, March.
    31. Dileep, B.K. & Grover, R.K. & Rai, K.N., 2002. "Contract Farming in Tomato: An Economic Analysis," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 57(2), June.
    32. Nagaraj, N. & Chandrakanth, Mysore G. & Chengappa, P.G. & Roopa, H.S. & Chandakavate, Pramod M., 2008. "Contract farming and its implications for input-supply, linkages between markets and farmers in Karnataka," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(Conferenc).
    33. Wainaina, Priscilla W. & Okello, Julius J. & Nzuma, Jonathan M., 2014. "Blessing or Evil? Contract Farming, Smallholder Poultry Production and Household Welfare in Kenya," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 53(4), pages 1-22, November.
    34. Paul Winters & Phil Simmons & Ian Patrick, 2005. "Evaluation of a Hybrid Seed Contract between Smallholders and a Multinational Company in East Java, Indonesia," Journal of Development Studies, Taylor & Francis Journals, vol. 41(1), pages 62-89.
    35. Liang, Qiao & Hendrikse, George, 2016. "Pooling and the yardstick effect of cooperatives," Agricultural Systems, Elsevier, vol. 143(C), pages 97-105.
    36. Key, Nigel & Runsten, David, 1999. "Contract Farming, Smallholders, and Rural Development in Latin America: The Organization of Agroprocessing Firms and the Scale of Outgrower Production," World Development, Elsevier, vol. 27(2), pages 381-401, February.
    37. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'souza, Alwin, 2016. "Impact of contracts in high yielding varieties seed production on profits and yield: The case of Nepal," Food Policy, Elsevier, vol. 62(C), pages 110-121.
    38. Li, Qiao & Wang, Jianhua & Mooney, Patrick H., 2013. "Strategies for Agricultural Cooperation in Contemporary China," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 41(1), pages 1-18.
    39. Fabio Chaddad & Constantine Iliopoulos, 2013. "Control Rights, Governance, and the Costs of Ownership in Agricultural Cooperatives," Agribusiness, John Wiley & Sons, Ltd., vol. 29(1), pages 3-22, January.
    40. Thomas Kopp & Richard J. Sexton, 2021. "Farmers, Traders, and Processors: Buyer Market Power and Double Marginalization in Indonesia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 543-568, March.
    41. Bharat Ramaswami & Pratap Singh Birthal & P.K. Joshi, 2005. "Efficiency and distribution in contract farming:The case of Indian poultry growers," Discussion Papers 05-01, Indian Statistical Institute, Delhi.
    42. Kalamkar, Shrikant S., 2012. "Inputs and Services Delivery System under Contract Farming: A Case of Broiler Farming," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 25(Conferenc).
    43. Singh, Sukhpal, 2002. "Contracting Out Solutions: Political Economy of Contract Farming in the Indian Punjab," World Development, Elsevier, vol. 30(9), pages 1621-1638, September.
    44. Kumar, Jagdish & Kumar K., Prakash, 2008. "Contract Farming: Problems, Prospects and its Effect on Income and Employment," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 21(2).
    45. Erkan Rehber, 2000. "Vertical Coordination In The Agro-Food Industry And Contract Farming: A Comparative Study Of Turkey And The Usa," Food Marketing Policy Center Research Reports 052, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
    46. Fabio R. Chaddad & Michael L. Cook, 2004. "Understanding New Cooperative Models: An Ownership–Control Rights Typology," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(3), pages 348-360.
    47. Phil Simmons & Paul Winters & Ian Patrick, 2005. "An analysis of contract farming in East Java, Bali, and Lombok, Indonesia," Agricultural Economics, International Association of Agricultural Economists, vol. 33(s3), pages 513-525, November.
    48. Kopp, Thomas & Salecker, Jan, 2020. "How traders influence their neighbours: Modelling social evolutionary processes and peer effects in agricultural trade networks," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).
    49. Keijiro Otsuka & Yuko Nakano & Kazushi Takahashi, 2016. "Contract Farming in Developed and Developing Countries," Annual Review of Resource Economics, Annual Reviews, vol. 8(1), pages 353-376, October.
    50. Murray E. Fulton & Konstantinos Giannakas, 2020. "Corruption in agricultural processing firms: A comparison of cooperatives and investor‐owned firms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(4), pages 445-460, December.
    51. Fabio R. Chaddad & Michael L. Cook, 2004. "Understanding New Cooperative Models: An Ownership–Control Rights Typology," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(3), pages 348-360.
    52. Ashok K. Mishra & Anjani Kumar & Pramod K. Joshi & Alwin D'Souza, 2018. "Cooperatives, contract farming, and farm size: The case of tomato producers in Nepal," Agribusiness, John Wiley & Sons, Ltd., vol. 34(4), pages 865-886, October.
    53. Narayanan, Sudha, 2014. "Profits from participation in high value agriculture: Evidence of heterogeneous benefits in contract farming schemes in Southern India," Food Policy, Elsevier, vol. 44(C), pages 142-157.
    54. Jos Bijman & Constantine Iliopoulos, 2014. "Farmers' Cooperatives in the Eu: Policies, Strategies, and Organization," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(4), pages 497-508, December.
    55. Tripathi, R.S. & Singh, Ram & Singh, Sube, 2005. "Contract Farming in Potato Production: An Alternative for Managing Risk and Uncertainty," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 18(Conferenc).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Villacis, Alexis H. & Kopp, Thomas & Mishra, Ashok K., 2024. "Agricultural marketing channels and market prices: Evidence from high-value crop producers in India," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1308-1321.
    2. Sudha Narayanan & Digvijay S Negi & Tanu Gupta, 2023. "Separability, spillovers, and segmented markets : Evidence from dairy in India," Agricultural Economics, International Association of Agricultural Economists, vol. 54(6), pages 884-899, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:oup:apecpp:v:40:y:2018:i:3:p:353-378. is not listed on IDEAS
    2. Bellemare, Marc F. & Bloem, Jeffrey R., 2018. "Does contract farming improve welfare? A review," World Development, Elsevier, vol. 112(C), pages 259-271.
    3. Mishra, Ashok K. & Kumar, Anjani & Joshi, Pramod K. & D'Souza, Alwin & Tripathi, Gaurav, 2018. "How can organic rice be a boon to smallholders? Evidence from contract farming in India," Food Policy, Elsevier, vol. 75(C), pages 147-157.
    4. Kumar, Anjani & Mishra, Ashok K. & Saroj, Sunil & Joshi, P.K., 2019. "Impact of traditional versus modern dairy value chains on food security: Evidence from India’s dairy sector," Food Policy, Elsevier, vol. 83(C), pages 260-270.
    5. Maertens, Miet & Vande Velde, Katrien, 2017. "Contract-farming in Staple Food Chains: The Case of Rice in Benin," World Development, Elsevier, vol. 95(C), pages 73-87.
    6. Bellemare, Marc F. & Lee, Yu Na & Novak, Lindsey, 2021. "Contract farming as partial insurance," World Development, Elsevier, vol. 140(C).
    7. Tripathi, G. & Kumar, A. & Roy, D. & Joshi, P., 2018. "Profits from participation in contract farming: Evidence from cultivators of onion, okra and pomegranate in Maharashtra, India," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277106, International Association of Agricultural Economists.
    8. Mishra, Ashok K. & Mayorga, Joaquin & Kumar, Anjani, 2021. "Technology and Managerial Gaps in Contract Farming:The Case of Specialty Crop Production," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 47(1), January.
    9. Ragasa, Catherine & Lambrecht, Isabel & Kufoalor, Doreen S., 2018. "Limitations of Contract Farming as a Pro-poor Strategy: The Case of Maize Outgrower Schemes in Upper West Ghana," World Development, Elsevier, vol. 102(C), pages 30-56.
    10. Khan, Muhammad Fawad & Nakano, Yuko & Kurosaki, Takashi, 2019. "Impact of contract farming on land productivity and income of maize and potato growers in Pakistan," Food Policy, Elsevier, vol. 85(C), pages 28-39.
    11. Delelegne A. Tefera & Jos Bijman, 2021. "Economics of contracts in African food systems: evidence from the malt barley sector in Ethiopia," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 9(1), pages 1-21, December.
    12. Ashok K. Mishra & Anjani Kumar & Pramod K. Joshi & Alwin D'Souza, 2018. "Impact of contract farming on yield, costs and profitability in low‐value crop: evidence from a low‐income country," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(4), pages 589-607, October.
    13. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    14. Nhan, Tran Quoc & Gillette, Raulston & Yutaka, Tomoyuki & Can, Nguyen Duy, 2020. "Impact of Outgrower Scheme on Yield,Output Price,and Income: A Rice-Farm-Level Study in the Mekong Delta,Vietnam," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 61(1), pages 1-19, June.
    15. Ruml, Anette & Qaim, Matin, 2020. "Effects of marketing contracts and resource-providing contracts in the African small farm sector: Insights from oil palm production in Ghana," World Development, Elsevier, vol. 136(C).
    16. Ba, Hélène A. & de Mey, Yann & Thoron, Sylvie & Demont, Matty, 2019. "Inclusiveness of contract farming along the vertical coordination continuum: Evidence from the Vietnamese rice sector," Land Use Policy, Elsevier, vol. 87(C).
    17. Kumar, Anjani & Roy, Devesh & Trapathi, Gaurav & Joshi, Pramod Kumar & Adhikari, Rajendra Prasad, 2016. "Can contract farming increase farmers’ income and enhance adoption of food safety practices?: Evidence from remote areas of Nepal:," IFPRI discussion papers 1524, International Food Policy Research Institute (IFPRI).
    18. Kumar, A. & Mishra, A. & Joshi, P. & D'Souza, A., 2018. "Impact of Contract Farming and Risk Preference on Food Security: The Case of Organic Basmati Rice Smallholders," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277008, International Association of Agricultural Economists.
    19. Nguyen Hung Anh & Wolfgang Bokelmann & Ngo Thi Thuan & Do Thi Nga & Nguyen Van Minh, 2019. "Smallholders’ Preferences for Different Contract Farming Models: Empirical Evidence from Sustainable Certified Coffee Production in Vietnam," Sustainability, MDPI, vol. 11(14), pages 1-26, July.
    20. Bhanot, Disha & Kathuria, Vinish & Das, Debabrata, 2021. "Can institutional innovations in agri-marketing channels alleviate distress selling? Evidence from India," World Development, Elsevier, vol. 137(C).
    21. Adu-Gyamfi Poku & Regina Birner & Saurabh Gupta, 2018. "Making Contract Farming Arrangements Work in Africa’s Bioeconomy: Evidence from Cassava Outgrower Schemes in Ghana," Sustainability, MDPI, vol. 10(5), pages 1-21, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jageco:v:73:y:2022:i:2:p:518-540. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.