Is Farmer–Food Retail Chain Linkage Feasible?

One of the greatest challenges facing farmers is adjusting to the changes taking place in the global food and agricultural system. These changes warrant farmers to adjust to the changing demands of the market, reduce cost of production and become more competitive, while at the same time meet the increasing demands of consumers for more specific products and ways of producing them. In this context, the emergence of retail chains and their backward linkages with farmers for procuring fresh fruits and vegetables has been analysed in this chapter. The main strategy of this system is to ensure a steady and continuous supply of vegetables to food retail chains and a continuous flow of income to farmers. This linkage may change the method of farming and the marketing arrangement adopted by the farmers. The study has indicated that farmer–food retail chain linkage is beneficial to both the parties. The new institutional arrangement of buying at competitive prices by the food retail chain through a fruit and vegetable consolidation centre reduced the market risks and transaction cost to the farmers, and helped them to break away from the dominance of traditional brokers/wholesalers/commission agents. Direct supply by farmers allowed the retail chain to simultaneously increase control over quality, supply reliability and price stability. In this format of linkage, large and small farmers participated more with less opportunity for marginal farmers as they could not invest in tube wells which is necessary for growing fruits and vegetables. The number of farmers involved in this business model, though small, has provided evidence that it is feasible to have a farmer–food retail chain linkage that ensures benefit to both the parties.