Horticultural Procurement And Marketing, Geographical Positioning And Farm Household Cropping Structure Adjustment

The increase of globalization of modern retailing sector in 1990s have significantly changed the agri-food marketing system in developing countries. More and more fresh produce(horticultural products) are sold nowadays through modern retailing outlets, i.e. supermarkets. This phenomenon has raised concern among scholars that supermarkets development might cause impact on the agri-food procurement in the rural area, thus impact on farmers in developing countries. Some researchers believe that supermarkets as modern retailing outlets has created opportunities for farmers. Farmers who are integrated into supermarkets procurement will have more accurate market information on trends of demand in time. This will reduce the costs of adjusting production blindly, and increase farmer's income. However, there are other opinions that the development of supermarkets is a threat to small scaled producers can not deal with big scale procurement of the supermarket. Poorer farmers from remote area could also be possibly excluded from this modern supply chain. As a result, small-scale producer and poorer farmers will be worse off. So far, there has not been a conclusion on what impact of supermarket has on small scaled farmers in developing countries. It has not been shown whether or not poorer farmers in remote areas are excluded from the market, and whether or not their income is affected by such new market development.The goal of this paper is to provide empirical evidence on supply chain development, and study the impact of supply chain development on the cropping structure of farmers in surrounding areas. We would like to find out the determinants of farmers cropping pattern, and the income effect, so that farmers especially the poorer farmers can benefit from changes in supply chain. We also provide policy references for the government based on our findings and analysis. To obtain such a goal, we conducted a survey that covers 3 wholesale markets in Beijing, the surrounding area within 140 kilometers circle, which includes 10 counties of Beijing and 25 countries in Hebei. We collected data of 90 wholesalers, 201 villages and 490 farm households. We applied Probit and Tobit model to evaluate the impact of supply chain change in the upper stream on farmer's income and horticultural production. In order to tackle the endogeneity problem caused between farmer's cropping pattern and farmers income, we use the models of system (two stage IV estimation).Our main findings are: 1) Even though the downsream of agri-food supply chain have changed significantly, the changes have not penetrated the upstream of the supply chain (i.e. farmers production and marketing). 2) Geographical location might still play a role on agricultural production structure, the transportation infrastructure contributed to reduce such impact. 3) The rise of demand on horticultural products helped to improve the agricultural production structure, and reduce income inequality, and improve equity.Based on the conclusions above, we have three policy recommendations: 1) Facilitate the vertical integration of horticultural products supply chain, to control and supervise food safety from production to marketing; 2) Improve transportation and other market development, to help farmers to adjust their production; 3) When drafting poverty alleviation policy, the government could encourage poor households to participate in horticultural production, thus increase their income.