Overview

The research agenda under Participation in High-Value Agricultural Markets project (Sub-Theme 2.2) focuses on diversification into higher-value agricultural products (HVAP).* The opportunities for diversification into HVAPs are expanding as a result of various trends:

• rising incomes are allowing consumers to shift from staples to higher-value foods,
• trade liberalization is increasing the opportunities to export to high-income markets,
• urbanization is creating growing markets of relatively high-income consumers, and
• improved information and communication technology is allowing improved coordination of demand in high-income countries and supply in low-income countries.

Small farmers often have some cost advantages in producing these commodities relative to large-scale producers due to the lower opportunity cost and better motivation of family labor compared with hired labor. However, small farmers are constrained from participating in high-value sectors because of:

• lack of information on production methods and marketing;
• difficulty in bearing the risks associated with growing and selling HVAPs;
• liquidity constraints that prevent even profitable investments; and
• the high transaction costs of assembling goods from many small farmers.

Increasing consumer preferences for quality and specific attributes, tightening food safety regulations, and the restructuring of the retail food sector (including the growth of supermarket chains) are imposing new requirements on suppliers which often give an advantage to large farmers, including those in developed countries. The challenge is to craft policies and regulations that establish a level playing field for different types of growers and to promote marketing institutions that facilitate vertical coordination—meaning the transfer of information, credit, inputs, and commitments—between small farmers and buyers.

Project Goals and Objectives

Participation in High-Value Agricultural Markets seeks to promote the participation of poor households and low-income countries in the production and export of high-value agricultural products to raise rural incomes and reduce poverty. High-value agricultural products are defined as products that generate relatively high returns per unit of labor or land, mainly meat, dairy, eggs, fish, fruits, and vegetables of which most of the livestock projects described are carried out by the joint IFPRI-ILRI program. The specific objectives of this project are:

1. To identify bottlenecks and constraints faced by small farmers and other poor households in their attempts to raise income by participating in supply chains for high-value agricultural commodities;
2. To analyze alternative policies, regulations, investments (public, private or mixed), and institutional arrangements that alleviate the identified bottlenecks and constraints;
3. To disseminate information on constraints and policy options to researchers and policymakers, and international organizations in developing countries; and
4. To strengthen the capacity of policymakers and researchers in targeted countries to undertake policy research concerning the role of diversification and high-value agricultural commodities in raising the incomes of small farmers and other poor households.

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*This research program involves joint activities with the International Livestock Research Institute (ILRI).  In September 2003, IFPRI and ILRI agreed to form a Joint Program for Livestock Marketing Opportunities.  The Joint Program coordinators are Steve Staal for ILRI and Clare Narrod for IFPRI.  Dr. Narrod is a research fellow in the Markets, Trade, and Institutions Division of IFPRI.