RapidDualTransformationofthe“HiddenMiddle”ofAfrican&Asian

FoodSystemsTomReardon,MSU

FIPPKeynoteatIFPRIJune262018

… “Rapid”: transformation not gradual but abrupt, sudden… image of a TIDAL WAVE

… “Hidden” Middle: often NOT KNOWN to policymakers in Africa & Asia… where food security debates are super focused on the farm sector… rice farming = 10% of Asian food system (all products & segments)… maize farming = 10% African food system… farming is IMPORTANT, feeding the whole system, à but the “midstream” also is pivotal, decisive, for national food security

… “midstream” of all food system = 40%… processors, wholesalers, logistics services (truckers, cold storage, warehousing)… image of HOURGLASS

1.RapidFoodsystemtransformationdrivenbymeta

drivers&CONFLUENCEof5trendsMetadrivers• incomegrowth• policyliberalization• Publicinfrastructureinvestment• Massiveprivateinvestment(FDI&domestic)• technologychangeandtransfer(ineachsegmentofsupplychains)andcrosscutting(e.g.internet)

PULLED byDownstreamdemand1)urbanization2)dietchangeinurbanandruralareas“FACILITATED”byMidstream&Downstream3)Transformationofprocessing,wholesale,logistics(dual:large&SMEs)…andretail(supermarketrevolution!FF!)FEDbyupstream4)Farmingintensification,commercialization,diversification5)inputvaluechaindevelopment

2.ChangesinDownstreamdemandimportantforstudyofthe“midstream”2.1.Urbanizationa) Rapidincreaseinpopulationshare!…Africa:24%in1970,40%in2011…Asia:24%in1970,45%in2011b)BIGGERinnationalfoodconsumptionthaninpopulation…SouthAsiaandESE:30/40/50-60%…SEAsiaandWestAfrica:40/50/60-70%

è Rural-urbanfoodvolumeflowgrowingfastoverpast3decades:

…800%inAfrica…1000%inSoutheastAsiaèMassive&rapidgrowthofthe“midstream”

c)Longer&longersupplychains,reachdeeper&deeperintoruralareasà Ruraldifferentiationasfunctionofdistancefromcitiesandtowns…DelhiIMPACTonUttarPradesh:...near-urban(deep,maturetransformation,“newIndia”)…middle(rapidearlytakeoffoftransformation,“emergingnew-India”)…far(hinterland,stilltraditional,“oldIndia”)

d)Urbandifferentiation…Rapidriseofthesecondarycities/towns:60%ofurbanàHubsforthe“midstream”andupstreamservices

à demandmagnet…maize-feed-chicken/eggcomplexinNigeria,womensellingtotowns(returntothislater)

2.2.downstream“pullfactors”continued:DIETCHANGE

…drawingonworkwithDavidTschirleyMSUa)NOTjust“urbanmiddleclass”…butinurbanandruralareas…andalsoamongpoor

b)RiseofPurchasedfoodintotalruralfoodexpenditures(purchased+ownproduction)IndonesiaandBangladesh,about80%NepalandVietnam,65-72%ESA,45%Nigeria,70%

èImpliesriseofrural-rural &urban-ruralsupplychains

è includingsurgeofmidstreamSMEsinthesechains

…exampleofTanzania,andchallenge

c)RiseofProcessedfood(purchase)…shareofprocessedintotalruralfoodexpenditureinESA=39%(inNigeria,65%)…inurbanESA,53%…inruralAsia,59%…inurbanAsia,73%…againAfrica&Asiapicturesconverging…èMassiveriseofSME&largeprocessors&“stockists”

d)rapiddiversificationbeyondgrains…vegetables/fruit,fish,meat,dairy…Asia:65%offoodconsumptioninruralareas,75%inurbanareas…Africa:50%inruralareas&65%inurbanèHugeriseofSME’sinperishables!…ruralpackingplants&stagingareas…secondary&primarycitywholesalemarkets…semi-wholesalersbetweencities&rural…logistics(includingcoldstorage!)

3.FocusonValuechaintransformation:Quiet&ModernRevolutions

3.1.Stagesoftransformationoffoodsystemsa) Traditionalb) Transitionalc) Modern

3.2.DUALtransformationofMidstream(anddownstream)a) Fromtraditionalstagetotransitionalstage:

THEQUIETREVOLUTION(grassrootsSMErevolution)

…GUESSTIMATE:roughly2/3ofdevelopingcountryfoodsystem(probablynext2-3decades)…advancedinAsia,wellalonginAfrica

b)Fromtransitionaltomodernstage:THEMODERNREVOLUTION(largeprocessors,supermarkets)…GUESSTIMATE:roughly1/3ofdevelopingcountryfoodsystem…wellalong inAsia,emerginginAfrica

c)Overlapsofstagespercountry&overcountries____________________traditional(waning)

_______________transitional(dominant)__________modern(emerging)

4.TransitionaltoModern:ModernRevolution

4.0.Overall…alsoabrupt/sudden/fast…drivenmainlybydomesticbutalsoexportmarkets&FDIaswellasdomesticinvestments

4.1.organization/structurechangea) Concentration&partialmultinationalizationa.1)symbiosisof…supermarketrevolution…largescaleprocessors,wholesalers,3PLSa.2)economiesofscaleandscopeoutcompetingtraditionalplayers

4.2.Conductchangeinmodernmidstream

a.)privatestandards&qualitydifferentiationb)procurementsystemmodernization(fasttrackingsupplychaintransformation)c)dominos,rollingout:firstinprocessed,thensemi-processed,andstartinginfresh

5.QuietRevolutioninthe“HiddenMiddle”

5.0.Overall…Sudden&fast…basedondomesticmarkets&domesticinvestments

5.1.Structuralchangesa) Longersupplychainsdrivenbyurbanizationb) Diversification&valueaddedinsupply

chainsdrivenbydietchangec) Proliferationof10’sof1000’sofSMEsin

processing,wholesale,3PLS(transport,warehouse,coldstorage)

5.2.Conductchangea) Traditionalsystemsup-ended,examples…tiedoutput-creditarrangementswithtraders,aredisappearing…shiftfromtraditionalruralbrokerstotown-basedwholesalers&3PLS…shiftfromunpackagedbulksaletopackaged,brandedmilledgrains

Boom in SME’s in food processing: packaging, labeling, branding

b)Widespreadtechnologychanges,forexample…shiftfrompasturestofeed…fromcapturetoenclosure(chickens,fish)…tomachinesforfarming,transport,milling,packaging,cooling

àIbelieve75%oftechnologychangeindevelopingcountriesisofthisbasictransitionaltype

…other25%ismodern,emerging(e.g.,roboticsortersinfruitpackingplantsinMexico)

c)Someexamples,alldomesticmarketstories

c.1)Bangladeshfishfarming(IFPRI/MSU)…grew15foldin25years…feedsectortripledin5years…bigshiftfromtraditionalvariety(carps)tofast-growers(tilapia,catfish)…SMEsinthesupplychaintripledin10years

c.2)Teff inEthiopia(IFPRI)…BartMintenEthiopia:walk/horsetovehiclesinteff valuechainin10years(100yearsinUS)…hugejumpinurbanwholesale,milling,preparedsalesofenjera andmilledteff…Farmresponsewithvarietychangeandintensification

c.3)BoomingNigeriamaize/feed/chickens-eggscomplex(MSU,SawedaLiverpool-Tasie)…hugegrowthinchickenfarmingatSMEscale…intenseinvolvementofwomen…marketingtogrowingtowns…600%feedsectorgrowthin10years…growthofthelongnorthsouthsupplychainformaizeandfeed

c.4) “confluence”:PotatocoldstoragesboominAgra/India

HIDDENMIDDLE:BartandIweretold2009bygovernmentandresearchgurus“verysadlythereareNOcoldstoragesinIndia”

Fig.1. Heaps in an open area under the shade of trees. Fig.2. Pit method of potato storage.

Fig.3. Pits covered with hut made up of locally available materials. Fig.4. Thatched roof at storage site for providing additional protection

against hot sun and rains.

Here, potatoes are heaped under· the shade of trees just outside the village. The heaps are covered with a layer of. available straw material (about 30 em thick). Generally, 6-30 tonnes of potatoes are stored in each heap by the farmers. Losses in heaps can reach even up to 40%, if they are not properly made and cut, cracked, bruised, diseased and rotted potatoes were not removed by sorting before storage. The work carried out at Lhe campus showed that it is possible

Firstwaveofpublicinvestment&firstwaveofpotatofarmingdevelopment

inlate1980s-early1990s

• Farmersshiftfromwheattopotato• Publicinvestment:NARSresearch&extensionofnewpotatovariety(higheryield,longerstoragelife,moreresistanttotransport)

• Publicinvestment:waterpumpsubsidies• EncouragedbyinitialgrowthinDelhieconomy

RapidUrbanizationas“demandpull”

• RapidgrowthinDelhi’spopulationandincomesinthe1990s/2000s(linkedtoeconomicliberalizationandpublicinvestmentincityinfrastructure)

• “diffusion”ofurbanizationeffectinruralspace:largepublicinvestmentinruralroads

• Dietdiversificationintohorticulturalproductsinurbanareas

RiseoftheRuralnonfarmsector

• Ruralnonfarmsectordevelopmentespeciallyfastandintenseinthe“market-shed”ofDelhi

• Drivesupfarmandnonfarmwages• Fuelsprivateinvestmentinallsegmentsofthesupplychain

Secondwaveofpublicinvestmentsinruralareas

• Publicinvestmentinenergygrid• Publicinvestmentinlimitedsubsidiesformoderncoldstorages

ModernColdStorageBoomin2000s!

• Massiveprivateinvestmentincoldstoragesstartinginmid/late1990s

• …crescendooverthe2000s• b)ShiftingpotatofromseasonalconsumptioninDelhitonearly-yearround(2/3fromcoldstore)

Secondwaveofpotatofarmdevelopment:capital-led

intensificationinsecondhalf2000s

• capital-ledintensification• Landconcentration(rentalandpurchase)

6.Conclusionsa) Dualrevolutioninthe“hiddenmiddle”of

thefoodsystem,drivenbyCONFLUENCEoftrendsdownstream,midstream,upstream

b) Disruptiveinitsspeed:tidalwave,recentabrupt,fast

c) Disruptiveinitschangingofstructure,institutions,technologies

d)Crucialforresearchtostudythewholefoodsystemandunderstandrapidchange