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Small Farmers and Big Retail: Trade-offs of Supplying Supermarkets in Nicaragua

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  • Michelson, Hope
  • Reardon, Thomas
  • Perez, Francisco

Abstract

In Nicaragua and elsewhere in Central America, small-scale farmers are weighing the risks of entering into contracts with supermarket chains. We use unique data from cooperatives supplying supermarkets to study the effect of supply agreements on producers’ mean output prices and price stability. We find that prices paid by the domestic retail chain approximate the traditional market in mean and variance while mean prices paid by Walmart are significantly lower than the traditional market. However, the Walmart contract is found to systematically reduce price volatility. We find some evidence, however, that farmers may be paying too much for this contractual insurance against price variation.

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File URL: http://www.sciencedirect.com/science/article/pii/S0305750X11001884
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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 2 ()
Pages: 342-354

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:2:p:342-354

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Web page: http://www.elsevier.com/locate/worlddev

Related research

Keywords: small farmers; supermarkets; contracts; Walmart; Latin America; Nicaragua;

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Cited by:
  1. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2010. "Smallholder Participation in Agricultural Value Chains: Comparative Evidence from Three Continents," MPRA Paper 27829, University Library of Munich, Germany.
  2. Rao, Elizaphan J.O. & Brummer, Bernhard & Qaim, Matin, 2011. "Farmer Participation in Supermarket Channels, Production Technology, and Efficiency: The Case of Vegetables in Kenya," Discussion Papers 113508, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.

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