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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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  • Michelson, Hope & Reardon, Thomas & Perez, Francisco, 2012. "Small Farmers and Big Retail: Trade-offs of Supplying Supermarkets in Nicaragua," World Development, Elsevier, vol. 40(2), pages 342-354.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:2:p:342-354 DOI: 10.1016/j.worlddev.2011.07.013
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    Cited by:

    1. Rob Kuijpers & Johan Swinnen, 2016. "Value Chains and Technology Transfer to Agriculture in Developing and Emerging Economies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(5), pages 1403-1418.
    2. 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.
    3. Michelson, Hope & Reardon, Thomas & Perez, Francisco, 2012. "Small Farmers and Big Retail: Trade-offs of Supplying Supermarkets in Nicaragua," World Development, Elsevier, vol. 40(2), pages 342-354.
    4. Michelson, Hope & Boucher, Stephen R. & Bai, Junfei & Jia, Xiangping & Huang, Jikun & Chen, Xinzhe, 2013. "Supermarket Supply Chains with Chinese Characteristics: The Case of Walmart's Direct Farms," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150441, Agricultural and Applied Economics Association.
    5. Hope C. Michelson, 2013. "Small Farmers, NGOs, and a Walmart World: Welfare Effects of Supermarkets Operating in Nicaragua," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 628-649.
    6. Chege, Christine G.K. & Andersson, Camilla I.M. & Qaim, Matin, 2014. "Impacts Of Supermarkets On Farm Household Nutrition In Kenya," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182724, European Association of Agricultural Economists.
    7. Michelson, Hope, 2015. ""You Quit?" Influence of Neighbor Experience and Exit on Small Farmer Market Participation," MPRA Paper 62239, University Library of Munich, Germany.
    8. Suganthi, D., 2013. "Behaviour of Premium Paid by Supermarket and Trade-off Facing Farmers," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 68(3).
    9. Ochieng, Dennis O. & Veettil, Prakashan C. & Qaim, Matin, 2017. "Farmers’ preferences for supermarket contracts in Kenya," Food Policy, Elsevier, vol. 68(C), pages 100-111.
    10. Ebata, Ayako & Velasco, Pamela & von Cramon-Taubadel, Stephan, 2015. "Distance to market and farm-gate prices of staple beans in rural Nicaragua," Discussion Papers 197540, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    11. Briones, Roehlano M., 2015. "Small Farmers in High-Value Chains: Binding or Relaxing Constraints to Inclusive Growth?," World Development, Elsevier, pages 43-52.
    12. Andersson, Camilla I.M. & Kiria, Christine G. & Qaim, Matin & Rao, Elizaphan J.O., 2013. "Following up on smallholder farmers and supermarkets," Discussion Papers 158142, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    13. Qaim, Matin & Andersson, Camilla I.M. & Chege, Christine G.K. & Kimenju, Simon Chege & Klasen, Stephan & Rischke, Ramona, 2014. "Nutrition Effects of the Supermarket Revolution on Urban Consumers and Smallholder Farmers in Kenya," Discussion Papers 180976, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    14. Chege, Christine G. K. & Andersson, Camilla I.M. & Qaim, Matin, 2014. "Impacts of supermarkets on farm household nutrition in Kenya," Discussion Papers 167910, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    15. Rao, Elizaphan J.O. & Qaim, Matin, 2013. "Supermarkets and agricultural labor demand in Kenya: A gendered perspective," Food Policy, Elsevier, vol. 38(C), pages 165-176.
    16. Rao, Elizaphan J.O. & Brümmer, 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.
    17. Abebe, Gumataw K. & Bijman, Jos & Kemp, Ron & Omta, Onno & Tsegaye, Admasu, 2013. "Contract farming configuration: Smallholders’ preferences for contract design attributes," Food Policy, Elsevier, vol. 40(C), pages 14-24.
    18. Herforth, Nico & Theuvsen, Ludwig & Vásquez, Wilson & Wollni, Meike, 2015. "Understanding participation in modern supply chains under a social network perspective – evidence from blackberry farmers in the Ecuadorian Andes," Discussion Papers 197709, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    19. Chege, Christine G.K. & Andersson, Camilla I.M. & Qaim, Matin, 2015. "Impacts of Supermarkets on Farm Household Nutrition in Kenya," World Development, Elsevier, vol. 72(C), pages 394-407.
    20. Trebbin, Anika, 2014. "Linking small farmers to modern retail through producer organizations – Experiences with producer companies in India," Food Policy, Elsevier, vol. 45(C), pages 35-44.
    21. Sudha Narayanan, 2012. "Safe gambles? Farmer perceptions of transactional certainty and risk-return tradeoffs in contract farming schemes in Southern India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-021, Indira Gandhi Institute of Development Research, Mumbai, India.
    22. Ebata, Ayako & Pacheco, Pamela Alejandra & Cramon-Taubadel, Stephan von, 2015. "Distance to market and farm-gate prices of staple beans in rural Nicaragua," 2015 Conference, August 9-14, 2015, Milan, Italy 211582, International Association of Agricultural Economists.
    23. Minten, Bart & Dereje, Mekdim & Engeda, Ermias & Kuma, Tadesse, 2015. "Coffee value chains on the move: Evidence from smallholder coffee farmers in Ethiopia:," ESSP working papers 76, International Food Policy Research Institute (IFPRI).
    24. Upton, Joanna B. & Lentz, Erin C., 2016. "Finding Default? Understanding the drivers of default on contracts with farmers’ organizations under the World Food Programme Purchase for Progress Pilot," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235656, Agricultural and Applied Economics Association.

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