Vertical integration and the modernization of staple food value chains: Evidence from Myanmar’s rice sector

Increased vertical integration and coordination are defining features of transforming and modernizing agricultural value chains in low- and middle-income countries, with important implications for market efficiency and farm-level transformation. However, research documenting these processes in modernizing domestic value chains is limited, and tends to focus on foreign direct investment and high-value food products. We study the rice value chain – the most important staple in Southeast Asia – in Myanmar and use unique data from domestic rice mills and farmers to analyze millers’ expansion into other businesses and services. We show that both modern and traditional mills serve as key nodes in local rice value chains, fulfilling diverse roles beyond processing at both the farm and post-farm levels and highlighting a co-development of modern processing and vertical integration. Yet, statistical tests that control for mill and farmer characteristics, respectively, show that modern mills are more engaged in vertical integration and coordination, particularly in post-farm value chain segments, highlighting the co-development of modern processing and business expansion. Consistent with this pattern in the miller data, farmers using a modern mill are more likely to receive complementary services – especially post-farm – and to adopt modern production practices more broadly. However, this expansion is uneven, reaching large farms more frequently than small and medium farms.