8. Food for consumers: marketing,
processing and distribution

Technical background document
© FAO, 1996

1. Introduction

1.1 Progress towards the goal of universal food security is impeded by the absence of well-functioning marketing, processing and distribution systems. All too often the ability to store food and move it from producing to processing or consuming areas is inadequate. Processing facilities frequently operate inefficiently. The costs of marketing can be considerable and can constitute a major component of the final price. In a large number of countries the main constraints are inadequate transportation and processing systems. The costs of these constraints are immense in terms of lost job opportunities, forgone economic growth and inadequate access to food.

1.2 As the urbanization process unfolds, a larger share of national food consumption takes place at a location other than where it is produced. The marketing system must develop to provide necessary services as producers sell in markets distant from where consumers purchase their food.

1.3 The urbanization process also influences the composition of the diet. The diet of an urban resident tends to consist of a higher share of processed foods, in part because some foods do not travel well. Some foods spoil soon after harvest, unless processed. Fresh produce must move to market soon after production, either directly to the consumer or to the processor. The composition of the national diet also changes as the development process proceeds. Consumers tend to seek a wider variety of foods, induced by rising incomes and the demand for convenience in preparation.

1.4 Urbanization and development tend to encourage producers, communities and nations to specialize in products for which they have a comparative advantage. However, food production patterns are constrained by household needs, agroclimatic factors and the known and available means of production. Subject to these constraints, producers tend towards specializing in the production of goods that promise the highest economic returns.

1.5 Specialization stimulates trade in food products, among the members of the local community or between them and other nearby or distant communities. Over time, provided that transportation is reliable and efficient, the flow of food products moving between communities increases, and provides the basis for the further development of the marketing, processing and distribution systems.

1.6 Differences in agroclimatic factors preclude efficient production of the full range of foods necessary to a healthy diet. Optimum efficiency is realized when a community specializes in the production of products for which it has a comparative advantage. Before this can happen, it is necessary to have an efficient system to take produce from the producing to the processing or consuming areas.

1.7 A large proportion of the resources devoted to meeting growing consumer demand for food has traditionally been allocated to ways of increasing agricultural production and productivity. In most countries, far less attention has been paid to the chain through which the food reaches the consumer. Indicative of this approach was the 1974 World Food Conference, which, apart from a brief acknowledgement that “the efforts to increase food production should be complemented by every endeavour to prevent wastage of food in all forms”,⁽¹⁾ more or less ignored issues relating to food marketing, processing and distribution.

1.8 This relative neglect is difficult to explain in view of the essential contribution that these sectors make to national economies and to employment and of their role in assuring an adequate, low-cost and diversified supply of food to consumers throughout the year. An indication of the importance of the sector comes from the fact that in Western countries the share of the food producer in the final consumer price continues to decline. In Germany, for example, increased processing meant that crop producers received around 35 percent of the retail price in 1960, 26 percent in 1975 and only 14 percent at the end of the last decade (European Commission on Agriculture, 1991).

1.9 If the marketing chain functions inadequately, investment in production becomes both more costly and more risky and may end up being wasted. Poor storage of staple grains in many developing countries leads not only to food loss but also to a wastage of the resources required to produce the food. These resources could have been used to diversify diets or to produce crops for export. Equally, inadequate handling and transport arrangements for high-value export products such as fruits can jeopardize expensive investments in production facilities.

1.10 An efficient post-harvest chain can be environment-friendly and promote sustainable development. The production of crops to meet market demand, the minimization of losses in the marketing chain and the efficient distribution of foods to areas where there is consumer demand all serve to avoid unnecessary production that can utilize scarce water resources, may require heavy application of pesticides and fertilizers and can lead to erosion and soil degradation. Where food resources are threatened, e.g. in the case of fish stocks, inefficiency and loss in the distribution chain only exacerbate an already difficult situation. Improvements in distribution methods help reduce traffic, thus reducing energy costs. More efficient facilities, e.g. wholesale markets, reduce congestion and, by providing more sanitary conditions for food handling, lead to improvements in public health.

1.11 A further indication of the importance of marketing, processing and distribution can be gauged from the fact that between 1990 and 2010, production of cereals in developing countries is forecast to rise by about 472 million tonnes and production of meat by about 78 million tonnes (FAO, 1995b). It is projected that between 1990 and 2010 the rural populations in developing countries will grow annually by 0.6 percent and urban populations by 3.3 percent (United Nations, 1995). Thus, it is likely that a major proportion of the expected production increases will have to be marketed or processed, or both. As well as providing outlets for farmers’ produce, the marketing and processing sectors generate considerable added value and provide opportunities for businesses to be established in rural areas. This, in turn, should contribute to the growth of commercial activity and employment and lessen the flood of the population to urban centres. In fact, as noted above, the value added through marketing and, in particular, processing can be much greater than the value of the primary production. To sustain the sector, future investment requirements will be enormous. World Food Summit technical background document 10 Investment in agriculture: evolution and prospects estimates annual net investment requirements in the post-harvest sector at around US$15 billion, simply to expand the capacity of the post-harvest sector in response to population growth and market demand.

1.12 As noted in the FAO study World agriculture: towards 2010 (WAT2010) (FAO, 1995b), it is now well recognized that failure to alleviate poverty is the main reason for undernutrition. Alleviating poverty is an enormous task but, by improving the handling of food between farm and consumer, much can be done to enhance the access of the poor to inexpensive, but safe, food. Increasing the efficiency of the marketing chain can reduce costs and hence prices to the consumer. Reducing post-harvest losses can lead to significant reductions in consumer prices. Such efficiency improvements are vital if those with limited purchasing power are to be able to afford sufficient food of adequate quality. In many rural areas employment in post-production activities, such as processing, can make a major contribution to increasing incomes and thus alleviating problems of undernutrition. Women play an important role, frequently a dominant one, in such activities.

1.13 This paper focuses on the marketing and processing of staple grain crops as well as fruits and vegetables and, to a lesser extent, animal and fisheries products and non-wood forest products. Initially, the paper reviews steps that can be taken to avoid the misallocation of productive resources, which is often a major cause of losses. The danger of overproduction can be minimized when producers are left to plan their production in line with consumer requirements on the basis of price signals and governments refrain from offering unnecessary subsidies. The paper considers post-harvest handling on-farm and the role of storage both on-farm and within the marketing system. Many attempts to promote improved methods of handling, storing and primary processing have failed because they have been planned without reference to consumers’ ability or willingness to pay for improvements, to the way in which the marketing system functions or to the need for those involved in the marketing system to make a profit.

1.14 By meeting consumer demand, farmers, traders and processors should be able to operate profitably. However, the ability of the marketing system to function efficiently and profitably also depends on the existence of appropriate policy, economic and legislative environments. Recognition of the fact that everyone working in the post-production system must be able to trade profitably if they are to provide the necessary services is vital. Second, it is important to develop an appropriate macroeconomic environment in order to facilitate trade and create the potential for equitable economic growth. The role of government can also include the provision of infrastructure and support services, such as markets and information services. The paper explores these issues and then considers ways in which the food supply to rapidly growing urban areas can be secured. Issues related to food quality and safety are also stressed. The function of food processing is then discussed and conditions for the successful operation of food processing ventures identified. Finally, the paper makes a number of recommendations for future government and donor initiatives in the post-harvest sector.

1.15 While the paper concentrates on domestic marketing and processing of food crops, most of the points made are also valid for international trade in foodstuffs, with the additional limitation that trade between countries is hindered by national tariff and non-tariff barriers. Food commodities were included in the Uruguay Round of multilateral trade negotiations and this should increase food trade possibilities. To take advantage of these possibilities, countries will need both to strengthen their export marketing skills and promote effective internal marketing and handling arrangements prior to export.

2. Meeting consumer demand

THE ADVANTAGES OF CATERING TO THE CONSUMER

2.1 While the central planning of production is now a thing of the past in nearly all countries, the need to orient production to the needs of consumers is still often ignored. Inadequacies in information on demand, in terms of quantities needed, prices and quality requirements, continue to lead to a misallocation of resources and to a loss of markets. Under central planning or state-purchasing arrangements the cost of such misallocation was absorbed by the government: under liberalized markets it is the farmer who suffers. The greater availability of information about market requirements should in future permit farmers to make more informed decisions about what and when to plant.

MATCHING PRODUCTION WITH DEMAND

2.2 Significant food and financial losses can be caused by wastage resulting from demand-supply imbalances of particular crops. This has often occurred when subsidies have been given to producers, thereby leading to a disruption of normal market price signals. Examples of such subsidization are widespread. The Common Agricultural Policy of the European Union is frequently quoted, but almost all governments have at times subsidized food production⁽²⁾ and many continue to do so. Often steps are taken to store surpluses for which there are few market prospects or, alternatively, to process surplus raw materials into products that are similarly not in demand.

2.3 The dependence of much food production on climatic fluctuations means that variability in food output can never be completely avoided. Nevertheless, for many horticultural products the effects of gluts can be reduced by producing a range of varieties. Use of early and late varieties extends the season and should increase returns, but this method will only be profitable if the varieties used produce reasonable yields and if they find acceptance with consumers. Some varieties also can be stored longer than others and this will lengthen the period the crop is available to the consumer. However, while researchers have done much to develop fruits and vegetables with definable post-harvest characteristics, this has not always been the case with staple crops. Hybrid white maize, for example, has much higher yields than traditional varieties but requires skilled storage management and has poor on-farm storage characteristics. This is becoming particularly important in much of Africa as the role of marketing boards is being reduced and farmers are having to store much of their surplus on the farm for several months.

2.4 One way of avoiding the creation of surpluses for some crops, particularly vegetables, is to stagger planting dates where it is possible to do so. Successful out-of-season production can result in significantly higher returns and may be more economical than long-term storage. Producers also have some limited scope for delaying the harvest. Growth-regulating chemicals, which permit staggered harvesting, can be used in some circumstances. However, while consumers in richer countries may be prepared to pay for year-round availability of particular crops, those in poorer countries may lack the purchasing power to justify the additional costs to the farmer.

2.5 As with agricultural crops, the characteristics of livestock at the time of slaughter and the properties acquired during husbandry will determine the quality of the consumer product, whether sold fresh, frozen or processed. Livestock and dairy production can also be seasonal, as a result of variability in temperature, rainfall and pasture growth. Farmers tend to plan the birth of young animals in order to make optimal use of natural conditions, and this leads to greater milk availability at certain times of the year. Nevertheless, the use of different varieties of pasture or improved fodder allows farmers to plan milk production for times of short supply. In the case of meat, animal weight will differ according to the availability of pastures and fodder, and this will affect farmers’ decisions about when to send animals for slaughter. With adequate information farmers can calculate whether higher prices will justify slaughtering at lower weight. In the livestock sector, pronounced examples of matching supply with demand are the production of turkeys for the Thanksgiving holiday in the United States and for the Christmas period in many other Western countries and the production of sheep for the period of Ramadan in Muslim countries.

2.6 In more developed economies, many farmers are now less concerned about meeting the needs of final consumers than they are about catering to the demands of the processors. To cite just one example, the Swiss frozen-food industry at present offers around 500 individual consumer products. Under these circumstances, farmers do not need to understand developments in consumer demand for those raw materials that they are producing. There is a growing trend for direct contracts to be made between farmers and processors or traders. These reduce the freedom of the farmer to exploit market demand in return for guaranteed prices and sales quantities (European Commission on Agriculture, 1991). To a certain extent, the same situation also now applies to producers of items such as fruits and vegetables that need to be consumed fresh; these producers now increasingly supply supermarkets direct rather than through the more traditional wholesale marketing channels.

2.7 Farmers will respond to market demand if they can be assured that such demand will not be unduly disrupted by government actions that interfere with normal supply-demand patterns. In many countries, one area of particular concern to grain producers is poorly planned distribution of food aid which leads to market price falls. This risks a vicious circle whereby farmers respond to lower prices by producing less, making more food aid necessary. Poorly coordinated releases from government food security reserves can be similarly disruptive.

WHERE TO PRODUCE

2.8 While individual farmers have little if any choice about where to plant or where to rear animals, governments have at times in the past attempted to influence the overall location of production through pricing and other policies. In several developing countries, policies of encouraging subsidized production of one or two staple crops promoted the production of low weight-for-value commodities in remote areas and led to governments incurring excessive transport costs, both for inputs and the resulting outputs. Such policies eventually proved to be financially unsustainable. Recent moves towards market liberalization have meant that most countries no longer pursue pan-territorial pricing policies, with the result that farmers have to diversify production in accordance with their comparative advantage. A similar situation is witnessed in the former centrally planned economies, where allocation of production and inputs on the basis of bureaucratic dictate is now being replaced by market-oriented production.

2.9 Government, non-governmental organization (NGO) and donor-led development projects have sometimes been guilty of promoting food production in areas with poor road infrastructure and insufficient transport availability. There has been a tendency to see horticultural, livestock and dairy production as offering potential for increasing the incomes of the poorest farmers. This has often been done without addressing issues related to marketing costs and the availability of suitable marketing channels and infrastructure.

UTILIZING PRICE INFORMATION

2.10 If farmers are aware of seasonal price and demand patterns from previous years, they are, in theory, able to plan their production more effectively. Using the appropriate technology, they can harvest both before prices are expected to drop and after prices start to rise again. Daily or weekly market price supply and demand information can help farmers decide when to harvest and, in larger countries, where to send the produce (Schubert, Zehrfeld and Juntermanns, 1988). While farmers in developed economies are generally able to obtain and interpret market information themselves, producers in developing countries are likely to require both a market price information service and assistance in interpreting price information and planning production. However, extension staff, while usually well trained to provide advice on production aspects, frequently lack access to information on marketing and post-harvest matters.

3. On-farm post-harvest operations

IDENTIFYING ECONOMICALLY VIABLE IMPROVEMENTS

3.1 The quantity, quality and price of products available to consumers depend crucially on the way they are handled on-farm. Food safety is also a major issue. For example, poor drying and storage techniques can lead to mycotoxin development (FAO, 1979).  In order to improve post-harvest handling, FAO established the Special Action Programme for Prevention of Food Losses (PFL) in 1978. The focus of PFL efforts has been on small farmers who, in developing countries, produce the bulk of food, both for themselves and for the market. More than half of these small farmers are women, and women also commonly play a major role in post-production activities.

3.2 During the 1970s, post-harvest specialists tended to concentrate solely on the quantification of physical losses. Such studies were eventually largely discarded as being too costly and time-consuming,³ although, clearly, an awareness of loss levels is necessary in order to assess the viability of proposed improvements. The approach to the post-harvest sector gradually changed to one that gives greater attention to studying the post-production system and to identifying its problems and bottlenecks.⁴ However, because a non-commercial focus was often adopted, suggested improvements were sometimes based on what was technically possible rather than on what was economically justified.

3.3 In general, improved post-harvest technologies for grains have now been well identified.⁽⁵⁾ In the future, the focus of post-production activities for grains will be on adapting these technologies to specific environments and ensuring that they are economically and socially viable. With other crops, however, there is much potential for further technological development at the level of small- and medium-scale enterprises. For example, there is scope for new products with market prospects produced from traditional crops such as sweet potato.

ECONOMICS OF POST-HARVEST IMPROVEMENT

3.4 In theory, if all known technology and infrastructure were actually used, losses in the post-harvest system could be reduced significantly. However, the guiding principle of nearly every loss-reduction activity should be that the assumed benefits through reduced losses or higher prices must exceed the costs of the proposed improvements by an amount sufficient to justify the investment cost and the associated risk. Where possible, post-harvest improvements in developing countries should be relatively simple and low cost. For small grain stores, simple improvements to make existing structures secure against rats and vermin and to facilitate the application of pesticides may be more appropriate than the construction of new, more sophisticated stores. Small farmers, in particular, tend to tolerate fairly high losses before making expensive changes to their storage systems that run the risk of not offering a positive return.

3.5 An understanding of the way in which the marketing system functions is a precondition for any post-harvest improvement activity. As an example, moves to improve drying by farmers of grains destined for the market will have little impact if farmers cannot get a higher price for well-dried grains.⁽⁶⁾ There has been a tendency for farmers’ relationships with private-sector traders or millers to be ignored when planning post-harvest improvements. Suspicions about the private sector among aid agencies, government officials and NGOs have led to post-harvest activities by farmers’ groups being promoted and subsidized, often in competition with those of the private sector. The track record of such group business ventures has, on the whole, not been good. The private sector, on the other hand, has demonstrated that, given the right policy and economic environment, it can respond rapidly to commercial opportunities and provide necessary services to farmers and consumers. The recent expansion in the number of small-scale maize hammer mills in southern Africa, in response to the liberalization of maize markets, is a case in point.⁽⁷⁾

SOCIAL ASPECTS

3.6 There are social as well as economic constraints to post-harvest improvement, and these are being increasingly recognized. A major determinant is the labour constraint. In rural areas, where an adequate level of powered equipment is still largely absent, manual labour is the most important production factor. As result of migration, a shortage of farm workers can often be experienced and during peak periods children may be required to return from school to assist on the farm. A socio-economic survey conducted by an FAO project in Swaziland found that women were heavily involved in all aspects of maize handling and that harvests were frequently delayed to allow the participation of children during their school holidays. One of the recommendations was that school holidays should be adjusted so that children would have holidays during harvesting time (Booth,Toet and Bevan, 1987).

3.7 The introduction of technology can have unintended negative impacts on the poor and on women. In Sierra Leone and elsewhere, the introduction of village-based threshing and winnowing machines meant the loss of traditional gleaning rights for the women who had previously carried out this work manually. Other sociological considerations that have to be taken into account are whether the proposed post-harvest intervention conflicts with religious beliefs, organizational capabilities, traditional village structures or domestic priorities. It is also essential to understand decision-making within the household, as well as who controls the household’s resources.

4. Storage in the marketing system

ENSURING ECONOMIC VIABILITY

4.1 Storage has many functions but all involve moving produce through time, whether this be to provide subsistence families with a food supply beyond the harvest period, to provide for national food reserves in the event of an emergency or to ensure year-round availability of exotic foods for affluent consumers. As with all other post-harvest activities, the guiding principle for decisions to carry out storage, other than for food security purposes, should be that prices obtainable after storage should more than compensate for the cost of storage.⁽⁸⁾

4.2 Important for the future will be an increasing awareness of the implications of the ongoing liberalization process for storage. Governments, donors and technical-assistance agencies may have a role to play in conducting a thorough analysis of how the marketing system works in order to identify effective handling and storage improvements.10 Moreover, in an era of rapid changes to marketing systems, both as a result of policy changes and as a consequence of urbanization, there is a strong need for such analyses to be dynamic rather than static in their approach. A consequence of Structural Adjustment Programme (SAP) measures (see Box 4) in many developing countries has been that storage and handling facilities, which were formerly owned and operated by parastatals, are now largely redundant or are used for purposes for which they were not originally designed. However, storage continues to be constructed that is neither compatible with existing requirements nor with the likely requirements of either the government or the commercial sectors after marketing liberalization has been completed.

CHANGING STORAGE REQUIREMENTS

4.3 While some former marketing-agency stores may be needed for food security reserves which are, initially at least, likely to be operated by governments, others may go unused. Although there is some scope for traders to take over interseasonal storage functions from former grain marketing agencies, they are generally constrained by a lack of capital to finance stocks. One way to overcome this problem could be for traders to deposit stocks in secure warehouses and obtain loans with those stocks as security.⁽⁹⁾ There would also appear to be scope for specialized storage companies; these could be private companies, which take over marketing-board warehouses, or the former marketing agencies seeking to develop new, commercial business activities. Governments can assist such developments by promoting warehousing legislation and advising on appropriate quality standards.

4.4 Many of the large stores used by fruit and vegetable distribution organizations in the formerly centrally planned economies are inappropriate for use by the smaller wholesalers that are beginning to emerge. In many countries, the private sector has taken over these large facilities, but it is tending to use them for storage of a wide range of consumer goods, not solely fresh produce. Cold stores were often badly designed and are generally so large and poorly maintained that the private sector is unable to operate them economically. The breakdown of the old distribution system has led, in many cases, to farmers having to take over responsibility for marketing their own produce. In time, it can be expected that wholesalers using modern fruit and vegetable handling techniques will emerge. However, they are likely to make investments in their own storage facilities rather than continuing to utilize the infrastructure of the former system.

4.5 Particularly in the case of horticultural produce, there is much scope for using the available improved post-harvest technology. For example, improved control of storage temperatures and humidity and the use of controlled atmosphere can extend storage periods (Harris, 1986; FAO, 1989; Kader, 1992). In general, however, the tendency to look for purely technological solutions to problems in the post-harvest sector is best resisted.⁽¹⁰⁾ Often, a consideration of economic, social and management aspects can identify less costly and more appropriate solutions. In the days of heavy government intervention in marketing, for example, many cold stores were constructed in wholesale markets to store local produce, but these ended up being used solely to store imported fruits, as storage of domestically produced perishable crops was inconsistent with the daily selling of fresh produce on consignment.

5. Improving marketing services to farmers: the role of governments

AN ENABLING ENVIRONMENT FOR THE PRIVATE FOR THE PRIVATE SECTOR

5.1 It is now recognized that direct government intervention in produce marketing is rarely the best way to assist farmers. However, indirect support to those carrying out marketing may be required in many countries, particularly those that have recently undergone policy changes affecting the post-production system and where adjustment to the new marketing system will require considerable effort.

5.2 There are many ways in which governments can facilitate the improvement of post-harvest and marketing services to farmers. These include improving rural marketing infrastructure, maintaining roads, strengthening the marketing and post-harvest skills of the extension services and providing marketing information. Most important is a clear and stable policy environment in which the private sector can operate profitably. Unless traders can buy and store produce secure in the knowledge that the state will not, one, accuse them of being “hoarders” and seize their stocks, two, introduce price controls and, three, release large quantities of government stocks or food aid on to the market so as to cause a price collapse, they will be unlikely to become fully active in the market and this will lead to higher transaction costs and greater price instability. The private sector will also be able to function most efficiently when there is a favourable macroeconomic environment. This implies low inflation and interest rates, manageable balance of payments and budget deficits and bank liquidity. One of the contradictions of SAP measures is that the private sector has often been expected to take over functions previously performed by the state, without an appropriate macroeconomic environment being in place.

PROVIDING MARKETING INFORMATION

5.3 Governments can facilitate marketing by providing reliable market information (see Boxes 6 and 7). The availability of information enables farmers to make informed decisions about planting, harvesting and, in the case of some forest products, gathering and selling of crops. It helps traders make more informed decisions about the most appropriate markets for particular produce in order to maximize returns. Such a measure should help to stabilize fluctuating prices and reduce losses caused by gluts on particular markets, all of which benefit consumers.

5.4 The establishment of an effective market information service in countries with limited resources can, however, run into several problems. Services have often been introduced that are far too complex for the available resources. They have also often become sidetracked from the main purpose of market information, which is to provide up-to-date information for commercial purposes, into providing primarily statistical data for government officials. Market information services set up by technical-assistance projects have frequently come close to collapse after the withdrawal of donor support, as governments have lacked the resources to sustain activities. Initially, it is preferable to develop a service that covers a limited number of markets and concentrates on obtaining only price and basic supply information for a limited range of crops. Consideration can be given both to the commercialization of information provision, initially by having price broadcasts sponsored and eventually by having the private sector take over the entire service, and to the development of community-level information services, which has been done successfully in the forestry sector.

ROADS

5.5 The access of farmers to rural markets, like that of rural areas to urban markets, is crucially dependent on the adequacy of the road network. Unfortunately, the experience in many countries has been that resources allocated to the construction of roads have not been followed up with appropriate resources for their maintenance. New ways of guaranteeing road maintenance need to be developed; adopting a self-help approach whereby rural communities are responsible for maintaining their own roads is one possibility. Poor roads both slow down transport, thus increasing losses because of the perishability of produce, and increase transport costs because of the greater wear and tear on vehicles using them. Indeed, in many cases farmers have been unable to sell produce because the transport rates demanded by truckers have exceeded the likely returns from sending the produce to market.

CONSTRUCTING AND OPERATING MARKETS

5.6 Local authorities can facilitate marketing services for farmers by allocating land and building infrastructure for rural markets. Such markets can provide an assembly site where farmers can sell their produce to traders for onward shipment to urban markets. They are also important as food supply points for rural agricultural and non-agricultural labourers, artisans and the rural poor. Thus market improvements in rural areas can have a positive benefit for rural poverty alleviation and food security. Where such markets do not exist, traders have to visit farmers individually, thereby pushing up marketing costs. Where markets do exist, they often lack basic facilities, have no shelter to protect produce from the sun and the rain and frequently have no hard or raised floors, leading to flooding. All this reduces the efficiency of the market, leads to produce losses and presents possible health problems. Another important factor is the location of the rural markets. Where such markets have developed spontaneously, the location almost certainly reflects the preferences of both farmers and traders. Thus, where possible, existing trading sites should be improved rather than new sites developed, which may not be in a suitable location for the users. Many new markets suffer from overly elaborate designs and unnecessarily costly structures, resulting in high costs and hence high charges to users.

THE ROLE OF EXTENSION SERVICES

5.7 In most countries, marketing and post-harvest problems are regarded as being beyond the scope of field-level agricultural extension workers. While some governments maintain agricultural marketing departments, their activities rarely have any impact at the field level. Even when production extension workers identify marketing and post-harvest problems faced by farmers, their lack of expertise in the subjects or lack of knowledge of appropriate sources of assistance makes them unable to help the farmers. Sometimes the most visible participant in the marketing system, the trader, is then made the scapegoat for problems, particularly as extension workers tend to see the trader-farmer relationship as exploitative, without having carried out a detailed examination of traders’ marketing costs.⁽¹¹⁾ Utilizing price data provided by a market information service, extension workers should be in a position to inform farmers on price trends. An extension officer trained specifically in marketing should also be able to provide advice and train farmers in improved harvesting methods, sorting and grading, better packing and handling practices and appropriate storage.⁽¹²⁾

6. Supplying the cities

THE PACE OF URBANIZATION

6.1 The population of urban areas in developing countries is growing by about 3.4 percent per annum and by approximately 5 percent in sub-Saharan Africa. By the year 2000 there will be about 200 cities with populations of over 1 million people and 21 megacities with populations of over 10 million people. However, by far the greatest part of the urbanized population lives in cities of fewer than 500 000 inhabitants. Urban growth rates that exceed the infrastructural and institutional mechanisms needed to support them have been an almost universal feature of the developing world during the past two decades. This momentum will continue to change the balance between urban and rural areas to the extent that, by 2010, all of the major regions will be over 35 percent urbanized. The urban population of the least-developed countries is currently projected to increase by 4.6 percent annually and, by 2025, 43 percent of the population of these countries is expected to be urbanized. Worldwide, cities and towns are currently absorbing over 60 million people each year (United Nations, 1995).

6.2 Much progress has been made in developing food supplies to cities. Nevertheless, urban growth will continue to present enormous problems for the marketing of food. Moreover, simple growth rate figures tend to mask the complexity of the problem. On the one hand, incomes of certain segments of the urban population are rising rapidly, leading to increasing demand for more expensive foods such as fish and horticultural, forest (e.g. spices) and livestock products, as well as for products that provide a varied diet and are processed to offer greater convenience. On the other hand, the majority of urban dwellers in most developing countries remain highly disadvantaged, with very limited purchasing power. For these people, guaranteeing the efficient distribution of low-cost but nutritious food is becoming an ever more pressing concern.

THE NEED FOR WHOLESALE DISTRIBUTION SYSTEMS

6.3 Although much scope remains for home garden and peri-urban production, most urban food supplies will come from more distant areas and this will require the improvement of rural-urban linkages through continuing investment in roads, transport and marketing infrastructure, such as assembly markets in producing areas and wholesale and retail markets in urban areas. If transport, storage and marketing systems are inefficient, marketing costs will be high, adversely affecting food prices and the access of lower income groups to food. This emphasizes the importance of the planning, establishment and efficient functioning of marketing infrastructure. Unfortunately, the combined needs of farmers, traders and consumers are often not considered by national and urban planners. There are numerous examples of new urban markets that have had difficulty in becoming established because of a reluctance on the part of traders or their employees to operate in them as a result of errors in location or design or to the absence of supporting infrastructure.

6.4 Planning markets requires more than simply identifying a site and designing the structures; the ownership and management of the market as well as the regulations that will govern its operation are also priority concerns. This implies early and continued consultation with the expected users of the market. Market planning also requires a detailed knowledge of the marketing system and realistic forecasts of throughput.⁽¹³⁾ Land for markets should be set aside in urban development master plans.

6.5 Over time, food distribution practices in both developing countries and the former centrally planned economies are likely to take on many of the characteristics of distribution systems in the developed countries, which are becoming increasingly concentrated. In Belgium, France and the United Kingdom, as extreme examples, 10 percent of retail units account for over 80 percent of food distribution, the result of increasing numbers of hypermarkets and supermarkets. Such stores purchase directly from the producer or processor, bypassing traditional distribution systems.

6.6 Such is the level of consolidation within the retail industry in Western countries that the major buying companies are in a strong bargaining position with their suppliers (European Commission on Agriculture, 1991). This has been accompanied by an increase in distribution efficiency resulting from supermarket operations. A consequence is that consumers are now faced with a much wider choice of items at competitive prices, although in many countries they now have to go farther from their homes in order to do their shopping. The organization, operations, marketing research techniques, logistics and merchandising of supermarket and grocery chains in developed countries provide many valuable lessons for developing economies. Research is required to determine the extent to which these lessons can be applied.

MARKETING OF ANIMAL AND FISHERIES PRODUCTS

6.7 In order to examine the supply of animal products to urban areas it is necessary to divide these products into two categories. Beef, lamb and dairy production is, in many developing countries, generally small-scale, with a predominance of independent milk producers owning five animals or less. They are located in areas that are often some distance from the urban markets, and hence are heavily constrained by poor roads and weak collection and marketing services. This is also an emerging problem in some states of the former Union of Soviet Socialist Republics (USSR). Pig and poultry meat and egg production, in contrast, are increasingly large-scale and frequently sited on the outskirts of cities. Such production is thus less constrained by infrastructural weaknesses. In the longer term, economies of scale will become increasingly important if urban areas are to be adequately supplied. This applies particularly to dairy production and milk collection and processing where, initially, consolidation of small producers for the purposes of collaborative marketing efforts and, later, managing the transition from small- to medium- and large-scale production will be important issues.

6.8 Post-harvest losses of fish in some developing countries can be as high as 25 percent of the fish entering the marketing system, as a result of spoilage and insect infestation of dried fish. Among the factors contributing to this situation are the lack, or inadequate use, of ice, poor handling of the product and inadequate road infrastructure. Wasteful processing, such as the pursuit of fishery solely for the roe, discarding the flesh, or failure to use large amounts of flesh left after filleting or canning operations, is also a major problem. Poor processing and packaging of dried fish results in physical losses from crumbling. Inadequate wholesale and retail fish markets in many developing countries contribute to the wastage and may reduce the level of consumer demand. In many countries, both public- and private-sector investment in the distribution chain would result in considerable increases in the quantity and quality of fish available for consumption. In some countries, however, such investment has not emerged rapidly enough to compensate for the breakdown of state fish marketing organizations. In Poland, for example, the private sector was relatively slow to fill the gap created by the collapse of the state marketing body because of the high risk associated with the perishability of fish and the fact that, under the former system, there were no fish markets at the point of landing.

LOW-COST FOOD RETAILING

6.9 There has been a wide range of programmes in developing countries designed to assure consumers specified quantities of one or more food staples at prices fixed by the government. These have provided basic rations irrespective of income. In general, there is evidence that programmes such as food stamps and fair-price shops can successfully increase food intake among the needy, although they have placed a heavy burden on government budgets. In India, for example, food is distributed by the states under the Public Distribution System. Grain is issued by the Food Corporation of India at a uniform price to states that distribute the grain to consumers through fair-price and ration shops. Important to the operation is the fact that the rice supplied, although fully edible, is regarded as being of low quality because of the high proportion of broken grains. For this reason, consumers with a reasonable level of purchasing power are unlikely to purchase state-distributed rice, ensuring that it can be targeted at those most in need. There is, however, an element of subsidy involved in distributing grain in India, estimated at over US$1 billion a year. This has stimulated a search for alternative approaches to meet the needs of the poor. Similarly, untargeted food subsidies in Egypt were estimated to cost around US$2 billion annually in the early 1980s (Pinstrup-Andersen, 1988).

6.10 Untargeted food-subsidy programmes are not generally the most cost-effective way of improving food consumption for the very poor. Moreover, food subsidies, once introduced, are difficult to remove. An alternative approach used in some Asian countries is to supply subsidized rice only to shops in the poorer areas. Sri Lanka significantly reduced the fiscal costs of its food-subsidy programme in 1978 by introducing a means test that excluded much of the population from the programme. In theory, it should be possible to target those most in need. In practice, few targeting programmes have been completely successful, a major problem being how to identify and access the most needy.

6.11 A number of alternative approaches to reducing the cost of food distribution have been tried around the world, particularly in Latin America. These have often been based on the organization of consumer and small-shopkeeper networks to obtain better purchasing terms. Such networks include consumer purchasing associations and cooperatives, retailer purchasing associations and voluntary chains. Although they contribute towards enhancing food availability, experience to date has been that such initiatives fail to reach the very poor unless subsidized. They have probably been less beneficial to the urban poor than the improvements in supermarket-chain distribution efficiency discussed above in Paragraph 6.7.

STREET FOOD VENDING

6.12 In many countries the sale of raw and prepared foodstuffs by itinerant vendors is widespread. The buying and selling of street foods is a daily activity undertaken by many urban residents. It is a source of employment and income and also contributes a significant share to the daily food consumption of a large number of people. With the expansion of cities and towns, increasing numbers of people find in street foods a convenient and economical source of food. Street food vending employs a large number of women who utilize their earnings to enhance the general standard of living of their families. In certain cities in Africa, as much as 90 percent of the street food trade is carried out by women.

6.13 However, street foods have tended to be overlooked by many development planners, policy-makers and researchers. They have generally been viewed negatively because of the problems they create in terms of environmental hygiene, food safety and traffic congestion. The assumption had been that, with modernization, this informal sector would have disappeared. This has not been the case as street food vending has become a global urban phenomenon. A more constructive approach would be recognition of the activity and its important social and economic roles; the education of street food vendors in hygienic practices; the provision by public authorities of adequate facilities, including tap-water and garbage disposal; and the involvement of street food vendors in all decisions related to their activities, including the identification of sites for food stands or carts.

7. Food processing

THE ROLE OF FOOD PROCESSING
In the family

7.1 A particularly important aspect of food processing is that it permits greater diet diversity, giving consumers access to a wider range of products and nutrients than they would otherwise consume. The most basic level of processing is food preservation, which, in a variety of forms, has been practised by families in traditional societies for generations in order to provide food when other sources are scarce. Examples include meat preservation through drying, salting, curing and smoking. Non-wood forest products offer possibilities of complementing seasonal availability of cultivated crops and providing income and employment opportunities. Several palm varieties are useful sources of food for processing, providing vegetable oil, palm wine, dates, coconut products and indigenous flour for baking. In Melanesia, palm sago, produced through a laborious process, provides a staple carbohydrate for some 300 000 individuals. However, as most people now have access to more convenient, commercially processed foods or are within reach of government food-distribution programmes, many of the traditional ways of guaranteeing food security are dying out. This is not necessarily a desirable trend, particularly in those areas of the world subject to food shortages. Governments can assist by taking steps to document existing practices and, where appropriate, by promoting improved methods.

In the village

7.2 Village-based processing includes basic transformation activities such as drying and milling as well as rudimentary value-added processing of products for which there is demonstrated market potential. Such processing can be done on an individual or group basis and provides employment for millions of people, often being the main source of income for rural women. The processing of gari, the smoking of fish and the preservation of fruit and vegetable pulps are examples, enabling highly perishable materials to be transformed into products that can be transported long distances and stored. Simple activities, such as apiculture, which are integrated and under the full control of entrepreneurs, can contribute significantly to both nutrition and income. Where such ventures have been designed to preserve surplus crops for consumption after the fresh season is over, few problems generally occur. However, where village-based processing is primarily designed to provide cash incomes, such schemes often run into severe problems through a lack of input management and marketing expertise and are often characterized by a failure to assess demand adequately in terms of potential sales, product quality, presentation, price, etc.

On a larger scale

7.3 Agro-industries convert commodities into processed foods, which are usually more stable and more marketable than the raw, untreated commodity. They can thus make available certain types of food, e.g. animal protein, often at low prices, to consumers who would not otherwise have access to them, ensure year-round availability of seasonal, perishable products and provide food in a more convenient form than the raw material. Where urban populations require processed foods in large quantities, mechanized processes with high output capacities are generally efficient and economical. Widely dispersed populations may, on the other hand, be better served by smaller-scale technologies. Food-processing industries may be concentrated in urban centres or spread among rural communities where they offer the twin advantages of processing perishable crops and animal products close to their source and of providing employment for rural people. Small-scale milk processing in rural areas, for example, is labour-intensive, while small rural slaughterhouses can, in many cases, provide a nucleus for the establishment of satellite meat-processing industries.

7.4 Agro-industries offer considerable scope for employment generation. In the future, the rate of growth of the labour force in non-production, agriculture-related activities will be far higher than that in farm work. During the past two decades, for example, employment in food-processing industries in Asia rose by about 8 percent a year. However, many nations lack the material, financial and human resources essential for stable, sustainable development of food processing and other related agro-industries. Even among the more advanced developing countries, the need is greatest to raise the standards of operating efficiency in the industries that exist, rather than to promote product innovation. Unfortunately, many national and academic research institutions appear to be geared more towards new product research than towards assisting basic industries to operate with greater efficiency. As a result, there is a need for practical agro-industrial advisory services that can assist food industries to use their limited resources more efficiently and economically. This calls for a greater emphasis on operations research on the factory floor than for research in laboratories and pilot plants.

DEMAND FOR PROCESSED PRODUCTS

7.5 All processing operations, whether small-scale, village-level activities or large ventures employing thousands of people, must be based on the existence of a demand for the processed product, a demand that can be satisfied profitably. This simple fact has not always been appreciated and agroprocessing has often been promoted as a way of disposing of surplus production. In the 1970s, FAO identified 70 canning, slaughtering and related plants in Africa, almost all constructed using donated funds, which had not succeeded because of a failure to research the market fully before the investment was committed.⁽¹⁴⁾ A recent study of African state-owned processing ventures makes the same point.⁽¹⁵⁾

7.6 Technological innovation to improve shelf-life, storage properties and consumer appeal depends on an adequate assessment of the associated improvements required. Ultra-high temperature (UHT) milk, for example, appears to address supply problems stemming from the seasonality of production and retail problems caused by the short shelf-life of fresh milk. The introduction of UHT milk, however, has not been uniformly successful in developing countries, in part because it needs high-quality milk, expensive packaging, stringent hygiene and good infrastructure and is significantly more expensive than fresh milk. Moreover, consumer acceptance of the taste has been poor in some countries. Many of these aspects were ignored or poorly assessed during the planning stage.

CONSTRAINTS TO AGRO-INDUSTRIAL DEVELOPMENT

7.7 Even where markets exist, there may frequently be significant barriers to the development of agro-industries in the food sector. In some countries, certain processing activities are still reserved for the state sector or private entrepreneurs are required to accept state equity. Other countries remain reluctant to encourage the participation of foreign investors in the food sector without attaching numerous restrictions to their activities, while domestic investors are often constrained by a lack of liquidity, underdeveloped or non-existent stock markets and a lack of venture capital (Jaffee and Morton, 1995).

7.8 As a result of restructuring in Eastern Europe and the former USSR and of SAPs in Africa, Asia and Latin America, macroeconomic constraints that affect the development of efficient food processing are gradually being addressed. However, in several countries, overvalued exchange rates continue to encourage imports at the expense of domestic production. In many countries, official and unofficial restrictions on private investment persist. Policy changes have not always been transparent, causing uncertainty that has deterred private investors. The application of price and margin controls squeezes profitability and restrains investment. In some countries, the damage to domestic industry is compounded because such controls are only applied to locally produced goods, thus providing a strong incentive for wholesalers and retailers to concentrate on selling imports. Export development of both processed and fresh products is also constrained by overvalued exchange rates, by protectionism in the most affluent markets and by the lack of marketing and presentational skills. An important problem is the inability of many exporters to meet the quality requirements of importing countries.

7.9 In Eastern Europe and countries of the former USSR, food-processing industries have been caught in a credit squeeze resulting from having to fund operating and some investment-capital requirements from high-cost commercial credit. The loss of traditional markets has exacerbated their problems. Countries have had varying degrees of success in responding to the new environment, but those companies now obliged to rely on commercial credit have nearly all experienced greater difficulties than those that expanded in the era of subsidies. This has affected their ability to develop the new products necessary to compete with suppliers from the West. Similarly, in Africa, tight monetary policies, while necessary, have undoubtedly constrained commercial development. Another major area of concern for countries that have recently undergone reform is that the legal framework is often inappropriate for the new transactional methods. Commercial laws and procedures may provide inadequate protection for private property (physical and intellectual) and fail to cover such matters as the enforcement of contracts.

OFFICIAL FOOD CONTROL

7.10 An important element in the food-marketing chain is the control procedures necessary to assure that the food is safe, of high quality (meeting established official standards and buyers’ expectations) and nutritionally sound. This applies whether the food is a raw commodity, semi-processed, processed, manufactured or prepared. Implementing food control practices to assure food safety, quality and nutritional value is of paramount importance. Food moving in international trade must meet established international food standards, e.g. those set by the Codex Alimentarius Commission. International trade agreements, such as the North American Free Trade Agreement (NAFTA), Southern Common Market (MERCOSUR) and others, have set trading practices, standards and measures for food safety and protection of human and animal health. These measures have increased the level of safety and quality of food in international trade, promoted international food trade and helped to provide assistance to the development of the food industry, particularly in developing countries. These agreements have, however, placed costly burdens on developing countries in terms of improving and strengthening their food export control procedures to assure market access and to protect both their trading reputations and international consumers.

INTERNATIONAL TRADE

7.11 The Uruguay Round of trade negotiations involved countries in undertaking commitments to reduce domestic support to agriculture, cut export subsidies, eliminate non-tariff barriers to trade and rely in the future on tariffs to regulate imports. Many countries have agreed to reduce their agricultural tariffs, often substantially, over the next few years. In addition, a number of countries have introduced tariff quotas under which a certain volume of imports will be eligible to enter at a lower rate of tariff. Special safeguards to protect importers from import surges have been allowed under certain conditions. Together these changes in market access are expected to boost the value of world agricultural trade significantly, offering higher prices and some increase in import possibilities for a number of agricultural commodities.

7.12 To take advantage of these possibilities, countries will need to strengthen both their domestic and export marketing capacity. Expenditure on bona fide export marketing by developing-country governments is allowed under the Uruguay Round. However, investment in export promotion will achieve relatively little unless the necessary handling and processing arrangements are in place to ensure that the products reaching world markets are competitive. Although this paper has concentrated largely on the marketing, processing and distribution of food for domestic markets, many of the points made are equally valid for food items destined for export. In particular, attention needs to be paid to arranging for efficient procedures for export quality control and to ensuring that exporters of fresh produce are not constrained by numerous restrictions that jeopardize their ability to ship produce rapidly to overseas markets.

8. Priorities for action

8.1 The above sections call for more attention to be paid to the marketing, processing and distribution of food. On the basis of the foregoing discussion, a number of priority areas for action by governments and donors can be identified. These are subdivided below under the headings of: Policy; Research; Technology; Infrastructure; Extension; and Support services to the private sector.

POLICY

8.2 Governments can take steps to create an appropriate macroeconomic environment in which food producers, traders and processors can function profitably, thereby promoting efficient agricultural marketing and national food security. Such an environment includes relatively stable real interest rates, low inflation, exchange rates that fluctuate in accordance with economic and financial fundamentals and the avoidance of unsustainable fiscal deficits. Policy should reflect the crucial role of the post-production system in ensuring an adequate, affordable and safe supply of food to consumers and in maximizing the efficiency of the production system itself. The benefits to consumers of the lower prices, which can result from reduced losses and improved efficiency in marketing and processing, need to be recognized. Governments can help by committing themselves to creating a greater awareness of post-production issues among those responsible for production activities and to developing the skills of those working in the post-harvest sector. An important area of concern in this respect is the need to coordinate the activities of all relevant government and NGO agencies in this area.

8.3. Policies, laws and regulations should be consistent with the need both to encourage the efficient functioning of the private sector in marketing and processing and to guard against possible abuses such as cartels, collusion and other monopolistic practices. Existing legislation can be examined for its relevance and to remove unnecessary constraints on the private sector. Policies directed at promoting effective competition and at enabling viable small- and medium-scale concerns to compete on equal terms with larger companies should be developed. Issues that governments can address include the misallocation of resources through price controls, direct subsidies, interest rate subsidies and credit rationing. In many countries, a major priority is to develop new commercial legislation so as to provide security for those carrying out commercial transactions and to lower the costs of arranging, monitoring and enforcing contracts.

8.4 Donors can assist governments in carrying out the necessary reviews of legislation and its impact on efficient marketing and processing. Donors are also well placed to advise countries without an adequate body of commercial law on the development of necessary legislation.

RESEARCH

8.5 Interventions designed to improve post-harvest handling, processing and marketing should be examined within the context of the functioning of the entire post-harvest system and from the standpoint that all actors within that system need to operate profitably. Without an understanding of the social and economic aspects of, and interlinkages within, the system, there is a danger that inappropriate measures will continue to be taken. Governments can be most effective in facilitating farmer and private-sector development when they have a detailed knowledge of the functioning of post-harvest and food-preservation systems and carry out the research necessary to develop this knowledge. Improved statistics are vital. For example, the level of small-scale processing in developing countries is often underestimated, and this, in turn, leads to a lack of government support for the sector’s development. Improved technical knowledge of the chemical, physiological and nutritional aspects of foods produced and consumed in developing countries is particularly important if improved storage and processing technologies are to be implemented by the private sector.

8.6 In recognizing the complexity of supplying foodstuffs to rapidly growing urban areas, special programmes designed to assure the supply of low-cost staples need to be constantly reviewed to ensure that they result in cost-effective operations. The experiences of countries that have successfully reduced costs without reducing impact can be examined. The different approaches to reducing the costs of retailing in urban areas merit further investigation and the extension of modern distribution and retailing techniques to new countries could do much to increase marketing efficiency. The positive role of street food should be recognized. At all levels and in all environments, the use of appropriate technologies in solving food safety and environmental hygiene problems would benefit from investigation and promotion.

8.7 The research areas elaborated above are expensive to carry out. Donors would need to continue support to poorer countries to enable them to carry out such research, both in terms of funding part of the research and of developing national research capacities. Collaborative efforts between international agencies, research institutions and national organizations to support such research can be further developed.

TECHNOLOGY

8.8 An important consideration for both governments and donors in promoting the adoption of both large- and small-scale technology is that such technology should be first given appropriate economic and social evaluation. Governments and donors alike should aim to encourage economically viable investment by the private sector in processing facilities, cold stores, etc. It is necessary to resist providing lavish facilities to soon-to-be-redundant government bodies in favour of concentrating attention on developing the capacity of the private sector to make viable investments.

INFRASTRUCTURE

8.9 The withdrawal of the public sector from privately profitable activities should continue. Nevertheless, there are areas in which considerable government investment may be necessary in order to promote the flow of food from producer to consumer. A vital consideration in this respect is for governments to focus on food-distribution requirements when planning road construction and maintenance. Particular areas of emphasis include the development of appropriate marketing infrastructure, both assembly markets in rural areas and wholesale and retail markets in urban areas, as well as specialized installations for fish and livestock marketing. Nearly all countries require improved infrastructure, but this is a particular need for countries in transition. National governments should stress to local authorities the need for markets and ensure that these needs are incorporated into urban and rural development plans.

EXTENSION

8.10 Extension services have an important role to play in promoting the improved supply of quality food to consumers. Extension services can consider training field officers and new recruits in marketing, post-harvest handling and basic agribusiness so that they are able, for example, to advise farmers on improved storage techniques. The development of marketing and post-harvest activities to be carried out by extension workers depends on improved communication between existing production extension services, market operators and the marketing services of agriculture ministries and, where necessary, the establishment of an appropriate structure to ensure the necessary linkages among them. Donors can assist by funding training facilities and by developing training materials.

SUPPORT SERVICES TO THE PRIVATE SECTOR

8.11 A competitive private sector requires information, whether it be information on prices in local markets or information on export opportunities for fresh and processed products. Governments can facilitate efficient marketing by providing market information services. Private-sector provision of market information should be encouraged where feasible. Market information services are a particularly important tool for easing the transition from state-controlled to private-sector marketing.

8.12 Governments can provide positive support to private-sector traders, exporters and processors by offering training in marketing management, research, export marketing development and business methods, as well as advice on handling, packaging and processing. Quality control is also an important issue, particularly for processed produce and for exported produce. In small-scale food marketing and processing, an area where a high proportion of women are involved, governments can assist by providing information and training on the use of appropriate processing technology and by providing extension support for the marketing of fresh and processed products.

8.13 Support needs to be offered to the private sector to develop appropriate institutions. Experiences in Western countries suggest that marketing systems are developed not only by entrepreneurs but also through an institution-building process, such as through the development of chambers of commerce, trade associations and other cooperative organizations, at the national, regional and local levels. Donors should consider developing business and technical training programmes for the private sector and supporting the development of associations representing farmers, traders and small- and large-scale processors, both as channels for training and as organizations capable of promoting improved understanding between state and private sectors.

8.14 A major constraint to private-enterprise development is the lack of finance. Many countries, particularly those in the process of restructuring, lack a suitable banking structure to meet the needs of entrepreneurs. Governments, sometimes with assistance from donors, can help by reviewing the policy environment within which banks operate in order to assess its continued suitability in the light of the requirements of the developing private sector and, more generally, to identify ways of increasing the efficiency of the financial sector.

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Booth, R.H. & Shaw, R.L. 1981. Principles of potato storage. Lima, Peru, International Potato Centre (CIP).

Booth, R.H., Toet, A. & Bevan, L. 1987. Investing in sustainable post-harvest programmes. Special Action Programme for the Prevention of Food Losses (PFL). Rome, FAO.

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Boxall, R.A. 1986. A critical review of the methodology for assessing farm-level grain losses after harvest. London, UK, Tropical Development and Research Institute (now Natural Resources Institute).

Cardino, A. 1982. Market needs for grain drying in the Philippines. In R.H. Young & C.W. McCormac, eds. Market research needs for food products and processes in developing countries. Ottawa, Canada, International Development Research Centre (IDRC).

Coulter, J. & Shepherd, A. 1995. Inventory credit – an approach to developing agricultural markets. FAO Agricultural Services Bulletin No. 120. Rome, FAO.

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Government of Zambia. 1994b. Maize milling in a liberalized grain market. Market Liberalization Impact Study No. 2. Lusaka, Zambia.

Government of Zambia. 1995. The agricultural market information system in Zambia. Market Liberalization Impact Study No. 9. Lusaka, Zambia.

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Harris, S.R. 1986. Improvement of post-harvest fresh fruits and vegetables handling: a manual. Association of Food Marketing Agencies in Asia and the Pacific, Bangkok, Thailand, FAO.

Jaffee, S. & Morton, J. 1995. Private sector high-value food processing and marketing: a synthesis of African experiences. In Marketing Africa’s high value foods. Dubuque, IA, USA. Kendall/Hunt Publishing Company for the World Bank.

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Notes

⁽¹⁾ From the Universal Declaration on the Eradication of Hunger and Malnutrition, Report of the World Food Conference, United Nations, New York, USA (1975).

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⁽²⁾ An extreme example was a Near East country where high subsidies to farmers led to 90 percent of the horticultural crops being destroyed because there was no market, while the use of subsidized irrigation to produce them was having damaging environmental effects (Shepherd, 1991).

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⁽³⁾ For a detailed account of loss assessment and related issues, see Bourne (1977), Boxall (1986), Greeley (1982) and Harris and Lindblad (1978).

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⁽⁴⁾ See Booth, Toet and Bevan (1987) for the evolution of FAO’s approach to post-harvest development. Back to text

⁽⁵⁾ For example, see FAO (1985a).

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⁽⁶⁾ This was, for example, the case in some Latin American countries in the early 1990s (Shepherd, 1993b). Cardino (1982), on the basis of research in the Philippines, argues that grain drying improvements, if not accompanied by improved farm storage, may result in more grain reaching the market soon after harvest, thereby depressing prices.

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⁽⁷⁾ For a detailed analysis of this development, see Government of Zambia, 1994b.

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⁽⁸⁾ See Booth and Shaw (1981) for an example of how an analysis of seasonal price patterns can be used to identify the advantage of medium- to long-term storage of potatoes.10 An example of where such research is being carried out is in Zambia, where the Ministry of Agriculture and an FAO project are conducting in-depth reviews of developments as a result of marketing liberalization (Government of Zambia, 1994a).

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⁽⁹⁾ FAO has worked with the Natural Resources Institute, United Kingdom, to develop such an arrangement. The results of this work have been published by FAO (Coulter and Shepherd, 1995).

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⁽¹⁰⁾ An example of what can go wrong comes from Peru in the 1960s. The government constructed large forced-air stores in an attempt to regulate the supply and price of potatoes. A combination of high storage costs, potato collection difficulties and bureaucratic problems defeated this aim. The stores have never served their intended purpose (Rhoades et al., 1988).

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⁽¹¹⁾ For advice to extension workers on marketing cost analysis, see Shepherd (1993a).

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⁽¹²⁾ The Agricultural Support Systems Division of FAO has prepared two training videos as well as a manual on horticultural marketing for extension workers (FAO, 1989; FAO, 1992; FAO, 1994).

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⁽¹³⁾ For information on market planning, see FAO (1991) and FAO (1995a).

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⁽¹⁴⁾ Abbott (1986), p. 116-121, based on Mittendorf (1968).

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⁽¹⁵⁾ Problems experienced with agroprocessing ventures in Africa are well discussed in Jaffee and Morton (1995).

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