How do existing and anticipated standards affect the structure of the livestock food chain and vice versa?

Food security has been an emphasis for many developing countries, with a strong focus on supplying staple foods from within the country. Food security can sometimes be increased and food production made more efficient by international food chains but this requires political security to allow equitable distribution to occur. Perceptions of what constitutes food security will be affected by perceptions of continued stability in the food chain.

Food safety is considered very important in developed countries but elsewhere has received less attention. For example, animal health, which is strongly linked to food security, has been emphasized above veterinary public health, and data on the incidence and impact of zoonotic and foodborne disease in humans is very limited. Food safety needs to be given increasing but appropriate emphasis as it is important to the poor. A balance is needed between food safety and the cost of food safety. The poor cannot afford to be sick and have limited social networks to support them but equally, should not be asked to pay for inappropriate levels of safety.

It is not always evident that risk is taken into account in assessing appropriate standards to be applied in a particular food chain. The poor need food safety but they may not need SPS agreements and all that is contained in them. Governments should be setting the minimum national level of risk, however the international community may be required to do the appropriate risk assessment. The government should then decide to implement appropriate measures, which may include standards, enforcement of existing standards, or other measures.

There are differences between commodities. For example:

• There is little trade in milk between or from developing countries (East Africa is an exception). Yet there is an increasing national demand for milk and milk products in urban centres, supplied from peri urban and rural areas through collectives or vertically integrated chains.
• In Africa, there has been regional trade in live animals for a long time, involving mostly animal health standards, but recently there has been an increasing trade in chilled carcasses, which requires food safety standards.
• Poultry markets tend to be segmented. Exotic birds produced in large units, with internationally set health and safety standards, supply the export market and urban consumers influenced by international tastes, while local birds produced on small farms supply local demand through a short value chain with locally determined standards.

Trends in the structure of the food chain and their relationship with SPS standards.

Lengthening of food chains. There has been a decoupling of production locations from consumption, and this has resulted in the risk through the food chain becoming an issue. It is possible that environmental concerns will interrupt the trend towards lengthening the supply chain, though this is not yet evident. The increasing length of the food chain affects areas such as the cost of transportation. The primary price is negotiable and local producers may be price-takers because they have no transport and therefore no negotiating power. However, where a professional and commercial vertically operated chain is in place, good prices may be paid for quality of product. When conditions become sufficiently attractive (a sufficient number of consumers and concentration of producers, economic and political stability and therefore a predictable level of profit), the private sector invests. The length of food chains, particularly where they include an international dimension or cater to affluent local consumers, impacts on consumers and increases the requirement for food safety measures such as traceability. International trade includes regional trade between developing countries, and here the standards applied may be very different from those for trade between developing and developed countries. For private sector international involvement there needs to be at least a clear minimum standard to work to. OIE and Codex standards should be the minimum needed for safe operation of long food chains. The consultation is concerned that these standards are in fact moving to become more representative of more affluent country producers and consumers which may create obstacles to regional trade.

Vertical integration within food chains. Multinationalization of food chains and a dramatic rise in the market share of supermarkets and the modern retail sector in many countries have created a number of effects, such as:

• important changes in procurement systems, e.g. centralization;
• a shift toward cross-border systems, with corporation procurement in their different countries of operation;
• a shift toward specialized/dedicated wholesalers (specialized in product category, dedicated to supermarkets);
• a shift toward preferred supplier systems to select producers meeting quality and safety standards and lower transaction costs;
• a consolidation of production and processing which may be of unknown safety;
• a shift toward private safety and quality standards.

While the speed and intensity of effects vary by region - rapid in Eastern Europe, Latin America and China, much slower in Africa - they suggest a trend that will continue.

Market concentration within the food chain. This can be driven by the following:

1. The need for greater efficiency, for example with development efforts to concentrate dairy producers into marketing groups. How will this affect the way standards are applied? In dairy co-operatives in East Africa, milk is cooled and much of it is sold fresh. If the milk is to be used to produce ultra high temperature (UHT) milk, it needs to be of high quality.
2. A response to crisis, e.g. in Thailand following the highly pathogenic avian influenza (HPAI) crisis, the poultry sector and particularly the layer industry, showed signs of becoming more concentrated. Factors affecting this include producer liquidity, government policy and consumer risk perception towards food safety. The trend was already in evidence as a result of the export-oriented policy of one large company, but has been hastened by the disease epidemic.

Regional diversification and value adding. This introduces new products and therefore the need for new standards. Uganda, Tanzania and Kenya have a regional trade in fresh milk, UHT milk and value added dairy products. Arbitrary invocation of SPS standards, or technical barriers to trade (TBT) standards, may affect the sustainability and stability of regional trade and therefore create sudden over-supply of products to domestic markets. SPS standards on milk are being applied. Where there is an overspill onto the domestic market, the products are not usually consumed by the poor. Producers are contracted into vertically integrated chains.

Segmentation - or exclusion? People who are not involved in any kind of integration or concentration may not be affected by international standards at all, and may continue to apply local standards. However, if consumers learn of new products or new standards, this may change the value of traditional knowledge. For example, overspill from vertical food chains into domestic consumption in the Thai chicken industry has affected consumer perceptions of quality.