Agricultural development, technology and value chains in developing and transition countries.

This thesis is about agricultural development, technology adoption and value chains in developing countries. It first focuses on the transition economies of Central Asia, and Central and Eastern Europe before exploring the dairy market in India. Though they display great heterogeneity, what joins these two regions is a strong dependency on their respective agricultural sectors to alleviate poverty and maintain food security. 

The first part of this thesis centers around agricultural developments in Eastern Europe and Central Asia (ECA) following the collapse of the Soviet Union in 1991. In spite of their common institutional history, the ECA countries differ greatly in terms of their economic development, geography, culture, political systems, food security, agricultural systems and potential. Over the last three decades, these countries have all experienced major economic and institutional changes, which have had profound effects on land use, food production, and transformed their food and agricultural value chains. Although they departed from a common starting point, these countries grew in vastly different directions after gaining independence.

We examine the potential of major food producers and large exporters to act as a “breadbasket” for the world as well as their export reliability for food importing countries. Food security throughout the region has improved on the whole as incomes grow, although the poorest countries continue to face issues of poverty and food insecurity. However, a new problem now looms on the horizon—as incomes grow, ECA countries, like many other parts of the world, are now facing the triple burden of malnutrition: an overlap between undernutrition, micronutrient deficiency, and overweight and obesity.

We analyze the evolution of smallholder farms during transition and the ways in which the process differed across countries and commodities. Smallholders in agriculture play different roles in the various transition countries and this diversity can be attributed to a combination of factors. These include capital, labor and land endowments, income levels, scale economies, market imperfections, and reform choices. Over the past decade, the share of smallholders in land use and production has declined significantly across all transition countries and this is most likely to continue in the future.

We look at the adoption of Bt cotton in Central Asia. Probably the most successful story of genetically modified (GM) crops is that of cotton, especially among poor smallholders, and almost three quarters of the global cotton area is now covered with GM cotton. However, none of the Central Asian cotton producers (Uzbekistan, Turkmenistan, Kazakhstan, Tajikistan) use GM cotton. This is surprising given that Central Asia is an important cotton producing and exporting region. There are a number of possible reasons for this, but ultimately none of them appear convincing. The most likely explanation also happens to be the most trivial: there is limited local demand for Bt technology due to low pest infestation.

Part two of this focuses on India. Using a unique two-round representative panel survey of dairy farms in Punjab and Andhra Pradesh (AP) we analyze issues related to technology adoption and value chains. (Global) value chains have contributed to agricultural technology adoption in transition countries and food export commodities in developing countries through various forms of vertical coordination, often associated with FDI. However, not much is known about how value chains do (not) affect technology transfer and/or adoption in food chains in developing countries. While important increases in the adoption of some technologies among traditional and poor dairy farms are found, the role of vertical coordination in value chains in stimulating this technology adoption seems to be minor, both for domestic and for FDI companies. The role of value chains in the dissemination of these technologies to small dairy farmers remains insignificant in AP as well.

Rapid growth in dairy consumption and food scandals in India in the 2000s increased the awareness of food safety issues among consumers and policymakers. This led to the Food Safety and Standards Act (FSSA), and the Food Safety and Standards Authority. There is little information about how new public and private standards have affected farm-level activities that impact food safety and quality and how value chain innovations have affected this. We address these questions and find significant improvements in the adoption of farm-level hygienic practices, especially in Punjab. Value chain innovations do not play a significant role in stimulating safety and quality improvements of dairy smallholders in India. 

We also look at changes with respect to marketing channels in Punjab, India. The importance of informal channels has grown over the two periods, contrary to the expectation that general growth in the production and consumption of dairy is more likely to be associated with increased formality. Our results suggest that several factors are at play, including an increase in off-farm employment opportunities, specifically for males, growth in demand, and possibly a shift towards larger producers. 

We provide one of the first and most detailed accounts of the newly emerging large dairy farms that are being overlooked in the mainstream literature despite their apparent importance for the Indian dairy sector. We conducted 49 interviews throughout Punjab and found that these large commercial modern farms appear to be very well integrated into the value chains. They often, but not exclusively, sell milk to formal supply chains, sometimes on a contractual basis. Understanding and acknowledging the emergence of these modern dairy farms is a very important piece in understanding the development of value chains not only in the dairy sector in India, but domestic food sectors in developing countries in general.