AJAD Volume 9 Issue No. 1 June 2012

As an economy develops, agriculture faces distinctly different problems: food insecurity, sectoral income inequality, and food trade deficits associated with declining comparative advantage. Fear of widespread famine was Asia's major agricultural problem in the 1960s, which was subsequently solved by the Green Revolution. As nonfarm sectors of the economy grew more rapidly than agriculture, an income gap appeared between farm and the nonfarm sectors; this gap has been reduced primarily by increasing nonfarm income of farm households and migration to urban areas. Advanced countries in Asia (i.e., Japan, Taiwan, and Korea) now face a third problem— trade deficits in agriculture, as reflected by the rapidly declining food self-sufficiency ratio. This foreshadows the problem facing other rapidly growing Asian countries in the future. Massive imports of food grains to Asia, if they occur, will aggravate the world food shortage and would have significant implications on climate change.

Food security is not a viable social objective unless it is also a profitable undertaking for input suppliers, farmers, and marketers of output. Consumers must then be able to afford to purchase food, secure in the knowledge that it is safe and nutritious (Reardon and Timmer 2007). Achieving food security within these constraints of a complex economic system is a challenge because both poor consumers and small farmers must be effective participants.

Population growth, accelerated urbanization, and higher incomes are expected to increase food demand by about 70 percent by 2050—involving 1 billion extra tons of cereals and 200 million extra tons of meat (FAO 2009a). The region of Eastern Europe and Central Asia includes major food producing countries, particularly Russia, Ukraine, and Kazakhstan. These countries produce 15 percent of the world’s wheat and export almost as much as the USA and the EU. In this regard, the region could potentially play an important role in meeting the challenge of global food security. Yet, it has been underperforming. In contrast to most other regions in the world, yields in Eastern Europe and Central Asia have stagnated since the 1970s. Some estimates suggest that average yields could be increased by 75 percent and that an additional 13 million hectares (ha) of land could be brought into production (FAO 2008).

This paper discusses the challenges and opportunities faced by small farmers in Asia and the Pacific region in raising agricultural productivity and in diversifying into high-value commodities. About 87 percent of the world's 500 million small farms (less than 2 hectares) are in this region, with China and India accounting for 193 million and 93 million of these, respectively. Small farms significantly contribute to agricultural production, food security, rural poverty reduction, and biodiversity conservation, despite their constraints with respect to access to productive resources and service delivery. More new challenges confront them: integration into high-value chains, adaptation to climate change, market volatility, and other risks and vulnerability. The small farms can benefit from high-value chains if they can receive support through intermediation (e.g., public-private cooperation to ensure food safety standards) and internalization (e.g., through producers' association to meet quality standards). New investment opportunities have emerged in agriculture, leading to large-scale investments and competition for land. Although new economies of scale (e.g., in external financing) have emerged, smallholders can enhance their competitiveness only if the biases against them (e.g., in credit) are eliminated. Governments must play an active role in coordinating the delivery of inputs, technical services, and output marketing services to small farms. They must also provide incentives to the private sector to innovate. Support is also needed to enable smallholders to adapt to climate change and market volatility.

This paper attempts to look at the dynamics and perhaps the complexities of agro-food marketing in Asia. It is based on my observations and readings on the topic. As such, it is not strictly a scientific paper. It ends with my impressions on the potentials of agro-food marketing and some possible policy directions that can be inferred from the discussion.

A little caveat before I proceed. This paper cannot really do much justice on the topic of Asian agro-food because Asia is a big continent, comprising 44 countries and stretching over 10 time zones. The region speaks five major languages: Chinese, Japanese, Korean, Hindi, and Javanese, although English is widely spoken in many parts. No one country can represent Asia; all countries have little in common except their geographic proximity. Perhaps, the commonalities depend on how each Asian country relates to the various phenomena observable vis-a-vis their own agro-food marketing practices.

Lao PDR and Cambodia have been transitioning to a market-oriented policy regime. Both are agrarian economies with agriculture contributing about one-third of the gross domestic product (GDP). This study assessed their prospects of achieving the first Millennium Development Goal (MDG 1, extreme poverty eradication) and the centrality of agricultural growth in achieving this goal. As these are macro relationships, richer insights on determinants of poverty were obtained by detailed analyses of recent household surveys in these countries. Some of these insights relate to access to markets, returns to crops, education, land size, non-farm activities, ethnic affiliation, and rural infrastructure, with unavoidable variation due to differences in the coverage of the household surveys used. Another major theme studied for Cambodia is integration of farmers (especially smallholders) into markets, focusing on barriers between large and smallholders (e.g., transaction costs). An accelerated transition to a more market-oriented policy regime may promote not just a more efficient agriculture but also a more equitable outcome.