1. Reform of Agricultural products marketing rules in the light of socio-economic changes
Edward Seidler
Agricultural Marketing Group,
FAO
5th ALAWUC, Cairo, Egypt, February 2008

2. Outline of Presentation
Review of Near East marketing;
Socio- Economic trends and changing food systems;
Rise of Supermarkets;
Food Safety and Control issues;
FAO’s role
Recommendations to member countries;

3. Features of NE Region (1)
Agriculture remains an important sector;
High commodity concentration in trade- cereal imports and horticulture exports;
Private sector marketing promoted since 90s following SAPs and WTO;
EU remains dominant export market for most- need to conform to public and private voluntary standards;
Regional markets poorly integrated and facing competition on quality and safety with imports;
Lack of product diversity, non tariff barriers, infrastructure and transport weaknesses

4. Features of Near East Region (2)
Increased competition, emerging food quality and safety issues- domestic standards and enforcement lacking and int. standards difficult to comply with;
Exporters confronting food quality, safety and environment issues- procurement standards and codes of practice ( individual, collective national (BRC) and collective international ( GlobalGAP);
Dual structure emerging- highly regulated for exporters and supermarket suppliers and unregulated local sector not complying with any standards;
Regional trade opportunities- young population, increased incomes, expats and tourists but require quality and safe products

5. Features of NE Region (3)
Increasing importance of food chains in many countries e.g. Gulf ( Carrefour and Geant Saudi);
Inadequate marketing and post harvest facilities- transport issues, poor packing, limited cold stores, inadequate info on foreign markets and access conditions;
National food control systems lacking- inadequate inspectors, labs, analytical and testing services, certification agencies- being addressed in Egypt, Tunisia, Morocco and Lebanon

6. Food Systems are Changing

7. Socio-economic trends
rapid urbanization;
income growth and increasing middle class;
women’s employment;
buyers want quality, variety and choice which traditional markets slow to accept;
refrigerators and cars;
increasing foreign travel;
changing food habits
supermarkets look for new growth areas ( fresh produce) to combat declining margins for other products
one stop shopping- produce attracts clients

8. Emergence of Dual Food Systems
Demand for safe food growing quickly, esp. among middle income consumers in developing countries;
Public food safety systems often outdated and inadequate;
Private chains bypass public system when public standards fall short of consumer expectations;
Results is increasing gap between public and private standards;
Dualism  separation of traditional from new, modern food retailing outlets .

9. Change Issues
Barriers to participation of small farmers due to rising standards and buyer requirements;
As product specifications change and multiply (private standards), poorer countries unable to compete and benefit from their lower labour costs; particular challenges for countries that lack modern technologies and infrastructure;
Substantial “adding up” problem; several countries increasing exports simultaneously leads to price falls esp niche markets; some countries and sub-regions being left behind

10. Changes directly impacting small farmers
High value domestic markets increasingly having the characteristics of international markets;
Rising demand for high quality and safe foods, and prepared and semi-prepared foods
Proliferation of supermarkets and hypermarkets – becoming chain ‘gate keepers’;
Specialised procurement, including centralized distribution centres and dedicated wholesalers
Internationalization and privatization of standards

11. Changes impacting small farmers
Expansion of contract farming to ensure supplies and prices; contracts in place of spot markets;
Farmer share of food value declining and continues to decline unless able to add value;
Changing sourcing programmes of retailers and food industries - sourcing from few high volume, reliable supply markets;
competition on price and non-price factors – based on service, variety, quality, consistency;
increase of value addition through agribusiness – services and agro-processing instead of primary products supply

12. Ensuring participation of small farmers
Former supply driven approaches( first produce and then figure out where to sell) are out- production must be market led;
Farmers need to be buyer responsive and know their markets and conditions of entry;
Farmers must understand markets and strategically plan all their activities to access them- alliances and groups;
Farmers must adapt to the quality and safety requirements and standards of importers and retailers – need information and technology to do this;
Strengthen farmer- market linkages through groupings allowing use of technology, more market power and economies of scale

13. Issues and Developments
Increasing consumer awareness of food safety, especially in developed countries
Globalization of food trade  increased risk of cross-border transmission of infectious agents
Outdated or un-enforced public standards has encouraged growth of private quality assurance schemes
Increased global competition between retailers and food industry  branding

14. The rise of supermarkets

15. Supermarkets
Trading becoming increasingly structured, governed and international ( sourcing)
Products handled demand led rather than supply pushed and supplies programmed (contracts)
Increasing concentration in food supply and distribution systems- lead firms become value chain managers and:
set own standards
gate keepers controlling access to markets
pioneers in modern logistics and supply chain management
able to demand and receive lower prices

16. Supermarket procurement and distribution
centralized procurement through own distribution centres;
cross-border procurement;
specialized and dedicated wholesalers;
preferred suppliers- contract marketing arrangements;
private quality standards and traceability required.

17. Perceptions of Food Safety
Broad impacts when safety is violated because of consumer perceptions
Impacts much broader than the outbreak itself – local outbreaks become national concern
Exacerbated when monitoring and observation are difficult and delayed info on source and cause
Markets respond to perceptions of risk
Reduced prices and consumption
Producers impacted by falling sales e.g bird flu
Maintaining perception of safety
Requires trust, knowledge, and transparency
Onus on producer and retailers to demonstrate safety- quality/safety marks

18. Food Control Systems Need for improved systems- regs, labs,staff;
Harmonize local with international standards or regional standards;
Certification capacity – needs increasing ( only 2 in Egypt for GlobalGap) and more cost effective around clusters;
Establish national accreditation/certification bodies and later regional body for harmonized standards and procedures;
Conformity assessments of sub sectors required;

19. Food Safety Considerations- Swot
1. Food Control Management systems (including institutional organization/ fragmentation);
2. Food Legislation- is it clear and known to producers and consumers;
3. Food Inspection- is an effective system operating?
4. Labs- are they sufficient and equipped and staffed adequately?
5. Information Mechanisms - Increasing awareness of key issues to producers and consumers

20. Global and National GAPS
Being promoted to assure quality and safety of food in domestic and export markets
Reduces the risks from chemically intensive agriculture and incorporates environnemental and social considerations;
Facilitates export market access and increasingly a necessary requirement;
However, little real price incentives for farmers
Difficulty in benchmarking different national GAP programmes with private-sector led initiatives

21. Farmer responses to changes
Farmers require to adapt to needs of changing buyers and focus on:
i) Efficiency- reduce production and marketing costs to be competitive
ii) Consistency- in supplies and quality
iii) Scale- ability to supply required volumes
iv) Safety and environmental standards- pesticides, production practices, certification etc
v) Seek new marketing arrangements and linkages- groups/clusters can provide added value- grading, packaging, processing, transport, contracting with clients

22. FAO’s Role AGS and AGN provides support on:
Analysis of marketing systems, polices and institutions;
Advises on marketing infrastructure and p-h improvement;
Supports upgrading of national food control systems
Capacity building programmes for the above;

23. Recommendations: Commission recommendations to Members:
Develop effective food safety and control systems
Support national and regional efforts to establish harmonized standards and procedures;
Consider quality and certification reqts for geographical indicators;
Further de-regulate markets and provide incentives for p-p investments in modern infrastructure and cold chains;

24. Recommendations (contd)
5. Streamline customs and transit arrangements (TIR) and promote greater competition in transport services;
6. Undertake supply chain analyses to plan improved marketing systems;
7.Encourage networking, clustering and contract farming for economies of scale in services and marketing;
8. Encourage improvements in marketing extension and information systems;

25. Thank you