most value chains. This results in power imbalances along value chains and creates a favourable environment for the abuse of market power by large players. 30 If such a market structure prevails unchecked, it effectively undermines competition in agrifood value chains, adding further downward pressure to prices paid to farmers. If there are a limited number of large players along value chains, this not only creates a favourable environment for anti-competitive practices, but almost certainly reduces bargaining room for fragmented farmers. As a result, the latter may not be able to bargain for higher and fairer prices for their outputs. To promote sustainable agricultural commodity value chains, it is critical to empower farmers, in the face of increasing concentration along value chains. In this regard, policies aimed at keeping value chains competitive and promoting strong farmer-based organizations are crucial. Such policies are detailed in this chapter. A. Promoting competitive agricultural commodity value chains 25. As noted, the current structure of agricultural commodity value chains results in power imbalances between highly integrated large players and smallholders, especially small-scale farmers. Therefore, creating a level playing field for all stakeholders in value chains, by ensuring competitive markets at national and international levels, is critical to empowering dispersed smallholders. Typically, this entails two measures. 26. First, it is imperative to enact, or reinforce, competition law in agricultural commodity-producing countries in order to prevent anti-competitive practices and limit the market power of trading or processing companies that source their inputs from farmers. Challenges in such countries with respect to competition law are often related to two issues, namely, how to enact and enforce such law and how to address the difficulties faced by legislators due to the extraterritorial characteristics of national markets, stemming from the fact that major transnational corporations active in trading or processing agrifood do not fall under the jurisdiction of producing countries. The former challenge may be addressed by improving institutional capacities at the national level, with strong competition agencies. Addressing the latter challenge almost certainly requires harmonization of the rules dealing with anti-competitive practices, as well as cooperation between competition agencies at the international level, with effective oversight by an international body. 27. Second, competitive domestic cocoa markets require a supportive environment for local small players, such as small-scale traders and agrifood processors, to remain in business. A key driver of the high concentration of buyers in the domestic agricultural markets of producing countries is the difficulties faced by local small players in competing on a level playing field with multinational corporations, as the latter have better access to resources such as finance. Keeping local stakeholders, including local small and medium- 30
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- Fall '19
- Archer Daniels Midland, global value chains, UNCTAD