Press release
, François-Xavier Branthôme
“Growers and processors aim at strengthening market concentration and social collaboration through Inter-Branch Organization (IBO), ensuring higher competitiveness and sustainability through a mutual agreement that is beneficial for all”.
VALUMICS (for “value chain dynamics”) is a research project funded by the EU H2020 programme. Valumics aims to enable decision makers to evaluate policy impact on food value chains.
Valumics recently published its complete report “Italian processed tomato value chain: market competitiveness, efficiency, and pricing mechanism”, a brief that summarizes key findings from economic and governance analyses using a suite of tools to provide in-depth understanding of the functioning of the Italian processed tomato value chain. The scope of the analysis includes tomato producers and processors in the leading Italian tomato producing region of Emilia-Romagna.
Here are compiled some of the main comment and conclusion of the report.
Dual-level governanceStrong connection of producers and processors through inter-branch organizations (IBOs). Retailers are becoming lead firms in relations to processors;
Inter-Branch Organisations
Producers and processors aim at strengthening market concentration and social collaboration through IBOs, ensuring higher competitiveness and sustainability through a mutual agreement that is beneficial for all;
Market power
The market power imbalances have considerably changed in favor of farmers since 2010, especially after creation of the regional IBO.
Productivity growth
Small tomato producers have taken the advantage to improve scale efficiency by increasing the scale of operations, resulting in growth of total factor productivity at the producer level.
Reference price formation
Regional IBOs provide an EU-unique framework of negotiating the annual reference price for processed tomatoes, resulting in fairer distribution of value between producers and processors.
Unfair trading practices
Reverse auctions of selling processed tomato products to retailers have become an unfair trading practice within the industry as retailers push for the lowest price, thus indirectly affecting the price setup of non-auctioned tomato products.
Concluding remarks of the report state that the results indicate that the upstream actors of the chain, i.e. producers and processors aim at strengthening market concentration and social collaboration through Inter-Branch Organization (IBO), ensuring higher competitiveness and sustainability through a mutual agreement that is beneficial for all.
This was confirmed by both price developments and margins obtained by producers and processors after 2011 and establishment of the IBO, and in the reduction of market power imbalances between them.
The results further indicate that price dynamics present at the producer and processing levels are not reflected at the retail level. One of the reasons might be that retailers are not part of the IBO, and the price-setting mechanism is entirely different at this stage of the value chain. The adoption of auctions for retail purchases pushes processors to squeeze their margins during the negotiation process.
Overall, the tomato processing case analyzed in the present research shows that the sustainability, integrity and resilience of the chain are related to the managerial governance of the chain. Thus, chain actors can contribute to finding a balance between competition and collaboration, so to aim for all chain actors’ higher level of competitiveness.
The complete report (pdf) is available at:
Source: Valumics
