Meeting the market requirements for agribusiness products has become more challenging in recent years for three reasons:
1) Globalization and its impact on Agricultural Exports
Global agricultural trade in general has been characterized by the increasing importance of standards. Satisfying the food safety requirements of importing countries has become more complex as both the range of items covered by mandatory standards and the stringency of standards increase. At the same time, demonstrating compliance with standards has become more complicated because of a shift from product standards, largely enforced through testing at borders (of exporting and importing countries), towards controls over the way that products are grown, harvested, processed and transported. At the same time, public, mandatory standards have increasingly been complemented by collective private standards such as EurepGAP and Safe Quality Food (SQF);
2) Emergence of Global Value Chains
Some of the most dynamic sectors in agricultural trade have to satisfy the requirements of demanding global buyers. These requirements may include large-volume supply, speed and reliability of delivery, customization of products through processing and packaging and guarantees about product safety. The importance of these 4 GLOBAL VALUE CHAINS IN THE AGRIFOOD SECTOR requirements has increased with the overall tendency towards concentration at multiple points in agribusiness value chains;
3) Product Diffrentiation on a Large Scale
There are opportunities for product differentiation strategies in sectors such as tea and coffee. In the words of a World Bank report on coffee, they are part of a strategy to move “outside of the commodity box” (Lewin, Giovannucci and Varangis, 2004) as a means of adding value to agricultural commodities and offsetting declines in prices. Typically, strategies for adding value to such products involve certification (for example, organic produce) or closer links with traders, processors or retailers. The process of adding value requires that the identity and distinctiveness of the product is established at the point of origin and maintained as it moves along the value chain. In other words, adding value to traditional agricultural export commodities often involves the same types of challenges as seen in the production and trade of non-traditional agricultural exports.
Meeting these challenges means organizing agribusiness value chains so that they are able to deliver what is required by global buyers and food safety regimes. The organizational trend is frequently referred to as “vertical coordination”. Cook and Chaddad (2000: p. 213) argue that “agribusiness researchers generally agree that the growing number of complex contractual arrangements replacing spot markets is a defining characteristic of the agro-industrialization phenomenon”, while van Roekel et al. (2002: p. 2) suggest that “integrated supply chains are one of the most powerful competitive tools in today’s globalizing business economy”.
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