Improving analytical capacity and understanding of the bargaining power and interactions of farmers with the operators of the value chains

Expected Outcome:Reinforcing the position of farmers in the value chain is a key objective of the common agricultural policy (CAP). In line with this CAP objective, and other related policies [1], the successful proposal will enhance knowledge and analytical tools useful to the development and implementation of effective governance and policy mixes aimed at improving the functioning of EU agriculture and food value chains (hereafter ‘value chains’). The successful proposal will contribute to support value chains that generate a fair income to farmers and create enabling conditions for the transition to sustainable, resilient and competitive farming systems.

Project results are expected to contribute to all of the following expected outcomes:

• the capacity of the research community to analyse and model the EU agricultural and food sectors, their market structures, and the formation, transmission and distribution of costs, prices, risks and economic values along value chains is enhanced; likewise, policymakers, farmers and other value chain operators have a better understanding of the functioning of value chains and the formation, transmission and distribution of costs, prices, risks and economic values along them;
• policymakers at EU, national and local level have a better understanding of the impacts of policies on the functioning of value chains, and are therefore better equipped to design and support the uptake of existing and future policy tools strengthening farmers’ position in them;
• farmers and consumers benefit from improved policy mixes, fair business interactions and tools reinforcing the bargaining power of farmers with upstream and downstream operators and supporting more sustainable, transparent and resilient value chains.

Scope:The understanding and the capacity to analyse the functioning of agriculture and food sectors, value chains [2] and market structures remain incomplete and oversimplified. This contributes to a knowledge gap on the relations between farm production costs and price transmission, from input prices faced by farmers to food prices faced by consumers. Market and value chain conditions and dynamics affecting farmers’ bargaining power are important drivers of farmers decision-making and income. They define the prices of the inputs and services bought and the commodity and non-commodity outputs sold by farmers. Hence, they contribute to the choices of production and business model, investments, and to the adoption of sustainable practices. A better understanding of the composition and functioning of value chains and market settings, in a granular and comprehensive way, would support accurate assessments of the socio-economic impacts of policies and business operations. It would also support the development of effective, evidence-based policies and business strategies adapted to the diverse conditions faced by farmers and consumers that will improve the functioning of the agricultural and food markets.

Proposals should:

• provide an analytical framework and tools capturing the complexity and heterogeneity of EU value chain structures, in particular relative to: • their length (number of intermediaries from the input industry to the consumers);
• their scale (global, EU, national or local);
• the degree and forms of vertical coordination;
• the degree and forms of horizontal coordination between farmers;
• the degree of concentration of operations at all stages;
• the degree of product (quality) differentiation.

• the framework should include a consolidated conceptualisation such that it can be adapted to represent the diversity of cases within and between sectors. The framework should also be sustained with empirical evidence and data to the maximum extent;
• apply the developed analytical framework and tools to empirically model production costs, price formation, price transmission, risk, cost and economic value distributions, and profit margins along selected value chains, and to characterise sources of market failures and occurrence of unfair trading practices. Proposals should consider different economic contexts (e.g., high/low prices, different patterns of price volatilities, etc.);
• develop and/or improve adequate indicators and collect the necessary data to improve the assessment of farmers bargaining power with upstream and downstream operators of value chains in analytical tools and models;
• explore, characterise, and analyse the interactions between value chain operators and the characteristics of value chains affecting farmers’ bargaining and decision-making power, in particular on the type of farm business and structural changes (e.g., farm size, legal form, etc.). The proposed activities should include the analysis of the transaction relationships between farmers and input suppliers, farmers and service providers, and farmers and buyers of agricultural products. Among others, this work should analyse the types of contracts, provisions, clauses, standards, indications and calculations of prices and volumes, and how economic value, costs, and risks are shared among the operators. Proposals are encouraged to analyse whether farmers’ bargaining and decision-making power is affected by socioeconomic characteristics (e.g., gender, age, etc.).
• explore existing and/or propose new policy and business solutions and tools to reinforce farmers bargaining power in value chains. Identify good practices (governance, awareness raising, etc.) for their successful implementation and uptake. Among the possible solutions, proposals should explore: • coordination approaches between farmers and/or between farmers and other value chain operators (e.g., form, size, contractual agreements, capacity building, etc.);
• tools (e.g., data tools, innovative technologies) to increase market transparency and the accessibility and use of information. This should contribute to better inform farmers and consumers on the distribution of costs, prices, economic value, and risks along value chains and improve the fairness and efficiency of agriculture and food markets.

Proposals should develop dissemination materials (e.g., policy briefs, research findings briefs, audio or visual presentations, etc.) summarising the results of key deliverables to facilitate the uptake of R&I outputs by decisionmakers in policy or business contexts.

Proposals should capitalise on existing relevant research findings and tools. Proposals should also ensure synergies with other relevant EU-funded studies, projects, initiatives, and processes [3].

This topic should involve the effective contribution of Social Sciences and Humanities (SSH) disciplines.

[1] e.g., the EU Directive 2019/633 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, and the EU Regulation 1308/2013 establishing a common organisation of the markets in agricultural products.

[2] The agriculture and food value chains encompass all operators from the producers of necessary inputs for agricultural production to the consumers, including farmers, food and bio-based industries (including processing), retail, wholesale, food service (including public procurement), as well as the suppliers of inputs and services such as seeds, pesticides, fertilisers, energy, machinery, packaging, repair, transport, finance, advice, and logistics.

[3] e.g., producer organisations operational programmes, the EU Agri-Food Chain Observatory, fi-compass, etc.