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Vertical integration as a strategy to increase value absorption by primary producers: The Belgian sugar beet and the German rapeseed case

  • Vertical integration is a means of increasing market power. For some agricultural products, it is easier for farmers to exert control over their product beyond the farm gate, but for others it is more difficult. Cases in the latter category have two main characteristics. First, the farmer cannot sell the respective product to final consumers without processing. Second, processing is capital-intensive. Consequently, farmers have limited sales channels, and vertical integration of the supply chain is complex and challenging. It implies cooperation among farmers to process the raw material at a profitable scale and to finance the installation of processing facilities. Thus, for these product categories, farmers are prone to market power issues, since they depend on private businesses that have the financial means to install processing facilities and the logistical capacities to organize the collection of large amounts of raw material. This paper aims to identify and analyze the role of supply chain integration for farmers who are alreadyVertical integration is a means of increasing market power. For some agricultural products, it is easier for farmers to exert control over their product beyond the farm gate, but for others it is more difficult. Cases in the latter category have two main characteristics. First, the farmer cannot sell the respective product to final consumers without processing. Second, processing is capital-intensive. Consequently, farmers have limited sales channels, and vertical integration of the supply chain is complex and challenging. It implies cooperation among farmers to process the raw material at a profitable scale and to finance the installation of processing facilities. Thus, for these product categories, farmers are prone to market power issues, since they depend on private businesses that have the financial means to install processing facilities and the logistical capacities to organize the collection of large amounts of raw material. This paper aims to identify and analyze the role of supply chain integration for farmers who are already cooperating horizontally. Two case studies serve as the basis for the analysis: sugar beet in Flanders, Belgium, and oilseed rape in Hessen, Germany. The analysis is based on a qualitative research approach combining interviews, focus groups, and workshops with farmers and processors. While for sugar beet, the effects of market power are emerging only now with the termination of the quota system, farmers growing oilseed rape have been experiencing these problems since the 1990s. Our analysis concludes that most strategies to maintain or improve farm income have been exhausted. Even various forms of vertical integration supported by European policies do not necessarily work as a successful strategy.show moreshow less

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Metadaten
Author:Katharina Biely, Susanne von MünchhausenORCiD, Steven van Passel
URN:urn:nbn:de:kobv:eb1-opus-5610
DOI:https://doi.org/10.3934/agrfood.2022041
ISSN:2471-2086
Parent Title (English):AIMS Agriculture and Food
Publisher:AIMS Press
Document Type:Article
Language:English
Year of Completion:2022
Date of first Publication:2022/08/17
Publishing Institution:Hochschule für nachhaltige Entwicklung Eberswalde
Release Date:2023/05/25
Tag:supply chain; vertical integration; horizontal cooperation; qualitative research; sugar beet; rapeseed
Volume:7
Issue:3
First Page:659
Last Page:682
Institutions / Departments:Fachbereich Landschaftsnutzung und Naturschutz
open_access (DINI-Set):open_access
University Bibliography:University Bibliography
Zweitveröffentlichung
Peer-Review / Referiert
Licence (German):License LogoCreative Commons - CC BY - Namensnennung 4.0 International
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