Aurélie Harou is a post-doctoral research fellow at Columbia University’s Earth Institute Agriculture and Food Security Center.
Walking through the fertile but dangerous fields of eastern Democratic Republic of Congo (DRC) in 2007-2008, I was bewildered by the disparity between the extreme levels of poverty and yet the incredible wealth in natural resources that surrounded me. Minerals, precious stones and metals aside, the sheer wealth in the quantity and quality of the land and soil was impressive. The kind of mangoes and avocados Whole Foods dreams of sold for 10-15 cents a piece. Helping farmers gain access to international markets would surely benefit them and make them better off. Or would it?
One poverty-reducing strategy put forward in some developing countries is to link smallholder farmers with international buyers and supply chains. Many studies that examine smallholder suppliers feeding into modern supply chains show that they enjoy higher net earnings per hectare. However, many of these studies measure impacts over a short time span, not taking into account potential unforeseeable shocks faced by farmers. Indeed, growing new cash crops exposes farmers to new market risks, especially if farmers reallocate land and other inputs to the new crop. Farmers do not observe consumers’ changing preferences, exchange rates or other trade barriers.
Such was the case for many farmers growing pineapple in southern Ghana in 2004-2005, where farmers reported that buyers who had agreed to purchase their crops suddenly stopped showing up to collect the farmers’ harvests. The primary reason for the drop in demand was a sudden shift among European consumers’ taste from the variety of pineapple most commonly grown in Ghana, Smooth Cayenne, to a new, sweeter and smaller variety called MD2, mostly grown in Costa Rica. Most Ghanaian farmers could not grow the new variety because of the cooling and processing facilities needed to preserve the smaller, more delicate MD2 variety.
In a study co-authored with Thomas Walker and Chris Barrett, we measure the effect of the timing of adoption of pineapple relative to the demand shock on farmers’ welfare in Ghana. We find that earlier adopters are better off than later adopters who are better off than non-adopters, as expected and as theorized in Cochrane’s technology treadmill. However, late adopters are only marginally better off than non-adopters, by a magnitude of 0.1 standard deviations. The welfare ordering between the groups of early adopters, late adopters and non-adopters therefore depends on the magnitude and timing of the market shock, if any, experienced by new entrants.
Our results call into question the longstanding assumption that ‘better late than never’ applies to entry into new product markets. Policies and programs promoting farmers to grow new products must remain attuned to shifting market conditions and be prepared to facilitate exit.