“Implications of the Quinoa Boom on the Farmers’ Income"
How do changes in the quinoa market structure mediate quinoa
farmers’ income
A Research Paper presented by:
Cinthya Verastegui Effel
Bolivia
in partial fulfillment of the requirements for obtaining the degree of
MASTERS OF ARTS IN DEVELOPMENT STUDIES
Specialization:
Full Name of Specialization
ECD
Members of the Examining Committee:
Dr. Susan Newman
Dr. Howard Nichols
The Hague, The Netherlands
December 2012
2
Contents
List of Tables
4
List of Figures
4
List of Images
4
List of Diagrams
4
List of Acronyms
5
Abstract
6
Relevance to Development Studies
7
Keywords
7
Chapter 1 INTRODUCTION
8
Chapter 2 Changes in the Quinoa Value Chain analyzed through the Global Commodity
Chain lens
15
Chapter 3 Mapping the Quinoa Value Chain
25
a) Identification of Actors
26
b) Market Structure and Bargaining Processes Pre and Post Demand Changes
30
Chapter 4 New Private Players characterize the Current Quinoa Market Structure
35
a) Loss of Monopoly
35
b) Loss of Market Share
37
Chapter 5 New Business Practices in the Current Quinoa Market Structure and its
Implications for the Quinoa Farmers’ Income
a) Vertical Integration Strategies and Market Coordination
39
39
b) Farmers Bargaining Power under “Contract Models”
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c) Price Implications of the New Competitive Environment
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Chapter 6 CONCLUSIONS
50
Appendices
56
References
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3
4
List of Tables
Table 1: Trend in Quinoa Prices (FOB) between 1990 and 2010
Table 2: Volume trend of quinoa exports between 1990 and 2010.
Table 3: Price distribution under Jatary
Table 4: Difference in export prices received between the PO’s and private firms.
Table 5: Price paid by Quinoa Corporation between 1999 and 2005.
10
11
18
41
49
Table 6: Quinoa price trend between 1990 and 2010 (FOB)
59
List of Figures
Figure 1: Trend in Quinoa Prices (FOB) between 1990 and 2010.
10
Figure 2: Volume trend of quinoa exports between 1990 and 2010.
11
Figure 3: Quinoa Export Destinations
12
Figure 4: Evolution of Quinoa Exporters between 1990 and 2004.
13
Figure 5: Producer prices as a share of exporter prices (US$/MT)
16
Figure 6: Producer prices versus exporter prices (US$/MT)
17
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Bookmark not defined.
Figure 8: Market share by the producer organizations before the entry of new private firms. 36
Error! Reference source not found.
39
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41
Figure 11: Evolution of quinoa exports by producer organizations (ANAPQUI and CECAOT) and
private firms (Andean Valley, Jatary and Quinoa Bol S.R.L.) between 1990 -2004
49
Figure 12: Commodity Prices Trend (US$/TM)
62
List of Images
Image 1: Bolivia/Quinoa stand at the “Floriade” event.
Image 2: Bags of quinoa ready to be sold at the “Challapata Fair”.
8
29
List of Diagrams
Diagram 1: The Quinoa Value Chain
25
5
Diagram 2: Incentives offered by the three venues
Diagram 3: Mapping of producer organizations ANAPQUI and CECAOT
Diagram 4: Mapping of the vertical integration by Jatary and Quinoa Bol S.R.L.
Diagram 5: Mapping of the US market
31
56
57
58
List of Maps
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defined.
Error! Bookmark not
List of Acronyms
ANAPQUI
The National Association of Quinoa Producers
CECAOT
Central de Cooperativas Agropecuarias “Operación Tierra” LTDA.
BDCC
Buyer Driven Commodity Chains
CABOLQUI
Bolivian Chamber of Royal Quinoa and Organic Product Exporters
FAO
Food and Agriculture Organization of the United Nations
GCC
Global Commodity Chains
IYQ
International Year of the Quinoa
HA
Hectares
ICA
International Coffee Agreements
IYA
International Year of the Quinoa
MNC
Multinational Corporations
MT
Metric Tons
NAFTA
North American Free Trade Agreement
NGO’s
Non-governmental Organizations
PO
Producer Organizations
PDCC
Producer Driven Commodity Chains
SBPC
Bolivian System of Productivity and Competitiveness
WSA
World System Approach
6
Abstract
This thesis analyzes the implications of the current quinoa market structure on some aspects of the
farmers’ income such as producer prices and bargaining power through an alternative approach to
mainstream economics. The increased demand for quinoa during the last few years, especially since
2006 have led to an increase in the value and volume of the transactions related to this market. As a
result new private firms have entered the quinoa market seduced by the potential profits. The entry of
these new private firms has changed the structure of the quinoa market, which through new business
practices have displaced the monopoly that the peasant producer organizations had in the market for
organic quinoa exports.
The implications of such changes on the farmers’ income are studied in this paper through the
Global Commodity Chain analytical framework which puts at the center of the discussion issues
surrounding the power relations within a production process. While under mainstream economics
efficient price discovery is thought possible through market clearing at each stage of the production
process, the GCC analytical framework is more careful in drawing conclusions from market data and
challenges us to inquire into the types of relationships amongst the different participants in a particular
production process; which is why, this paper starts the analysis by mapping out the Quinoa Value Chain
looking to uncover the power relations at work therefore the bargaining power of each actor and
ultimately the distribution of profits.
For the case of the quinoa farmer in Bolivia, this paper shows that the new business practices
brought by the private firms manifested in vertical integration strategies which include “contract
systems” have limited the bargaining power of the farmer to its contract specifications. Hence the
possibilities that quinoa farmers have to profit from the booming demand for their crop are seriously
circumscribed by those who are able to more successfully enter the models of vertical coordination.
Lastly, this thesis bears in mind that a limitation in its analysis is the lack of sufficient knowledge
regarding the type of relationship between the peasant producer organizations and the farmers, since
this information could bring light on explaining some recurrent themes mentioned by the farmers
interviewed during the fieldwork and that is the issues of price volatility. Often farmers would mention
their frustration about a lack of knowledge regarding how prices are set in the quinoa market, which
often caused them significant losses. Furthermore, despite the increasing difficulty that the producer
organizations have in fulfilling their role of “protecting the farmer” under the new quinoa market
structure, these remain important for the lives of the farmers, which is why this paper recommends the
need for state policy on control mechanisms to help stabilize prices in the quinoa market (currently
characterize by high levels of volatility) as well as a greater support for the producer organizations since
these represent a point of reference and buffer between the quinoa farmer and the private firms.
Concluding, the data presented in this paper is a combination of desk research and fieldwork
interviews to a wide spectrum of actors which include: government personnel, university lecturers,
private firm and producer organization representatives as well as quinoa farmers.
7
Relevance to Development Studies
The recent boom in food type commodity prices between 2006 and 2008 has reopened the opportunity
to analyze how do farmers fair under what are presumed to be favorable market conditions – that is
high crop prices.
This thesis focuses on the quinoa farmers in Bolivia and analyzes the implication of high quinoa
prices on the farmers’ income in a more holistic way that the Global Commodity Chain (GCC) analytical
framework allows in contrast to mainstream economics. Although producer prices data was taken into
consideration as a point of departure for the analysis, this paper does not rely on these figures to draw
conclusions from.
Instead, through its analysis attempts to uncover the power relations governing the Quinoa
Value Chain and in this way contribute to the economic literature on the quinoa case with a more
challenging and thought provoking debate.
Lastly, not much research and data is available on the current market structure post the changes
in its demand. Most academic works on the subject date back to 2005, which is precisely when the craze
for quinoa and its prices start to shoot up. Hence this work aims to contribute with more up to date data
as well as fieldwork interviews that have captured the current sentiment of the different actors’
participants of the Quinoa Value Chain.
Keywords
Bolivia, quinoa, value chain, organic, prices, vertical integration, farmers, ANAPQUI
8
Image 1: Bolivia/Quinoa stand at the “Floriade” event.
*Source: Picture taken by the author at the “Floriade” event on June 12th, 2012.
Chapter 1
INTRODUCTION
‘In 2006, the production (of quinoa) was barely of 7.000 tones but as of last year, we don’t have
data for this year yet, the production went up to 20.336 metric tons. From 7.0000 to 20.000 in very little
time is the growth of quinoa production. The producers export primarily to Europe but also to USA and
Asia. The exports have gone up from $8 million in 2006 to $63 million in 2011. Since it is a new product
for the world, the market is growing’
Bolivian president Evo Morales
9
At the Floriade1 event
Venlo, The Netherlands
June 12, 2012
The Bolivian president Evo Morales participated at the Floriade event during the month of June
of this year, as part of the activities surrounding the International Year of the Quinoa (IYQ). The
Organization of the United Nations for Food and Agriculture (FAO) has declared next year 2013, as the
Year of the Quinoa. This has been the result of a pursuit by the Bolivian government that started in the
70’s to promote the consumption of quinoa both nationally and internationally. In the year 2002, the
Bolivian System of Productivity and Competitiveness (SBPC) laid out a plan which in addition to the goal
of having a year designated by the FAO for the promotion of the quinoa it also included the target of
having 50% of the total quinoa production to be produced and managed by the peasant Producer
Organizations (PO’s).
The creation of the producer organizations during the 1980’s came in handy and facilitated the
commercialization of quinoa. Now there was also a “social” cause behind its promotion. However, it is
during the decade of the 2000’s that the volumes of quinoa production and commercialization reached
significant levels in Bolivia (Caceres, 2005). Below is a quote from Freddy Mamani, second secretary for
the Bolivian Mission at the United Nations that sums up the transition that the quinoa grain has
experienced in the market over the last 20 years:
“I think that the quinoa has had three phases. Up until the 1990’s, the quinoa was simply
“comida de indio” (food of and for the indigenous). Derogatorily, it was referred as food that only the
indigenous could eat. Hence the quinoa along with the llama meat was only produced for selfconsumption of the producing families. On a second phase, in the early 2000’s, the quinoa starts to
become a product for exchange. For example, farmers would exchange two kilos of quinoa for one kilo of
rice. Currently, on a third phase, we see a reversal of the situation where there is actually a high demand
for quinoa. The quinoa is no longer just the food of the indigenous and it is being exported and so on”
Freddy Mamani
Second Secretary, Permanent Mission of Bolivia to the United Nations
Interviewed on July 26, 2012
UN Headquarters – New York, USA
The fairly recent spike, as of 2006, in the figures related to the quinoa market has to do primarily
with a change in the preferences of consumers in the industrialized countries for organic and fair trade
related products. In addition, the increasing demand for grains with no gluten2 content such as the
quinoa have played a role in its increasing demand; as well as the creation of food security programs by
international organizations like the FAO, which have included the quinoa in their programs due to its
high nutritional content and adaptability to different and harsh climates (Birbuet and Machicado, 2009).
1
2
I visited the Floriade event as part of my fieldwork activities.
Currently 0, 4% of the world’s population suffers from celiac disease (Birbuet and Machicado, 2009).
10
As a result, quinoa prices have more than tripled over the last 20 years:
Table 1: Trend in Quinoa Prices (FOB) between 1990 and 2010
Year
1990
2000
2010
Price of Quinoa (FOB)
$830 (US$/MT)
$1.259 (US$/MT)
$3.061 (US$/MT)
FOB Quinoa Prices between 1990 - 2010
3500
3,061
3000
2500
2000
1500
1,259
1000
500
830
0
Price trend for quinoa exports in US$/TM
Figure 1: Trend in Quinoa Prices (FOB) between 1990 and 2010.
11
Similarly, the volume of quinoa exports has more than quadrupled:
Table 2: Volume trend of quinoa exports between 1990 and 2010.
Year
2000
2009 (peak year)
2010
Volume of Exports (MT)
1.431 (MT)
14.376 (MT)
8.378 (MT)
Volume of Quinoa Exports
between 1990 - 2010
16000
14,376
14000
12000
10000
8000
8,378
6000
4000
2000
0
1,431
Volume of Quinoa Exports in Metric Tons (MT)
Figure 2: Volume3 trend of quinoa exports between 1990 and 2010.
The main international market destinations are the US which imports almost half of the total
Bolivian quinoa exports with a 48% market share, followed by France with 16%, the Netherlands with
11%, Germany at 9%, Canada and Brazil4 at 4%. The last 8% is covered by a few other countries which
import quinoa on a smaller scale such as England, Israel and Peru5.
3
Although the level of volume exports has come down during the last year, it continues to be double what the
level was just six years back in 2006 with 8.378 (MT), as the graph shows.
4
Brazil is a young market, but is growing rapidly.
5
Although Peru is one of the main quinoa producing countries (along with Ecuador) they also import quinoa.
However, the majority of the quinoa that goes to this country is actually smuggled through the “Black Market” in
the “Challapata Fair” versus being officially imported. Peru is the biggest consumer of quinoa around the world.
12
Quinoa Export Destinations
Brazil
Canada 4%
4%
Others
8%
USA
48%
Germany
9%
The Netherlands
11%
France
16%
Figure 3: Quinoa Export Destinations
As shown above through the tables and graphs, the increased demand for this grain has led to a
spike in the value and volume of the transactions related to its market. Yet in addition to an increase in
the figures, there has also been an interesting dynamic in the quinoa market structure since the late
1990’s, and that has to do with the immersion of new actors in the form of private firms seduced by the
potential profits its market appears to offer. The graph below shows the evolution in the number of
quinoa exporters between 1990 and 2004.
13
Evolution of Quinoa Exporters
between 1990 - 2004.
1000
900
Andean Valley
800
ANAPQUI (PO)
Metric Tons
700
CECAOT (PO)
600
Irupana
500
400
Jatary
300
Quinoa-Bol
200
Quinoa Foods
100
SAITE
0
Other firms
Figure 4: Evolution of Quinoa Exporters between 1990 and 2004.
*Source: (Laguna 2005, as cited in Ton 2006).
The entry of these new private firms has dramatically changed the structure of the quinoa
market as will be illustrated in the coming chapters. The ways in which the quinoa market has changed
has serious implications for the quinoa farmers. The aim of this paper is to find out:
“How do changes in the quinoa market structure mediate aspects of the farmers’ income”?
In light of all of this, the thesis that this paper will put to the test is as follows:
“The immersion of new and more private firms into the quinoa market structure during the late
1990’s, lured by the potential profits its market appears to offer have displaced the producer
organizations from the quasi-monopoly they had in the market for organic quinoa exports. The entry of
these new private firms have brought new and more business oriented principles to its market
manifested in vertical integration strategies which include “contract systems” in its interaction with the
farmers. Under the new market structure, the ability of the farmer to profit from the booming quinoa
market is seriously limited by contract specifications which do not offer the farmer the opportunity to
participate in more profitable upgrading activities along the chain. Lastly, the continuous loss of market
share by the producer organizations to the private firms reinforces these practices threatening the
expansion of “wage worker” types of farmers throughout the quinoa fields in Bolivia, dangerously
challenging the country’s ability to benefit from its booming sector”.
14
The questions set out on this paper have been formulated following the Global Commodity Chain
analytical framework, which will be described at length in the following chapter.
Chapter 3 starts by mapping out the Quinoa Value Chain looking to first identify the full set of actors
involved in the Bolivian quinoa market. Distinguishing in the process the ways in which the quinoa
market structure has changed post the increased demand for this grain and with the entry of the new
private firms into its market structure. While up until the 1970’s quinoa farmers pretty much had only
one venue where to sell their quinoa production, starting from the 80’s and onwards new quinoa buyers
enter the quinoa market structure in the form of peasant producer organizations as well as new and
more private firms. Each one of these selling points has different incentives (identified during the
fieldwork) that the farmers take into consideration for their decision-making process. The characteristics
surrounding each selling venue will be illustrated in this chapter.
Chapter 4 and 5 will be dedicated to analytically answering the main question as well as the
related sub-questions:

“How have changes in demand affected the quinoa market structure during the last 20 years?
The time scope of the analysis in this thesis is on the last twenty years since the quinoa market
structure starts to fundamentally change since the 1990’s. As the quote from Mr. Freddy
Mammani, Second Secretary of the Permanent Mission of Bolivia in the United Nations
illustrated, up until the 1980’s, the quinoa had pretty much no value in the market. At most, it
was a product for exchange yet starting in the 1990’s, the demand for this grain increases
dramatically thanks to a change in the preference for organic and fair trade related products, by
the consumers in the industrialized countries.
The first set of actors that enter the quinoa market in response to the changes in the demand
for this grain were the peasant producer organizations which pretty much held a monopoly over
the market for organic quinoa exports during the 1990’s. Yet, starting in the decade of the
2000’s, new private firms enter the quinoa market displacing the monopoly that the peasant
producer organizations had and threaten their dominance in the chain. The implications of such
changes will be studied in detail in Chapter 4.

“How have these changes in the quinoa market structure affected aspects of income such as
producer prices, their bargaining power?
The entry of new private firms into the quinoa market structure have brought novels forms of
competition to the chain such as vertical integration strategies which include “contract systems”
that limit the farmers’ bargaining power to its contract specifications. Furthermore, the closed
nature of such vertical integration strategies has exacerbated the market loss by the producer
organizations which contribute to reinforce the entry of the quinoa farmers into such “contract
systems” despite the not so favorable conditions. The implications of such new business
practices on the farmers and producer organizations will be studied in more detail in chapter 5.
15
Lastly, the data presented in this paper has been gathered through a combination of desk research
and fieldwork in Bolivia where a wide spectrum of actors were interviewed following the GCC analytical
framework. These include: quinoa farmers, producer organizations representatives, private firms
personnel and university lecturers, located in the cities of Oruro and Potosi in Bolivia. In addition,
government officials were interviewed at the UN Headquarters in New York, USA. A total of 35 people
were interviewed.
Fieldwork interviews were conducted looking to gather the current sentiment of the different
participants in the Quinoa Value Chain with a focus on the quinoa farmer. Following the GCC analytical
framework to be described next, the questions asked during the fieldwork aimed to uncover the power
relations within this chain looking to bring clarity to what the current quinoa market structure means for
the farmers’ income.
Chapter 2
Changes in the Quinoa Value Chain analyzed through the
Global Commodity Chain lens
The ways in which the world communicates and trades have significantly changed over the past 20
years, and so have the rules of the game under what is known as Globalization.
In economic terms, there have been important shifts in the global production and trading
system, which are characterized by: a) the disintegration of the stages of the production process and
consumption across national boundaries, b) the increasing spread between producer prices and
consumer prices; while producer prices go down, consumer prices do not, c) it is common for products
to be produced in developing countries and be consumed in the industrialized ones, d) intangible
aspects of the production process such as marketing, brand development and design are key factors in
securing real profits, e) Multinational Corporations (MNC) exert powerful influence in the coordination
and governance of global production and trade, lastly f) “flexible systems of production” characterized
by sub-contracting and off-loading less profitable activities onto smaller and weaker firms are more and
more prominent in today’s global production and trading system (Newman, 2009).
Interestingly, the changes that the quinoa market structure has undergone during the last 20
years follow similar patterns and characteristics. For example:
a) The disintegration of the production process (flexible systems of production) and
consumption across national boundaries is manifested in the fact that although the
production of the quinoa product starts in Bolivian processing centers, the final stages of
the process are usually finished in the destination country, closer to the consumer.
16
b) The increasing spread between producer prices and consumer prices can also be seen in the
quinoa case. As demonstrated earlier, quinoa export prices have shot up significantly over
the last 20 years. However, quinoa producer prices seem to actually be on a downward
trend with an increasing gap between producer prices and export prices as the following
figures illustrate.
0.600
0.500
0.400
0.300
0.200
0.100
0.000
Producer Prices as a share of Exporter Prices (US$/MT)
Figure 5: Producer prices as a share of exporter prices (US$/MT)
17
Producer Prices alongside Exporter Prices
5000
Exporter Prices
(US$/MT), 3061
4500
4000
3500
3000
2500
2000
1500
Producer Prices
(US$/MT), 1332.6
1000
500
0
Figure 6: Producer prices versus exporter prices (US$/MT)
c) It is common for products to be produced in developing countries and consumed in
industrialized ones. In fact, internal quinoa consumption in Bolivia is quite low compared to
its demand and consumption in the industrialized countries. According to the Bolivian Vice
Minister of Rural Development Victor Hugo Vazquez, internal quinoa consumption for this
year (2012) will be limited to a total of 12.000 tons which is considered a very low figure. In
a very different manner to the external consumption of quinoa, the internal consumption
has barely increased by a little more than a kilo per capita over the past few years
(Exportacion de Quinoa se duplicara el 2012).
d) Intangible aspects of the production process such as marketing, brand development and
design are key factors in securing real profits: an example of this can be found in the price
distribution under the French company Jatary. While the Bolivian quinoa farmer receives
10% of the final price paid by the French consumer; Jatary, which is positioned closer in the
chain to the intangibles of the production process, receives more than double the
percentage received by the farmer, specifically 24%. Furthermore, the next set of actors
downstream the chain, such as the importing company EURONAT (to be analyzed in detail in
the following chapters) receives 76% of the total price paid by the consumer. See table
below:
18
Table 3: Price distribution under Jatary
French market: price distribution under Jatary (2004)
Quinoa Bolivian
Price in US$
Price
(bolivianos) per
Quintal
Kg
quintal
4.92
Quinoa (1)
consumer Price
Price paid to the
175
Bolivian
producer
Challapata
150
market Price
FOB Price (ton)
received by
JATARIY (2)
Difference (1-2)
=northern
margin
* Source: (Raynolds, 2007)
Consumer Price
distribution (%)
100
22.7
0.49
10
19.5
0.42
1,200
1.20
24
3.72
76
e) Multinational Corporations (MNC) exert powerful influence in the coordination and
governance of global production and trade: the French retailers EURONAT and MARKAL
represent those big players in the Quinoa Value Chain that are challenging and changing its
market structure as will be discussed in the following chapters.
There is a strand of scholars who are interested in studying this processes resulting from
Globalization acknowledging that there are winners and losers under what has been named by them as
Global Commodity Chains (GCC). According to Jennifer Bair (2005), a leading scholar in this literature
“GCC helps us analyze the local consequences of globalization for firms and workers”.
Although this strand of literature is fairly recent (dating back to the 1990’s), the commodity
chain as a concept was originally thought of in the World Systems Approach (WSA) literature (back in
the 70’s). Immanuel Wallerstein, (one of its founders) conceives the commodity chain “as a network of
labor and production processes whose end result is a finished commodity”. For the WSA, the totality of
all commodity chains makes up the global production system (Hopkins and Wallerstein, 1982).
This concept would later be retaken by Gary Gereffi who in 1994, through his work titled “The
Organization of Buyer-Driven Global Commodity Chains: How U.S. retailers shape overseas production
networks” would establish the concept of commodity chain as one unit of analysis through what he
called Global Commodity Chains (GCC). Under GCC, concepts drawn from the international business
19
literature (such as industry structure, governance and value added) are emphasized over others coming
from the dependency theory, which WSA was influenced by.
Gereffi starts by identifying four key dimensions with respect to which every commodity chain
can be analyzed: 1) a physical input-output structure (which is the process of transforming the raw
material into a final product), 2) a territoriality (or geographical scope), 3) a governance structure and 4)
an institutional context. However, the focal point of its analysis is on the third dimension: governance
structure, since as for Gereffi there are power relations embedded within each stage of the production
process which set apart the winners and losers of globalization.
It is in this context that GCC is interested in determining which the ‘driving firms’ in a chain are,
since this will speak about their ability to control the various aspects of the production process and
therefore about how value is created, appropriated and/or distributed within the chain (Bair, 2005).
For Gereffi and Korzeniewicz (1994), there are two types of governance structures based on this
“driveness” factor: buyer driven and producer driven commodity chains (BDCC’s and PDCC’s,
respectively).
BDCC’s (buyer driven) are essentially found in labor-intensive production processes where
“production itself is contracted out to a network of independent firms that obtain necessary inputs and
organize supply to hegemonic retailers” (Gereffi and Korzeniewicz, 1994). As mentioned at the
beginning, this is the process where the sub-contractors “themselves begin to transfer the least
profitable parts of their new portfolio of functions to other nodes”. The driving firms in BDCC’s are
Retailers and Branded Marketers which specialize in design, branding, marketing, financial services and
are usually found in consumer goods industries, such as garment and footwear (Gibbon, 2001).
“International subcontracting of more labor-intensive manufacturing is common; as are strategic
alliances between international rivals” (Gibbon, 2001). Similar governance structures are found in the
commodity chain of some agricultural products. This reflects the power of supermarkets over the
producers (Bair, 2005) (Dolan and Humphrey, 2000).
On the other hand, PDCC’s (producer driven) are usually found in capital and technology
intensive industries. In this case, the coordination of production takes place amongst heavy
transnational corporates and through a wide network of subsidiaries, suppliers and subcontractors
(Newman, 2012). These tend to be multilayered (first, second and third tier suppliers) and involve
thousands of firms (including parents, subsidiaries and subcontractors). Capital and proprietary knowhow represent the main barriers to entry into the “producer node”. (Gibbon, 2001).
Yet, for some opposing scholars these categorizations reveal the descriptive nature of the GCC
analytical framework. For these, GCC is poor in the analysis and reliant on chain typologies that do not
adequately account for the diversity in empirical case studies (Newman, 2009)
Furthermore, GCC has been accused for being somewhat deterministic when depicting the
industrial organization of chains, its governance and upgrading. It is also accused of being “fatalistic”,
20
since it suggests that the limits of economic activity in developing countries are determined almost
entirely by the economic structures and behavior in OECD countries (Gibbon, 2001).
Another concept that is extensively used in the GCC literature in addition to governance is the
one related to upgrading. This concept makes reference to the processes through which actors’
upstream (that is closer to the production side) can move along the chain towards higher added value
activities (closer to the final consumer). Upgrading can be done in different ways, such as: intra-chain
(also called functional), or by product, by process or inter-chain.
Intra-chain upgrading, is when a firm takes on additional functions beyond basic production
such as design or logistics management, securing in this way its position within the chain. “Full-package
manufacturers” are an example of this. Product upgrading is when more sophisticated products are
produced with higher unit prices. Process upgrading, happens when the technology or production
systems are improved. Finally, inter-chain upgrading takes place when there is a move from one industry
to another (Bair, 2005) (Gereffi et al. 2001b; Humpfrey and Schmitz (2001).
However, several studies suggest that the ability of firms to upgrade in any of the ways
mentioned above is more and more difficult due to increasing entry barriers as we move along the chain
(Newman, 2012). Interestingly, it seems to be that the barriers of entry to the intangible aspects of the
production process (such as marketing, design and brand development) are much greater than the
barriers of entry to the tangible ones (meaning production and manufacturing), the least profitable
(Bair, 2005) (Gereffi et al. 2001b).
Furthermore, although upgrading is thought of as a positive for those involved, this is not always
the case. In fact, upgrading (intra-chain) can often simply mean the increased competitiveness of the
firm, as it takes on additional responsibilities without reaping the benefits associated with upgrading,
such as increased security within the chain and/or greater profitability. What’s more, smaller firms
within the country are often excluded in this process.
For example, a comparative study of Kenyan horticulture and Indian textile value chains by
Dolan and Tewari, concluded that “changes in both value chains associated with processes of upgrading
on the part of the largest firms severely circumscribed the future upgrading prospects of smaller
producers and pose the danger of excluding a large swathe of low-performing domestic firms from the
circles where new skills and learning are being generated” (Bair, 2005)
Similarly, for the case of the workers, upgrading does not necessarily translate into higher
wages, greater job security or improved working conditions (Newman, 2012) (Ponte 2002; Schurman
2001; Talbot 1997)
Yet, according to Cramer (1999) another opponent scholar, GCC analysis over-emphasize what it
refers as the “rigidly exploitative terms” set by the multinational corporations. For some scholars (GCC),
places the firm at the center-stage of its analytical work hence firms are thought to be in “uniquely
powerful positions in terms of their ability to shape outcomes along the chain and the distribution of
value added”. In this sense, upgrading is only possible at the firm level. Labor and other social categories
21
are not taken into account for the analysis, which shows the departure of the GCC literature from the
World System Approach (its origin). Under WSA, labor is thought to be quite important.
Another set of criticisms, accuse GCC analysis for being too worried by the vertical nature of the
chain and as a consequence have neglected the inter-chain interactions. In addition, according to
Newman (2009), there has been an exclusion of finance, which has for example left commodity
derivatives out of the analysis.
Furthermore, for some authors like Bair, the emphasis of the literature on concepts such as
upgrading (as mentioned above), although necessary and useful, these lack an analysis of the social
context surrounding these upgrading processes (or lack thereof). Hence, proposes an agenda for what
she has called a “Second generation of commodity chain research”.
For Bair, the next generation of commodity chain research should pay close attention to the
factors “external” to the chain and by this she means the contextual factors that affect whether or not
the different participants in the chain benefit and the extent to which they do. She highlights the
importance of market institutions, regulatory mechanisms, particularly of trade policy and how these
have an effect on the extent to which developing countries benefit from their participation in
commodity chains.
Some examples are found in the context surrounding the International Coffee Agreements (ICA)
and the North American Free Trade Agreement (NAFTA). According to Stefano Ponte, changes in the ICA
regime negatively affected developing country exporters: ‘From a balanced context between producing
and consuming countries within the politics of international coffee agreements, power relations shifted
to the advantage of transnational corporations. A relatively stable institutional environment where
proportions of generated income were fairly distributed between producing and consuming countries
turned into one that is more informal, unstable and unequal’ (Bair, 2005)
Similarly, a study done by Plankey Videla on ‘Moctezuma’ a large Mexican apparel firm,
concludes that the inability of this firm to take advantage of the “export environment” (created and
brought to the country with NAFTA) has more to do with the characteristics of Mexico’s contemporary
business environment than with the organizational dynamics of this particular commodity chain. The
lack of friendlier banking rules that facilitates credit for domestic firms impedes these to convert the
potentially “favorable conditions” into solid sustainable growth for these firms and ultimately bring
benefits to the firm’s owner and its workers (Bair, 2005).
Furthermore, a study done by Bair and Gereffi (1998) explain how the dramatic increase in
apparel exports from Mexico after 1994 is a reflection of the response of leading US textile and clothing
companies to the new trade regime - NAFTA. In addition, they show how the shift from the maquila to a
full-package production model (under NAFTA) left Mexican exporters pretty vulnerable and dependent
on the conditions of the US economy.
The contextual factors in the Quinoa Value Chain seem to be somewhat favorable at the
moment. For example, in March of last year (2011), the Bolivian president launched the Organic Quinoa
22
Sectorial Credit Program budgeting Bs. 84million ($12 million approx.) coming from the state-run
Productive Development Bank. These credits vary in size. Small-size farmers can receive up to Bs.21.000
($3.000 approx.), medium-size farmers can receive between Bs.21.000 - Bs.70.000 (up to $10.000
approx.), while producer organizations can obtain between Bs. 70.000 – Bs. 350.000 (up to $50.000
approx.). According to the bank’s general manager, Veronica Ramos, 19.000 farmers had already
received credits6 (Ministry of Economy and Public Finance, 2011). In addition (as mentioned earlier),
some international organizations like the FAO are supporting the Quinoa Value Chain by including this
grain into their worldwide food security programs and naming the year 2013 as the Year of the Quinoa
(IYQ) helping to promote this grain around the world.
Although the GCC literature, (as mentioned earlier) has been criticized for being somewhat descriptive;
in my view this is an unfair assessment of GCC as an analytical framework given that the core of the GCC
analysis is on a constant quest to determine the power relations within the production process, which
by no means is a descriptive endeavor. The methodology that GCC employs for this purpose is a
reflection of this and consists of:
a) Determine the full set of actors involved from the production stage until its final distribution
to the consumer,
b) Determine the type of relationships that exist amongst them; and finally with the previous
information,
c) Find out where and how value is added to the product, the division of labor and the
distribution of profits along the chain.
The purpose of making the mapping of the commodity chain the starting point for the analysis is
intentional. For commodity chain scholars, to “describe a chain’s governance structure is to illuminate
the nature of power relations that exist along a chain” (Bair, 2005). Power in GCC is conceived as the
ability to coordinate the system (of production) rather than the concentration of ownership of the
productive resources (Gibbon, 2001).
Furthermore, GCC scholars recognize the numerous downsides to globalization such as falling
and volatile producer prices (Newman, 2009). The quinoa value chain is no exception and similar trend
(refer to Figure 5 and 6) can be found in their producer prices, as mentioned earlier. The gap between
producer prices and exporter prices seems to be widening even though quinoa prices have shot up over
the last few years.
These imbalances in the distribution of profits amongst the different actors in a commodity
chain are a manifestation of the power relations within it that GCC is interested in studying, because
these will ultimately reflect the bargaining power of each actor involved in the production process and
therefore will help us understand the processes behind the profit distribution scheme.
6
The farmers’ ability to pay back the loans is measured by the number of cultivated areas.
23
During my fieldwork and while talking to farmers, I realized that a constant source of worry for
them are the price swings that characterize the quinoa market nowadays in the context of its changing
market structure (which I will continue to illustrate in the following sections).
Often, farmers would express their frustration over a lack of information as to how prices are set
since this causes them significant losses. Interestingly, they would often mention that it was the ones in
the capital of the country (La Paz), the ones who “knew”:
“[.. a bit hesitant to say..] the ones from La Paz. Well the big entrepreneurs. When we lose, we
really lose. When we win, we win. I have no clue how they manage this sort of stuff. The price I mean.. I
really don’t understand. The big guys (the big entrepreneurs) are the ones who set the price”
Quinoa Farmer from the Quijarro Province in the city of Oruro
Interviewed at the “Challapata Fair”
August 18th, 2012
While perhaps mainstream economics would disregard this last quote or at most consider it
anecdotal, an analysis done through GCC may be more careful and question “what this knowledge by
the ones in the capital” means in terms of uncovering the power relations within the chain. This
information has implications for the bargaining power of the farmers and their ability to capture profit in
the quinoa market.
Under mainstream economics, price transmission is basically explained through competitive
pricing behavior (Bargawi and Newman, 2009). In other words, it assumes there is market clearing at
each stage of the production process. It does not take into account that actors downstream the chain
(closer to the consumer) can heavily influence what happens to the actors upstream (closer and
ultimately to the producer). Furthermore, mainstream economics does not study the connections
between each one of the stage of the production process. It ignores them.
For Newman (2009), “Neoclassical economic theory is inherently unable to deal adequately with
the existence of vertical supply structures (chains) since it relies on a horizontal model of supply and
demand. At best, a supply chain is conceptualized as a series of stacked supply and demand processes.
The relationship between one stage in the vertical production process and another (except as a
purchaser of supplier of inputs) is inherently absent from the framework”.
24
The changes that are brought to the structure of domestic marketing systems by financial
globalization (mentioned at the beginning of this chapter) exacerbate either the quick passing of
negative price changes to the farmers versus positive ones (Shepherd, 2004) (Newman, ?) and or the
quick passes of wholesale price increases onto consumers versus negative downturns (Morriset 1998;
Abdulai 2006).
In the quinoa case, this is manifested in the fact that while producer prices as a share of
exporter prices appears to be on a downward trend, quinoa products in the industrialized countries
have more than tripled in prices. According to a recent report by NPR, just six years ago American
shoppers could purchase quinoa for $1.50 per pound whereas now retailers get between $4.50 and $8,
for every pound they sell of quinoa (NPR, 2012).
Concluding, in a nutshell the literature of Global Commodity Chain (GCC) puts at the center of
the analysis the existence of power relations embedded within each stage of the production process and
through its study attempts to explore the bargaining power of each actor involved in such production
process. Since the distribution of power amongst the different actors along the chain will most likely not
be equal, this will ultimately determine, or at the very least influence, their level of profits and its
distribution. As illustrated above, the GCC literature aims to provide an alternative approach by focusing
on institutional structure and power when analyzing price transmission and income shares (Morisset,
1998; Shepard, 2004; Fafchamps and Vargas Hill 2008). In this way, the analysis becomes much more
complex and thought provoking than what perhaps mainstream economics would allow.
This paper will attempt to study these complexities in the more holistic way that the literature
of Global Commodity Chain proposes and, through this analytical framework, answer the main question
set out on this paper:
“How do changes in the quinoa market structure mediate quinoa farmers’ income?”
The Quinoa Value Chain analyzed through the Global Commodity Chain lens informs us that the
presence of more and new players in the market contesting for the dominance of the chain and the
distribution of profits will have impacts upstream – on the farmers and their incomes.
25
Chapter 3
Mapping the Quinoa Value Chain
Diagram 1: The Quinoa Value Chain
Quinoa Farmers
Medium or Big Size Land
Owners
Small Land Owners
Produce mostly for self
consumption
SELL
Mostly deal with Organic
Quinoa
Producer
Organizations
Organic and Non Organic
Private Firms
(ANAPQUI and CECAOT)
(new private firms enter the
quinoa market during the late
1990's)
EXPORT to markets in the
US and Europe (primarilly)
EXPORT to markets in the
US and Europe (primarilly)
Regional PO's deliver the
quinoa to the umbrella
POs for full or final
processing.
Some companies are
vertically integrated
throughout the chain. Ex.
Jatary.
Importers and
Distributors
Importers and
Distributors
French company Euronat
is vertically integrated
with Jatary.
Ex. Rapunzel, GEPA.
Retailers and
Supermarkets
Retailers and
Supermarkts
Ex. Carrefour
26
"Challapata Fair"
Also, known as the "Black
Market" since Qunoa is either
smuggled into Peru or destine
towards the Internal Market.
Conventional Quinoa
prices are set here.
a) Identification of Actors
The set of actors7 involved in the case of the Quinoa Value Chain in Bolivia are varied and start with the
farmers (producers), followed by the producer organizations, private processing firms, exporters,
importers and or distributers, which can either be private companies or fair-trade related organizations
with and without transnational reach (Laguna, 2006).
I will continue the GCC analysis by describing each set of actors starting with the farmers:
Farmers (producers)
Quinoa production in Bolivia represents the most important economic activity for around 70,000
farmers in 200 communities of the Andean cities of Potosi, Oruro and La Paz (Ledezma et al. 2011). The
first two cities are amongst the poorest in the country.
Quinoa farmers can be classified as small if they own between 2 – 5 hectares of land, mediumsize farmers if they own between 10 – 20 hectares of land and large-size farmers if they own more than
20 - 30 hectares of land. In addition to their land size, quinoa farmers can also be classified by the type
of quinoa they produce as either organic farmers or conventional quinoa farmers (non-organic).
While small size land owners mostly produce quinoa for self-consumption, medium and large
size land owners also produce it for commercialization purposes. Currently, quinoa farmers have three
venues where to sell their production: a) the producer organization they belong to, b) private processing
firms and c) the “Challapata8 Fair” (located in the city of Oruro).
Next:
Producer Organizations (PO’s)
‘Cooperatives and producer organizations have a key role to play in bringing about a future
without hunger’ he said (FAO Director-General Jose Graziano da Silva). Standing alone, a smallholder has
fewer opportunities. When farmers get together, they have better condition to negotiate of price and
better access to assets and services such as information, communication, input and output markets,
natural resources, from local to international levels’ (FAO, 2012).
Producer organizations in developing countries such as Bolivia are very important for the lives of
the farmers since these are supposed to fulfill an economic and social function (of interest
representation). The economic function deals with the: collecting, processing, marketing of agricultural
products, implementation of quality assurance programs and training. Training consists of how to
7
Another set of actors considered as supporting institutions/bodies are: public institutions, NGO’s, certifying
companies, international organisms of cooperation (Laguna,2006).
8
This was one of the locations I visited during my fieldwork.
27
improve farm gate prices (by reducing logistic inefficiencies), reduce transaction costs and strengthen
their bargaining power (Ton and Birbuet, 2006).
The producer organizations of the Quinoa Value Chain in Bolivia emerged during the 70’s and
80’s along with the support of Belgium NGO’s with the objective of improving the living conditions of the
quinoa farmers through the acquisition of better prices and the incorporation of value added by the
producer organizations along the different levels of the quinoa chain.
There are two main umbrella producer organizations: ANAPQUI and CECAOT9. These two were
established in 1983 and 1974 respectively and represent a total of 3,000 households. Geographically
speaking, ANAPQUI covers the cities of Oruro and La Paz grouping a total of 9 regional producer
organizations along the regions of the Uyuni Salt Dessert. On the other hand, CECAOT10 is concentrated
in the city of Potosi and brings together a total of 13 local co-ops in the North Lipez province.
The president of CECAOT describes his organization as follows:
‘My name is Javier Lopez, I am the president of the CECAOT. We are located in the North-Lipez
Province of the city of Potosi. We are organic producers certified by the certification office and organized
as a cooperative. There are 13 cooperatives associated in 13 communities. We have around 300
members approximately. We are in charge of producing quinoa as well as commercializing it. Our main
activity though is the processing and commercialization. Our processing plant is here (Uyuni) because in
our community there wasn’t electricity in the past. Which is why around 7 to 8 years ago, we installed
this processing plant. It is true that in the last few years, the business of quinoa has increased as well as
the production and the price of quinoa. This last two years we’ve had good climate for the quinoa. We’ve
had lots of rain. We have lots of production. We have around 16000 certified quintals which should allow
us to export for around a year’.
Javier Lopez Delgado
President of CECAOT – Central de Cooperativas Agropecuarias “Operación Tierra” LTDA.
Interviewed at CECAOT’s Headquarters in Uyuni, Potosi- Bolivia
August 17, 2012
Next:
Private Firms (processing firms, exporters and importers)
According to the Bolivian Chamber of Royal Quinoa and Organic Product Exporters (CABOLQUI11) there
are ten private companies in Bolivia involved in the market for quinoa exports. As mentioned earlier,
most of these companies entered the market late in the 1990’s. For example:
9
I visited both PO’s during my fieldwork and interviewed the presidents of both organizations. A diagram with the
list of the regional associations under ANAPQUI is provided in the Appendix – Diagram #3.
10
CECAOT is organized as a cooperative.
11
This organization was created in 2005.
28

‘Jatary’, starts exporting organic quinoa since 1996.

‘Coronilla S.A’., starts exporting organic quinoa since 1997.

‘Quinoa BOL S.R.L’., exports organic quinoa since 1998.

‘Andean Valley’, exports organic quinoa since 1999.

‘Irupana S.A’., since 2003.

‘Quinoa Foods Company S.R.L’, since 2002.
Some of these firms like the ‘Coronilla S.A.’ and ‘Quinoa BOL S.R.L’ have some other smaller
subsidiary firms such as ‘Real Andina12’ (created in 2004) that are geographically based in the quinoa
producing communities and take care of some of the more basic upgrading functions. Upgrading in the
quinoa value chain starts with the basic removal of the saponin13 and cleaning of the grain to allow its
basic consumption; followed by its packaging, next its transformation into flour, flakes and insufflated
quinoa (also called popocorn) which will later allow the production of even higher processed and unit
cost products such as breakfast cereals, energy bars, pastas, muesli, sweets, etc. (Gandarillas, 2011).
Private firms will usually have specific quinoa producing communities they work with to secure their
quinoa supply under “contract” models, which will be explained in greater detail in the following
chapters. Nevertheless, if their “strategic partners” as the private firms refer to the farmers, fail to
provide them with the amount of quinoa they need then they will also buy the quinoa from other
farmers who come to offer their production14 to their locations.
Furthermore, some of these firms like ‘Jatary’ and ‘Quinoa Bol S.R.l.’ are vertically integrated with
some other larger international companies, such as the French EURONAT and MARKAL15; which actually
created the local processing firms (‘Jatary’ and ‘Quinoa Bol S.R.L’) alleging unpunctual deliveries and lack
of quality from the quinoa coming from the producer organizations. Both EURONAT and MARKAL used
to work with ANAPQUI (producer organization) prior to creating their own local processing firms.
Lastly:
The “Challapata Fair”
Another important actor/institution of the quinoa market is the “Challapata Fair” also known as
the “Black Market” since at this fair several products are smuggled into the bordering country of Peru16,
the quinoa being one of those.
12
I visited this private firm during my fieldwork.
The saponin is a bitter coat that covers the quinoa grain.
14
Ideally, certified organic quinoa is preferred.
15
A diagram with the list of the companies vertically integrated is provided in the Appendix – Diagram # 4.
16
As mentioned earlier Peru is the biggest consumer of quinoa in the world.
13
29
Most of the quinoa commercialized at this point is conventional (or non-organic). Although
farmers have a price incentive (as it will be illustrated further) to produce organic quinoa not all farmers
are able to do so. If that is the case, then their main market will be the “Challapata Fair”, since the
quinoa buyers here are not concerned with whether or not the quinoa is organic.
‘Between 35%-40% of the farmers in the area are organic producers. The organic producers are
registered and follow an auditing system. There are norms that they have to follow in order to export
their production to the US, Japan, etc. Whereas the conventional producers use chemicals and their main
market is the market in Challapata. Not really for exports’.
Ing. Marcelo Gonzalez
Professor at the Technical University of Oruro
Interviewed on August 15th, 2012.
The “Challapata Market” is an important one within the Quinoa Value Chain since this
represents a point of reference where conventional quinoa prices are set.
Image 2: Bags of quinoa ready to be sold at the “Challapata Fair”.
* Source: Picture taken by the author at the “Challapta Fair” on August 18th, 2012.
30
Following, I will illustrate the interaction of the farmers with each one of these actors when
commercializing their quinoa.
b) Market structure and bargaining processes pre and post demand
changes
The Quinoa Farmer and the “Challapata Fair” (pre-demand increases)
According to Raynolds et al. (2007), up until the 1970’s the “Challapata Fair” represented the
only commercial path where the farmers could sell their quinoa production. “The quinoa was purchased
in small quantities from peasant producers, collected and consolidated by wholesalers who
monopolized its distribution”.
Also, the “trueque17” used to be practiced. Middle men would come to the quinoa producing
communities offering some “staple products” such as: candles, some clothing and other food products
in exchange for quinoa. According to Mr. Javier Ramos, production chief at ‘Real Andina’ the middle men
would often take advantage of the farmer and pay really low prices:
‘[…] the middle man was abusing the producers. They would pay the farmer with whatever price they
wanted. They used to take some “staple products” such as candles, lighters, rice, or flour and would
exchange it for quinoa. I’m talking about when the quinoa was priced at Bs.20-Bs.30 (currently the
average price for a quintal of quinoa is Bs.600). Three quintals of quinoa would be exchanged for one of
sugar or two quintals of quinoa would be exchanged for one of flour.3 for 1 and 2 for 1’
Javier Veliz Ramos
Production Manager at private firm “Real Andina”
Interviewed at the company’s office in Uyuni, Potosi- Bolivia
August 17, 2012
Nowadays, even though the “Challapata Fair” is not the only venue where the farmer can sell
the quinoa, this market remains important for the Quinoa Value Chain since it is here where
conventional quinoa prices are set. For Raynolds et. al. (2007) the “Challapata Fair” represents quinoa’s
“Wall Street”, where its prices are set on a weekly basis. This market is dominated by the logic of supply
and demand here, with about a dozen buyers and the farmers as price takers.
However, as explained earlier, the increased demand for the quinoa grain has led to the
immersion of new players in the market hence the farmer under the current market structure has more
than one venue where to sell the quinoa. Each one of these venues has different incentives and paying
structures, which will influence the farmer’s income. During my fieldwork, I identified a few factors18
that a farmer will take into consideration when choosing one venue over another: 1) the relationship the
17
18
Local word that means exchange.
Nevertheless this is not meant to be a complete list but rather the factors I identify as important.
31
farmer has with its producer organization, 2) how needed is the farmer for cash, 3) the price that each
buyer is willing to pay for the quinoa and 4) the type of quinoa the farmer produces, which can either be
organic or conventional (that is non-organic).
Following, I will elaborate on each one of these factors by describing the interaction of the
quinoa farmer with each one of the selling venues.
Diagram 2: Incentives offered by the three venues
Quinoa Farmer
Organic and Convetional
Producer
Organizations
- Farmers will have to wait
at least 1 month and a
half to get paid.
- Prices are set in advance.
- Prices are usually higher
than what the private
firms pay (although not
always).
- But higher (usually) than
what the "Black Market"
pays.
"Challapata Fair"
Private Firms
Farmers will have to
wait at least 3 monhts to
get paid.
-
- Prices are set at the
"signing of the contract".
However, these only
indicate the % that will be
added to the "Challapata
price", which varies on a
weekly basis.
- Prices paid are usually
lower than what the PO's
pay (although not always).
- But higher (usually) than
what the "Black Market"
pays.
32
- Farmers are paid on
the spot.
- Prices are set on the
spot.
- Prices are usually lower
than what the PO's and
private firms pay.
The Quinoa Farmer and the pay incentives through the Peasant Producer Organizations
During harvest time, quinoa farmers affiliated to the peasant producer organizations will collect
their quinoa and “make their acopio (delivery)” it to their regional peasant producer organizations.
These in turn will deliver it to the main umbrella producer organizations ANAPQUI or CECAOT.
The pay incentives that a farmer has to sell the quinoa to the peasant producer organization
involve:
- a higher price than the one being paid by the Private Firms and the one being paid at the “Challapata
Fair”, also
- affiliated farmers also have the opportunity to be paid for their participation in the transformation of
the product and direct sale of the quinoa to the importers (Reynolds, 2007), furthermore
- affiliated farmers value having the peace of mind of knowing that their quinoa production already has
a “buyer” who is willing to pay a “higher price”
However, although these are the ideal conditions, the peasant producer organizations are not
always able to serve all of their members since their business transactions are small compared to the
quantity of quinoa they receive from their members. This means that although affiliated quinoa farmers
have a “secure buyer” this may not be able to purchase all of the production of the farmer. In this case,
the farmer will have to recur to the second best price option – the private firms.
The Quinoa Farmer and the pay incentives through the Private Firms
- The price that private firms offer is also higher than the one offered at the “Challapata Fair” and often
rival the one offered by the peasant producer organizations, however
- farmers will have to wait at least 3 months to get paid; the waiting time with the peasant producer
organization is of 3 months, also
- farmers do not get paid any additional amount from the processing of the grain.
Lastly, private firms will buy quinoa from individual farmers however they primarily work with “contract
systems” (which will be described in more detail further in chapter 5) in order to secure their quinoa
supply.
The Quinoa Farmer and the pay incentives in the “Challapata Fair” (post demand increases)
Given that both peasant producer organizations and private firms delay in their payment, if a
farmer is in need for quick cash then the best option will be the “Challapata Fair”, since payment here is
done on the spot. The disadvantage however as already mention is that:
- the price paid at this point is usually lower than what the peasant producer organizations and private
firms offer. According to Prof. Marcelo Gonzalez from the Technical University of Oruro, farmers when in
need will sell their quinoa production at whichever price.
33
‘[…] well this has to do with their “necessities”. Sometimes they (farmers) won’t even ask what
the price the quinoa is being bought at, is’
Ing. Marcelo Gonzalez
Professor at the Technical University of Oruro
Interviewed on August 15th, 2012.
Lastly, as mentioned earlier if a farmer is only able to produce conventional quinoa then the
“Challapata Fair” continues to represent the only selling point for this farmer under the current market
structure post the demand increase.
The market for conventional (non-organic quinoa) pre and post demand changes
Initially, the commercialization of quinoa was for conventional or non-organic quinoa. However
during the 1990’s there is a shift in the preference by the consumers in the industrialized countries for
organic quinoa. According to Laguna et al. (2006), during the 1990’s the demand for quinoa in the
industrialized countries (US and Europe) changed its requirements and turned almost exclusively
organic. The shift in Europe took place in 1995 while for the US market in 1999. Hence the quinoa
market in Bolivia followed similar pattern and focused on organic quinoa production.
However, although both producer organizations and private firms deal primarily with organic
quinoa they also commercialize conventional quinoa which is destine primarily towards the internal
market.
In addition, there have been some instances in which private firms have been accused for
buying conventional quinoa in the “Challapata Fair” but selling it as organic quinoa to the distaste of the
producer organizations that work hard in obtaining and maintaining their organic certification.
‘ANAPQUI and CECAOT are the only exporters in Bolivia that have an internal quality control and
certification policy. The private firms buy in the Challapata market and export them as organic. […]
Other export firms get their quinoa at lower price and use fraudulent certification practices (mixing
organic quinoa with conventional quinoa). Although the producer organizations are not decisive in
regulation of farm gate prices, their position in the international market for organic quinoa gives them
the possibility to contribute to improving the living conditions for the producers’ (CIOEC-Quinoa , as
cited in Ton, 2006:9).
Quinoa farmers have an incentive to produce organic quinoa over the conventional one, since
the price paid for it, is greater than the price for conventional quinoa (or non-organic). This was
confirmed by the quinoa farmers interviewed during my fieldwork:
34
‘There is a big difference in the price of organic quinoa versus non-organic quinoa. For example, in the
“Black Market19”, the price of white20 quinoa non-organic is Bs.520 per quintal (or $7421); versus the price
of the organic quinoa which is around or above Bs.700 (or $100)”.
Ovidio Silvestre Alanoca
Responsible of personnel at ANAPQUI and Quinoa Farmer
Interviewed at the PO’s headquarters in the town of Challapata, Oruro - Bolivia
August 16th, 2012
However, as it will be illustrated later in the paper obtaining the certification is costly and
complicated to do it on an individual basis hence only associated farmers are able to produce organic
quinoa.
In conclusion, the increased demand for quinoa has increased the selling venues for the farmers
(as illustrated above). Although each one of these venues has different pay incentives the main
difference is between the “Challapata Fair” and the other two venues: the producer organizations and
private firms. Since:
- the price paid at the “Challapata Fair” are lower however immediate payment is received , whereas
with the producer organizations and private firms
- the price paid is higher yet there is a significant delay in payment.
On the other hand, the difference in pay incentives between the producer organizations and the
private firms do not seem to be very different, except for
- the additional payment the farmer gets for the processing of the product
- the price difference between these two player does not appear to be significant, and
- the inability of the producer organizations to buy all of the quinoa from their affiliated farmers may
compensate the lower price offered by the private firms
Concluding, although the selling venues for the farmer post the increase in the demand for its
crop are greater, this does not appear to have increased the bargaining power of the farmer
significantly, since the two major “quinoa buyers” meaning the private firms and the producer
organizations do not offer significantly different incentives. At most, the increased number of venues
may allow the farmers to sell more of the quinoa production they would otherwise, however their
19
The “Challapata Fair” is also called the “Black Market” since quinoa is also smuggled to the bordering country of
Peru through this point.
20
There are several kinds of quinoa. The “white” variety is the most highly commercialized and preferred.
21
Conversion rate as of 24/10/2012.
35
ability to bargain for higher prices or “play these two actors” (the PO’s and the private firms) seems
seriously limited due to the very similar pricing incentives these two offer.
It appears that in fact, the major impact of the increased number of selling venues has been on the
bargaining power of the producer organizations in the market. Next, I will illustrate the new quinoa
market structure and its implications for the producer organizations and farmers.
Chapter 4
New private players characterize the current quinoa market
structure
In addition to the spike in the value and volume of the transactions related to the quinoa market
(as shown earlier), the increased demand for this grain has led to the entry of new actors to the quinoa
value chain in the form of private firms seduced by the potential profits its market appears to offer.
This has implied the loss of the quasi monopoly the producer organizations held in the market
for organic quinoa exports up until the late 1990’s which consequently has meant the loss of market
share, to be shown.
a) Loss of Monopoly
According to Raynolds (2007), the producer organizations pretty much had a monopoly over the Bolivian
quinoa exports during the 1990’s. Specifically, by 1998 between ANAPQUI and CECAOT the producer
organizations had a 78% share of the export market. ANAPQUI held a market share of 57% while
CECAOT’s reached a 21%. Together these two producer organizations had almost 4/5 of the total market
for quinoa exports.
36
PO's market share up until 1998
ANAPQUI
CECAOT
Others
22%
57%
21%
Figure 8: Market share by the producer organizations before the entry of new private firms.
However, the following year in 1999, the share of the export market of quinoa by the producer
organizations would start to fall which coincides with the entering of private firms in the quinoa value
chain, as illustrated below:
37
Evolution of Quinoa Exporters
between 1990 - 2004.
Metric Tons
1000
900
Andean Valley
800
ANAPQUI (PO)
700
CECAOT (PO)
600
Irupana
500
Jatary
400
Quinoa-Bol
300
Quinoa Foods
200
SAITE
100
Other firms
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Figure 7: Evolution of Quinoa Exporters between 1990 and 2004.
*Source: (Laguna 2005, as cited in Ton 2006).
b) Loss of Market Share
The entrance of private firms in the Quinoa Value Chain represented a definite market loss by the
producer organizations to the private firms. While in 1998, the producer organizations held a market
share over the quinoa exports of 78%, by 2004 this percentage had reduced to 34%. Currently according
to the Bolivian Chamber of Royal Quinoa and Organic Product Exporters (CABOLQUI), the private firms
hold 70% of the market for quinoa exports leaving the remaining 30% in the balance sheets of the
producer organizations.
38
90%
80%
78%
70%
60%
50%
40%
34%
30%
30%
20%
10%
0%
1998
2004
Evolution of the quinoa export market share by the PO's
2011
Trend
Figure 9: Evolution of the quinoa export market share by the PO’s between 1998 and 2011.
In conclusion, the increased demand for quinoa encouraged the immersion of new actors in the
form of private firms to the Quinoa Value Chain, lured by the potential profits its market appears to
offer. The entry of these new private firms represented a dramatic altering event for the chain which
brought competition to its market structure displacing the quasi-monopoly the producer organizations
had up until the mid-1990’s. Furthermore, the new private firms established more business oriented
practices in the chain, such as vertical integration strategies and contract models. The combination of
these factors have made the Quinoa Value Chain more complex and have reorganized its governance
structure with impacts upstream in addition to new downstream relations (Laguna 2006).
This new organization of the quinoa market structure has implications for some aspects of the
farmers’ income which will be discussed in the following chapter as these are essential to answering the
main question put forward in this paper:
“How do changes in the quinoa market structure mediate quinoa farmers’ income?
39
Chapter 5
New business practices in the current quinoa market
structure and its implications for the quinoa farmers’ income
a) Vertical integration strategies and market coordination
According to Raynolds (2007), the new private firms that entered the quinoa market during the late
1990’s, were particularly French retailers. An example is the French company Jatary created in 1996,
which thanks to the vertical integration model this company is part of, received a fully equipped plant
from its larger partner EURONAT plus benefited from heavy marketing carried out in France. In addition,
in 2004 another large global player entered the downstream segment of the Quinoa Value Chain and
that is CARREFOUR a transnational retailer, distributor and hypermarket. This company signed a fiveyear contract with EURONAT and JATARY.
Furthermore, this vertical integration strategy by the French retailer has also involved the
creation of its own certification entity, called Bio-Equitable. Jatary and EURONAT started working with
the Bolivian certifier BOLICERT, however later decided along with other French companies which
specialized in the transformation and distribution of organic products, to create their own label alleging
lack of confidence on the Bolivian certifier. Unlike with other labels, the firms associated under BioEquitable are not required to work exclusively with producer organizations in order to carry the
“organic” label. Instead, they are only required to provide technical assistance to the farmers as well as
pay for their organic certification22 (Laguna, 2006).
Interestingly, this model (vertical integration) seems to be proving successful for the French
group, as the quick rise in the market share for organic quinoa exports by the French subsidiary
company Jatary shows, since its exports quickly increase from the moment this company enters the
market in 1997 almost catching up the major quinoa exporter in 2004, producer organization ANAPQUI.
See graph below:
22
The private firm retains these organic certificates.
40
Evolution of quinoa exports between
ANAPQUI and Jatary between 1990-2004
1000
900
800
Metric Tons
700
600
500
ANAPQUI (PO)
400
Jatary (FR)
300
200
100
0
Figure 10: Evolution of Quinoa Exports Between ANAPQUI (PO) and Private Firm Jatary.
The case of the vertical integration between French companies Jatary (local subsidiary),
EURONAT (importer), CARREFOUR (retailer/distributor/hypermarket) and BIO-EQUITABLE (organic
certifier) represent an example of how coordination manifested through open and direct dialogue)
between upstream actors (closer to the production side such as Jatary) and downstream actors (closer
to the consumer such as CARREFOUR) can have dramatically different results as the fall and rise of
exports by the producer organization ANAPQUI and Jatary, illustrate.
Furthermore, the coordination that vertical integration is characterized by and that it is
manifested in the French case in the form of:
a) allocation of resources (fully equipped plant for Jatary),
b) marketing (heavily carried out in France),
c) a secure buyer (five-year contract with CARREFOUR),
represent not only competition (previously inexistent) in the Quinoa Value Chain but also a very
different structure and rules of the game in which the private firms contest the dominance of the chain
through a very closed group whose power reside in their ability to coordinate the entire production
process.
Another example that shows the dramatically different results that can be obtained through
higher levels of coordination can be found in the case of producer organization CECAOT.
41
According to Reynolds (2007), since 1991 CECAOT has been working with a “broker” who does
not agree to share the information about who exactly the importers are. Hence the relationship
between this broker and the producer organization CECAOT, is simply restricted to the definition of
export prices which interestingly turn out to be lower than the ones received by the other producer
organization ANAPQUI (which does not have this sort of “obscure” relationship with its importing
companies); as well as the prices received by the French subsidiary firms Jatary and Quinoa Bol, who of
course have a direct flow of information since these belong to the vertical integration model.
The price that each organization and private firm received for their quinoa between the period
of 2000 and 2004 is as follows:
Table 4: Difference in export prices received between the PO’s and private firms.
CECAOT (PO)
ANAPQUI (PO)
JATARY (private firm)
QUINOABOL (private firm)
Export Prices between 2000 – 2004
$1050 (lowest)
$1200
$1250 - $1350
$1100 - $1150
This was corroborated during my fieldwork interview with the president of the producer
organization CECAOT who asked me if people in the Netherlands consumed quinoa. I was surprised to
hear he did not have this information considering that the Netherlands is the third biggest importer of
quinoa in the world. However, while doing further research and learning the commercial dynamics of
this producer organization (whose financial standing is not as strong as the other PO), the reason for the
lack of knowledge by the president of this producer organization became clearer. Below is the
statement he made during the interview:
‘Do people in the Netherlands consume Quinoa? Open markets in the Netherlands! That way we
will improve the economic situation of the farmers’.
Javier Lopez Delgado
President of CECAOT – Central de Cooperativas Agropecuarias “Operación Tierra” LTDA.
Interviewed at CECAOT’s Headquarters in Uyuni, Potosi- Bolivia
August 17, 2012
Lastly, another example can be found in the case of the red quinoa.
The entry of new private firms and the buyer-driven nature of the Quinoa Value Chain have
transformed it into a chain of higher complexity and this is expressed through an increase in the demand
for different kinds of quinoa, mainly based on color. Interestingly, although the work required to harvest
each kind of quinoa is the same (for all), its prices vary quite significantly as well as fluctuate depending
on the preferences of the consumers in the industrialized countries. During my fieldwork, I had the
42
opportunity to ask Mr. Javier Veliz Ramos about what he thought was behind the fluctuations in the
price of the quinoa. This was his response:
‘The middle men and the “Black Market” of Challapata. The demand! For example, in Challapata
the red quinoa that was costing Bs.1500 now costs Bs.300. Can you imagine that?! This cannot be
justified in any way! Because you do the exact same work for this quinoa as well. There aren’t any extra
works to do. Or no more investment is needed”
Javier Veliz Ramos
Production Manager at private firm “Real Andina”
Interviewed at the company’s office in Uyuni, Potosi- Bolivia
August 17, 2012
While the price of the white quinoa real23 is on average between Bs.600 to Bs.700 per quintal (or
€66 to €7724respectively), during the year 2008 the price of red quinoa had jumped up to Bs.1500 (three
times more) just to plummet to Bs.300 the next year. The increased demand for this color of quinoa had
to do with a sudden preference by the chefs in the industrialized countries who liked the exotic color
that this quinoa gave to their dishes. The farmers encouraged by the high prices being paid for this color
of quinoa planted it exclusively in their fields. Hence, when the prices came down the following year
(due to an excess in supply), several of these farmers had to face significant losses. Interestingly, this
year the black quinoa is following similar pattern. Its price as of August25 of this year (2012) was at
Bs.1500. It would be no surprise for its price to plummet next year similarly to the case of the red
quinoa.
In conclusion, the almost direct role that the preference in the tastes of consumers in the
industrialized countries had for how prices were set in the case of the red quinoa is evidence of the
buyer-driven nature of the chain. The implications of such in the current quinoa market structure
characterized for vertical integration strategies of coordination for the farmers’ income are manifested
in the lack of inclusion of the farmer in the lines of communication and coordination with downstream
actors; therefore farmers’ find themselves trying to “intuitively” determine the direction the market is
taking via some price signals which are not always the most efficient indicators, as the case of the red
quinoa shows. Furthermore, while mainstream economics logic of supply and demand would be enough
to explain the price consequences of the red quinoa (excess of supply), an alternative approach like the
GCC analytical framework has allowed us in this analysis, is more helpful in determining the causes
behind such excess in supply.
23
The white quinoa real is the most highly commercialized quinoa hence its prices serve as a reference point for
the setting of prices of all other kinds of quinoa.
24
Conversion rate as of 25/10/2012.
25
Month dedicated to the field work in the quinoa producing communities of Bolivia.
43
The “contract-model” practices that the private firms have implemented in the quinoa fields to
secure their quinoa supply is another example of this coordination effort and will be studied in more
detail in the following section due to its critical implications for the quinoa farmers’ income.
b) Farmers bargaining power under “contract models”
According to Reynolds (2007), the entrance of new private firms in the upstream segment of the
quinoa chain consolidated the “contract model” between individual peasant producers and agroindustrial companies, establishing a functional division of labor whereby peasants are limited to their
agricultural function and subject to “selection” according to quality requirements.
The contracts under the “contract-model” mentioned above are characterized by:
a) The specification of the duration of the agreement which is normally a year with the
possibility of renewal,
b) A ballpark price which is normally set taking the quinoa price quoted at the “Challapata Fair”
as the base and adding a specific percentage to it,
c) Pre-financing for the organic certification26 of the farmers’ land plus some technical assistance
and equipment; and lastly
d) Commitments where the farmer promises the organic quality of the quinoa production
following the practices required by the exporting companies and organic certifiers; who themselves
follow international norms. In addition, some monitoring is agreed upon with the farmer (Reynolds,
2007).
However, according to Laguna (2006), it is often the farmers who in fact provide the financing to
the private firms. Since farmers agree to wait several months (9 months in some cases) for full payment
accepting to receive only a small percentage (10% at least) of the full pay when delivering their
production to the collecting locations. Hence, the farmer does not only receive payment late but also
loses due to the depreciation factor. Furthermore, small-land size farmers may lose out to the big-land
size farmers due to a certain selectivity factor in favor of them by the private firms. It makes business
sense to prefer dealing with a reduced number of farmers that can bring them the most quinoa.
Transaction costs increase the higher the number of quinoa suppliers private firms have to deal with.
These set of conditions were confirmed during my fieldwork when I interviewed a manager from
a private local subsidiary firm.
26
The private companies retain the certificates.
44
‘We have actually been able to establish a relationship of trust. If they (the farmers) are giving us
above 50 to 100 quintals, we pay them between 25% to 50% of the full pay. And then the rest they let us
pay them 1 to 2 months after. We have gained their trust! This helps us a lot. Because to have enough
funds to pay everybody is terrible! It is very difficult! It is not possible to serve everybody immediately.
We wouldn’t be able to serve not even the 50% of our producers’.
Javier Veliz Ramos
Production Manager at private firm “Real Andina”
Interviewed at the company’s office in Uyuni, Potosi- Bolivia
August 17, 2012
The producers that work with private firms also tend to be organized under some sort of
associations however unlike with the peasant producer organizations (ANAPQUI and CECAOT), these
lack any autonomy or social command and the farmers are not able to profit from any value added or
upgrading activities with the raw product. Furthermore, as mentioned previously although a set price
structure is established when signing the contract, farmers are not able to negotiate this sales price and
only have the guaranteed that this will be higher than the one offered at the “Challapata Fair”; which
fluctuates on a constant basis. These price swings were an issue mentioned on a continued basis by the
farmers interviewed during my fieldwork.
Furthermore, there also appears to be some horizontal coordination amongst the private firms
to exert control over the farmer by offering similar pricing.
The depiction (above) of the interaction between the farmers and the private firms under the
“contract system” speak of a relationship boss-worker type where the farmer is simply another source
of input of the overall production process. Hence, the bargaining power between the farmer and its
employer (the private firm) are limited to the specifications set out in the contract which does not offer
any possibilities to profit from upgrading activities of the grain nor of any positive developments
happening in the market and within the chain. The profit and the participation of the farmer in the
distribution of gains from the Quinoa Value Chain under the “contract system” will be limited at most, to
the productivity27 of the land, its size and the labor force that the farmer possess and or is able to hire.
Yet despite these unfavorable conditions several farmers not affiliated with the peasant
producer organizations (ANAPQUI and CECAOT) decide to join these types of contracts with the private
firms looking to have (reference):
a) An organic certification,
b) Prices at least greater than the ones offered at the “Challapata Fair” and
c) A secure buyer.
27
The continuous quinoa plantation is leading to the degradation of the land therefore to a loss in productivity.
While in 2003, the productivity per hectare was of 26,46 (MT), by 2007 this productivity went down to 23,17
(MT).(Ledezma, 2011)
45
According to Mr. Marcelo Gonzalez28 (lecturer at the Technical University of Oruro), it does
make sense for farmers to associate in order to obtain the organic certification since obtaining this
certification is costly (as illustrated earlier in the paper). Plus the price paid for the organic quinoa is
higher than the price paid for conventional quinoa (or non-organic). As of August 2012, the price paid
per quintal of organic quinoa real29 was of BS.600 to Bs.700, which is equivalent to $86 to 10130
respectively; versus Bs.520 approximately (or $74) for the conventional quinoa (or non-organic).
“The majority of organic quinoa farmers are farmers belonging to an association. Because
producing organic quinoa involves extra costs. They have to pay to the certification office and it is the
producer organizations the ones who take care of these fees. Hence to do it individually would be a bit
too complicated”.
Ing. Marcelo Gonzalez
Professor at the Technical University of Oruro
Interviewed on August 15th, 2012.
Although being affiliated to the peasant producer organizations – ANAPQUI and CECAOT,
represent the first choice for the farmers not only due to the economic incentives (of a higher and fixed
price) but also of social representation (at least in principle), this is not always possible since often the
producer organizations cannot serve all of their members. Hence farmers end up having to recur to their
second best option which is either selling their production to the private firms on an individual basis
(and occasionally) or officially become part of an association of farmers sponsored by a private firm,
therefore enter into the “contract system” (as explained in chapter ?).
This became apparent during my fieldwork interviews with some quinoa farmers and private
firm representatives.
‘The thing is that ANAPQUI does not get to serve all of its producers. ANAPQUI restricts them.
Despite being a pioneer firm along with CECAOT (which is nearby), […] ANAPQUI cannot satisfy all of its
producers. So their members actually come here to offer us quinoa. According to when we withdraw the
money (receive payment), if our “strategic partners” (the farmers) do not offer us quinoa then their own
members such as SOPROQUI31, CEDEINKU or APROQUILLAN come and offer us quinoa; so we buy their
quinoa because it is also organic’
Javier Veliz Ramos
Production Manager at private firm “Real Andina”
Interviewed at the company’s office in Uyuni, Potosi- Bolivia
August 17, 2012
28
Interviewed during my fieldwork.
There are different types of quinoa. The “Quinoa Real” is the most highly commercialized.
30
Conversion rate as of 12/10/2012.
31
SOPROQUI, CEDEINKU and APROQUILLAN are regional producer organizations affiliated under ANAPQUI (its
main umbrella organization). I interviewed the president of regional organization SOPROQUI during my fieldwork.
The list of all regional producer organizations under ANAPQUI is provided in the index under Diagram #3
29
46
Similarly, Mr. Ovidio Silvestre Alanoca a quinoa farmer as well as a worker at ANAPQUI
indicates:
‘[…]. There are around 2.000 to 2.500 farmers that the association cannot buy the quinoa from
all. For example, I have 10 to 20 quintals. If I have an emergency that day.. (meaning the day he wishes
to sell his quinoa production), ANAPQUI will not buy my quinoa production immediately. Then in that
case I will have to sell it immediately to somebody else in the “Black Market32”’.
Ovidio Silvestre Alanoca
Responsible of personnel at ANAPQUI and Quinoa Farmer
Interviewed at the PO’s headquarters in the town of Challapata, Oruro - Bolivia
August 16th, 2012
As expected this creates a series of internal conflicts within the producer organizations since
these often find themselves having to choose which farmers (producers) will benefit from the fair trade
price. Furthermore, these problems are exacerbated, since producer organizations do not seem to have
clear mechanisms to determine which farmers will access the fair trade price and secondly there are no
compensation mechanisms for those farmers that cannot benefit from it (Ton and Bijman, 2006).
The inability of the producer organizations to serve all of their members has to do with the fact
that their participation in the organic fair-trade market is characterized by small-scale transactions. In
other words their market share is lower than the total product offered by all of the associated farmers
(as explained earlier).
In conclusion, the market loss experienced by the producer organizations to the entry of the
private firms exacerbates their inability to serve all of their members hence unintentionally contribute
to the flow of their farmers into “contract-system” practices that lock them into a defined and limited
set of activities (in its relation with the private firms). This develops into a cycle in which the producer
organizations lose market share to the private firms primarily due to the new strategies of vertical
integration that they bring to the Quinoa Value Chain and also contribute to the loss of their ability to
“control” the farmer. Who at the same time through its dealings with the private firms unwittingly
empowers them through “cheap credit” sort of practices as explained earlier, looking to simply come
ahead with their quinoa production and participate in the distribution of profits from the quinoa market
in the context of its changing structure.
Lastly, the market share loss by the producer organizations and the competition brought by the
new private firms into the quinoa market structure has implications for the quinoa price and the
farmers’ income, which will be analyze in the following section.
32
The “Challapata Fair” is also known as the “Black Market” since most of the quinoa destine towards the
bordering country of Peru is smuggled through this market/location.
47
c) Price implications of the new competitive environment
According to (Laguna,2006), looking at the volume of exports by the top quinoa exporters and
the dates of entry or creation of the new firms suggests that the growth in quinoa demand (and
favorable prices) did not necessarily translate into the strengthening of the position of the producer
organizations in the market. In addition, international trade and quality requirements by western
markets created higher and new entry barriers for the producer organizations and their aspirations to
participate in higher upgrading activities along the chain.
It is particularly interesting to analyze the case of the private firms Andean Valley, Jatary and
Quinoa Bol S.R.L because in addition to the fact that they serve the major quinoa importing countries:
USA, France and the Netherlands, these private firms belong to the set of firms that came into the
quinoa chain in the late 1990’s, seduced by the potential profits the quinoa market appears to offer and
pretty quickly increased their share over the market for organic quinoa exports. Andean Valley enters
the organic quinoa market in 1999, Jatary in 1996 and Quinoa Bol S.R.L. in 1998. The figure below shows
the evolution of the quinoa exports by these companies and the major producer organizations.
48
Evolution of quinoa exports by PO's and
private firms between 1990-2004
1000
900
800
Metric Tons
700
Andean Valley (US)
600
ANAPQUI (PO)
500
400
CECAOT (PO)
300
Jatary (FR)
200
Quinoa-Bol (FR)
100
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
0
Figure 11: Evolution of quinoa exports by producer organizations (ANAPQUI and CECAOT) and private
firms (Andean Valley, Jatary and Quinoa Bol S.R.L.) between 1990 -2004.
While the case of the private firm JATARY gave us an example of vertical integration within the
Quinoa Value Chain and its implications for its structure and the farmers’ income in the form of
misleading price signals; the case of private firm Andean Valley allow us to explore and analyze the
increased competitive environment that the entry of new private firms have brought to the chain and
how this mediates quinoa prices and the farmers’ income.
Andean Valley enters the organic quinoa market in 1999 and serves primarily the US market
through the importing company Quinoa Corporation33. This importing company Quinoa Corporation
used to work exclusively with producer organization ANAPQUI, however the entry of this new private
firm Andean Valley caused the producer organization to lose its exclusivity contract with the importing
company. This represented a significant loss for the producer organization since the US market
constitutes almost half the market for the Bolivian quinoa imports.
The competitive environment that the entry of private firm Andean Valley created in the chain
led to two interesting developments. First, the competition between Andean Valley and ANAPQUI
brought down the FOB price for the organic quinoa.
33
A diagram mapping its market is included in the appendix under – Diagram #4
49
While in 1999, importing company Quinoa Corporation paid $1.420 per ton of quinoa; between
the years 2000 and 2005, the price that the importing company paid was lower and fluctuated between
$960 and $1090.
Table 5: Price paid by Quinoa Corporation between 1999 and 2005.
Price paid by Quinoa Corporation
$1420 per ton of quinoa
$960 - $1090 per ton of quinoa
1999
2000 - 2005
Secondly, importing company Quinoa Corporation took advantage of this competitive
environment and imposed greater requirements on its quinoa suppliers ANAPQUI and Andean Valley.
The importing company required them to provide cleaner and homogenous grain, more punctual
delivery, etc. Similar, types of developments seem to have taken place between producer organization
ANAPQUI and its other importing companies in Europe, Asia and Latinamerica.
Hence, the competition that Andean Valley brought to the market represents several losses for
the producer organization ANAPQUI, such as:
a) A significant market share loss, considering that the US is the main importer of Bolivian
quinoa),
b) Higher quality demands, which imply higher production and or transactions costs just to
maintain the customer,
c) A lower FOB price which ultimately affects (d)
d) The price paid to the farmer whether this is associated with ANAPQUI or works with the
private firm (in this case) Andean Valley through the “contract system”.
Furthermore, importing companies appear to go back and forth from working with the producer
organizations for their quinoa supply or the local private firms which causes huge imbalances in the PO’S
accounts.
In conclusion, the themes raised in this last chapter make reference to the vulnerability that
farmers face in the current quinoa market structure and in spite of its current “profitable prospects”.
This is manifested in their necessity to associate and participate in “contract systems” which
conditions are not the most favorable yet at least (in principle) these provide some sense of “stability”
and “predictability” for their transactions and livelihood. Since, the buyer-driven nature of the chain and
the ‘closed vertical systems of coordination’ which exclude the farmer from the flows of communication
and that the producer organization do not seem to be able to improve (such flows of communication),
makes it increasingly difficult to cope with the volatile price swings that currently characterize the
50
quinoa market structure and that threatens the financial stability and security of the farmers who find
themselves trying to “intuitively” catch the direction that the market is taking via some “price signals”,
which are not always the most efficient indicators, leaving the farmers with significant losses in some
instances.
The exclusion of the farmer within the dialogue of downstream and upstream actors or rather
its inclusion as simply a receptor of information makes of the new quinoa market structure a pretty
confusing and uncertain scenario for the farmer which neither the “contract systems” of the private
firms nor the producer organizations commands are able to tone down but quite the opposite seem to
exacerbate through their competition. Lastly, the “secondary role” that the farmer has in the new
Quinoa Value Chain manifested in the conceiving of the farmer as simply a “worker” despite its direct
contact with the production of the grain itself, speak of the unequal distribution of power within the
chain swayed towards those actors who are able to more successfully enter the new models of
coordination that the new private firms propose and therefore influence or determine the distribution
of profits within the chain.
Chapter 6
CONCLUSIONS
My interest to study the issues raised throughout this paper sparked in a context in which
commodities34 are back in the center stage of economic discussions due to the fairly recent spike in its
prices, its role in the craze for the creation of alternative energy sources, its potential to establish new
power structures depending on the control and ownership of such commodities and lastly its crucial
importance for the world as a whole, due to its direct connection for food security in the midst of the
threats that climate change brings to its availability.
However, during my preliminary research I had encountered several studies which suggested
that the farmers involved in the production of such commodities where not part of the exciting or
promising part of the story. In fact, it appeared that in several instances the farmers’ income as a matter
of fact were going down as the prices for the commodities they produced were rising.
Hence, when I choose to study the case of the quinoa farmers in Bolivia, right away I looked for
a similar pattern. However, to my surprise producer prices had gone up just as quinoa prices had. This
confused me and I felt compelled to dispute this numbers. I did not believe them. Yet, as I continued
with my research I understood that my focus on the upward or downward trend of the data was
erroneous and ran the risk of being simplistic with the analysis. Although this paper starts highlighting
the increasing gap between producer prices and export prices this could only be a point of departure.
34
A figure plotting the quinoa price trends along with the other commodities is included in the Appendix – Table 6.
51
The Global Commodity Chain analytical framework represented an alternative approach to the
emphasis that mainstream economics puts on data and figures to draw conclusions from. Instead this
paper attempted to uncover the power dynamics underneath the numbers, conscious of the fact that as
the GCC literature informs us the production process is inherently characterized by power relations
which guide the distribution of profits within and often reveal more than what the numbers do.
The tripling of quinoa prices over the last 20 years however, made it an interesting and
challenging market to study from the GCC perspective, precisely due to the fact that such “positive trend
in prices” on the surface already seemed to signal a promising scenario for all of those involved. Yet,
regardless of whether or not this was the case, such a dramatic change in figures deserved at least an
analysis regarding the causes behind. In the case of the quinoa market, the change in the preference for
organic and fair trade related products by consumers in the industrialized countries led to a spike in its
demand, which was followed by a similar boom in its prices, the value and volume of its exports and
most importantly the immersion of new actors into the Quinoa Value Chain.
The entry of new actors into the chain during the late 1990’s, in the form of new private firms
seized the quasi-monopoly held by the peasant producer organizations over the market for organic
quinoa exports transforming its structure not only due to the increase in the number of players in the
market but also because these new private players brought with them novel forms of competition
characterized by vertical integration strategies which signified the continuous loss of market share by
the producer organizations; plus the increasing entry barriers to higher value added activities along the
chain due to the closed nature of such vertical integration schemes dominated by the private firms
which also include “contract systems” in its interaction with the farmers.
These “contract systems” represent the change in the quinoa market structure that have had
the biggest impact on aspects related to the farmers income since these limit the bargaining power of
the farmer in the market to its contract specifications hence the farmer under the new quinoa market
structure has become primarily a “wage-worker” whose prospects of taking part on the distribution of
profits is limited to the size and productivity of the land plus the labor force the farmer possess or is able
to hire. The farmers’ participation from the gains of higher upgrading activities or of any positive
development within the chain is severely circumscribed by those who are able to more successfully
enter the vertical integration models.
“How do changes in the quinoa market structure mediate quinoa farmer’s income?
In summary, the changes that the structure of the quinoa market has undergone as a result of
the increased demand for this grain manifested in the immersion of new private firms have at most
implied a second best wage option for the farmer whose participation in the “contract system”,
sponsored by the private firms contributes to the strengthening of this system and the consequent
market share loss by the producer organizations, reinforcing in this way the structures that are allowing
the new private firms to contest the dominance of the chain.
One of the limitations of the analysis in this paper has to do with the relationship between the
farmer and the peasant producer organizations. Although both ANAPQUI and CECAOT in addition to
52
their economic function are supposed to fulfill a social representation function, during my fieldwork I did
not feel a strong affiliation between the farmers and the producer organizations nor a sense of
belonging to the group. However, this does not necessarily mean that is the case. The questions asked
during my fieldwork were not meant to address this. However, I believe that finding out more about the
nature of the relationship between the quinoa farmers in Bolivia and their producer organizations
(strong or weak) would contribute to our understanding regarding issues such as the flaws in price
transmission that affect negatively the farmers. Additionally, further research is necessary on the
scheme of the distribution of profits within the producer organization itself, in order to better
understand the real profiting prospects that the affiliated farmers have when participating in the
upgrading activities within the producer organizations.
In my view, producer organizations in the quinoa case in Bolivia are important in the sense that
the essential goal of the organization is to “protect the farmer”.
“What really led us to organize is the fact that the middle-men were “fattening” on a constant
basis at the expense of the farmer because the price of quinoa was quoted at really low prices and also
the “trueque”35used to be practiced. This means that the middle-men for example would bring us a shirt
to be exchanged for 1 quintal of quinoa”.
Santiago Alanes
Supervision Secretary at ANAPQUI
In addition, there is a crucial difference between the private firms and the producer
organizations and that is the fact that they own the land. In Bolivia, the quinoa fields belong to the
farmers or are considered as communitarian. Therefore according to law, the land cannot be sold to
private companies. The affiliated farmers own the producer organizations as well as the tracts of land or
have the right to use the land because they are part of the given community (Birbuet and Machicado,
2009).
Hence, although the mission of the peasant producer organizations ANAPQUI and CECAOT is
becoming increasingly difficult to fulfill due to the challenges that the immersion of new private firms
have brought to the quinoa market structure (as illustrated throughout the paper), these remain
important for the lives of the farmers since their presence and existence continues to represent a buffer
between the farmer and the new private firms which until now take the practices of the producer
organizations as a point of reference for their interactions with the farmers. Furthermore, unlike any of
the other players in the market, the producer organizations have the goal of integrating the farmer into
higher upgrading activities along the chain and into any positive development within it.
Recently, the producer organizations were able to gain some important shares in the internal
market over the private firms such as:
35
Local word that means “exchange”.
53
1) Make the producer organizations eligible for the provision of food for nutritional programs.
Something which until 2004 had been reserved for firms inscribed in the Bolivian Chamber of Commerce
(hence private firms had preference), and
2) The producer organizations were decisive in changing the policy of government-sponsored
food nutritional programs. This means that now Andean cereals such as the quinoa are a central
component of the government’s food security program. As of today, the quinoa is a major ingredient on
public school breakfasts.
The introduction of this sort of policies has been easier under the current government headed
by President Evo Morales, since it prides itself in being an indigenous government hence a very
important part of its agenda is to preserve and if possible re-implement ancestral indigenous practices.
In fact, one of the goals of the current government is to have 50% of the total quinoa production coming
from the producer organizations (Ministry of Economy and Public Finance, 2011).
Currently, quinoa production represents about 3.6% of the Bolivian agricultural GDP and its
participation has been rising in recent years. As of 2007, Bolivia’s agricultural GDP was of $320 million
and its contribution to the national GDP was of 17%.
Under the GCC analytical framework, upgrading is a necessary condition for survival in this era
of global production processes: ‘In order for countries to succeed in today’s international economy, they
need to position themselves strategically within.. global networks and develop strategies for gaining
access to the lead firms in order to improve their position’ (Bair, 2005)
Developing countries around the world seem to be very well aware about the importance of
immersing themselves within value chains in order to prosper economically. An example of this are the
UNCTAD meetings were ideas and initiatives promoting the immersion of developing countries into
value chains are championed by these. There seems to be a general consensus still that believes that if
a country is able to successfully shift from import-substituting industrialization strategies in favor of
export oriented initiatives, the country as a whole will benefit and immediately assume a bright picture
for all of those involved in such export strategies. Yet, as I have attempted to show throughout this
paper often, the story is much more complex than what the numbers seem to indicate.
Furthermore, despite of the not so rosy picture presented in this paper regarding the economic
implications of the current quinoa market structure on the farmers’ income, I must recognize that
during my fieldwork in addition to the wide frustration expressed by the farmers due to the volatility in
prices, I was also able to perceive an overall sentiment of down to earth expectation that this “quinoa
boom” could in fact contribute to an improvement in their quality of life. After all up until the increase in
the demand for this grain, the quinoa producing communities had no real profiting prospects
whatsoever.
There seems to be a perception by the farmers interviewed, that some farmers have in fact
reaped the economic benefits of the “craze for quinoa”. Below is a quote from a farmer who I asked if
she thought that farmers were benefiting from the current high quinoa prices. This was her response:
54
‘Yes, of course! Before here you use to only see “little cars” now you see “big Volvos”!’
Quinoa Farmer
Interviewed at the “Challapata Fair”
August 18th, 2012
In addition, quinoa communities have been experiencing a reversal in migration. Quinoa farmers
who had previously migrated to other cities looking for better economic opportunities are coming back
to the quinoa fields encouraged by the news of the high quinoa prices and the promises for profits.
There is also another group of “farmers” who although continue to live in the cities they had previously
migrated to, they “plant quinoa by cell”. Meaning, they just call and hire people to plant quinoa for
them and only come to the quinoa fields during harvest time. Interestingly, this reverse migration is
causing some tension amongst the farmers since some have overtaken these lands thinking they had
been abandoned. Lastly, several quinoa farmers encouraged by the high quinoa prices are becoming
monocrop farmers dedicating themselves exclusively to the plantation of quinoa leaving no space for
the raising of llamas, previously a second source of income for the farmer. The aggressive plantation of
quinoa (non-stop) is also dangerously threatening the future productivity of the quinoa fields.
Although the focus of this paper is not on the social or environmental implications of the
increased demand for quinoa, these developments reinforce the need for a much stronger presence of
the Bolivian state in the quinoa fields. So far the intervention of the Bolivian government in the Quinoa
Value Chain has mostly been limited to policy surrounding the promotion of the quinoa looking to
increase its consumption and demand in external markets. Yet, given the current trend in the preference
of the consumers in the industrialized countries for high quality organic and fair trade related products,
such as the quinoa, the intervention of the Bolivian government to promote its consumption seems an
unnecessary double effort. There seems to be an impression by the current government that an
increased demand for the grain automatically translates into a benefit for the farmers which as seen
throughout the paper this is not necessarily the case.
Instead, I believe a lot more intervention is needed in the area of regulation. For example,
during my fieldwork I could perceive that in the town of Challapata where the fair is located, there is
absolutely no control to stop the smuggling of quinoa to the bordering country of Peru. Farmers would
openly mention that the quinoa commercialized in the fair was also being illegally destined for Peru.
“[..] all the quinoa here is going to Peru, via desaguadero”.
Gonzalia, Quinoa Farmer
Interviewed at the “Challapata Fair”
August 18th, 2012
55
Furthermore, government intervention is needed to help bring some stability to the volatile
nature of the current quinoa market structure that responds to changes in the demand, often causing
huge losses for the farmers who find themselves trying to “intuitively” determine the direction of the
market, following some price signals which are not the most efficient indicators. As mentioned earlier
government efforts seem to be concentrated on the promotion of the product. During my research I did
not encounter any government entity in charge of overseeing and or regulating the developments
happening in the Quinoa Value Chain.
In addition, given the important role that the producer organizations still play in the lives of the
quinoa farmers, government support is needed to strengthen the producer organizations and thereby
help strengthen the position of the farmers within the chain. As illustrated throughout the paper, the
new business practices (i.e. vertical integration) that the private firms bring to the Quinoa Value Chain
are quite difficult to compete with due to its “closed nature”. Similarly, producer organizations should
take advantage of the pride and the identification of the current Bolivian government, which promotes
the quinoa grain internationally as a “gift from the indigenous to the world” with indigenous causes to
help create policy in their favor.
Lastly, the “quinoa craze” is leading some other countries such as India, Canada and the US to
start experimenting with the plantation of quinoa in their lands. Currently these crops are under test
given that the ideal condition for the quinoa plant to grow is the cold weather found in the Bolivian salt
flats. Should these countries be successful in adapting the quinoa plant to their fields a very interesting
question emerges: how would the Bolivian quinoa farmer fair in a market with even a lot more players?
56
Appendices
Diagram 3: Mapping of producer organizations ANAPQUI and CECAOT
Producer
Organizations
Peasant PO
ANAPQUI
CECAOT
Umbrella PO
Umbrella PO
Regional Producer
Organizations
ANAPQUI
CECAOT
Umbrella PO
COPROQUIRC
Regional PO
SOPROQUI
Regional PO
APQUINQUI
Regional PO
CEDEIINKU
Regional PO
Umbrella PO
APROQUIRY
Regional PO
APROQUIGAN
Regional PO
COPROQUINAC
Regional PO
APREQC
Regional PO
ARPAIAMI
Regional PO
57
13 cooperatives
associated in 13
communities
Diagram 4: Mapping of the vertical integration by Jatary and Quinoa Bol S.R.L.
Quinoa
Importers
Countries
France
Market share 16%
CARREFOUR
Retailer/Distributor/Hypermarket
Netherlands
Market share 11%.
MARKAL
Importer adn Distributor
Quinoa Bol
S.R.L.
EURONAT
Created in 1998.
Importer and Distributor
JATARY
Created in 1996.
58
Diagram 5: Mapping of the US market
USA
Market share 48%
Shoppers
Supermarket
Quinoa
Corporation
Importer and Distributor
Andean
Valley
Relationship established
since 2000.
59
Table 6: Quinoa price trend between 1990 and 2010 (FOB)
Year
Export quinoa prices (FOB)
1990
830
1991
900
1992
920
1993
1020
1994
1300
1995
1250
1996
1050
1997
1210
1998
1260
1999
1343
2000
1259
2001
1136
2002
1153
2003
1101
2004
1140
2005
1155
2006
1166
2007
1254
2008
2233
2009
3002
2010
3061
60
Commodity Prices Trend (US$/TM)
800.000
3500
Barley (US$/TM - Canada)
700.000
3000
600.000
2500
500.000
2000
400.000
1500
300.000
1000
200.000
Rice (US$/TM - Thailand)
Wheat (US$/TM - United
States)
Maize (US$/TM - United States)
Sorghum (US$/TM - United
States)
Soybean (US$/TM - United
States)
Commodity Prices (US$/TM all)
100.000
0.000
500
Commodity Prices (US$/TM Food)
0
QUINOA (US%/TM - Bolivia)
Figure 12: Commodity Prices Trend including quinoa prices (US$/TM)
61
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