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Small Farmers and Big Retail: Trade-offs of Supplying Supermarkets in Nicaragua

Hope Michelson (), Thomas Reardon and Francisco Perez

World Development, 2012, vol. 40, issue 2, 342-354

Abstract: In Nicaragua and elsewhere in Central America, small-scale farmers are weighing the risks of entering into contracts with supermarket chains. We use unique data from cooperatives supplying supermarkets to study the effect of supply agreements on producers’ mean output prices and price stability. We find that prices paid by the domestic retail chain approximate the traditional market in mean and variance while mean prices paid by Walmart are significantly lower than the traditional market. However, the Walmart contract is found to systematically reduce price volatility. We find some evidence, however, that farmers may be paying too much for this contractual insurance against price variation.

Keywords: small farmers; supermarkets; contracts; Walmart; Latin America; Nicaragua (search for similar items in EconPapers)
Date: 2012
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Working Paper: Small Farmers and Big Retail: trade-offs of supplying supermarkets in Nicaragua (2010) Downloads
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DOI: 10.1016/j.worlddev.2011.07.013

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