Determinants of Smallholder Farmers' Marketing Channel Choice: Evidence from the Vietnamese Rice Sector

• Author: Thai Thuy Pham,Verena Otter,Ludwig Theuvsen
• Published date: 01 September 2019
• Date: 01 September 2019
• DOI: http://doi.org/10.1111/asej.12187

Determinants of Smallholder Farmers’Marketing

Channel Choice: Evidence from the Vietnamese

Rice Sector

Thai Thuy Pham, Ludwig Theuvsen and Verena Otter

Cash crops such as specialty rice and other high-value varieties produced for

domestic and international markets are considered an increasing source of income

for smallholder farmers in many Asian countries. The present study focuses on

the factors affecting Vietnamese specialty rice farmers’choice of marketing chan-

nel and how their choice influences farm performance. The analysis has been con-

ducted using multinomial logit and linear regression models on quantitative data

collected from 280 specialty rice farmers in the Red River Delta, one of the main

rice production regions in Vietnam. Results reveal that even though local collec-

tors and wholesalers are still the most common recipients of farmers’goods in

rural areas, reduction in transaction costs with regard to uncertainty influences

farmers to choose modern marketing channels through collective action (via spe-

cialty rice farmer associations). This collective marketing channel helps farmers

increase average prices received by US$0.028 per kg of paddy. Based on the

results, manifold political implications are derived.

Keywords: smallholder market participation, marketing channels, specialty rice,

collective action, Vietnam.

JEL classification codes: Q13, D10, D47.

doi: 10.1111/asej.12187

I. Introduction

In recent decades, non-traditional marketing chains, such as supermarkets or

export markets, have come to coexist with traditional marketing chains through

wholesale market or collectors/wholesalers in developing and transition coun-

tries. This has created more profitable opportunities for farmers to sell their

*Pham: University of Goettingen, Department of Agricultural Economics and Rural Develop-

ment, RTG1666: ‘GlobalFood’- Transformation of Global Agri-Food Systems, Heinrich -Düker -

Weg 12, D-37073 Göttingen, Germany. Email: pham.thai@agr.uni-goettingen.de. Theuvsen: Univer-

sity of Goettingen, Department of Agricultural Economics and Rural Development, “Agribusiness

Management”, Platz der Göttinger Sieben 5, D-37073 Göttingen, Germany. Email: theuvsen@uni-

goettingen.de. Otter (corresponding author): University of Goettingen, Department of Agricultural

Economics and Rural Development, “Agribusiness Management”, Platz der Göttinger Sieben 5,

D-37073 Göttingen, Germany. Email: verena.otter@agr.uni-goettingen.de.

© 2019 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Asian Economic Journal 2019, Vol.33 No. 3, 281–300 281

products. Thus, small-scale farmers can choose from among an increasing num-

ber of different types of potential buyers. As a result, researchers and policy-

makers have turned their attention to new agri-food systems and farmers’choice

of marketing channels (Goetz 1992; Fafchamps and Hill 2005; Rao et al.,

2012). There is a large body of literature on the relationship between collective

action and market access. In this regard, social network variables, such as mem-

bership in local associations and networks or participation in collective action,

can improve the market participation of small-scale farmers (Markelova et al.,

2009; Narrod et al., 2009; Moustier et al., 2010; Fischer and Qaim 2012).

Among researchers, access to modern marketing channels is considered an

important tool for lifting farmers out of poverty and enhancing food security in

developing countries (Barrett 2008; Fischer and Qaim 2012). Additionally, liter-

ature on collective action has indicated that by organizing in groups, farmers

have more bargaining power and fewer transaction costs (Ouma et al., 2010).

Nevertheless, smallholder farmers can still face various bar riers (e.g. small farm

sizes and limited marketing information) to entrance into non-traditional mar-

kets, especially those for high-value and specialty products that have not yet

been thoroughly empirically investigated (Blandon et al., 2009).

One of these specialty produc ts is rice of cer tain varieties. Vietnam produces

approximately 44 m tons of rice annually, whereof 15.23 percent is sold to the

export market and 84.77 percent to the domestic market (FAOSTAT 2015).

Many Vietnamese small-scale farmers depend on rice as their main source of

income (Nielsen 2003). Currently, rice farmers are increasing their income by

growing high-value and specialty varieties. The term specialty rice (SR) in the

context of this study refers to glutinous varieties, sometimes also called sticky

rice or golden flower glutinous rice, which is grown mainly in Southeast and

East Asia, for example, in Laos, Tha iland and Vietnam. These varieties are

famous for their origin in specific regions and sold mainly to the domestic mar-

ket, where they command a premium price. In essence, glutinous rice is a tradi-

tional variety that has been upgraded in seed quality due to development

programs during the past one and a half decades (Jaenicke et al., 2010). From a

marketing perspective, it has a price premium due to its superior quality.

According to data from Vietnam’s National Office of Intellectual Property, four

rice varieties have names that reflect their geographical place of production, and

by 2015, 21 other rice varieties were protected under a collective mark.

However, there is a lack of transparency regarding marketing information in

the traditional market for SR varieties (Moustier et al., 2010). Thus, earlier qual-

itative research on the Vietnamese rice sector has suggested that smallholders’

participation in specialized marketing channels through membership in coopera-

tives and associations selling to supermarkets or private companies can help

overcome information asymmetries in the SR market sector and increase house-

hold incomes. Conversely, participation without such a membership is still asso-

ciated with the typical barriers to entry, including limited access to credit, third-

party certification and information about quality controls, and, therefore, with

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