Overcoming supply chain failure in the agri-food sector A case study from Moldova.pdf

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Overcoming supply chain failure in the agri-food sector A case study from Moldova.pdf

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Overcoming supply chain failure in the agri-food sector A case study from Moldova

Food Policy 31 (2006) 90–103 /locate/foodpolOvercoming supply chain failure in the agri-food sector: A case study from Moldova Matthew Gorton a,*, Mikhail Dumitrashko b, John White c a School of Agriculture, Food and Rural Development, University of Newcastle, Newcastle upon Tyne NE1 7RU, UK b Institute of Economy and Advanced Training in Agribusiness, Chisina?u, Moldova c Faculty of Social Science and Business, University of Plymouth, UKAbstract Successor states of the Soviet Union have witnessed substantial falls in agri-food production since the break-up of the USSR. Supply chain disruption has been a major factor in this decline. This paper identifies how asymmetric information between farmers and processors led to market failure in Moldova and how one dairy company has attempted to overcome such a crisis. The case study company has invested in better monitoring of milk quality to effectively supervise transactions. Milk production is a major source of income for rural households who sell to dairies via village collecting stations. The costs of monitoring milk quality to avoid market failure from adverse selection are sig- nificant. Preventing small-scale producers being marginalised from dairy supply chains is an impor- tant factor in safeguarding and improving rural livelihoods. 2005 Elsevier Ltd. All rights reserved. Keywords: Market failure; Milk; Procurement; Moldova; ContractingIntroduction The transition from centrally planned to more market based economies in Central and Eastern Europe (CEE) and the Former Soviet Union (FSU) has been characterised by sig- nificant falls in agri-food production (Lerman, 2001). A number of reasons have been identified for this fall, such as the greater international contestability of markets, a fall0306-9192/$ - see front matter 2005 Elsevier Ltd. All rights reserved. doi:10.1016/j.foodpol.2005.08.003 * Corresponding author. Tel.: +44 191 222 6927; fax: +44 191 222 6720. E-mail address: matthew.gorton@newcastle.ac.uk