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The impacts of differentiated markets on the relationship between dairy processors and smallholder farmers in the Peruvian Andes E. Fuentes Navarro a,*, G. Faure a, E. Cortijo b, E. De Nys c, J. Bogue d, C. Gómez e, W. Mercado e, C. Gamboa e, P.-Y. Le Gal a a Cirad, UMR Innovation, 73 Avenue Jean-François Breton, 34398 Montpellier, France b IAMM, 3191 Route de Mende, 34093 Montpellier, France c World Bank, 1818 H Street, Nw., Washington, DC 20433, United States d University College Cork, O’Rahilly Building, Cork City, Ireland e Universidad Nacional Agraria La Molina, Apartado 12-056, Lima, Peru

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information is available about the way small-scale farmer–processor 2. Material and methods relationships affect the performances of both stakeholders in relation to markets in developing countries. Some studies have evaluated 2.1. Context in detail the impacts of vertical coordination processes (Dries et al.,

2009) or of implementing contract farming (Gow et al., 2000; Miyata Formal and informal markets differ in the dairy sector accordet al., 2009). However, these studies assume that both farmers and ing to criteria such as existence and application of official quality processors interact under fixed conditions throughout the year and standards, especially sanitary standards, contracts between stakeonly aim to maximize their profits. The reality may be more complex, holders along the supply chain, or public tax charges on transactions.

for instance, when dairy production is just a part of farmers’ ac- The national balances between both markets vary greatly from one tivities or when a diversity of markets co-exists in the same area, country to another, from mostly ‘informal’ countries in the develwith various quality standards and arrangements between farmers oping world to Western countries where the informal sector is almost and processors. non-existent (Table 1). In that respect, Peru shows an intermediThis article aims to identify the strategies implemented by both ate situation, where the two markets occupy a similar position in farmers and dairy processors at technical and at organizational levels terms of milk quantities processed. The Peruvian dairy sector has in order to respond to uncertainty in milk supply and milk price been growing for the last 20 years with a regular increase in milk offered in the simultaneous presence of formal and informal markets. production (Fig. 1). Three main drivers have contributed to this It is based on empirical surveys conducted in a small Andean area growth: the growing urban demand for dairy products and the naMantaro Valley in Peru) which benefits from its proximity to the tional protection of the dairy sector from imports though ceased capital Lima for developing its dairy production. After describing since 2008 (Aubron, 2007), and the food aid regime, based on the the materials and methods used in these surveys, the diversity en- “Programa Nacional de Asistencia Alimentaria” (PRONAA) curcountered at farmer, collector and processor levels is outlined before rently called Qali Warma, which provides milk to school children analyzing how they interact and how their relationships impact on (Knips, 2006).

the dynamics of the local dairy sector. Finally, these results are dis- These national features are also encountered in the Mantaro cussed by comparing them with similar situations around the world. Valley (75°18′ longitude West; 11°55′ latitude South; 3200 m above Fig. 1. Evolution of dairy production at National level and in the department of Junín (Mantaro Valley) from 1994 to 2011. The figure shows the similar trend in terms of increased volumes over time. (Source: Ministerio de Agricultura del Perú (MINAG), 2014 and Instituto Nacional de Estadística e Informática (INEI), 2010).

E. Fuentes Navarro et al./Agricultural Systems 132 (2015) 145–156 147 sea level) located in the central Andean region of Peru, in the de- regarding costs and gross products were collected from two artisanal partment of Junin. The local annual rainfall varies between 600 and cheese-makers and two medium-scale dairies, which accepted to 765 mm per year, but most of the dairy production benefits from provide this information.

irrigated forages such as rye-grass, clover and oats, cultivated on In every study, dairy processing units were purposively sampled surface irrigation schemes. Dairy production has been important in order to represent the largest diversity of cases, based on their to the area since the 1960s thanks to the development of indus- volume of milk processed, technological level and their market oritrial companies funded both publicly and privately, and to the entation. Dairy farms were selected either randomly (2011 study) commercial links with the wholesale market in Lima, the Peruvi- or because of their links with the surveyed processors (2009 and an capital located 270 km from the Valley. The national land reform 2012 studies).

program conducted in the early 1970s favored the dismantling of large haciendas and the emergence of small-scale farms and cooperatives. Nevertheless, collective co-operatives set up in the area 2.3. Data analysis failed to increase agricultural productivity, in comparison with other regions of the country, because of farmer’s preference for individ- A farm typology was designed based on the 2009 farm survey.

ualization of land use and ownership (Scurrah and Caravedo, 1991; A structured table was built in Excel 2010 (Microsoft). Descriptive Trivelli et al., 2006). The terrorism movement active in the area statistical analysis were performed in SPSS for Windows (version during the 1980s negatively affected the local economy, discour- 14.02, © 1989–2005). It was combined with a detailed qualitative aging producers from investing in farms including those in the dairy analysis of each farm in order to understand the consistency between sector (Fernandez-Baca and Bajorquez, 1994). the farmer’s objectives, strategy, practices and performances. FolFrom being the second most important national production area lowing the methodology proposed by Landais (1998) farms were in the 1970s, the Mantaro Valley nowadays provides only 2% of Pe- then aggregated qualitatively in homogeneous clusters combining ruvian dairy production. However, milk production has been three main criteria of differentiation: activity orientation (dairy speincreasing since 1994, reflecting much of the dynamic growth found cialized versus diversified crop and livestock production), herd at the national level (Fig. 1). Indeed, the establishment of a collec- stocking density and land availability. Each farm was then astion center belonging to a multinational dairy company in 2005 has signed by type and each type was characterized by the range of its provided local dairy farmers access to technical support and credit assigned cases. Using the same process, different types of procesAubron, 2007), and the possibility to increase their milk produc- sors and their channels of commercialization were distinguished.

tion by offering a secure outlet for their produce. This dynamic Results of both the 2011 and 2012 studies allowed the complecombined with the turbulent history of dairy production in the tion of cluster descriptions by including interaction characteristics region has led to a large variety of dairy farmers, involving almost between farmers and processors, and to determine average milk 40% of the local rural population in a rather small area (approxi- prices and profits at farm and processor levels.

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