The Battle for the Market

In India, a dense network of commodity markets moves about 95 percent of the country’s produce from small farmers to small retail vendors generally within thirty-six hours from the time of harvest. Public regulation typically requires that farmers transact with buyers in designated wholesale markets.Footnote ⁶ Horticulture farmers (or trader-aggregators) thus arrive to these markets in the first hours of the morning when temperatures (and traffic) are low, with commodities sometimes stacked loose or in gunny sacks in trucks, but more often today, sheltered in sturdy plastic crates. Once inside the market, farmers link up with brokers who make quick, tacit quality assessments and then auction or negotiate sales on farmers’ behalf for a “commission” (in Karnataka, for example, 5 percent of the sale price by law but potentially double by market practice).

Goods then travel to their next destination—perhaps another wholesale market or small retail stall. All of this circulation happens with no cold chain and little, if any, mechanization. Value is always tenuous. Thin-skinned tomatoes threaten to overripen while sitting in their crates; delicate leaves of spinach are poised to wilt as they are tied into bunches by casual female laborers squatting on the ground. Price, moreover, fluctuates sometimes significantly, among markets, seasons, weather, and, indeed, in any one market over the course of the day.

Since the mid-2000s, retail corporations have been bent on integrating these fragmented, decentralized markets, describing opportunities both for profit and rural development. Yet after roughly fifteen years of investment, corporate chains have continued to grow but hold only approximately 5 percent of India’s food sales—a percentage far below early industry expectations. “Retail companies were seen as a big game changers,” reflected Sanjeev Asthana, an ex-CEO of Reliance, one of India’s largest domestic retail companies, “that Wal-Mart would come in and suddenly it changes the supply chain.”Footnote ⁷ “And we did invest huge big-time money into [supply chain] interventions,” Asthana continued. “But the fact is that those interventions never reached fruition, because the private [corporate retail] sector, which is profit-oriented, typically finds it the most efficient to buy, first, from [individual] traders, and second, from the mandis [wholesale markets], and, third, from the farmers.”Footnote ⁸

Asthana’s suggestion—that it can be more price efficient to work with existing market intermediaries rather than to circumvent them—directly contradicts mainstream policy assumptions. I interviewed twenty senior and mid-level corporate managers and entrepreneurs about the challenges they faced building an integrated “farm-to-fork” supply chain for fresh fruits and vegetables—sometimes spending a day or two with them in their collection and distribution centers. Retail managers describe three systemic challenges: opportunism, diseconomies of scale, and accumulated knowledge and social relations, which I summarize briefly here. For my purposes, these challenges matter because they add up to the following description: that (1) rather than easily reducing transaction costs and amassing surplus, many value chain companies work on razor thin margins, which (2) creates ever more incentives to pivot to value additions as a strategy of market differentiation, which (3) for small farmers means new risks and pressures, combined with uncertain rewards, if they decide to participate in value chains.

Opportunism first. One value chain entrepreneur vividly encapsulated the problem. Hill bananas, he explained, change hands in three wholesale markets as they travel from farmers to retailers, but “every one of these [actors] is an individual entrepreneur including the mini truck [driver], including the mule owner, and the loader and unloader [who] transfers it from one truck to another …. It works like clockwork because their incentives are perfectly aligned.” “If you have a paid employee doing all this,” he continued, “there are loopholes. Either there will be quality dilution, or there will be financial, transactional exchanges outside the purview of the actual transaction.”Footnote ⁹ For similar reasons, senior managers complained that traders arbitrage nimbly as commodity price fluctuates across time and place, whereas companies use “systems and audits” to align employee interests with their principals’, “so we are less efficient at execution.”Footnote ¹⁰ Numerous managers, in other words, commented that the social governance structures in markets constrain opportunism more efficiently than in new large firms (cf. Granovetter Reference Granovetter1985).

Second, small traders benefit from diseconomies of scale. In India, aggregating commodities is expensive; 85 percent of cultivated land is owned in holdings of five acres or less (Government of India 2014, 6)—a consequence of land ceilings laws and restrictions on leasing (laws now challenged by policymakers who wish to facilitate farmer aggregation). Mechanization is expensive as well—the costs of inputs like electricity and land are generally still higher than the costs of human labor. Scale can also trigger politicization. One senior executive cautioned that purchasing more than 5 to 10 percent of the produce in a given area invites “political forces,” for example, local politicians who would “like us to buy from their community [and] will say … at this price only you should buy, so a whole lot of vested interest will come into play” once a company amasses buying power.Footnote ¹¹ Decentralized supply chains also serve consumer preferences well: “In India, needs and tastes are so different by place, which means my [food] sourcing gets split up,” a former multinational executive explained, “What efficiencies am I going to get with decentralized tasting preferences?”Footnote ¹² Small traders, in other words, have long capitalized on the “cultural differences that give rise to distinctive products” (Porter Reference Porter, Lawrence and Samuel2000, 28), constraining how new large companies can compete simply through volumes and scale.

Finally, managers struggle to compete with brokers and traders given their advantages of knowledge and social relations. “It’s so tricky,” observed a senior manager who sent me with his pricing team to a major wholesale market, so that I could witness the company’s challenges of “just standing there watching auctions when there are different prices for different grades that change throughout the day.”Footnote ¹³ Brokers and traders, by contrast, describe decades of tacit knowledge; “feeling” price was a common refrain. And they feel price across multiple points of the chain: “Trading firms may buy, sell, broker, store, transport, process, produce, finance production, and finance trade. There are two to the 9th possible combinations of these nine activities and there are other activities” (Harriss-White Reference Harriss-White2008, 26). Brokers and traders also leverage these integrated activities into patronage and social regulation by, for example, extending revolving cycles of credits and guaranteeing quality for their regular buyers and extending finance as well as “individual attention, common courtesy, frequent contact, and on occasion, personal protection” to regular farmers (Krishnamurthy Reference Krishnamurthy, Harriss-White and Heyer2015, 93).Footnote ¹⁴ Again the former multinational executive: “My buyers have eight years of experience, they can’t get a better price than the trader who has been sourcing locally for decades. What efficiency? Even a cost reduction of half a percent would make a massive difference.”Footnote ¹⁵

To return, then, to Asthana: “You have to understand India to realize how efficient the markets are. Within the constraints we have—no cold chain, poor logistics, difficult conditions in which the product is moving that are absolutely against preserving—the fact remains that the market is highly, highly efficient in the way [a good] is brought, within the cost it is brought, and the way it is getting delivered to consumers.” “And so to that extent,” he concluded, “inefficiency does not exist.”Footnote ¹⁶ Thus with a nod to Harriss-White, it turns out to be hard—far harder than policy rhetoric belies—for corporate capital to beat indigenous merchant capital at their own game.

But can corporate capital change the game by pivoting to (new kinds of) value additions? Even if, as Asthana and others argue, commodity markets are reasonably price efficient, “we’re losing value,” Asthana stressed. Commodity markets, this argument goes, preserve the status quo against a larger pie. Asthana, for example, described new technologies to improve harvesting and distribution (he once imported expensive machinery to wash and polish potatoes). The former multinational executive emphasized changing consumer culture. Intermediaries, he emphasized, earn their margins: “But is it progress? No, not really. The multinationals offer a modern way of selling, better ambience, quality standards. I too have economically developed as an individual … [so] the way I buy will change.”Footnote ¹⁷ Both these arguments echo Porter: value is about ideas and insights—polished potatoes, ambience in stores—and the complex ways that firms construct and satisfy human desire. These are the sources of value understood to enable advanced industrial economies to grow.

This is the GVC transposed to Indian food markets—it is business school against neoclassical economics. Rather than assert simply that they will cut costs by eliminating intermediaries, retail elites now also reason that margins should grow, not shrink, to achieve the surplus necessary to propel forward widespread transformations—to justify sustained investment in, say, a fleet of refrigerated trucks and storage systems that could transform economic geographies. And therein lies a new challenge. As senior managers told me, without significant state support to subsidize infrastructure such as cold storage and land for food parks and processing plants, pivoting to a value economy through market forces means that food in India must become more expensive.Footnote ¹⁸

To create a quality economy with higher consumer prices, senior managers repeatedly told me they must source directly from farmers: “It is to get control on the quality,” one sourcing head explained, “the price [saving money through direct sourcing] is not the important point there.”Footnote ¹⁹ Another executive emphasized the link between improving quality and rural development. Direct sourcing is necessary, he explained, for a company to advance its social cause of supporting (for example, skilling) farmers.Footnote ²⁰ Or consider how a communications manager of an agribusiness company (with funding from several major social impact investors) put the point: “We are not traders, we do value additions to develop small farmers.”Footnote ²¹

This is the GVC configured as development. In this model, lead firms do not claim to contract with ever lower cost suppliers through outsourcing or other means (cf. Tsing Reference Tsing2013). Rather they profess to partner with suppliers in order to develop them, here by creating farmers who are both desirous and capable of embracing the value chain’s calculative rationalities. For example, I observed a state-sponsored development workshop designed to link farmer groups and value chain buyers. One trainer admonished forty mostly middle-aged male farmers: no longer could they assume that “OK, [since] the trader bought my produce, my job is over.” Now, to participate in a value chain, he explained, “you need to take responsibility [for product quality] until it reaches the consumer.” “You need,” he continued, “to look for the customer’s requirement …. There is no point in you claiming that [your] product is good, it’s up to the customer.” Likewise, the trainer stressed, you must sell only consistent products, “if there is no consistency there is no point in having a brand.” This trainer knew well what he was demanding: “A ship in a port is safe, but that’s not what ships are built for,” he attempted to inspire.Footnote ²² But what this Part has argued is that even as value chain companies wager that they can leverage emergent social judgments about the qualities of food (such as “consistency” and “brands”) into surplus value to share, they are nonetheless constrained by remarkably resilient, price competitive (and productive) local commodity markets. As the following Part illustrates, these constraints make it hard for farmers to envision themselves as collaborators in new mutually beneficial forms of economic exchange, rather than as competitors determining how best to sustain their own existence under unequal bargaining conditions.

Purchasing Strategy: Value Creators and Value Adders

To purchase commodities directly from farmers, value chain companies establish state-licensed collection centers (CCs), often clustered together in strategic locations near well-irrigated farming villages and not far from cities.Footnote ²⁵ They benchmark daily buying prices against the prices discovered in wholesale commodity markets which, again, dominate agricultural trade. And then they adjust these prices based on two kinds of strategies.

First, companies pursue strategies that negotiation scholars call value creation, most commonly by trading on differences in subjective valuations and, where possible, pursuing noncompeting similarities. To briefly illustrate: if the CC is located closer to the farmer than the wholesale market, perhaps the farmer will accept a lower price in exchange for saving time and costs associated with transportation, transit damage, and labor (“convenience,” as CC buyers call it). Or if the farmer would have otherwise sold to a broker and if the company would have otherwise purchased from a broker, then potentially both can save “commission” creating more surplus to share. In other words, companies pursue a range of value creation strategies, all aimed at convincing a farmer to accept a price lower than what he might fetch in the market because of the new substitute utilities he receives.

Second, companies offer price premiums over market prices based on value additions—premiums that are meant to reflect higher quality because of commodity size, color, freshness, etc. And, then, depending on how the math of “value creation” plus “value additions” works out for a particular farmer, by selling in the CC, he can realize as much or more than he would in the market (measured, again, by his own standards of value). But in any one transaction he can also walk away with less.

Companies like Freshchain anticipate this second possibility and therefore seek out particular kinds of farmers. Freshchain ventures that the kinds of “value creators” and “value adders” they need are farmers with at least four or five acres of land—that is, farmers with enough capital to want to trade some price for more convenience so they can invest more time into value adding. Here is how a Freshchain company founder put it:

It is worth pausing on this point: studies in India (Ghosh and Vadivelu Reference Ghosh, Vadivelu and Chandrasekhara Rao2016) and elsewhere (Dolan and Humphrey Reference Dolan and Humphrey2000; Barrett, Browne, and Ilbery Reference Barrett, Browne, Ilbery, Hughes and Reimer2004; Neven et al. Reference Neven, Odera, Reardon and Wang2009) report that very small farmers rarely transition into value chain agriculture; indeed, scholars suggest that retail chain concentration precipitates supplier concentration (Reardon, Timmer, and Berdegue Reference Reardon, Timmer and Berdegue2004). In this Part, I should simply stress that the negotiations I describe are not with India’s smallest farmers (they are not who I found in conventional value chains). In what follows, I first elaborate how common value creation negotiation strategies (such as trading on differences) can fail to mediate conflicts over price, and then I describe conflicts over value additions.

Conflicts over Price and the Limits of Value Creation

Months before Anil left the company, he took me to one of the several CCs he supervised to show me—in response to my queries—how Freshchain adds value to the supply chain process. I would eventually spend seven days between two Freshchain CCs watching negotiations. As we travelled, Anil explained that a good value chain is like a glass cube: transparent to suppliers, regulators, and consumers. What happened when we arrived thus genuinely confounded him. A beetroot farmer was threatening to pack up his crates and leave. The price the CC offered was too low, he argued; he could do better elsewhere (unlike more perishable vegetables, beetroots could potentially be sold the next day). The Freshchain CC buyers, however, did not want to let him leave. We watched as they tried to hand the farmer a Goods Received Note (GRN), and the farmer refused to accept it. Issuing a GRN meant payment was forthcoming. The buyers, via this small slip, were insisting that the beets were already sold. The farmer, via his refusal, was insisting they were not.

Anil was perplexed. A conflict like this should have been precluded by the transparency built into the negotiation system. The night before the buyer would have called the farmer with an order for beets. They might debate the price (or the buyer might call other farmers to bid the price down), but ultimately the buyer would settle with one farmer on a price that was basically guaranteed (a drastic change in commodity market prices the following morning could lead to a negotiated price adjustment in either direction). Freshchain considered the transparency this process provides to be a source of value creation: a farmer who valued a transparent price known one day in advance of sale might accept that price even if it was not necessarily higher—and sometimes lower—than what the farmer would discover if he took his goods to market.

So why was the beetroot farmer now protesting price? Wild price fluctuations from one day to the next were unusual for beets. The CC buyers, it turned out, had decided to deviate from the practice their superiors had instructed them to employ. Following the lead of other local CCs, Freshchain buyers placed orders in the evening without mentioning price.Footnote ²⁷ If farmers accepted, they would harvest a specific amount according to company standards but learn the price they would receive only on the day of delivery. In this area, the nearest wholesale market is roughly twenty kilometers away. Hence if a farmer disliked the price he was offered, leaving the CC for the market meant spending more on transportation and selling supermarket-quality goods below optimal morning prices. By failing to negotiate price in advance, the Freshchain buyers thus gained bargaining power over the farmers. But they undermined the transparency of the process—to Anil’s clear disapproval. He thought the company’s value creating propositions (convenience, prompt payments) should stand (or not) on their own. The problem, however, was that the other CCs clustered in the area created value in exactly the same way. To compete on price, Anil’s subordinates decided they could not afford that much transparency.

“It’s a war zone out there!” one buyer joked, explaining why he delayed announcing price to ensure that enough farmers arrived at the Freshchain CC. Companies, indeed, compete to attract farmers. Some CC buyers send laborers to learn the prices available in nearby CCs; some guard their prices, but others share them (including by making daily prices public on whiteboards), sharing information can help manage potential competition.Footnote ²⁸ In this sense, the CCs operate not unlike commodity markets.

Making matters more challenging, however, CC buyers are not supposed to mimic the strategies that commodity market brokers use to manage conflicts over price. Brokers also deploy negotiation strategies of value creation—but they often trade price for the promise of mutually beneficial (if always unequal) social relations. Value chain companies, by contrast, worry that fostering social bonds and reciprocity will create value for the wrong sets of people—perhaps buyers and farmers but not necessarily firms. Here, in brief, is the danger. Companies benchmark CC prices to commodity market prices, which fluctuate based on location, quality, time of day, and the networks and skill of a buyer. This fluctuation means that companies never know market prices precisely—so actors in the CCs may spot margins. Farmers, for example, told me about other farmers who work out deals with buyers—for example, sharing profit in exchange for the benefit of an order when the CC price is higher than the market. In CCs, traders (“vendors”) supply items when farmers cannot. CC buyers told me about other buyers who make deals with these vendors (e.g., “the CC price today is ten can you get tomatoes somewhere for nine?”). A senior manager of a national retail chain was thus intent on moving a CC away from its current location near a wholesale market—not only because that location upped his farmers’ bargaining power, but also because proximity to the market influenced the mindsets (his word) of his employees: “They sit with the vendors in the collection center and drink tea together” and work out ideas for trades.Footnote ²⁹ Such were the anxieties of senior entrepreneurs and staff. One described corruption as the “cancer” of modern retail; another wryly remarked that CCs stood for “corruption centers”; a social impact agribusiness investor told me (only half-jokingly) that he was unlikely to hire anyone previously employed as a buyer in modern retail.

The consequence of all of this is that value chain companies purposefully constrain how their buyers can negotiate with farmers. They want to offer farmers formalized, equalized sources of value (“time saved,” “convenience,” “transparency”) not the value of reciprocal, personal obligations. But as the example of the CC buyers trying to leverage the beetroot farmer into accepting a deal suggests, these alternative sources of value do not necessarily add up for farmers in price (indeed, as the beetroot example also suggests, sometimes they are not even forthcoming). Buyers may therefore look to create value through other more familiar means.

Consider my conversations with Arshad, who managed a Freshchain CC. When he started, Arshad’s responsibilities included searching for farmers to enroll in the company database, collecting local price information and feeding it to the central team, calling farmers with orders and negotiating prices according to company instructions, and managing quality control and logistics operations. He used these responsibilities, and the discretionary power they provided, to generate loyalty and to supply patronage. For example, when prices in the local wholesale market dropped significantly below the wholesale markets in the city, he would recommend to his superiors a downward price adjustment for the farmers in his area—but not one that was as low as the local market would support. Farmers knew this; they remembered when Arshad paid them more than the local market and felt grateful to him for it (or he could remind them when he had to pay them less). Arshad also used orders to reward loyal farmers when company prices were high. For Arshad, these decisions helped to ensure a steady supply of farmers—which benefited him in part because his salary was pegged to performance measures and in part because without loyal farmers the work could feel grueling. (Indeed, when I asked a few buyers why none of their colleagues were women, they answered that conflict with farmers (always male) would overwhelm female buyers.) Sometimes Arshad contributed his own money to right a potential injustice—for example, after he called a farmer to order a local fruit, Freshchain decided it could no longer supply that particular commodity and instructed him to cancel the order. So Arshad purchased the fruit himself. He told me this, I should add, when I asked him why farmers suggested that he helped them “from his pocket.”

I had encountered this dynamic before. One small farmer who sold to a national retail chain told me the company helped him buy seeds. But this company, I knew, like nearly all companies, refuses to advance credit. The CC buyer looked sheepish when I asked him to explain. “It’s from our pockets,” he confessed. This buyer gave in other ways too—harvesting for a farmer if he was ill or had a family emergency. These were simply the practices necessary to manage the CC. The buyer described a time when his company had mistakenly underpaid a farmer. In the weeks it took to rectify the error, the farmer threatened to shame the company in the local newspapers unless the buyer paid him more than he was due. This buyer needed loyal farmers to convince the aggrieved farmer to back down.Footnote ³⁰ Or to put this another way, in a context with low barriers to entry and low switching costs, local buyers know well that economic values must intertwine with social values in order for transactions to normalize and stick.

For companies like Freshchain, however, none of this is desirable policy. They wish to offer formal sources of value creation easy to scale among anonymous economic actors, not sources of value rooted in idiosyncratic relationships among people bound by localized mutual obligations. And they certainly do not want employees and suppliers profiting at a company’s expense. So Freshchain divided labor, transforming work that was once flexible and person-dependent into more circumscribed tasks. “Wherever we have things which [can differ according to] a person,” one cofounder explained, “we try to move it into a process.”Footnote ³¹ As a result, now one team collects local price information; another enrolls farmers; a third monitors quality. Finally, a central team—a group of people that farmers have never met and will never negotiate with in person—call farmers in the evening with orders based on computer-generated information. And now, as elsewhere, price is revealed in the early afternoon on the day of delivery.

In Freshchain CCs, installing these formal, non-discretionary procedures changed the possibilities and expectations for negotiation: without social relations to trade, zero-sum price conflict could easily intensify. For example, the first time I met Arshad, a medium-sized farmer sitting inside the CC was objecting to a just-revealed price. Arshad pointed calmly to a customer service number on the wall—the headache now belonged to someone in an office in the city. But this farmer understood price as the outcome of supply and demand mediated by the decency and reciprocity (or lack of decency and reciprocity) of another known person (“How can you conduct business like that over the phone? … Is that the way to play with farmers? They will surely get beaten if they are seen,” he jested about the people he was asked to speak with on the phone).Footnote ³² Soon after this conflict, this farmer decided to sell instead to a more informal intermediary company where, he later told me, he could negotiate face-to-face.Footnote ³³ Indeed, without voice or loyalty, some farmers turned readily to exit. One farmer who sold to multiple CCs explained his strategy. He would agree in the evening to supply but in the morning shut off his phone. If he could learn in time that the market rates appeared higher, he simply would not show. A buyer for a national retail chain described this as a systemic problem:

These farmers, in other words, used whatever counter-coercions they could muster in order to maximize the distribution of price in the present moment.

Unsurprisingly, then, buyers continued to invoke personal relations to mediate conflict even in the newly formalized system. I watched one Freshchain farmer argue with a customer service representative by phone about a price he asserted was below the market; no, all companies pay within a few days, not just Freshchain, and, no, he did not want a higher price another day. “When we know to grow it,” he quipped, “you think we don’t know to sell it, is it?”Footnote ³⁵ He left the CC to shop around but quickly returned. His procurement representative had called him, he explained, asking him please to supply the goods. This person would have introduced the farmer to the company and spent time on his farm. (It is also the case that this employee’s variable pay depends on maintaining farmers in the company database.) The buyers suspected that the farmer’s decision was motivated at least in part by a lack of better options (this all happened late in the day). But what the farmer professed, as he compromised on price, was loyalty to one particular person in the system.Footnote ³⁶

In sum, observing price negotiations in the value chains illustrates that it is hard not to compete on price given the intensity of price competition that characterizes commodity trade. Companies therefore instruct employees to mediate price conflicts by emphasizing formal, uniform sources of value creation as a default negotiation strategy—for example, by emphasizing the convenience or time saved that a farmer may receive in exchange for a lower price. But these offers do not invariably satisfy farmers who, in turn, engage in practical forms of resistance such as refusal to sell or to show up as promised—acts that reflect how they calculate their own dependencies and economic self-interest.

To compensate, employees may provide farmers with bits of patronage so that they can secure a reliable supply of commodities or perhaps engage in bits of obfuscation like delaying announcing commodity prices in order to stay competitive. These are hardly overwhelming acts of exploitation. But I also suspect these gritty descriptions of actual negotiations are not how policymakers envision GVCs as installing new models of rural development that are both progressive and mutually beneficial. Or to put these observations a different way, I witnessed conflicts over what counts as a negotiation strategy of “value creation” as farmers and buyers rejected formalized, equalized, and scalable sources of value (convenience, prompt payments) in favor of obligation, patronage, and reciprocity—the kinds of values that agrarian scholars have long observed enable economic exchange to endure in contexts of unpredictable agricultural prices, erratic rainfall, and other longstanding forms of social and economic precarity that are endemic to rural life (Scott Reference Scott1976; Freidberg Reference Freidberg2004).

To be sure, not all CCs experience the same degree of price conflict. For example, in one set of CCs I observed operated by a national retail chain, I witnessed no conflict: buyers simply paid more than the market (and their corporate competition). But this was not, a senior manager clarified, a strategy for the long term. He recalled once drafting press releases about how chains would benefit small farmers by eliminating inefficient intermediaries and redistributing margins, but he has since modified his thinking. He still hopes that farmer income will increase as retail chains expand. But his company’s current price premiums, he explained, reflect a targeted effort to attract farmers away from longstanding relationships cultivated in wholesale markets. Making farmer benefits both sustainable and efficient over time, he reasoned, will depend on how “modern retail … improves production and quality.”Footnote ³⁷ That is, rural development will turn on “the quality agenda,” which requires companies to grow margins through value additions (Neilson and Pritchard Reference Neilson and Pritchard2009, 206).

Conflicts over Value Additions: Negotiating Standards and Standards as Negotiations

“[R]ising standards,” Peter Gibbon and Stefano Ponte (Reference Gibbon and Ponte2005, 161) explain, “provide[] the opportunity for selected suppliers to add value, assimilate new functions, improve their products, and even spur new or enhanced forms of cooperation among actors in a specific industry or country.” In this section, I examine not the cooperation but rather the “conflict and negotiation around the qualification of goods” that can characterize trading in CCs (Callon, Meadel, and Rabeharisoa Reference Callon, Meadel, Rabeharisoa, Amin and Thrift2004, 60). Unlike in commodity markets, where farmers sell what they harvest, and brokers make quick, tacit, and highly localized quality assessments, in CCs, farmers bring produce according to predefined specifications, which are confirmed by laborers armed, for example, with metal rings that authorize commodity circumference and posters that illustrate commodity color. Rarely, however, do farmers talk about these new standards in the collaborative language of value adding—instead they constantly weigh the risks of commodity rejections in the CCs against the cost of the broker’s selling fee in the market, describing standards as literally an alternative “commission.”

To make sense of why, I analyze standards not simply as metrics of value additions, but also as practices of negotiation. Standards set the terms of entry into value chains. They are understood to lower transaction costs: when agricultural commodities are standardized and their attributes clearly specified, communicating about them is supposed to be transparent and inexpensive (Giovannucci and Reardon Reference Giovannucci, Reardon and Giovannucci2000). Standards also settle conflicts. Standards, after all, are widely agreed-upon social norms (“objective criteria” in negotiation speak), which are supposed to both determine and resolve disputes about their meaning (Timmermans and Epstein Reference Timmermans and Epstein2010). But practice on the ground reveals how standards—rather than fixed and predictable—may fluctuate according to bargaining power; may embed ambiguities that, for farmers, increase risk and uncertainty; and may conceal different social and cultural understandings of what counts as quality. Let me briefly elaborate these three points. Together they illustrate why farmers describe value additions as conflictual rather than collaborative processes full of distributional consequences.

First, in CCs, buyers may renegotiate standards based on market fluctuations. For example, the day I visited Freshchain’s central distribution center, the head of quality control was revising specifications for cabbage and ridge gourd based on the weekly information his team collects about what is circulating as “first quality” in major commodity markets. He decided to relax the rules for cabbage (and increase the weight buyers could accept from 1.2kg to 1.5kg). But he wanted his ridge gourd thinner. It seemed that some were overripe, and market comparisons suggested the company could demand a decrease in diameter.

Surplus, in other words, is a relative concept, not an objective or stable one; companies extract more quality when they have more bargaining power and thus lower prices in the commodity markets may come coupled with higher demands for quality in the CCs. As one farmer groused, “When the prices are low, they want excellent big sized produce [and now] they accept even worm-infested produce.”Footnote ³⁸ He was describing how one company had just accepted small fruit from a farmer after previously rejecting that same size from him because supply had dropped. Companies may also change how standards are applied like the day Arshad was told to take cabbages, purchased by weight, and strip their outer protective leaves to save the company money (before stripping happened just as the cabbages hit retail shelves). He thus pronounced cabbages that had previously made the grade too small and summarily rejected them. And standards may fluctuate across CCs. One company, for example, may accept cucumbers up to 400 or 450 grams, whereas others enforce a 350-gram limit. Farmers must decide whether to protest variations. “I fought with them,” the fruit farmer quoted above made clear.Footnote ³⁹ But farmers who protest company standards too much will find themselves excluded from company rosters. Peter Benson (Reference Benson2012, 156) has thus likened agricultural grading to “harmony ideology” (Nader Reference Nader1990). Farmers are rewarded for compliance and cooperation (and punished for contestation) even as they must confront the risks of fluctuations within and among standards, as well as their uneven application.

Second, even when standards stay stable over a period of time, they embed ambiguities that constrain how farmers can anticipate and negotiate commodity rejections. Economists have argued that when product specifications are not standardized “bargaining will … be needed” (Den Butter, Groot, and Lazrak Reference Den Butter, Groot and Lazrak2007, 11). But perhaps they have never stood on a grading floor. Farmers tangle with graders about the meanings of particular specifications (and also strategically cultivate friendships with them), attempting to use any ambiguity to their advantage. CC employees, in turn, debate appropriate resolutions: Is the head of this carrot reasonably green or does that bit of brown suggest some soft rot? Is this tomato in fact more red or really more orange? (An evaluation that may change over the course of three hours in hot summer sun.) If they punt the question to their supervisors manning the distribution centers, they better be certain of the quality of their camera phones. Arshad and his colleagues thus frequently joked that the time they spent adjudicating whether farmers had conformed to precisely enumerated definitions had damaged their vision.

Grading, of course, is a value addition. But precisely because of these ambiguities and conflicts—which farmers find hard to predict in advance—farmers told me that grading more extensively at home was not worth the costs; many doubted they could get it right. As one remarked when I asked why he could not manage the risks of quality rejections better: “Even if I bring only good ones, there are these people like this [laborer] here and that [laborer] there, they all come [to grade].” “How much ever I do,” he continued, “it doesn’t work here.” Then he tallied up the labor hours he would need to grade more at home (a calculation complicated by whether farmers could hire laborers by the day or the hour).Footnote ⁴⁰

At the same time, some farmers do attempt sophisticated value calculations to maximize the opportunities presented by the new system. For example, I watched one middle-class family harvest cauliflower in the morning. They separated CC-quality cauliflower from second-quality cauliflower based on visual inspection and weight approximations and then they sorted CC- quality produce by size. A nephew brought the second-quality cauliflowers plus the larger CC-quality ones in a rented vehicle to a small wholesale market where buyers purchase by weight. An uncle drove the remainder of the CC-quality produce in the opposite direction in the family’s small truck to a CC of national chain where the company purchases by piece. Somehow, however, the family had miscalculated; the uncle trudged into the market late in the day with two gunnysacks of rejected cauliflowers, swearing off the companies.Footnote ⁴¹ Maximizing the opportunities presented by value additions was expensive and exhausting, and a family had to be able to afford not to get it right. Farmers thus constantly debated when and if the risks and costs of value additions would cash out in price. “I am scared to sell to this company,” a farmer elsewhere told me. That day he had agreed to supply only 60 percent of the company’s requested order so that he could sell the rest of his harvest in the market early in the morning to make sure that “profit from here and there comes to a level.”Footnote ⁴²

Finally, standards do not create only potential economic value. For standards to work—to generate profit through product differentiation—they must express, or rather create, a shared sense of social value: that is, an authoritative consensus about what kind of food is good and attractive and socially desirable. This consensus, however, can alienate farmers who participate in defining neither the new norms nor their metrics. Negotiations in the CCs are thus also about competing cultural understandings of what counts as quality—they are conflicts over “economies of worth” (Boltanski and Thévenot Reference Boltanski and Thévenot2006; Gibbon and Ponte Reference Gibbon and Ponte2005).

To return one final time to Anil, he found conflict over valuations especially agonizing. “Parents always think their own children are beautiful,” he told me. I heard several variants of this expression, which I interpreted as an attempt by buyers to suggest that small-scale farming involves a measure of personalized (even noncommodified) labor analogous to child rearing. I also interpreted this phrase as an attempt by buyers to explain why farmers experience grading as a process of alienation, separating producers from their own sense of qualifications (Tsing Reference Tsing2013). As I stood next to grading tables, farmers would pick up rejected vegetables to demonstrate their own commitments to quality: yes, here is a large mark or a place where a worm may have entered, or, yes, this is too ripe or too raw—these should be removed. But what of this ridge gourd with a bend or this cauliflower that is bit large? “These are perfect, you can take them home.”

And although all the farmers I studied produced primarily for markets, new cultural demands for commodification confounded their own sense of value: cucumbers with diameters meant for sandwich slices for urban elite; ridge gourd whose new life as inventory means a length that must match standard-size crates and standard-size supermarket shelves. Susanne Freidberg (Reference Freidberg2004, 5) has illustrated how European supermarkets introduce new vulnerabilities in the livelihood opportunities of African farmers participating in “postcolonial food commodity networks” across national borders. Here the divide may span less than one hundred kilometers. Anil thus tried to mediate conflicts over quality by conjuring new social imaginaries—new identities, rationalities, and relationships meant to connect farmers with local consumers. For example, he encouraged farmers to feel proud that their vegetables were featured in upscale supermarkets close by. Farmers, however, repeatedly asserted that they would regularly eat the kinds of commodities they could no longer sell to IT professionals and wealthy households shopping in the city.

Critics of GVC agriculture argue that powerful retailers, processors, and manufacturers appropriate away the value that smallholders create through inputs like labor and land, while simultaneously devaluing individual and cultural forms of knowledge (McMichael Reference McMichael2013; Neilson Reference Neilson2014; McKay Reference McKay2018). This section offered microclues as to how and why this can be the case. In the CCs I observed, when farmers attempt to exchange according to grades and standards, they must negotiate fluctuations and ambiguities within and among standards and new forms of cultural and social alienation. These negotiations, in turn, illustrate how value additions can be systemically risky and cost-filled practices with different distributional consequences for different farmers—not simply or incidentally risky only when people are not clever or committed enough to add value right.

Alternative Value Chains

Consider a collective of three small retail stores and an online home delivery network called Buffalo Back. Its founder, Vishala, left her job as an accountant to farm according to a permaculture model. Agriculture is often a literalization of production—the form of surplus from which all other creative and distributive acts follow. But as we wandered across her land, where fruit trees intersperse with grains and vegetable patches, Vishala likened agriculture to mining. “It’s extraction,” she insisted. Farmers, via whatever chemical or organic methods, take from the earth more minerals, nutrients, “value” than they can replenish. For Vishala there is thus a structural priority to distribution; surplus rests on processes that are zero-sum.Footnote ⁴⁴

Profiting from extraction, she argued, means “you have to be responsible [or] you won’t add value.” Responsibility, in turn, requires distributing ownership, control, and risk. For example, no stakeholder—distributor, retailer, or farmer—owns equity in the chain but rather all must work off their own margins (a decision that confounds prospective investors who wish to see plans for a proprietary brand). Likewise, even though farmers do not use pesticides or chemical fertilizers, the chain rejects organic certifications—Vishala sees certifications as enabling rents, that is, opportunities to capture profit by making product differentiation scarcer and more expensive when she would rather that chemical-free production become more cheap and common (see Guthman Reference Guthman2004). The chain imposes quality standards—for example, beans and okra must be harvested before they become overripe so they snap not bend—but with a few exceptions, it does not grade for a standard shape and size in order to harmonize how producer and consumers coproduce and assess commodity value. Indeed, Buffalo Back retailers encourage their customers to desire commodities in ways that communicate solidarity with farmers—for example, by forgoing milk and eggs on weeks when producers suggest their animals must rest.

Perhaps most significantly, risk is distributed through collective planning. Vishala works with groups of five to fifteen farmers to execute production plans based on her best assessment of consumer demand. Many small Indian farmers monocrop, which simplifies skill and labor even as it creates the potential for distressed sales. “It’s easier for [small farmers] to grow just one variety or two varieties,” Vishala explained, “whereas we put our foot down and keep telling them we need at least ten varieties.”Footnote ⁴⁵

Requiring farmers to grow multiple varieties according to a predefined plan is supposed to generate value creation. Distributors receive sufficiently diverse commodities to stock retail shelves while minimizing the costs of logistics. In return for added labor, farmers receive security against risk because the chain promises to buy everything farmers harvest. But surplus only sometimes expands under this collaborative model: everyone is better off when supply matches demand. Often, however, surplus shrinks and flows from the chain to the farmers. Demand is difficult to predict: “there are holiday seasons, festivals, so many things.” Harvests are hard to predict as well: “Lower yield is always okay for us, we say sorry to the customers. Higher yield is when we start looking for options” like dehydrating and simple forms of processing.Footnote ⁴⁶ In these cases, collective planning morphs from value creation into purposeful practices of distribution.

Buffalo Back runs a tiny operation. But the larger AVCs I studied likewise begin by distributing preharvest risk through collective planning. Consider Sahaja Samrudha, which incorporated in 2010 as a farmer-owned, for-profit company. In 2017, the CEO reported buying about six tons of grocery per day, of which almost half is fresh produce, from about 5000 small farmers, and supplying (certified organic) produce to small upscale retail outlets concentrated mostly in three cities. A good deal of initial capital was invested by N.R. Shetty, a retired civil servant also turned natural farmer. Like Vishala, Shetty embraces his role as an intermediary trader: “I take from the farmers and facilitate them. But I believe in a sustainable margin.”Footnote ⁴⁷ Sahaja also pursues collective planning combined with near-guaranteed sales, knowing well that this strategy for value creation may require private redistribution. “We had four years of loss and I put in my own money,” Shetty recounted. “Why should I lose hard earned money? Still, I am ready to lose because my cause is farmers. If losing is too painful, you can’t go forward.”Footnote ⁴⁸

In one CC (where farmers received state support for organic cultivation), about forty horticulture farmers receive regular orders. Together they harvest roughly sixty different commodities, each rotating every three months among a few different varieties and growing each variety according to staggered fifteen-day planting cycles. To execute this plan, Sahaja needs particular kinds of farmers. But unlike Freshchain, these are farmers with less than two acres of land. This decision reflects more than a commitment to anti-poverty.Footnote ⁴⁹ To “create value” for farmers, company buyers, here called field officers, must aim to buy all the harvest they plan; to “add value” for consumers, they must visit field sites regularly to ensure production is pesticide free. To make planning and quality inspections manageable, field officers “work with small patches of land.”Footnote ⁵⁰

Farmers willing to supply small batches of diverse products multiple times a week also appear to be better value adders. Selling to small upscale urban stores creates market pressures: certain commodities cannot be too small and especially not too big—gourds and papayas, for example, can grow unacceptably large and overwhelm urban nuclear families. But here farmers have better incentives to harvest selectively. “Before [Sahaja when we went to the market] we plucked everything together because the risk is less,” one farmer explained. Bulk harvesting meant spending less on hired labor, transportation and time in wholesale markets. “Over here, in this office, they tell us [small orders] daily, so I just pluck 50 kgs and bring one bag on my two-wheeler.” This means, this farmer continued, he can harvest himself just-in-time and at the desired ripeness and size: “Over here, we give only the good ones, I will show it to you.”Footnote ⁵¹

What, then, do negotiations between small farmers and company buyers look like? “There are problems,” one Sahaja farmer told me. A grandmother in her sixties, she had a primary school education and owned just under three-fourths of an acre of land. “For example, [we] are not going according to the plan … [or] we may not grow [what the company asks] because of water issues.” “But we just discuss and figure it out.” “There is income over here,” she added.Footnote ⁵² Collective planning created different forms of social reciprocity. Rather than invocations of patronage or personal loyalty, “figuring it out” approximates what negotiation scholars call problem-solving collaboration.

For example, about twenty farmers gathered to discuss exactly who would plant what when while field officers corrected them: “If you are going to plant heirloom tomatoes you cannot delay it. Now write it down there. It should be put after 15 days.” Some protested their assignments: “I kept my land ready for onions, now you say beetroot?” They debated who had more capacity to adjust their plans—someone finally took the beetroot—and how much notice farmers needed to prepare their land for a new assignment (probably a week).

Then the group tried to manage some quality issues. Leafy greens were wilting en route to the city. Some proposed harvesting at night when it was cool (“We will also have to work at night and you [the field staff] will also have to work at night. That way even more fresh vegetables will go”), but the field staff did not think evening deliveries were practicable. So farmers proposed dispatching the truck by 7:00 am to evade the midday heat. Some liked the idea: “Keep everything ready beforehand and pluck leaves only in the morning.” Others resisted: “At seven, one person will come and another won’t”; “In the morning, I have to milk the cow, I have to do that [and] this, there will be so many problems.” And one field officer had to get her son to school on time. Well, another suggested, what about harvesting, grading, and loading at night and then an early morning dispatch handled only by the driver of the truck? With that suggestion, farmers debated how to manage security if they left a loaded vehicle alone overnight. Finally, the group debated how to divide some “withheld profits” that the company amassed over a year. Rather than allocate a roughly equal amount to each member (the board’s proposal), farmers wanted to peg profit to sales. As one explained, even if this option meant that sometimes he would receive less, he preferred it because it would encourage everyone to sell more and thus encourage everyone “to grow.”Footnote ⁵³

In another farmer organization with a similar structure (albeit without the same level of preplanning or explicit smallholder commitment), farmers likewise attempted to determine collectively what to grow and how to market it. The farmer-president began a group meeting by admonishing suppliers: “You cannot say we will supply what we grow … that is how farmers work in the market.” He too spoke GVC language. Then the group spent hours debating questions like whether they could reliably coordinate production to sell a sufficient variety of vegetables to attract a small export company, whether organic broccoli was worth its margins (it is vulnerable to certain pests and easily overripens), whether using plastic covers for weeding harmed the soil and/or contravened the chain’s environmental values, and how to manage recurring quality problems like fungus on spinach (the group concluded that they should improve their harvesting and washing practices).Footnote ⁵⁴

These quotidian, everyday negotiations suggest that companies and small farmers can pursue flexible and long-term practices of collaboration. Indeed, they suggest that small farmers can transform themselves into new kinds of negotiators—people who want to adopt the kinds of modernist, disciplined, problem-solving capitalist subjectivities that GVC proponents envision (indeed, consider that Sahaja farmers proposed to allocate withheld profits in a manner calculated to incentivize growth rather than greater redistribution).Footnote ⁵⁵ But they also suggest that these particular kinds of value-making subjects emerge when farmers negotiate under more stable and equitable background conditions.

Lessons for GVC Proponents

What does this comparison between conventional and alternative value chains suggest for GVC proponents? In conventional value chains, we saw how the development ideals articulated by Porter and others encounter friction when they make contact with the ground—friction that emerges not necessarily through organized political resistance but rather as a result of the efforts of marginal market actors to sustain their own economic existence. Perhaps for this reason, GVC proponents like Gereffi and his colleagues have encouraged scholars and policymakers to think more deeply about the background conditions that make new economic collaborations actually desirable and beneficial for producers at the base of a chain. In this call is perhaps a suggestion that sometimes value must be redistributed before it can expand. As James Ferguson (Reference Ferguson2015, 40) argues:

I have attempted to illustrate the force of this argument at the level of everyday negotiations. My claim, however, is not that AVCs will therefore transform rural development in India. To the contrary, they raise their own challenges and possess their own limitations. On the one hand, like all value chains, they embed biases and exclusions. They privilege small landed farmers against agricultural laborers, and they privilege farmers who live near cities and have sufficient irrigation for thirsty fruits and vegetables against farmers who live in more remote and arid places. On the other hand, AVCs depend on supply chain partners willing to sacrifice some (potentially long-term) profit and growth. Particularly for this second reason, I suspect AVCs are highly unlikely to influence the broader GVC development model. For example, Porter now widely encourages corporations to “create shared value” by considering the needs of smaller suppliers. Yet he emphatically stresses that “shared value creation”—such as companies linking farmers to third-party sources of finance as an example of pursuing a common interest—does not involve any private redistribution (Kramer and Porter Reference Porter and Kramer2011).

But even if AVCs therefore remain marginal in actual development practice, they hold insights for GVC analysis. To recap: they illustrate both how small farmers may want to adopt some of the value-adding subjectivities that development planners envision for them and how these shifts occur more readily under equitably distributed conditions. My descriptions of AVCs thus also help to illustrate why analysts should disaggregate value chains into practices of negotiation. A perspective rooted in the actual practice of negotiations reveals how lead firms aim to introduce new conceptions of “value” defined not only as an adjective that characterizes a product, but more significantly as a social ontology, a way of reconfiguring self and social organization. It likewise reveals how background conditions shape such microlevel self and social transformations—an observation that the following section argues should inspire renewed theories of collaborative negotiation.

Lessons for Negotiation Proponents

Throughout this article, I have used the analytical tools of the field of collaborative negotiation to trace how the strategies that negotiation scholars call “value creation”—lowering transaction costs, trading on differences, pursuing common interests, and simple forms of value additions—produce surplus in economic collaborations. What my fieldwork ultimately offers, however, is a glimpse at contemporary globalizing contexts where the pursuit of value additions is meant to become basic to economic existence. One Indian fruit dealer newly supplying supermarket chains put this point starkly: “At some point, [these] companies … [will] say that all you people are not adding any value to us…. So, lots of people in the chain will disappear unless they find a space where they can add some value.”Footnote ⁵⁶ This supplier expressed what small farmers know well: today adding surplus value is a high-stakes process full of distributional consequences.

For this reason, my fieldwork also suggests that familiar negotiation strategies—e.g., pursuing shared interests (linking farmers to financiers or saving the broker’s commission) or trading on differences (offering a lower price but for the benefit of “convenience”)—alone appear too anemic to help propel forward a new “value” economy. This is because from farmers’ perspectives, value additions are themselves unstable propositions. As the discussion of standards above illustrates, the line between expanding surplus and shrinking it is hardly fixed or clear.

Let me offer one final example of how surplus blurs with distribution. I spent an afternoon with a group of farmers who produce a processing variety of potato under contract for a large chip manufacturer (for GVC proponents, processing is an exemplary value addition). Although these farmers had worked with the company for well over a decade, the present situation felt dire. The company continued to pay a premium for its water-hungry variety of chipping potato, yet farmers’ yields had declined appreciably over time and their land was now too depleted to support an older mass-consumption variety of table potato that was cheaper to grow. “This year also our cost and profit were the same,” one farmer said. “If it happens again, farmers may commit suicide. Then others will stop potato.” In India, where over 300,000 farmers have taken their lives since the intensification of market liberalization, this was a sobering moment.Footnote ⁵⁷ My translator, himself the son of a small farmer, spoke these final words so softly that I strained to hear them.

We all sat in silence until a second farmer elaborated: “See, we got handsome money in the beginning. When the company came to the village, people were so poor…. They were not in a position to understand what I understand now [about the effect of the company seed on soil quality].” When I asked this farmer if he would therefore advise a hypothetical different village to accept a contract—that is, to risk soil and long-term yields for short-term profit—his answer was nonetheless yes: “We will advise them to switch to [the company]. It will raise your standards…. What is the point of maintaining soil standards when [farmers] cannot overcome poverty? Once we get good money, later farmers can improve soil quality.” When I asked this farmer if he was able to improve his own soil quality, he sighed loudly, “We can do [it] but we don’t have enough money now.”Footnote ⁵⁸ So did these potato farmers add and capture value compared to their alternative options? From their perspective, the answer appears simultaneously, indeed impossibly, no and yes. But if small farmers must choose between adding value benchmarked as a rise in human standards or soil standards (even knowing these will eventually converge), then value adding is a process of distribution.

And if value adding is a distributive process, then as negotiation proponents, we might flip some basic normative assumptions. The field of collaborative negotiation aims to help people unlock the zero-sum mindsets presumed to limit social imagination. To that end, negotiation proponents, like GVC proponents, reason that despite bargaining inequalities, people will seek out collaborations when they come to recognize opportunities for mutual gain that outweigh risks and costs. But what AVCs suggest is that sometimes people form new social and economic associations precisely because they realize that the risks and costs of economic activity necessitate interdependence and because they desire to manage these risks and costs in more egalitarian and democratic ways.Footnote ⁵⁹ Under GVC development, the poor are transformed into entrepreneurs—development subjects must all become “value adders” now. Read from this perspective, AVCs offer a lesson for negotiation proponents apart from whatever influence they hold for India’s rural development. They illustrate how new collaborations and social alliances sometimes become possible only when stakeholders make clear that they are jointly negotiating and distributing the risks, uncertainties, and ecological and social dangers—not only, or even primarily, the benefits—of value creation.