Improving farmers' and consumers' welfare in agricultural supply chains via data-driven analytics and modeling : from theory to practice

Thesis: Ph. D., Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, September, 2020Page 236 blank. Cataloged from PDF version of thesis.Includes bibliographical references (pages 223-235).The upstream parts of the agricultural supply chain consists of millions of smallholder farmers who continue to suffer from extreme poverty. The first stream of research in this thesis focuses on online agri-platforms which have been launched to connect geographically isolated markets in many developing countries. This work is in close collaboration with the state government of Karnataka in India which launched the Unified Market Platform (UMP). Leveraging both public data and platform data, a difference-in-differences analysis in Chapter 2 suggests that the implementation of the UMP has significantly increased modal price of certain commodities (5.1%-3.5%), while prices for other commodities have not changed. The analysis provides evidence that logistical challenges, bidding efficiency, market concentration, and price discovery process are important factors explaining the variable impact of UMP on prices.Based on the insights, Chapter 3 describes the design, analysis and field implementation of a new two-stage auction mechanism. From February to May 2019, commodities worth more than $6 million (USD) had been traded under the new auction. Our empirical analysis suggests that the implementation has yielded a significant 4.7% price increase with an impact on farmer profitability ranging 60%-158%, affecting over 10,000 farmers who traded in the treatment market. The second stream of research work in the thesis turns to consumer welfare and identifies effective policies to tackle structural challenges of food safety and food security that arise in traditional agricultural markets. In Chapter 4, we develop a new modeling framework to investigate how quality uncertainty, supply chain dispersion, and imperfect testing capabilities jointly engender suppliers' adulteration behavior.The results highlight the limitations of only relying on end-product inspection to deter EMA and advocate a more proactive approach that addresses fundamental structural problems in the supply chain. In Chapter 5, we analyze the issue of artificial shortage, the phenomenon that leads to food security risks where powerful traders strategically withhold inventory of essential commodities to create price surge in the market. The behavioral game-theoretic models developed allow us to examine the effectiveness of common government interventions. The analysis demonstrates the disparate effects of different interventions on artificial shortage; while supply allocation schemes often mitigate shortage, cash subsidy can inadvertently aggravate shortage in the market. Further, using field data from onion markets of India, we structurally estimate that 10% of the total supply is being hoarded by the traders during the lean season.by Somya Singhvi.Ph. D.Ph.D. Massachusetts Institute of Technology, Sloan School of Management, Operations Research Cente

Economically Motivated Adulteration in Farming Supply Chains

© 2019 INFORMS. Economically motivated adulteration (EMA) is a serious threat to public health. In this paper, we develop a modeling framework to examine farms' strategic adulteration behavior and the resulting EMA risk in farming supply chains. We study both "preemptive EMA," in which farms engage in adulteration to decrease the likelihood of producing lowquality output, and "reactive EMA," in which adulteration is done to increase the perceived quality of the output. We fully characterize the farms' equilibrium adulteration behavior in both types of EMA and analyze how quality uncertainty, supply chain dispersion, traceability, and testing sensitivity (in detecting adulteration) jointly impact the equilibrium adulteration behavior. We determine when greater supply chain dispersion leads to a higher EMA risk and how this result depends on traceability and testing sensitivity. Furthermore, we caution that investing in quality without also enhancing testing capabilities may inadvertently increase EMA risk. Our results highlight the limitations of only relying on end-product inspection to deter EMA. We leverage our analyses to offer tangible insights that can help companies and regulators to more proactively address EMA risk in food products

The impact of unifying agricultural wholesale markets on prices and farmers’ profitability

As a leading effort to improve the welfare of smallholder farmers, several governments have led major reforms in improving market access for these farmers through online agricultural platforms. Leveraging collaboration with the state government of Karnataka, India, this paper provides an empirical assessment on the impact of such a reform—implementation of the Unified Market Platform (UMP)—on market prices and farmers’ profitability. UMP was created in 2014 to unify all trades in the agricultural wholesale markets of the state to be carried out within a single platform. By November 2019, 62.8 million metric tons of commodities valued at $21.7 billion (USD) have been traded on UMP. Employing a difference-in-differences method, we demonstrate that the impact of UMP on modal prices varies substantially across commodities. In particular, the implementation of UMP has yielded an average 5.1%, 3.6%, and 3.5% increase in the modal prices of paddy, groundnut, and maize. Furthermore, UMP has generated a greater benefit for farmers who produce higher-quality commodities. Given low profit margins of smallholder farmers (2 to 9%), the range of profit improvement is significant (36 to 159%). In contrast, UMP has no statistically significant impact on the modal prices of cotton, green gram, or tur. Using detailed market data from UMP, we analyze how features related to logistical challenges, bidding efficiency, in-market concentration, and the price discovery process differ between commodities with and without a significant price increase due to UMP. These analyses lead to several policy insights regarding the design of similar agri-platforms in developing countries