Are Collective Trading Organisations Necessarily Inclusive of Smallholder Farmers?: A Comparative Analysis of Farmer-led Auctions in the Javanese Chilli Market

Abstract

Organising smallholder farmers into groups or co-operatives is widely promoted as a strategy to connect farmers to markets and turn them into price makers rather than price takers. This pathway usually combines co-operative organisational models, based on collective ownership and representation in internal governance, with measures to shorten the agri-food chain, shifting the ownership of intermediary sourcing, aggregating and trading functions to the group. The underlying assumption is that this improves smallholder farmers' terms of inclusion in markets. To scrutinise this assumption, our study compares two examples of farmer-led auctions facilitating trading in the chilli market in Java, Indonesia. The auctions' ownership, management and performance evolved differently: one was run by a group and the other by a family. The comparison brings nuance to the prevalent emphasis on co-operative ownership structures. By researching practices central to collective trading at the chilli supplier–trader interface, this study unravels four dimensions—ownership, voice, reward and risk—capturing smallholder chilli farmers' terms of inclusion in both the auctions and the market. Our comparative analysis suggests that shared ownership and control of the trading function, a central feature of co-operative models, does not necessarily ensure favourable terms of inclusion for smallholder farmers with little capacity to take risks. The capacity to reconfigure the terms of market inclusion for vulnerable smallholder farmers involves direct payment modalities and risk taking. A collectively owned trading organisation does not necessarily imply an inclusive business concept when the organisation cannot acquire sufficient working capital to pay its suppliers.