Abstract

The article shows the asset-related determinants and the impacts of the participation of small farmers in supermarkets versus traditional market channels in Guatemala. Compared to farmers selling only to the traditional market channels, farmers selling to supermarket channels are larger (but are in the upper tier of the "small farmer" category), have more capital, and are much more specialized in commercial horticulture in general and in tomatoes in particular. While they have higher yields, they also have higher input use, including use of chemicals. In fact, they severely overuse pesticides and fungicides. Moreover, these greater input expenditures mean that their profit rates are roughly similar to those of farmers in the traditional market channel. Supermarket-channel farmers prefer the more demanding wholesale-supermarket channel because it offers lower risks and lower transaction costs to market, a variety of quality grades of tomatoes, all year long. In turn, the supermarkets, who do not buy direct but rather source from a few specialized-dedicated wholesalers, rely on this year-round supply, lower transaction costs, and consistency of quality. © 2007 International Association of Agricultural Economists.