 Dr. Thomas is a professor in the Department of Agriculture, Food and Resource Economics at Michigan State University. Right to joining MSU, he worked with Disney for eight years. Tom's research focuses on links between agri-food industry, transformations and food security in Asia, and he's listed in whose who in economics was back in writing to World Economic Forum in 2009, and he's also a member of the WES Global Alliance Council for Food Security. He's going to talk about the other end of the supply chain, talk about ice in the air supermarket. With that, Tom. Thank you so much. It's a pleasure to be here with you. My focus is not going to be on the farm level except in a way that in a sense the farm level is affected by the other levels in the supply chain. I think it's important to emphasize, as I'm going to be speaking about the rice industry and the rice market, that 50 to 75% of the rice price that's paid by the consumer in Asia is formed by the segments of the supply chain that come after the farm. Distribution and logistics, processing, retail, these are basically the segments that form 50 to 75% of the rice price. Yet the discussion already at this conference might have touched on those segments 5% of the time or 1% of the time. So I think that that investment of those and understanding of those has to become central to understanding the overall rice economy. Now to summarize that idea, the talk is called Rice in the Air of the Supermarket, and I'll focus on Asia and I'll use some field research that's been funded by the Asian Development Bank mainly in order to illustrate this. And of course the points will be general because I don't have time to go into great detail, but of course I'm talking about areas that are heterogeneous and so there's lots of differences across the area. So I'll talk about tendencies and future movements and moving averages. And I'll start with a set of points about structural change in the rice industry. Then I'll look at conduct change in the rice industry and finally performance change in the rice industry. And my first set of points will deal with trends that have been occurring in the 1990s and 2000s in the industry, let's say especially in Asia where I'll focus, and you can think of these as symbiotic trends, that is they're co-evolving, they're very related. The first one, one I'm very passionate about is the consolidation and multinationalization in retail simply put the rapid rise of supermarkets. And what we've been finding is that supermarkets that might have been a very small share of the food industry or food economy in 1990 even in Asia have gone to be 30, 50 more percent of the food economy by the end of the 2010. And an example from our recent work is that while there were no supermarkets at the end of the year in 1989 in China by the study that we did this year we found that 50% of rice retail in Beijing is going through supermarkets. Now this is about the early 1990s, late 1980s in Hong Kong so it's lagging behind that but it's already changed very quickly. It's lagging behind overall penetration of supermarkets and processed food which is around 75% of the largest cities in China but it's catching up. Now in Delhi where we just did a study and 85% of the supermarket sales in Delhi have been formed in the past three years so this is very recent. Already supermarkets have 7% of the rice retail in Delhi. The concomitant point of course is that there's been as in many parts of the world the trend that you see also in Northeast Asia and East Asia is now occurring in Southeast Asia and starting in South Asia and certainly in China which is the decline of the traditional rice shops. So there's a fundamental shading up of the retail side of the rice economy. Then there's also a shake-up that's occurring really over the past decade or a little bit more depending on the country in the milling sector with rapid consolidation and mechanization, a rise of large and medium mills and we've watched it in our studies that rapid decline of the small rural rice mills and a rise, this has been fascinating in our study in Beijing with Hanoi province, that there's a rise of direct relationships between the mill and the wholesaler and the mill and the supermarket cutting out the rural broker, the semi-wholesaler, all these pieces in the chain that we've come to think of are there. Third point of structural change is related to the point I just made which is the rapid consolidation and disintroduction in rice wholesaler. There's a rise of medium and large wholesalers that we've found are representing directly sets of mills or single mills and a decline of the small rural rice brokers in many areas. The last structural point is that just as downstream from the farmer once seen rapid ferment and change in Asia, also upstream as is evidenced by the presence of buyer and other agri-input companies at this conference, there's been a growth consolidation, multinationalization in the inputs being sold to farmers, a rise of large seed chemical companies. The start of the rise of one-stop shop rural modern input retail if you want input supermarkets that one is seeing in India and the rural business hubs. The decline of the state sector that was so important in input retail in decades past in China and India and elsewhere. So in four ways structural change has been occurring very quickly in what was thought to be a sleepy sector. Now all of that is inducing waves of change of the conduct of the behavior in supply chains of rice. First one that you can see is coming really immediately from these trends is disintermediation. So when I started to do this research with colleagues, everyone says, well the way the rice supply chain looks in Asia is there's a farmer and then there's a rural broker and then it goes to a mill and then it goes to a broker between the mill and the city, then it goes to a wholesaler within the city, then it goes to a semi-wholesaler and then it goes to the traditional retailer. Many hands, lots of inefficiency. But in fact what we've seen is that in very many places there's a shift from these long supply chains to much shorter chains with disintermediation. And along with that shift has come a shift from the informal sector to formalization. For example in the Beijing study in other places we've seen a shift from rice sold loose to rice now sold packaged, labeled, branded, 80% of the wholesale market rice in Beijing is sold packaged, labeled and branded, 80%. That was much much lower just five years ago. And with that comes incipient traceability, the importance of which I'll point out in a second. A third topic in change of conduct in supply chains which sends me into paroxysms of obsession really is this issue of the product cycle of the value ladder climbing that one can see happening in the rice sector as well as the non-rice sector in Asia. Shifting from local niches, building them up into commodity rices that are sold at zone level, national level and international levels into commodity cost-competed products. And then with differentiation of these commodity rices into quality differentiated rices that is by far the wave of the future. And differentiation into safe rice, green food for example in the rice sector in Beijing is rising very quickly, organic rices. And what we think, when I say we, I've been talking a lot and working a lot on this with Peter Timmer. In fact this is an outline of our joint paper that we're preparing Thursday. But there's a probable trend toward traceability and all of these things will conspire to make that happen. And we think that traceability will be a key thing in the rice sector for the same reason that it became so in the beef, milk and produce sector because all the points that have been made about the incursion of cities into the rice areas means also incursion of pollution of metals. There's going to be the same kind of PCB crisis that affected the fuel sector in Europe. You'll have several major crises like that in Asia in the next five years, I'm sorry to say. I really believe that will happen and the traceability topic will become very central in rice. On the other hand, besides those challenges we're faced with opportunities, food security increased through greater efficiency in the supply chain. Supermarkets is motors of rice market quality differentiation and labeling. And all of this will increase incentives right up the supply chain to the farmers. Now I have some open questions that I feel privileged to just throw on the table, which are two. I've been thinking what the heck is the role of policy and private public partnerships to address these challenges and pursue these opportunities? Is this a thing that will happen parallel or will policy interact with it? Will it make it faster? Will it make it easier? Will it include more people? Will it make it more effective? And the last question I had actually flipped the other way around when I was sitting this morning listening to the plenary. I'm thinking, hey, everybody has in their line of rice farmer and formal rice farmer and a big government guy. That's the way all these debates go. Over and over and over again like a broken record. And of course when there's a crisis it becomes more of a broken record. It spins a little bit faster. But really these changes I'm talking about are a lot more important over the longer term than some policy debates here and there as you're bumping along. How will these things change the policy debate? How will these actors that are consolidating turn around and say, as they have in the produce sector, they have in the dairy sector, they have in the meat sector, they have in the non-food sector. They turn around and policy makers and they say, hey, make this work. Cut down the resistance. Cut down the constraints. We need to make this market grow. What are you going to do about that? And there will be a heavy pressure in the future that will affect how the policies and how these market structures and regulations develop. Just in the way that proper science people are doing at present influencing the regulations and the property rights that envelop the supply chain at the input end. So with that, I conclude. Thank you.