The Determinants of Intermediaries’ Power over Farmers’ Margin-Related Activities: Evidence from Adana, Turkey ORJON XHOXHI a,b , SØREN MARCUS PEDERSEN a , KIM MARTIN LIND a and ATTILA YAZAR c,* a University of Copenhagen, Denmark b Agricultural University of Tirana, Albania c Cukurova University, Adana, Turkey Summary. — This paper investigates the determinants of intermediaries’ power over farmers’ margin-related activities in Adana, Turkey. In doing so, a holistic model of intermediaries’ power over farmers’ margin-related activities is proposed. The objective of this model is to contribute to a better understanding of the power relationships between farmers and intermediaries. It is argued in the paper that a balance of power needs to be established between farmers and intermediaries because it leads to the rise of more efficient trading relationships, with reduced transaction costs and improved chain coordination. Multiple linear regression is employed to analyze the hypothesized relationships. Ó 2014 Elsevier Ltd. All rights reserved. Key words — farmers, intermediary, market power, value chain, Turkey, Mediterranean region 1. INTRODUCTION It is often pointed out that farmers get the lowest profit or economic margin of the final product value in the food supply chains, 1 especially in developing countries (Banskota & Sharma, 1999; Khushk, 2001; Murray, 1997; Pokhrel & Thapa, 2007; Shrestha & Shrestha, 2000; Thapa, Koirala, Gill, and Thapa (1995)). Due to the size and structure of the food companies, it is often the retail sector and intermediaries that have the most market power in the food supply chains. As a result of their power, they transfer risks and unexpected costs to farmers which compromise the innovation, modernization, and restructuring of the farming sector into more efficient forms. When considering that 70% of the worlds’ poor who live in rural areas have farming business as main source of income (World Bank, 2012), it becomes crucial to understand the inter- mediaries’ power over farmers and its impacts upon farmers’ business and livelihood. However, most of the studies of power are focused on the downstream part of the supply chain (Collins, 2007; El-Ansary & Stern, 1972; Frazier & Summers, 1986), much less attention has been put on studies that attempted to understand the power determinants for the upstream part of the supply chain between farmers and inter- mediaries. By examining the nature of relationships within the supply chain it is possible to identify ways that can improve farmers’ livelihood, trading pattern, efficiency, and the perfor- mance of the whole chain. In turn, farmers could potentially benefit from increased profitability when there is a balance of power in their relationship with intermediaries. The literature shows that power has influence on the quality of the trading relationship, including: parties trust, satisfac- tion, conflict, supply chain, and performance (Batt, 2003; Benton & Maloni, 2005; Brown, Lusch, & Nicholson, 1995; Maloni & Benton, 2000). There are a number of authors who suggest that more collaborative relationships lead to increased supply chain performance (Barret, 2004; Gattorna & Walters, 1996; Horvath, 2001; Lewis, 1990; Saunders, 1994). Some scholars even argue that competition between firms has shifted from firm level to supply chain competition (Anderson & Katz, 1998; Christopher, 1992; Henkoff, 1994; Lummus, Vokurka, & Alber, 1998; Moore, 1996; Morgan & Monczak, 1996). However, as it will be discussed later, the relationships between farmer-intermediaries in the study region of Adana in Turkey (and in most developing countries) are at arm-length, both parties are focused on the short-term outcomes. According to Williamson (1979) this type of rela- tionships is embedded in high transaction costs which affects negatively supply chain performance, and the benefits of the parties engaged in such relationships. Moreover, the power regime that exists in trading relationships plays a critical role in the way those relationships are managed. In the case of a mismatch between the power regime and relationship manage- ment, this leads to reduced supply chain performance (Cox, 2004; Cox, Watson, Lonsdale, & Sanderson, 2004). As stated by Cox (2004), “Only by understanding the power that exists can buyers and suppliers fully understand, what is the appropriate way for them to manage relationships”. Therefore, the objective of this study is to investigate the deter- minants of intermediaries’ power over farmers’ margin-related activities, in the context of developing countries. In this paper, the term power over margin (POM) is the main focus of ana- lyzing the intermediaries’ influence over farmers’ activities that affect profit margins, such as influence over price or influence over credit terms to the intermediary (Collins, 2002). In taking this approach, we propose to highlight some of the ways to create a balance of power between farmers-intermediaries. The basic argument of doing so is that the creation of more collaborative relationships between farmers and intermediaries could be achieved only when there is a balance of power. This should have a positive effect not only on farmers’ livelihood but also on the efficiency of the farmers and intermediaries * We appreciate the assistance from SWUP-MED project and support from the Agrismundus Scholarship and the Agriculture Development gr- ant. A special word of thanks to Dr. Metin Sezen, Adil Arslan, and the staff of the water use associations in Adana and Mersin for their help in the data collection process. Lastly, many thanks also to all the farmers that have participated in this research and have provided valuable infor- mation. Final revision accepted: July 15, 2014. World Development Vol. 64, pp. 815–827, 2014 0305-750X/Ó 2014 Elsevier Ltd. All rights reserved. www.elsevier.com/locate/worlddev http://dx.doi.org/10.1016/j.worlddev.2014.07.012 815