Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil

Schneider, Sergio; Cenci, Alexander Article Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil Italian Review of Agricultural Economics (REA) Provided in Cooperation with: Firenze University Press Suggested Citation: Schneider, Sergio; Cenci, Alexander (2024) : Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil, Italian Review of Agricultural Economics (REA), ISSN 2281-1559, Firenze University Press, Florence, Vol. 79, Iss. 3, pp. 43-55, https://doi.org/10.36253/rea-15459 This Version is available at: https://hdl.handle.net/10419/325692 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Italian Review of Agricultural Economics Vol. 79, n. 3: 43-55, 2024 Firenze University Press www.fupress.com/rea ISSN 0035-6190 (print) | ISSN 2281-1559 (online) | DOI: 10.36253/rea-15459 REA ITALIAN REVIEW OF AGRICULTURAL ECONOMICS ITALIAN REVIEW OF AGRICULTURAL ECONOMICS Citation: Schneider, S., & Cenci, A. (2024). Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil. Italian Review of Agricultural Economics 79(3): 43-55. DOI: 10.36253/rea-15459 Received: July 12, 2024 Revised: October 3, 2024 Accepted: November 22, 2024 © 2024 Author(s). This is an open access, peer-reviewed article published by Firenze University Press (https://www.fupress.com) and distributed, except where otherwise noted, under the terms of the CC BY 4.0 License for content and CC0 1.0 Universal for metadata. Data Availability Statement: Data will be made available by the corresponding author upon request. Competing Interests: The Author(s) declare(s) no conflict of interest. Guest Editor: Pierluigi Milone ORCID SS: 0000-0002-4353-6732 AC: 0000-0001-7800-4800 The Multidisciplinary Approach of Rural Studies - Research article Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil Sergio Schneider1,*, Alexander Cenci2 1 Federal University of Rio Grande do Sul, Porto Alegre, Rio Grande do Sul, Brazil 2 Official at the State Secretary of Agriculture, Livestock and Rural Development of Rio Grande do Sul, Brazil *Corresponding author. E-mail: [email protected] Abstract. Recent studies on markets and their role in development processes have highlighted the crucial importance of market access as well as of power relations. In this article we argue that it is necessary to take a step forward regarding the notion that markets are collective action devices that can be mobilised in favour of the actors who build and govern them. We support the hypothesis that there are multiple markets that coexist and establish disputes, which lead to the emergence of different types of markets. At the same time, we will show that markets are structured differently, depending on the context in which agents participate in commerce. The article draws on empirical data on market diversification by family farming’s agri-enterprises in the State of Rio Grande do Sul, Brazil. Findings highlight the kinds of markets that are most desirable or recommended for family agri-enterprises and what kind of policies would better benefit such rural enterprises. Keywords: market diversification, social construction, family farmers, South Brazil. JEL codes: Q13. HIGHLIGHTS – There are increasingly precise and forceful diagnoses of how markets are structured and work under capitalism. – Beyond being socially constructed, markets are structured differently in different contexts and social spaces. – A market types based on characterization of the different marketing channels that are created and used to transact products and goods by suppliers is needed. The type will make it possible to describe the market structures. – To understand the structure and functioning of markets, it is essential to understand and analyse how the process of social reproduction of exchange relations takes place in certain social and economic contexts. 44 Sergio Schneider, Alexander Cenci 1. INTRODUCTION Recent studies on markets and their role in development processes have underscored the crucial importance of two aspects: the challenge of accessing markets and power relations. The issue of access to markets is related to the subordinate role of sellers and buyers in relation to large product distribution chains, whether they are digital commerce platforms, supermarkets or distribution companies operating in the agri-food sector. The problem with access to markets splits into hindrances related to asymmetries of power within the markets. In a globalised world, neither sellers nor buyers are content with the reduction in their negotiating capacity. After all, a promise of capitalism, the one that competition between sellers and buyers would be rewarded through comparative and competitive advantages to the most efficient agents, has failed spectacularly. Despite efforts to achieve allocative efficiency, throughout the process many agents realize that they live and fight in an environment full of imperfections and asymmetries, in which the winners are not always those who invest the most effort. In recent decades, economic sociology studies have been particularly assertive in demonstrating the correctness of Karl Polanyi’s (2000) assertions about the distorted functioning of markets in societies that allow their self-regulation. There are, today, precise and conclusive diagnoses on how markets are structured and function under capitalism. There is a consensus that commercial exchange relationships are always socially constructed and, therefore, subject to imperfections inherent to human action, such as self-interest, opportunism, falsehood and deception. Therefore, markets’ functioning, much like individuals in society, requires rules and regulation in addition to surveillance mechanisms that anticipate and curb distortions. Thus, the understanding that markets are socially constructed by agents who participate in their architecture and require regulatory institutions has become consensual. The importance of discussing markets in the current context of rural development is also evident in the work by Ventura et al. (2010: 321). According to the authors, new emerging markets have gained centrality in debates due to the changes that have occurred in the political economy of global agriculture. It is through these markets that agriculture begins to respond to new social needs and, thus, the establishment and functioning of food and agricultural markets becomes the main object of socio-political struggles. However, some gaps remain in the studies which require better understanding, for example, the issue of diversity and heterogeneity of markets. The recognition that markets are social constructions is important, but it says little about how they work in practice, how the actors who participate in their construction are organized, what power relations are like between agents and what the game of who wins and who loses is like in these relationships. Furthermore, it is reasonable to assume that there is no homogeneity in commercial exchanges and that they may vary according to criteria of size, scale and intensity. Therefore, we need to deepen our understanding about the diversity of markets. In this article we will argue that it is necessary to take a step further regarding the notion that markets are collective action devices that can be mobilized in favour of agents. We intend to show that, in addition to being socially constructed, markets are structured differently in different contexts and social spaces. Basically, we will argue that there is a diversity of markets which corresponds to their ways of structuring and functioning that depend on the context in which agents participate in commerce. Our analytical hypothesis draws on the idea that there are multiple coexisting markets, which dispute and struggle with each other, leading to the emergence of different types of markets. In view of this, we propose a typology of markets based on characterization of the different marketing channels that are created and used by suppliers to transact products. This typology will therefore enable us to describe the structure of markets. In this sense, to understand this specificity, we will analyse the process of market diversification taking family farming’s agri-enterprises located in the State of Rio Grande do Sul, southern Brazil, as an empirical case. Family agri-enterprises are small enterprises that transform, benefit, process and commercialize agri-food raw materials such as dairy products, meat, fruits, sugar cane, among others. We intend to show how they are structured and what markets are used to sell these family farming products, by identifying the channels they use. Data presented demonstrate that many production units sell their products through various marketing channels and that the diversity of forms of this marketing is based on different mechanisms for control and regulation, some tacit and informal, others manifest and formal. In the conclusions, we specify which markets are most desirable or recommended for farmers. Contrary to what conventional and mainstream views about markets claim, access to different marketing channels and diversification of buyers’ portfolios can represent an important advantage for sellers. After all, we argue, the greater the choices and sales possibilities, the greater the margin of manoeuvre and “market power”, understood as the capacity of an agency to cope with the objective cir- 45 Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil cumstances faced. In short, we will support the idea that farmers need more and better markets. 2. INSTITUTIONS AND THE SOCIAL CONSTRUCTION OF FAMILY FARMING MARKETS Institutions, as social phenomena that condition human behaviour, have instigated the work of various authors from different theoretical perspectives. Geoffrey Hodgson (1994), for example, when discussing the relationship between the economy and institutions, highlighted the importance of the environment in which the individual is embedded. However, Hodgson notes that the institutional environment does not completely determine what actors do or decide to do. In studies on markets as institutions, the author highlights that exchanges of goods are facilitated and structured by these institutions – markets are understood as organized and institutionalized exchanges1. For Hodgson, beyond issues related to conveying information on products’ prices and quantities, market institutions contribute to conditioning the acts and dispositions of agents, influencing their choices, preferences and prices. In a subtle way, through the functioning of market conventions, routines and rules, the individual in the market is, to a certain extent, “coerced” into a certain type of behaviour. Therefore, and precisely contrary to what many orthodox economists claim, the market can never be completely “free” in the classical liberal sense and does not necessarily represent the epitome of freedom for the individual (Hodgson, 1994: 179-180, authors’ translation). Hodgson (1994) also states that issues such as price and product quality are partially legitimized by the expectations and legitimizing and informative functions of institutions, which differ from those of the “equilibrium price” proposed by neoclassical theory. Thus, when discussing prices in the institutional context, Hodgson (2003: 898) claims that this mechanism depends, to a certain extent, on ideas and habits and that a theory of prices must therefore be “a theory of ideas, expectations, habits and institutions, involving routines and processes of valuation.” For Milone and Ventura (2016) markets can be conceived as an institution holding particular social norms that constitute the basis for enabling exchange relations, since such norms lead to the definition, for example, of 1 In his work, Hodgson (1994) emphasizes market institutions that help regulate and establish consensus on prices, as well as communicate information about products, prices and quantities to potential buyers and sellers. products’ characteristics and forms of use, as well as of consumer preferences. The authors point out that today, especially through the neo-institutional approach, the market is no longer considered a pure and abstract entity, free from the influence of commercial agents. Thus, different economic, political and social factors interact to determine the outcome of a transaction. In the same sense, Cassol and Schneider (2022), point out that “markets are social institutions, to the extent that they obey [or are embedded in] local characteristics of food production, marketing, handling and consumption, which are oriented by and based on the values shared by the actors who work in its construction” (p. 5, authors’ translation) For the authors, “economic exchange and commercial transactions are guided and based not only on criteria of price, quantity and liquidity, but also on the particular values and norms that govern the interactions of those who participate in such exchanges.” (p. 5, authors’ translation) Mark Granovetter (2007) initially focused on networks of interpersonal relationships, making it possible to delve deeper into how behaviours and institutions are affected by social relationships. According to Granovetter, the utilitarian tradition, originated from classical and neoclassical economics, “presupposes rational and self-interested behaviour minimally affected by social relations, thus invoking an idealized state not far from that of these thought experiments” (p. 3, authors’ translation). In contrast to this view, the author proposes an approach based on “embeddedness”, according to which “the behaviours and institutions to be analysed are so constrained by ongoing social relations that to construe them as independent is a grievous misunderstanding” (p. 3, authors’ translation). Regarding the context of social embeddedness of economic behaviour, Cassol and Schneider (2022,) suggest that the analysis of agri-food systems should not be limited to the social networks approach, as “previously to entering a network (connecting interpersonally with other actors), agents already share certain contextual cultural values that guide their choices” (p. 5, authors’ translation). According to the authors, “it is the choices stemming from values that shapes social interaction and business networks and defines the positions of actors in the field.” The institutional context involving social construction of markets is also echoed in Neil Fligstein (1996). Viewing markets as a political field, Fligstein argues that a first issue to be raised for developing a sociology of markets should be the theoretical proposition of the “social institutions necessary as preconditions to the existence of such markets” (p. 658). The author suggests that institutions – such as property rights, governance struc- 46 Sergio Schneider, Alexander Cenci tures, conceptions of control and rules of exchange – are essential for enabling actors to organize themselves in the markets to compete, cooperate and exchange. The author justifies the importance of state participation, considering that organizations, groups and institutions that make up the state in modern capitalist societies claim the formulation and enforcement of rules that govern economic interaction in a given geographic area. The interweaving of social relations in the economic system, proposed by Karl Polanyi (2000), is another aspect to be considered in the institutional approach to social construction of markets. Garcia-Parpet (2021: 124) notes that the research work undertaken by Polanyi on the genesis of the economy and of the markets system has marked the thought of contemporary social sciences. The author points that Polanyi’s work on the origins of economic institutions showed that the economy does not exist separately as a system in those social organizations, but rather it is embedded in other institutions, such as kinship, religion, political system, among others. For Polanyi, under very specific conditions, the self-regulating market does not fail to take place. The dominance of the economic system by markets has overwhelming effects on the entire organization of society, since society comes to exist as an extension of markets. Thus, according to Polanyi, “instead of the economy being embedded in social relations, it is social relations that are embedded in the economic system, and the other social domains become subordinate to market movements” (Garcia-Parpet, 2021: 127). Polanyi (2000: 98) uses the terms double movement and counter-movements, stating that “while on the one hand markets spread all over the face of the globe and the amount of goods involved grew to unbelievable dimensions, on the other hand a network of measures and policies was integrated into powerful institutions designed to check the action of the market related to labour, land, and money.” For the author, human society could have been annihilated if it were not for the protective counter-movements that mitigated the action of the self-destructive market mechanism, defined by the author as a “satanic mill”. Schneider and Escher (2011), discussing Polanyi’s contribution to sociology of rural development, argue that for the Polanyian perspective the central problem is the subordination of human society and its alienation through the “logic of the market”, what ultimately undermines the ability to shape the economy according to social objectives through politics. Discussions on family farming markets are also enriched by the nested markets approach, also referred to as territorial markets or embedded markets (Polman et al., 2010; Ploeg, 2016). The latter author defines these markets as “markets that are embedded within broader markets, [forming] part of large markets, but that differ from these latter with regard to their dynamics, interrelations, forms of governance, price differentials, mechanisms of distribution and overall impact.” (Ploeg, 2016: 23)2. In this perspective, in a recent work, Milone and Ventura (2024: 6) say that nested markets depend crucially on the social relations in which they are embedded, highlighting aspects such as trust, reciprocity and reputation. For the authors, exchanges are a consequence of actors’ behaviour patterns in relation to their social and natural environment – a behaviour that is strongly rooted in the territory. In the case of nested markets, the authors highlight sustainable practices that incorporate elements of solidarity, generated through exchanges between producers and consumers linked by common and shared goals and objectives. In turn, Schneider (2016) suggests a typology that seeks to contemplate the understanding of markets as a locus, as a principle of social ordering and as a social construction, stratifying four types of markets: proximity markets; territorial markets; conventional markets; public and institutional markets. According to the author, proximity markets are linked to the local context and exchange relations are based on reciprocity and mutual knowledge, so that trust and friendship dominate the regulation of established social relations. Territorial markets have a regional scope and are characterized by a greater quantity of production that is predominantly intended for sale. The forms of regulation are based on both trust and reputation, as well as on indicators of origin and price. Conventional markets are characterized by a competitive structure and are guided by price and contracts between buyers and sellers, in addition to the fact that the spatial scope is national and above all global. In turn, public and institutional markets are those that presuppose sales to the public or governmental authorities through institutional purchasing 2 The authors consider the propositions presented by Polanyi to be central for three reasons: First, because his ideas express the crucial role of social regulation on the economy and the role of institutions as mediators between socioeconomic structures and individuals as social actors. Secondly, because, in the current context, transnational companies and their articulations of expansion constitute a hegemonic force in the control of agri-food systems and can be deemed as the equivalent of the “satanic mill” of “self-regulated” and destructive capitalism described by Polanyi, operating as true “Food Empires”. Finally, because in rural areas, especially in Brazil (but not only) a myriad of forms of social and economic ordering and interaction exist, which are established according to principles studied by Polanyi, such as reciprocity and redistribution, and generally subordinate and little known. These rural establishments represent the basis for devising “another way” for rural development (Schneider, Escher, 2011: 185) . 47 Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil schemes. In this sense, these are markets that are heavily regulated by laws and contracts that do not prioritize competition between agents, but rather compliance with technical and regulatory requirements that are guided by legal instruments, such as public calls for bids and legislation. Milone and Ventura (2024) point out that nested markets show hybrid forms of governance, combining a socially constructed network and coordination mechanisms, which lean on sharing knowledge and collaborative values by the actors who participate in the network. These reciprocity and complementarity relationships can reduce coordination costs, besides fostering new forms of autonomy. Understanding marketing channels is a key element in markets’ analysis. As Brandão et al. (2020) observe, understanding the particularities of marketing channels is relevant because “together with markets geographic reach and classification of producers, they form the basis for market categorization” (p. 442, authors’ translation). The authors highlight that the greater the number of marketing channels, the more complex the transactions and relationships established throughout the channel. Marketing channels can be defined as the commerce, distribution or marketing channels as the sequence of steps followed by the agricultural product until it reaches the final consumer. Such steps configure the organization of intermediaries – each of whom performing one or more marketing functions – and the institutional arrangement that enables market relations in agri-processing production chains. (Gereffi et al., 2005; Porter, Kramer, 2011; Waquil, Miele, Schultz, 2010) Coughlan et al. (2013), in turn, define marketing channels as the routes used to sell products and services in markets. For the authors, a marketing channel is “a group of interdependent organizations involved in the process of making a product or service available for use or consumption”, that is, it is not about a single enterprise acting independently, many entities are usually involved and “each channel member depends on the others to do its job” (Coughlan et al., 2014: 2-4)”. For Kotler (2018), marketing channels perform the task of “transferring goods from manufacturers to consumers, filling the gaps of time, place and possession that separate goods and services from those who need or want them” (p. 459). Kotler (2018) also discusses the extent of marketing channels represented by the number of intermediaries, classifying the channels into four levels, namely: zero level, one-level, two-level and three-level channels. Zero level channel, also defined by the author as direct marketing channel, comprises the cases of direct sales from manufacturer to final customer. Onelevel channel has a single sales intermediary, such as a retailer, while the two-level channel has two intermediaries, usually a wholesaler and a retailer, and the threelevel channel is made up of three intermediaries (Kotler, 2018: 550-551). Deggerone (2021: 167-168), drawing on the typology proposed by Kotler (2018), offers examples of each level, restating that zero-level channels occur when products are sold directly from producer to consumer. One-level channels occur in the presence of a retailer such as supermarkets or grocery stores. In the case of two-level channels, a wholesaler such as a distribution centre, for example, and a retailer are involved. Finally, three-level marketing channel situations occur in the presence of a food processor, such as a cooperative or an agribusiness, a wholesaler and a retailer. Regarding the factors that influence the choice of marketing channels by small farmers, Djalalou-Dine et al. (2014) argue that farmers can be swayed by issues related to availability, attributes, product prices, geographic distances and transportation costs, in addition to issues related to the quality and cost of information. The authors also highlight the relevance of factors such as trust between the parties and asymmetrical power relations, in addition to producers’ level of experience and know-how. Other aspects underlined by the authors refer to the influence of product quality and compliance with standards and regulations. Finally, in relation to the diversification of marketing channels, these can be classified into three categories (Deggerone, Schneider, 2022; Cenci, Schneider, 2023): exclusive, when production units access only one marketing channel; diversified, when production units access two to three marketing channels; and superdiversified, when they access four or more channels. For the authors, the matter of diversity and diversification refers to “ways of producing and ordering available resources and technologies that, in heterogeneous social contexts, require devices of efficiency, coordination, cooperation and control”. Thus, the matter of diversity and diversification of family farming is related to the way “individuals and heterogeneous social groups organize themselves and build mechanisms for resources distribution” (Schneider, 2010: 64). 3. FAMILY AGRI-ENTERPRISES AND INTEGRATION INTO MARKETING CIRCUITS In the context of family farming in Brazil, studies on the relevance of transforming and processing production on the farm began to take shape from the 48 Sergio Schneider, Alexander Cenci 1980s onwards, and mainly in the 1990s (Cenci, 2022). Thus, the debate on rural agri-processing – as the process of processing agricultural produce within the farm, by farmers and their families themselves, came to be called – emerged as a new path for rural development and for coping with problems of supply, food security, exodus and exclusion of marginalized areas. In Brazil, as in other Latin American countries, from the 2000s onwards, rural agri-enterprises became an integrating factor between the agricultural sector and the processing and service sectors, thus assigning a new value to the role of peasantry in rural modernization and development (Boucher, 1998)3. According to Pellegrini (2003: 51), the artisanal processing of food has a cultural and historical character, constituting a practice inherent to family farms. By means of agri-processing and the establishment of small processing facilities in rural areas, some farmers’ family members succeed in building strategies to remain in rural areas by adding value to agricultural products and, hence, increasing family income. Mior (2003: 178) defines family agrienterprise as the “form of organization through which a rural family produces, processes and/or transforms part of its agricultural and/or livestock produce, aiming mainly at generating exchange value by means of marketing”. For the author, the experiences of product transformation involving thousands of family farmers formed the “root of the so-called rural agri-enterprises” that emerged from the 1990s onwards. Hence the need for public policies to support the various forms of agri-processing, which range from the informal market to niche markets, organic products and quality products. Gazolla and Schneider (2015: 181) point out that four factors contributed to the creation of family agrienterprises in Brazil: (i) the crisis in the modern pattern of regional agriculture, which excessively commodified family farming; (ii) farmers’ historical knowledge about artisanal and differentiated processing and conservation of food were most important for the constitution of family agri-enterprises; (iii) the search by farmers for alternatives, as they were excluded from the existing regional markets and the long supply chains; (iv) the intervention of public policies and differentiated rural development programmes that supported the creation of various regional experiences. Examples are the Family Agri-pro3 According to Boucher (1999), at the beginning of the 1980s, a movement for development of rural agri-enterprises emerged in Latin America and the Caribbean, when institutions such as the International Center for Tropical Agriculture (CIAT) in Colombia and the Centro Nacional de Ciencia y Tecnología de Alimentos (CITA) in Costa Rica initiated post-harvest transformation projects involving peasant groups. Seemingly the term “rural agri-enterprise” was firstly used by CITA in Costa Rica, when it started its MAIR project (Rural Agroindustrial Models). cessing Program (PAF) in the state of Rio Grande do Sul (RS) and the National Program for Strengthening Family Agriculture (PRONAF), in its agri-processing modality. Family agri-enterprises show diverse profiles and are quite heterogeneous in several aspects. According to Cenci (2022), heterogeneity is present in issues related to the types of products, amounts produced, production processes, legal status, revenue, facilities, equipment, the number and gender of family members, the way raw material is obtained, geographic location and, finally, accessed marketing channels. One of the most sensitive topics in the study of rural family agri-enterprises refers to integration into markets. Since these enterprises gained prominence in the rural areas of southern Brazil, the issues of certification and adequacy of enterprises to the formal legal guidelines that govern industrial food production have become controversial. Traversed by disputes and disparate ideological views, the procedures for regularizing family agri-enterprises are subject to different legislation and public policies, which vary according to the government levels – municipal, state or national. Formalization of family agri-enterprises is also closely related to access to new marketing channels, since these channels can be either the reason for formalization or even an outcome of such process (Cenci, 2022). It is worth highlighting, however, as suggested by Wilkinson and Mior (1999), that an informal status should not be confused with an illegal one. Many products and producers in family agrienterprises may not have required qualifications or comply with legislation to sell and circulate their goods, but this does not mean that the processing of such products on the farm is prohibited or illegal, as long as it is for their own consumption. Studies conducted by Caldas and Sacco (2010) showed that many family-based enterprises gave up on the initiative due to the impossibility of adapting to the standards applicable to the sector, dominated by large corporations that influence regulations on the trade of agricultural products. The most important hindrances concern food safety, tax and social security legislations. More recently, obstacles have also arisen regarding the compatibility of projects with environmental legislation. According to the authors, besides the standards strictness, which are not always justified from a health perspective, there is also the inability of public agents to offer feasible alternatives to support small agri-enterprises in adapting for compliance with standards. In a work that analysed the influence of economic, institutional and social factors on the formalization of family agri-enterprises, Santos Jr and Waquil (2012) highlighted that the economic and the institutional 49 Towards more and better markets for farmers: The case of family Farming Agri-processing in Rio Grande Do Sul, Brazil dimensions have similar and preponderant sway over agri-enterprises’ integration into markets. According to the authors, these influences are at least twice as large as that of the social dimension. The authors draw attention to the clearly evident influence of institutions and the market on the integration of agri-enterprises, for example, by inducing the “rules of the game” that lead to the standardization of products in order to meet formal standards. While, in the short term, this may encourage the integration of agri-enterprises into markets, in the long run it can cause these establishments to lose their competitive asset: differentiation. Viana, Triches and Cruz (2019) found that informal agri-enterprises often sell their products through short face-to-face supply chains, while the formal ones expand their scope to short supply chains of spatial proximity and to long supply chains, thus losing, in part, the craftsmanship of their products. A study by these authors on the inclusion of artisanal cheeses into formal markets showed the quality assessment focus on the sanitary aspect (cleanliness, hygiene, etc.). When cheeses (especially the “colonial” type) circulate in informal marketing channels, the most valued quality aspects refer to attributes such as taste, culture, tradition and nature. Thus, according to Cruz (2020), even though there have been some legislative advances towards aligning and adapting norms to the characteristics and production scale of family farming, they end up moving artisanal production to industrial scales. Therefore, in order to meet the set of requirements, family agri-enterprises end up submitting to the rules of large industries in the agrifood sector (Cruz, 2020). The dynamics and challenges related to the processes aimed at formalizing family agri-enterprises has led, since the mid-1990s, to the emergence in Brazil of several public policies to support the sector. In the case of the state of Rio Grande do Sul, particularly, the creation of the Family Agri-processing Program (PAF) aimed to facilitate formal integration into markets of products processed by family farmers4. More recently, the government of the state of Rio Grande do Sul created the State Policy for Family Agri-processing (Law nº 13,921, 17/01/2012) and the Family Agri-processing Program of the state of Rio Grande do Sul (PEAF) which established the certification seal “Sabor Gaúcho”. 4 According to Boucher (1999), at the beginning of the 1980s, a movement for development of rural agri-enterprises emerged in Latin America and the Caribbean, when institutions such as the International Center for Tropical Agriculture (CIAT) in Colombia and the Centro Nacional de Ciencia y Tecnología de Alimentos (CITA) in Costa Rica initiated post-harvest transformation projects involving peasant groups. Seemingly the term “rural agri-enterprise” was firstly used by CITA in Costa Rica, when it started its MAIR project (Rural Agroindustrial Models). The creation of public policies for family agri-enterprises allowed the visibility of these enterprises in rural areas to increase and expanded their access to markets. In fact, as shown by Gazolla (2012), agri-enterprises got to expand their participation insofar as they were able to innovate in the construction of markets and in opening new marketing channels, especially those related to short supply chains. In a comparative study between Brazil and Italy on the construction of markets and marketing channels, Gazolla, Schneider and Brunori (2018) showed that Brazilian family agri-enterprises differ from Italian ones. In Brazil, the emergence of these enterprises was motivated by both the crisis in “modern” agriculture and the state support through public policies for the sector. In Italy, family agri-enterprises emerge on account of the potential for adding value to raw produce and the potential offered by new markets. Regarding the construction of markets and marketing channels for family agri-enterprises, the authors highlight the existence of short food circuits as the main marketing strategy in both Brazil and Italy – in both cases around 20% of produce circulates through these markets. Another important aspect in the discussion on integration of family agri-enterprises into markets concerns the changes in the internal dynamics of these farms when they access certain marketing channels. Dorigon (2008) drew attention to the fact that, as family agrienterprises progressively increase the number of points of sale, their scale of production increases. This aspect is important and deserves to be observed because change in production scale aiming to adapt the enterprise to a certain sales channel could entail profound changes regarding technology, production practices and organizational formats, which could even change the enterprise’s identity from family agri-enterprise to corporate agribusiness, bringing it closer to the conventional food industry. However, in a recent study that sought to understand how social interactions dynamize commercial relationships between actors within a family agrienterprises chain, Albarello, Deponti and Brose (2020) found that most commercial relations established by the researched family agri-enterprises are based on the logic of trust, reciprocity, kinship and affection. The authors also highlight the strong intertwining of commercial relations between family agri-enterprises in the territory and that “the sale of products from agri-enterprises is mostly to always the same customers and intermediaries” (Albarello et al., 2020: 308). Based on the literature reviewed so far on the main elements related to interfaces between institutions, markets and family agrienterprises, in the following section we intend to analyse and discuss some empirical data on marketing circuits 50 Sergio Schneider, Alexander Cenci of products from family agri-enterprises in Rio Grande do Sul, Brazil. 4. MARKETS AND MARKETING CHANNELS FOR FAMILY AGRI-ENTERPRISES The State of Rio Grande do Sul (RS) is located in southernmost Brazil, comprises 497 municipalities spread over a territorial area of 281.7 thousand square kilometres and has a population of 10.8 million inhabitants, being the sixth most populous state in Brazil (IBGE, 2022). In 2022, economic production of RS contributed 6% of the national Gross Domestic Product (RS, 2022). According to data from the last Agricultural Census conducted in Brazil (IBGE 2017), the country has 5,073,324 farms, 76.8% (3,897,408) of them are family farms and 23.2% (1,175,915) are non-family farms. Rio Grande do Sul has 365,094 rural farms, which is equivalent to 7.2% of the country’s farms, with 293,892 categorized as family farms (80.5%) and 71,202 non-family farms (19.5%). The number of farms that include rural agri-processing in Brazil is 852,639, 84.5% of which are family farms (720,644) and 15.5% are non-family farms (131,995). In this category, RS has 140,462 farms that include agri-processing, representing 14% of the country’s farms; 121,649 of them are family farms (86.6%) and 18,768 non-family farms (13.4%). Data on farms and rural agri-processing in Brazil and RS can be seen in Table 1. As for family agri-processing in RS, data from PEAF (Family Agri-processing Program of the State of Rio Grande do Sul) reveal that, by April 2023, the state had 5,500 family agri-processing connected with the program, 3,830 of which were registered agri-enterprises and another 1,670 were agri-processing farms included in program. Such farms are concentrated in the northern half of the State, as can be seen in Figure 1. By comparing data on family farms that conduct agri-processing activities in RS (121,649) with data on family agri-processing farms linked to PEAF (5,500) a considerable quantitative gap is perceived, revealing a significant mismatch in adherence to the program by farms in RS5. In this sense, it is worth highlighting that networks of relationships play an important role in the social construction of markets by family agri-enterpris5 Data currently available does not allow us to precisely define the reasons for the reduced adherence to the PEAF by farms that include products processing in RS. Among the hypotheses to explain this phenomenon, the high costs for formalizing enterprises (Gazzola et al., 2016) and the existence of consolidated informal markets (Cenci, 2022) are suggested. es, since the relationships they establish during the marketing of products allow them to carry out these operations, in many situations, without the need for formal contracts. This relationship of trust is manifested, for example, in the fact that non-formalized family agriprocessing farms are contacted by customers who want to purchase products (Cenci, 2022). Regarding the formalization of family agri-processing in order to commercialize their products, despite a number of initiatives aimed at supporting and promoting it, these farms are mostly unable to adequately and quickly overcome many of the barriers imposed by legislation, especially those related to products regulations established by the Ministry of Agriculture, Livestock and Supply (Cenci, 2022). Such regulations are more consistent with large farms. This shows that legislation is not neutral and can favour certain types of enterprises, Table 1. Farms and rural agri-processing in Brazil and State of Rio Grande do Sul. Type of farm Brazil (units) Rio Grande do Sul (units) Farms 5,073,324 365,094 Family farm 3,897,408 293,892 Non-family farm 1,175,915 71,202 Farms with rural agri-processing 852,639 140,462 Family farms with rural agri-processing 720,644 121,649 Non-family farms with rural agri-processing 131,995 18,768 Source: IBGE (2017). Agri-enterprises Registered in the PEAF - Fev/23 Registered (sum) Figure 1. Localization of family agri-enterprises registered in the PEAF. Source: Santos (2023).