The future of small farms - Overseas Development Institute · developing world • Equity labour...
Transcript of The future of small farms - Overseas Development Institute · developing world • Equity labour...
The future of small farms
International Food Policy Research Institute
Imperial College
&
Overseas Development Institute
www.ifpri.org/events/seminars/2005/20050626SmallFarms.htm
Questions to be covered
• Why rural development?
• Why agricultural development?
• Why small farms?
• Importance of context
• Policy and research pointers
Why rural development?
• MDG 1: halve poverty by 2015
• 75% of the world’s poor live and work in rural areas will be no less than 60% in 2025
• NB: Rural areas will lose population but will take time
• Some will benefit from transfers from urban economy, but …
• … most of these poor will depend heavily on their own incomes, and from transfers within the rural economy
Why agricultural development?
Two arguments:
(1) Agriculture can sustain livelihoods of many; by growing it can reduce poverty:
• Theory: • Farming can employ much labour, little capital
• Generates returns to land, an asset that some poor have
• Agricultural growth pushes down food prices
• History — few if any countries have industrialised without an agricultural revolution
• Recent analyses:
• A 10% rise in farm yields → 7% fall in poverty [Irz et al. 2001]
• In Africa, through farm incomes, in South Asia through farm wages, in Latin America, through jobs in food chains [de Janvry & Sadoulet 2002]
Case for agricultural development (2)
(2) What’s the alternative in rural areas?
• Agriculture can be difficult, with growth rates that
struggle to beat 5% a year; while manufacturing
industry can expand at twice that rate
• But mining, tourism, rural manufacturing all
have limited possibilities
Average real wholesale prices rice & wheat, 1980–2000,
Bangladesh [IFPRI]
Why small farms?
Clarifications
Note debates may be:
• SF Kenya versus LF Brazil
• SF Kenya versus LF Kenya
Small farms: how small? India classifies :
• The prospects for SF (and semi-medium) are
much better than those for marginal farms
The case for small farms
• Efficiency: SF use land
more intensively
inverse ratio of farm size:
yield/ha
• … and this may explain
why farm sizes fall in the
developing world
• Equity labour use,
strong consumption links
to local economy
T-cost advantages SF LF
Labour supervision X
Local knowledge X
Self-provisioning X
Knowledge of markets &
technology
X
Access to inputs, credit,
markets
X
Quality assurance X
Risk management X
India: farm sizes
DESRIPTION SIZE AVERAGE
SIZE HA
% OF Total
HOLDINGS
% OF
AREA
% OF
IRRIGATED
AREA
MARGINAL FARMS <1 ha O.4 62 17 21
SMALL FARMS 1-2 ha 1.42 19 19 20
SEMI-MEDIUM 2-4 ha 2.73 12 24 24
MEDIUM 4-10 ha 5.84 6 25 24
LARGE >10 ha 17.2 1 15 11
ALL FARMS 1.41 100 100
Brazil & India: farm size & yield/area
India: Farm size and output per unit area
0
100
200
300
400
500
600
700
800
0–5 5–15 15–25 > 25
Acres
Ru
pees/a
cre
Brazil: Farm size and output per unit area
0
10
20
30
40
50
60
70
80
90
100
0–9.9 10–49.9 50–99.9 100–199.9 200–499.9 > 500
Hectares
US
$/h
a
Farms sizes fall in developing countries
Do small farms have a future?
• The share of both holdings and cropped area accounted for by small farms continues to rise in most developing countries.
Small farms are not about to disappear!
• Is this rising share of small farms indicative of:
• their superior ―efficiency‖
• market imperfections (especially for land)
• social, insurance or other values attached to land?
• Can increasingly small farms still act as a ―driver‖ for growth and poverty reduction?
The changing world for small farms
This is not mid-1960s Asia!
• Lower international commodity prices
• Environmental limits to intensification
• Exhausted easy options in crop technology
• HIV/AIDS
• Climate change
• GR context of closed domestic markets & heavy subsidies now unthinkable in many developing countries
These affect all farms in given countries / regions, but may be differential impacts across regions
• Concentration in supply chains
Concentration in supply chains
• Key point: to keep down T-costs, buyers favour a
few large suppliers
• Different contexts
• Two key questions:
• How fast is concentration?
• If this responds to economic growth, then impact on SF/MF
is much mitigated
• Ability of SF to organise and meet new demands
High LowDemand for Output from Small Farms
Inequality in Farm
Structure
High
(Dualistic)
Low
(Mainly small)
Importa
nce
of
credence
attrib
ute
s
Co
mp
ara
tive
Ad
va
nta
ge
of S
ma
ll
Fa
rms
Low
High
1
2 4
3
High
Low
Importance of context
Driver Supporter
Export manufacturing
potential, coastal
- √
Mineral economies - √
Agrarian potential, unimodal
land distribution
√ -
Agrarian potential, bimodal
land distribution
√ -
Low agrarian potential,
landlocked
? ?
Pointers for policy
• Need good governance, macro-economic stability, rural roads, research … but also following need attention:
• Follow demand … and look for competitiveness
• Institutional innovation in supply chains
• Farmer organisation
• Rural financial systems
• Encouraging linkages & providing jobs for marginal farmers