Making small farms economically viable

Dhaka,  Tue,  26 September 2017
Published : 24 Aug 2017, 17:52:35

Making small farms economically viable

Abdul Bayes
Small farmers are mostly poor. Thus, improving productivity and incomes of small farmers can significantly reduce poverty. There are several ways to reduce poverty of small farmers. Researches across the globe, particularly that by Joachim von Braun and his team of the University of Bonn, show that commercialisation and technological innovations among small farmers can help reduce poverty. Diversification from solely staple crop production to the production of commercially high-value crops is another avenue for reducing poverty among small farmers. 

It has also been observed that in selected parts of India, for example, diversification to vegetable production has increased profits among small farmers. Some experts have found that farmers in Indonesia, shifting from coffee to cocoa production following the Asian economic crisis in 1997-98, may have increased their incomes by 14 per cent. "Diversification typically may also involve specialisation at the farm level with growing varieties of production and processing at the regional level. However, not all small farms could immediately benefit from liberalisation and higher degrees of commercialisation. Therefore, timing, speed and extent of reforms need to be appropriately fine-tuned to avoid exposure of small farms to additional market risks they are unable to cope with. Leaving to markets to sort this out by themselves may not work due to market and institutional imperfections in many developing countries, especially when stakes are high, as the livelihoods of millions of small farming households depend on the success of these reforms". 

Obviously, not all small farms would be economically viable, especially in the context of increasing opportunity costs of labour due to higher wage growth rates in non-farm sectors. Already many small farmers are engaged in rural multiple income-generating activities. Presently, about half of earnings of rural households in Asia come from non-farm sector. The researchers tend to argue that pluriactivity is not a mere survival strategy for small farmers but also a strategy to increase incomes due to lower labour requirements in farms. This indicates that, in any case, improving access to non-farm jobs is another critical aspect of poverty reduction among small farmers.  The researchers then invoke theory of migration across occupations namely, push and pull scenarios. In the case of pull scenario, dynamic agricultural development stimulates growth of non-farm sector the way it happened in many Asian economies whereas in the push scenario, stagnant agriculture and falling productivity force rural households to seek, mainly in Africa, whatever incomes and livelihoods outside agriculture. Thus, push scenario may not necessarily lead to an escape from poverty for many rural households. In both cases, there is a need for creating conditions for orderly out-migration of labour from farm to non-farm sectors and even from rural areas to urban areas, especially in Asia, given the magnitudes of these population movements. 

Joachim von Braun and Alisher Mirzabaev of the University of Bonn lead us to another important but often neglected dimension - vulnerability of small farms. The Human Rights Council Advisory Committee of the UN General Assembly indicates that family farms are most vulnerable to the violation of their rights, including their land rights that could lead to social conflicts, social marginalisation and exclusion. "Moreover, policies to improve land rights should also give prominence to the land rights of women. In many Asian settings, existing tenure systems are gender-biased favouring males in the farming households. Research shows that secure land tenure provides stronger incentives for adopting new improved technologies and making longer-term investments in sustainable land management practices. Promotion of the 'Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security' is an important step forward, but needs to be institutionalised and implemented at the national levels. Moreover, the envisaged outcome behind land reforms targeted at securing land rights needs to be poverty reduction and enhancing food security among the rural poor, preventing potential 'elite capture' which may defeat the purpose of securing land rights for smallholders. 

In conclusion, researches on small farms and poverty, led by the University of Bonn, seem to argue that agriculture is driven by economic and sociological forces, and agriculture itself is also driving change in the economy and society.  Some of the changes may or not may not suit small farms. Market value webs, increasingly dominated by supermarkets, with controlled quality standards are raising transaction costs making it difficult for small farms to enter these markets. For example, researchers find that current certification standards for aquaculture may not be feasible for small farmers in Vietnam but some, on the other hand, cannot find evidence that large-scale buyers prefer not to have contract farming arrangements with small farms in Shandong province in China though it is acknowledged that all farms in their area of study are small. 

Crucially, contract farming was found to lead to higher farmer incomes. Similarly, it could also be observed that the participation in contract farming was negatively related to farm size in tobacco production in the Philippines, with smaller farms being able to reap more benefits from contract farming. A study on contracting from Indonesia shows that contracts may have increased returns to capital for seed corn and broiler producers, but not for seed rice producers .  By and large, "the challenge is to enable small farmers to successfully integrate and benefit from these new market webs or find non-farm employment. Market access for small farms could be improved in several ways, such as through collective action and forming producer and marketing associations".

The writer is a former Professor of Economics at Jahangirnagar University.

Editor : A.H.M Moazzem Hossain
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