Is there a future for small farms?

Achieving pro-poor growth through agriculture: the challenges

Friday, 2 December 13.00–14.30, at Overseas Development Institute, 111 Westminster Bridge Road, London SE1 7JD

Is there a future for small farms?

Speaker: Colin Poulton, Imperial College and Steve Wiggins, Overseas Development Institute

Chair: Andrew Shepherd, Overseas Development Institute

Audio (listen to the meeting)
Steve Wiggins
Colin Poulton (1)
Colin Poulton (2)
Discussion (1)
Discussion (2)

See Colin Poulton and Steve Wiggins’ presentation

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Steve Wiggins outlined the ways in which agriculture reduces poverty in low income countries – through raising farmer incomes, (above all in Africa), employment opportunities (especially in South Asia), lower food prices, and returns to land (especially in Africa) for small farmers. In Latin America agricultural growth creates opportunities in processing and food chains. There are very few countries which have industrialised without an ‘agricultural revolution’. Recent cross country econometric analysis supports the relationship between agricultural growth (and especially growth in crop yields) and poverty reduction. Alternative approaches to reducing rural poverty may be hard to come by.

Small farms have some advantages: they use land intensively, labour supervision is easier, small farmers have reservoirs of local knowledge, and benefit from producing their own food supply. The advantages of big farms, on the other hand, are knowledge of markets and technology, access to inputs and technical services, ability to cope with quality assurance, and to manage risks.Given that average farm sizes in poor countries are falling, whereas they are increasing in rich countries, the advantages of small farms may outweigh those of large farms in the developing world. Small farms are certainly not disappearing.
Nor will they disappear, agreed Colin Poulton. Their rising share – of land farmed – can be explained either by their economic advantages or by ‘market imperfections’, especially in land markets, which do not allow for easy concentration of land. Other values also attach to land – social insurance, land as a base for diversified livelihood portfolios – which encourage individuals and households to retain land even as subdivision creates smaller and smaller units. The key question, therefore, is: Are small farms still able to function as drivers of growth or are they increasingly repositories of chronic poverty?
There are strong arguments to suggest the latter, as the world becomes more hostile to small farms: commodity prices dip ever lower (though local markets may be buoyant – eg in African coastal cities); there are environmental limits to intensification; the easy technological options for yield increases may have been exhausted; HIV/AIDS has undermined both the labour force and capital stock of millions of affected agricultural households, especially in sub-Saharan Africa (although the total agricultural labour force continues to rise even here); and in Sub-Saharan Africa, again, there is no model for intensification of cereals production (the ‘green revolution’) in the context of liberalised agricultural markets. (The green revolution in Asia happened in the context of closed markets and heavy state intervention and subsidies – all of which are now effectively ‘ruled out’ by international policy.) Finally, the increasingly present supermarkets prefer large suppliers, though where small farms predominate (eg China) supermarkets have developed ways of relating to them.

On the other hand, small farms have an advantage where products require intensive and diligent labour, but if assurances on quality or environmental issues is required by the market, small farmers will find that more challenging – if not impossible. Small farmers’ ability to associate will be critical to their ability to stay in or get into markets. Both speakers agreed, however, that the prospects of marginal holdings of less than 1 hectare acting as a driver of growth are remote. Rather, attention must be paid to strengthening the linkages between agricultural and non-farm growth if households with such marginal holdings are to be lifted out of poverty. More generally, where land is equally held, agricultural growth is more likely to reduce poverty than where landholding is unequal.

What alternative is there in Africa? Where opportunities exist, both export-oriented manufacturing growth in coastal areas and growth based on minerals (the Indonesian example) can demand increased output of agriculture, as well as generate funds for investment in agriculture as a “supporter” of growth and poverty reduction. However, much of the continent is landlocked, so can’t easily get into manufacturing, nor does it have minerals.
An excellent discussion ranged over labour absorption in agriculture, the costs of getting food from the hinterland to coastal cities, and the need to focus on inland population centres too; through the need to gather data which showed that agriculture was not always the failure it is often thought to be, through discussion about the role of the state and subsidies, through to the difficulties posed by marginal farms.

In conclusion, it could be agreed that:

  • Small farms will be there for a long time to come
  • There is a need to assemble the positive picture on small farms and challenge the perception of failure
  • The links between small farms and the market are difficult; the ‘co-ordination’ problems are significant
  • Risk is a substantial constraint on small farm development, and
  • Good functioning policies should be preserved – there was too much of a tendency to change policy without having found a better one.

    The policy agenda needed to shift towards policies focused on the demand for agricultural produce:

  • The structure of urban areas: metro areas are less the answer than hinterland urbanisation
  • Sectors which generate demand for agriculture
  • Enabling farmer organisation linked to value chains
  • Reduced inequality in land and through taxation

    And, the world needs to allow states to intervene where there is clear market failure, which is especially likely in grain markets, and around development co-ordination issues. Limited protection is still possible within WTO rules for LDCs, so that can also be used. States need to be allowed to enable the reduction of risk faced by small farmers too.