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.

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:

Peter Bazeley (see his presentation) started by noting that failure characterises the context on which to talk about agriculture reform processes in Africa and that a different paradigm is needed on how to reform agriculture in order to have a real impact on growth and livelihoods.

He identified three important contextual factors for analysing agricultural policy processes. The first of these is that there has been insufficient response in the agriculture sector (in terms of scope and scale) to technological change, institutional reforms (changing the rules of the game) and policy adjustments – he noted that the sector is not achieving what it has to achieve. The second factor is that there are two concurrent processes in the sector with regards to reform: aid effectiveness and modernisation of government agenda in donor countries, running parallel to a focus on policy and institutional reform as a means to achieve change. The third contextual factor is that agriculture, despite the rhetoric, is not doing well in terms of featuring large in PRSPs, or as a beneficiary of improved country-led programming under budgetary support, etc.

Although policy process was the focus of the talk, he noted that on the substance of policy few important things have happened since structural adjustment and liberalisation the Green Revolution, for example, which was supposed to be something applicable to Africa, has not happened in the continent.

Making reference to the work of the Imperial at Wye school (work by Dorward, Kydd and Poulton) Peter stressed the importance of the concept of development coordination. He noted it is not about multi-stakeholder coordination – between donors or coordinating projects or programmes across development partners and governments but about balancing and sequencing technical, market, institutional and policy fixes, recognising the multiple factors at play and the interlocking of local, national and international factors.

On the processes of agriculture policy reform, Peter remarked that we are still largely talking about Sector Wide Approaches (SWAps), despite what many have concluded about their poor performance in agriculture. He argued that the agriculture sector (as well as in other sectors) is still equated to a single (or more, in some countries) organisational structure (Ministry), despite the fact that required reform processes stretch well beyond those structures. The (bold) assumptions underlying the SWAp approach are that the Ministry of Agriculture has the mandate as far as agricultural sector reform is concerned, that sectoral reform processes are to be delegated to the sector technocrats and that this it puts boundaries around scope, scale and capacity. The fundamental problem, Peter noted, is that the debate and experiences have turned these approaches and instruments (such as SWAps) into ends in themselves the complexities of the mechanisms of putting them in practice and the long time horizons required to achieve change have distracted attention from the substance of reform (the actual objectives of reform). The targets used by government and the development community are typically much shorter-term and they do little to address longer-term reform processes.

Peter noted that he did not expect to be talking about SWAps in the middle of this decade, but that in Africa, both governments and donors are in practice saying that this is the way they want to go forward. SWAps in agriculture have not worked. Despite the years of intense activity and investments around SWAps, farmers have not yet seen tangible benefits from them. Sectoral programmes have tended to work better in other sectors, such as Health and Education. But in the agriculture sector, the approach is harder to apply ,not least because of the centrality, importance and size of the private sector, with which SWAps have failed to engage. He added that agricultural SWAps have largely failed to capture non-agricultural determinants of agriculture productivity and growth. This has led to enormous impatience and to the (probably wrong) conclusion that the problem was with the instrument’s design which led to multiple reorientations and re-starts, perpetuating the focus around process rather than substance.

Peter Bazeley argued that the determinants of agricultural livelihoods and growth often lie outside a ministry of agriculture’s scope of activity. He illustrated this by providing examples of what participatory poverty assessments (and similar exercises) identified as the determinants of agriculture productivity and growth, in three countries (Malawi, Mozambique and Uganda). Peter noted that only a few of these (such as production technology and information) fall within the mandate of ministries of agriculture that usually lead on agriculture sector reform. However, other issues such as security, justice, contract enforcement, transaction cost, etc. are key for the sector, but are not about the core business of ministries of agriculture.
What is needed, Peter suggested, is stronger development coordination, which implies a reconfiguration of large-scale high influence policy actions and investments across multiple spheres of public interest. There have been some attempts (although incomplete) of tackling the issue of cross-sectoral reconfiguration.

In Kenya, the Strategy for Revitalizing Agriculture (SRA) poses interesting challenges on how to achieve supra-ministerial coordination. But the process is still too new to comment on achievements.

An interesting example from Kenya comes though from the justice, law and order sector. The Governance, Justice, Law and Order Sector (GJLOS) programme emphasises innovative mechanisms of cross-sectoral coordination, and a strong move towards an effective sector-wide perspective. This provides example on how sector-specific issues are determined by other sectors’ problems/issues overcapacity of prisons, for example, is related to the capacity of the judiciary, which in turn is related to performance in public prosecution and in policing all of which are under different ministries and agencies of government. GJLOS thus constitutes a governance framework which could be a source of inspiration for the agriculture sector. For example, Thematic Groups have been created which advise cabinet level committees on how the government should allocate resources. The Medium Term Expenditure Framework (MTEF) is central to resource allocation decisions, on the basis of the thematic group analysis and proposals.

Peter argued how important the MTEF seems to be (or could be), and how agricultural sector specialists have ignored and not engaged with the process. He believes that the MTEF, as a supra-ministerial cross-government policy statement of medium-term priorities and accountable actions, could play a major role in determining supra-ministerial cross-sectoral strategies.

Peter Bazeley concluded his presentation by offering a few points for discussion:

Michael Lipton (click here for presentation) started by stating the basic problem not as population growth outstripping production, but of the ability of the poor to gain employment and to afford to buy food. Food production on small farms is critical to this for the large numbers of poor people who live in rural areas and are either deficit food producers or landless labourers. Yield growth must play a key role here: the workforce is increasing by 2% per annum, demand for labour must also grow (and so must its productivity). This is important not only for immediate agriculture employment and food access for the poor, it is also a critical starting point for non-agricultural economic and employment growth. Yield growth is important to agricultural employment and productivity growth as opportunities for expanding areas are limited and expansion of agriculture tends to be onto marginal land, leading to land degradation and unsustainable production.

Small farms continue to be important, however, as a major source of employment. Indeed, the proportion of the agricultural work force and land on small farms (defined as less than 5, 2 or 1 ha) has increased since 1965 in most poor countries.
A number of issues were picked out for further attention.

First, studies have shown that ‘low potential’ areas now offer the potential for higher returns to research investment than high potential areas, but these tend to be by-passed by private research. Transgenic innovations offer the potential for raising plants that are better able to resist moisture stress.

Second, increasing global and national water shortages will reduce water available for the production of (low value) staples, as only higher value crops will justify the cost of water. This will result in increasingly ‘anti-poor’ water distribution. Science needs to address this, not only through plant genetic development but also through improved hydraulic systems (there have been no dramatic advances in irrigation systems in modern history).

Third, crop nutrition enhancement (bio-fortification) presents major opportunities for benefiting the poor (for example through increasing vitamin and mineral content of staple crops at little or no extra cost to producers and consumers). This is an area where transgenics have the potential to deliver major benefits quickly. It is also an issue with potential for greater public led partnerships offering incentives to private research suppliers.

Public/ private research partnerships also need to be given much greater attention.

Low external input agriculture (LEIA) as widely practiced (but not promoted) is unfortunately often a form of resource mining (where it is associated with higher outputs) or drives people onto marginal lands (where it is associated with low outputs). Either way it can be a major cause of land degradation. Major LEIA successes include IPM (integrated pest management). However basic input/output relations limit its potential to raise yields in many circumstances. Intensification using external inputs must, however, be sensitive to natural resource management issues.

Agriculture faces major challenges ecologically (for example soil mining, salinisation of irrigated lands, the changes discussed above), economically (with increasing input prices and falling produce prices) and socially (with ageing and declining numbers of people trapped in farming in the north, and rural poverty in the South).
Food production will be a long term problem and this needs intensification – but it must be ecologically, economically and socially sustainable.

ILEIA was founded around 20 years ago initially to address concerns with the sustainability of green revolution technologies. It has investigated a wide range of options – such as indigenous, organic and permaculture technologies, working mainly with committed practitioners concerned to optimise local resource use. There have been some major successes (for example the organic movement in the North, a variety of smaller success in the South) but these have tended to be scattered and not coherent. The emphasis is on Low External Input Sustainable Agriculture (LEISA). This involves working within natural constraints, adapting to specific sites, feeding soils and recycling in many ways, emphasising micro-climate management, synergy and complementarity, and minimal fossil fuel use.

ILEIA has found that LEISA is feasible and viable, that small farms are more productive than larger farms, and that small farmers are willing to invest – but they need support. Support is needed to enhance their secure access to and control of resources (especially land). Institutions are needed to defend their rights. They also need access to information on strategies and specific technologies. Wider policy support is also crucial. Finally, development involves change on a number of local and wider fronts, and farmers need support in coping with and managing transitions.

Discussion:
A variety of questions were raised in discussion.

Harnessing private sector research: how can this be done more effectively, and are there examples of private sector research in LEISA?

Michael Lipton suggested that more effective harnessing of private sector research required very careful and precise contracts specifying required outputs – and that these needed to be achievable to provide private sector research organizations with profit incentives – but that other incentives to private sector investment can also be important (such as their need to attract top quality researchers and allow them some flexibility to work on interesting and socially important issues). He suggested that organic farming might be a LEISA area which private sector research might have a role. Anita Ingevall stressed the difficulties that common property rights posed for private research investment.

What are the implications of long term challenges of climate change and fossil fuel depletion?

Anita Ingevall pointed out the very inefficient use of fossil fuels in many intensive production systems, and also in food distribution systems. There is a need to adapt to fossil fuel shortages by sourcing local produce. Michael Lipton commented that high energy and transport costs will hit low value products hardest (although transport costs have been falling). This question also meant that in some circumstances investments in roads in Africa needs to be questioned – although there is a serious need for better roads in Africa in some areas it is important to ask what supply and demand the roads will serve.
What should be done about large areas of marginal land being cropped unsustainably (for example in some areas of Southern Africa)?

Michael Lipton commented that there is a need to intensify with better water control and use of inorganic fertilizer where it can be done in sustainable ways with economic benefit – subsidies to intensification in other circumstances are damaging. In some areas of West Africa there are very low returns to fertilizer without higher levels of organic matter in the soil – there is then a need to identify farmer incentives for undertaking costly investments in applying organic matter to the soil – this needs better farmer access to water control, crop germplasm and inorganic fertilizers so that organic matter investments can yield returns to farmers.

Can LEISA benefit from transgenic technologies (for example Bt maize has encouraged conservation tillage and ox-ploughing with reduced tractor ploughing in parts of KwaZulu-Natal in South Africa)?

Anita Ingevall responded by noting that some LEIA technologies, such as conservation tillage, have been part of mainstream commercial agriculture – but that these could be pursued without GM. Michael Lipton argued that there was potential for strong complementarity between GM techniques and LEISA – as argued, for example, by Professor Swaminathan, a leading figure in the Asian green revolution.

Is it practical for international research centres to concentrate more on generic yield enhancement issues and to leave more locally specific NRM management and social issues to national research systems when national research systems are often weak?

Michael Lipton agreed that NARS are often weak, because African governments are so stretched as regards public expenditure constraints – and this means that donor investments in this area often allow reductions in governments’ own expenditure commitments. There are also very substantial incentive and system problems that prevent highly able and committed staff in NARS from being effective. These systemic problems need to be addressed – capacity building by itself is not enough. Nevertheless there are some very effective NARS in Africa (for example in Kenya)

Can small farmers make more use of the stock of technologies that have already been developed for large, corporate farming?
Both speakers agreed that although there is some potential for this there are also fundamental differences in technology needs between small and large farms, and this limits the extent to which ‘on the shelf’ technologies for large farms can be adapted to the benefit of small farms. A big advantage of seed and fertilizer technologies is that they are generally divisible (apart from transaction costs of accessing them): this is not the case with many other (for example machinery) technologies.

Can the high costs of obtaining expert knowledge on LEISA be reduced?

The speakers agreed that this is a major challenge. Anita reported that much more information is now available than it was – but it can be difficult to track down and apply.

Can international research centres deliver demand driven research to small farmers or are they too remote, and how can the more locally specific science demands for LEISA be met?

Michael Lipton suggested that paradoxically the international research system had been more effective in promoting participatory research approaches than national and local research systems. Anita Ingevall questioned this. She noted that the development of locally specific technologies required the development of wider strategic solutions and principles.
How quickly could transgenics science come up with solutions to the water challenges posed by Michael?

Michael Lipton agreed that this is a major challenge – very substantial resources will be needed over a long period. He suggested as a very rough estimate that a period of 15 years or so could deliver substantial progress if the whole CG system budget (£300 million per year) were devoted to it. Anita Ingevall suggested that this will never happen, the challenge is too great: plants cannot be pushed to increase their output on two major fronts (moisture stress resistance and high yields). Michael Lipton commented that the long history of plant breeding suggested that net gains in plant performance are possible.

Conclusion
The chair noted the agreement between the speakers on the major challenges to agriculture and poverty reduction and the importance of technology to this, agreement on some responses but differences over others. He thanked the speakers for their informative and stimulating presentations and discussion.

Peter Hazell outlined the key characteristics of the rural non-farm economy (RNFE). Typically the sector generates around 35-40% of rural incomes and occupies about 25% of labour time: these shares are higher for the rural poor who depend disproportionately on the RNFE for their livelihoods. The sector consists of heterogeneous activities; typically produced on a small scale, tending to agglomerate in rural market centres.

Most of what is produced is non-tradable, being consumed in local markets. This means the sector depends on the growth of rural activities that produce tradables of which agriculture is usually the main example. Given such growth, multipliers stimulate the RNFE, partly from linkages in production inputs, processing, etc. but above all from spending of additional (agricultural) incomes in consumption linkages. The multipliers can be considerable: estimates for Asia run in the range of 1.6 to 1.9, for Latin America 1.3 to 1.5, and for Africa 1.3 to 1.5.

The RNFE is affected by the investments of large private firms, NGO programmes and government policies. Policy for the sector, however, tends to be uncoordinated: usually there is no single government ministry or agency that has overview of the RNFE. The appropriate role for government is that of

The 1980s saw price movements against traditional smallholder export crops. As structural adjustment programmes were introduced, households diversified into a wider range of activities. This not only produced a stratification of peasant households, but also women and youth became significant earners of cash incomes. As markets were progressively liberalised in the 1990s, export crops came to be seen as an old man’s occupation, while women and youth moved into diversified activities in the RNFE although the patterns that emerged were highly varied by location. Urbanisation, above all the growth of secondary towns, proved a major stimulus.

In Tanzania the strong growth of opportunities in tourism, urban areas, and in gold mining by the end of 2003 formal mining was earning more than US$600M in forex, three times the value of traditional export crops accelerated de-peasantisation.

In Malawi, the rural areas were hit by the decline in remittances from migrant labour. With low rates of urbanisation and little to invest in intensified farming, a process of agricultural involution took place. The results seen include rampant poverty, with many forced to resort to casual (‘ganyu’) labour, recurrent famines, peasants dispossessed of land, and as if it this were not bad enough having to cope with HIV/AIDS as well.

For households, considerations of agriculture or the non-farm economy is not an issue: they seek whatever opportunities that can be had. But in the process we see loss of coherence of households. In Tanzania, new opportunities offer more flexibility, while in Malawi we see desperation. Agricultural specialists need to recognise the emerging patterns, with the associated changes in lifestyles and attitudes.

In conclusion:

Neo-classical economics assumes these costs away: markets are expected to operate with no friction at all. In reality, for some exchanges and in particular circumstances, transactions costs can be so high that exchanges do not take place, despite the clear economic opportunity for both parties to gain.

How do these ideas help us understand the issues in African agricultural development? In the 1970s and 1980s, many African countries, and especially those of Eastern & Southern Africa, created large parastatal enterprises, with monopoly powers, to manage the supply chain for agriculture. They typically provided inputs of seed and fertiliser to farmers, usually on credit, and then guaranteed to buy up whatever marketed surplus farmers would offer after the harvest. Transactions costs were low, but only since the state was prepared to subsidise operations and absorb losses. Although the agricultural parastatals had several successes in stimulating smallholder production of both food and cash crops, they proved unsustainable. Costs were high, inefficiencies were rife. Hence from the mid-1980s most of them were either closed or scaled down.

The liberalised model has functioned where certain conditions apply: dense physical infrastructure, and a growing and diversified agriculture. Bangladesh would be a good example. But other cases, and in much of Africa where these conditions do not apply, the result has been the green revolutions that the parastatals had fostered have stalled. Faced by high transactions costs largely those of information by which suppliers and traders come to understand the economic potential and moral character of farmers, and by which farmers learn of the possibilities of inputs and markets private investors have been deterred and have turned their back on agricultural markets.

What are the implications of these observations? Jonathan Kydd and his colleagues argue that agricultural development should be seen as consisting of three stages of public action, thus:
1. Establish the basic public goods that allow farmers to invest and produce roads, agricultural research and extension services, in areas with potential, irrigation schemes, and in some cases land tenure reform;
2. Kick-start the markets by active state intervention in the provision of farm inputs, and, above all, seasonal finance for agriculture;
3. Once a certain level of production has been reached, withdraw from the markets, leaving the field to the private sector.
The case of India provides support for this model. Analysis of data carried out in collaboration with IFPRI shows varying returns to different investments through time. In the 1960s the highest returns to public investment were in roads and irrigation; and subsequently in the 1970s by spending on fertiliser subsidies and rural credit provision investments that are now anathema to those recommending liberalisation. By the 1990s the returns to inputs and finance had declined. Only in the later decades has education paid off in agricultural productivity.

The process of institutional development, following Fafchamps, is likely to see agricultural supply chains change from those in which face-to-face, intensive and personal exchanges between farmers and traders dominate; to those in which relations are defined as much by (organisational) hierarchies as by markets, and in which reputation is critical.
Jumping stages too early and omitting stages one and two is likely to condemn a country to a low-level equilibrium trap. Otherwise profitable opportunities for agricultural development go begging since the transactions costs at early stages of development are just too high to allow sufficient returns to be made.

John Harriss (click here for presentation) sketched out the current dilemmas of agricultural development in India, starting by taking two examples of recent investments in farming. A private investor from the telecommunications sector, with funds from an merchant bank, tried to set up a schemes for export agriculture but found it difficult to ship produce promptly. Poor infrastructure and bureaucratic requirements at the border were blamed. On the public side, the World Bank has recently approved a loan to encourage diversified production in Uttar Pradesh, with a comprehensive package that includes innovations in the supply chain for more effective marketing.

Will such schemes benefit small and marginal farmers, or will they be biased towards larger farmers? When new lines of production for higher value markets have ‘credence characteristics’ for example, the way in which items have been produced, or pesticide applications and residues that cannot readily be checked by inspecting the produce, larger units have economies in providing such assurance. Farmer associations potentially allow smaller farms to interact with major players in supply chains, but the experience has been that they are typically captured by the larger farmers.

Small and marginal farmers the majority of Indian farms are increasingly marginal by any definition are not out of the market: the problem they face is that they are deeply engaged in markets, but on adverse terms.

Do these changes indicate that only large-scale, capitalised farming can make progress? And if so, what is the fate of the small and marginal farmers? Or does India need a new round of agrarian reform, with the state returning to a more active role to ensure that the small and marginal farmers have access to finance, inputs and technical advice?

Discussion saw the following points being raised:
What is the nature of the state and its policies that would be able to see through stages one and two of the model presented? In the case of India there were important contextual features to the start of the green revolution, including the legacy of long-term support to Indian agricultural research from Ford and Rockefeller, and large civil service with considerable capacity.
Jonathan Kydd admitted that to some extent one must await a certain level of state capacity before renewed agricultural development would be possible. Regional trading blocks with harmonised agricultural policy would, however, allow conditions to be created for the smaller states where capacity is low.

Is there scope for collective action by smaller farmers? John Harriss noted that larger farmers can dominate and lock small and marginal farmers in to relations where they are condemned to poverty.

Was it possible to replicate the experience of Bangladesh where energetic promotion by micro-finance by NGOs had taken place? Both speakers noted that micro-finance tends to be provided for shorter term finance rather than farm input loans. The problem becomes acute where the farming system is based around a single, long season a year where loans are likely to be outstanding for six or more months. Many countries in Africa, for example, have only one cropping season.
How feasible is it for states to withdraw from agricultural markets in stage three? Jonathan Kydd notes that in some cases the third stage sees an incomplete liberalisation: look, for example, at the European Common Agricultural Policy, or at the Republic of Korea, where the third stage has seen heavy state support to farmers. India is currently facing great difficulty in cutting back some forms of support to farmers.

How feasible is agricultural development, and smallholder agricultural development? Both speakers noted that progress was possible in unpromising circumstances. For example, between 1985 and 1993, Malawi had seen a genuine green revolution in the production of maize. In Bihar dairy co-operatives were had succeeded, despite the frequent failure of such associations in other sectors.

The chair summarised the meeting in three propositions:
1. Institutions are clearly important to agricultural development;
2. Institutions could be promoted by an active state or through private initiative deciding the more appropriate route in particular cases is a key question; and,
3. Private initiatives tend to be understated in debates on institutions, and cases of success in private institutional innovations are under-reported and under-appreciated. A key challenge is to document more of such cases, and to understand the factors that make for success.