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Smallholder or family farming in transforming economies of
Asia & Latin America: Challenges and opportunities
Ganesh Thapa
Regional Economist, Asia and the Pacific Division, International Fund for Agricultural
Development (IFAD)
International Conference on Dynamics of Rural Transformation in Emerging Economies
14-16 April 2010, New Delhi
Introduction
• Definition of small or family farms
- Asia (farm size, source of labour)
- Latin America (source of labour, management of farm, family’s place of residence, farm size, source of income, family capitalization)
• Significant contribution of small farms to total value of agricultural output, food security, biodiversity
• Overall trend: declining farm size in Asia, mixed trend in Latin America (e.g. Brazil vs others)
• Number of small farms and their share in total cultivated area increasing over time in Asian countries (e.g. India)
Transformation of agriculture
Green Revolution
• Impressive achievement in raising food production and
productivity, economic growth and reducing poverty
- Asia: doubling of cereal production between 1970 and 1995;
30% increase in per capita calorie availability; decline in real
prices of wheat and rice
- Latin America: by mid-1980s, 82% of wheat area planted to
modern varieties
• Marginal areas and crops bypassed
• Challenges in sustaining past gains– deteriorating soil and
water quality, build-up of pests, etc.
Transformation of agriculture
Recent Transformation in Agriculture
• Growth in consumption and production of high-value
commodities
- Impact of urbanization, rapid growth in incomes, trade
liberalization
• Transformation of agri-food industry
- Restructuring of wholesale, processing, and retail sectors
- Roles of public investment, private sector, and FDI
Challenges faced by smallholders
• Declining agricultural productivity
- Deteriorating soil and water quality
- Degradation of soils and build-up of pests
- Displacement of cereals by profitable crops
- Diminishing returns to modern varieties
• Environmental problems
- Salinization and waterlogging
- Water pollution
- Over-exploitation of groundwater
Challenges faced by smallholders
• Land and tenure security- Marginalization linked to lack of access to land and land-use
rights
- Acute land scarcity in Asia, inequality in Latin America
- Prospects for redistributive land reform not bright
- Scope for land tenure security (e.g. India), land tenure reform (e.g. China, Vietnam)
• Water shortages- Rising demand for agricultural and non-agricultural uses
- Unsustainable extraction of surface and ground water
- Water scarcity
Challenges faced by smallholders
• Diversification
- Potential for small farms to switch from grain-based systems to
high-value agriculture
- But face several constraints– high risks in production and
marketing, high transaction costs, poor access to credit,
stringent food safety and quality standards
• Impact of climate change
- Disproportionate impact predicted– decline in yields, flooding,
salinization, water scarcity
Challenges faced by smallholders
• Risks and vulnerability
- Market-oriented policy reforms or globalization increased
degree of potential income fluctuations
- High vulnerability of small farmers in semi-arid regions
- Significant effects of natural hazards
- Lack of access to risk-sharing mechanisms (e.g. insurance)
Opportunities
Technical innovations to address environmental problems and yield growth
• Agro-ecological approaches
- Conservation agriculture/zero tillage
- Organic agriculture
- IPM
• Biotechnology
- Asia: > 7 million small farmers adopted GM crops (2005)
- Latin America: 32 million ha under GM crops (2006)
- Limited to 3 crops (cotton, maize, soybean) and 2 traits (herbicide and insect resistance or a combination)
Opportunities
Institutional innovations that enable smallholders to benefit from ‘new agriculture’
• Farmer/producer organizations
- Help gain access to markets, public services, advocacy
• Contract farming
- Helps incorporate small farmers into growing markets for high-value commodities
- Generally positive impacts on incomes
- Also problems– asymmetrical power, non-compliance of contracts, social differentiation, environmental unsustainability
Opportunities
Institutional innovations that enable smallholders to benefit from ‘new agriculture’
• Supply chains and supermarkets
- Small farmers advantages– production technologies and associated labour requirements, adapt more easily to organic production
- However, need support for intermediation (e.g support in meeting food safety requirements) and internalization (e.g. producer organizations)
Enabling policy and programme support-
Examples
MERCOSUR/REAF
- Forum to promote dialogue among governments and organizations
to support family farms
- Design and harmonize policies to enable family farms to harness
benefits of regional integration
- Member states have implemented policies related to access to land,
resource allocation, agricultural insurance, cooperative development
- Land access
• Brazil: fund to purchase land through National Programme for farm
Credit + development of infrastructure
• Uruguay: programme to promote access to land for collective use
through leasing or renting out private or public land + complementary
infrastructure
Enabling policy and programme support-
Examples
MERCOSUR/REAF- Subsidized financial services
• Brazil: PRONAF provides funds to family farms with capital discounts as reward for timely payments and interest bonuses
• Chile: INDAF provides subsidies on production capital, non-bank credit designed for family farms, and credit to cover incremental transaction costs incurred by new, small-scale companies
- Support for insurance• …..: National and provincial governments provide partial subsidy
on insurance policy to family farms growing fruits & vegetables
• Brazil: Family farms in semi-arid region receive a minimum monthly wage of about US$ 50 for 5 months, if they lose over 50% of harvest due to drought
Enabling policy and programme support-
Examples
MERCOSUR/REAF
- Support to family farmers’ organizations
• Brazil: Financial and legal support is provided to cooperative
systems for supply of quality products to procurement by public
institutions
• Chile: Cooperatives receive assistance to help family farms meet
requirements related to volume and quality of products, and
timeliness of delivery to retailers, wholesalers, supermarkets,
and exporters
Enabling policy and programme support- China
1978 Reforms
• Changed the agricultural model from centralized planning to
household contract farming
• Significantly boosted farmers’ incentives to produce more,
increase in productivity and reduction in poverty
Recent policy support to small farmers
• Increased resource allocation to agriculture to benefit small
farmers– RMB 432 billion in 2007 to RMB 596 billion in
2008 and RMB 716 billion in 2009
• Abolition of agricultural taxes and other fees since 2006
Enabling policy and programme support- China
Recent policy support to small farmers
• Minimum procurement price for grains to protect farmers’
interest and national food security
• Increased resource allocation for rural infrastructure and to
improve rural production and living conditions
• Since 2007, tuition and fees exemption for students in rural
elementary and secondary schools benefiting over 148
million rural children
• Establishment of a new rural cooperative medical system
covering 815 million farmers
Concluding remarks
• Small and family farms have proved resilient over time
• Continue to contribute significantly to gross value to
production, food security, biodiversity
• New challenges– integrating into new agriculture, adapting
to climate change, managing market volatility and other
risks and vulnerability, challenges due to globalization and
trade liberalization (inability to achieve economies of scale,
ineffectiveness in dissemination of new technologies)
Concluding remarks
• Governments responding to these challenges– e.g. land
rental markets to address declining farm size in China,
supporting agricultural insurance in Brazil, etc., supporting
farmers organizations in India, LA, etc.
• Unfinished agenda: reorienting public expenditure away
from subsidies towards expenditures on public goods like
agricultural research and rural roads (e.g. India), supporting
smallholders and family farms in less-favoured areas,
policies to reduce rural-urban disparity (e.g. fiscal stimulus
focusing on rural areas), further reforms in land/land-use
ownership (e.g. China)
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