Introduction

The context and the debate on smallholders in agriculture 1

Smallholder farming is the dominant agricultural activity in most developing countries, particularly in the least developing countries. Globally, there are about 500 million smallholder farms2 in the developing world and they are home to some 2 billion people, including half the world’s undernourished people and the majority of people living in absolute poverty. In much of Africa and South Asia, small farms still account for the largest share of agricultural output.

Despite views that small farms are not viable and are not competitive with more mechanised and capital intensive larger farms and hence the prediction that they will  soon disappear3 , the smallholder farms have proved remarkably persistent. Indeed, the area operated in small farms in the developing world appears to be rising rather than falling, although average farm sizes continue to decline in large parts of the developing world. There is also an emerging view, tracing back to the ‘Green Revolution’ in Asia, where new crop technologies delivered agricultural growth across the region, that smallholder farms can be a key driver for poverty reduction. Investments in smallholder farms can pay off handsomely in terms of increases in income in rural areas, and through linkages effects, to poverty reduction on a sustainable basis.

Globally, significant changes in the political, economic and social circumstances are affecting the smallholders, many of them adversely, but some positively. Climate change, low investments and declining productivity, withdrawal of state support and institutions helping the development of the smallholder sectors are constraining them in becoming the engine for growth that many would like them to be.  On the other hand, the recent surge in integration and globalization of food market chains are opening up new high value opportunities for smallholders.

Although there is a significant body of knowledge on the problems faced by smallholders, recent years have seen a lively debate about their future because of significant changes in their economic environment. These changes include:

  • Rapid integration and globalization of food market chains that have opened up new high value opportunities for some farms, but made market access more difficult for many small farms due to high transactions costs and the need to meet credence requirements.
  • Globalization has exposed farmers to greater competition from international trade, and to lower prices. In Africa, for example, small farms are being squeezed out of their traditional food crop markets in urban and coastal areas by cheaper imports, while being undercut in their traditional tree crop export markets by new competitors from Asia.
  • Many developing countries are successfully and rapidly transforming their economies, but one consequence is that small farms face growing competition from larger and more capitalized farms that can capture economies of scale in production and marketing, especially for food staples.
  • The continuing miniaturization of small farms makes it difficult to provide viable farm incomes to support a family, especially from food staples and other low value products. Smallness in combination with poverty can also lead to resource degradation, which over time can cause downward spirals of worsening degradation and poverty.
  • Recent trends in the privatization of agricultural research have led to the neglect of many small farm problems;
  • Climate change is adding to the risks that small farmers must manage and may eventually undermine their longer term productivity

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Emerging views: challenges and opportunities

A consensus is however emerging that with business as usual, huge numbers of small farms could be left trapped with unacceptably low incomes or in poverty. Smallholder farmers either needs to find new business opportunities to boost their farm incomes, supplement their incomes from part time nonfarm sources, or sell up. Some small farms have already successfully moved into high value agriculture, while many others have gone part time and diversified their incomes off farm in the rural nonfarm economy. But rural off-farm opportunities vary widely with regional and country context, and without adequate skills or capital they are typically low paying jobs. The option to sell up and migrate to better paying urban jobs is also proving difficult in many countries because there is insufficient growth in better jobs in urban areas and many workers are not adequately educated. As a result, large numbers of smallholder farmers are becoming more dependent on relief and safety net programs for their survival, a situation that may prove neither socially nor financially sustainable.

Recent years have also seen a seismic shift in the institutions that support smallholder farmers. The role of the state in supplying modern inputs, credit, technology and markets has greatly diminished, while the private sector has expanded to fill many of these roles. Private financial institutions, NGOs, relief agencies, and community and producer organizations have also emerged as important players in supporting small farms. Too often these different agencies do not work together in a coordinated way and many small farms fall between the cracks and do not receive the support they need to operate as successful farmers.

Given these changes, this is an opportune time to reconsider many traditional approaches to assisting small farms. New emphasis is needed on: a) helping more small farms capture new business opportunities in farming, especially for higher value products and value addition activities, b) promoting opportunities within the rural nonfarm economy for greater income diversification and part time farming, and c) assisting those small farmers who want to leave farming. At the same time, much greater clarity is needed about the relevant roles of the different agencies who work with smallholder farmers, and how they might work more effectively together. The urgency of addressing these issues is all the greater given that many donors and governments have recently committed to substantial increases in agricultural investment, and much of this funding may be directed at small farms.

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The conference

To address these issues, IFAD held a conference on “New Directions for Smallholder Agriculture” on 24-25 January 2011.  IFAD has nearly 40 years of experience investing in smallholder farmers around the developing world, and has extensive experience working with poor and disadvantaged farmers, including women farmers, indigenous groups, and farmers in less-favoured areas. The conference provided an opportunity for IFAD to pool IFAD’s  rich experience with other like-minded investors, take stock of current strategies for assisting smallholder farmers, and identify promising new approaches that will better help smallholders farmers adapt and prosper within their changing environment. 

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The key issues

The conference addressed the following question:

What are the most promising innovations in technology, institutional and policy approaches for creating additional and better farm and off-farm business opportunities for smallholder farmers in the face of changing market structures, large farm competition, increasing pressures on land and water resource, climate change, and the growing importance of non-state agencies in supporting their needs?

The conference participants had to consider the fact the opportunities and constraints facing small farms are very different in different regions (Asia, Latin America and the Caribbean, Africa, etc.).  Within the framework of the above question, the issues and sub-issues that will be considered are as follows.

  • How can small farms be targeted for business investment?
    Small farms do not need to be full time to provide a viable farm business opportunity, but they do need access to markets and an entrepreneurial spirit. Judgments based on existing patterns of farming can be misleading because they are circumscribed by existing opportunities. There are countless examples of subsistence oriented small farms seizing new commercial opportunities when given the chance. The best small farm business opportunities are likely to be found in areas with good access to markets and low transport and marketing costs, while agro climatic conditions are often less important. Many farmers in more difficult circumstances, such as remote regions, or regions afflicted with HIV-AIDS or conflict, may be better served by a productive safety net approach, at least until such time as fundamental constraints can be overcome to create more viable business opportunities.

  • How can small farms be linked to modern market chains? 
    Small farms may be the more efficient producers, especially where wages are still low, but they face major disadvantages in accessing modern market chains. These include low volumes of produce to sell, variable quality, seasonality and limited storage, high transactions costs, poor market information and contacts, and limited ability to meet the high credence requirements of many high value outlets. Although many local market outlets still exist, the best business opportunities often lie with farmers who can organize for urban and export markets. Promising alternatives include contract farming arrangements with large farms or marketing/processing agents, voluntary producer groups, marketing cooperatives, and fair trade. Another key issue is how to make food staples markets work better for small farms, particularly in countries where the private sector has not adequately filled the gap left by the demise of state marketing organizations 

  • How can the productivity and sustainability of small farms be improved? 
    Shifting to higher value products can add significantly to land and labour productivity, but small farms also need access to improved technologies and knowledge to remain competitive, raise productivity and improve environmental stewardship. Since small farms typically put food security first, improving the productivity of their food staples is also an important step in freeing up resources for other higher value activities. A key issue is how to make agricultural research and knowledge systems work for small farms, particularly in an age of privatization and financial retrenchment. Another is how to improve the sustainable management of natural resources on small farms. Higher cash incomes from farming may help relieve the pressure on land and provide capital for investing in resource improvements, but a market led approach also presents its own challenges if it requires greater specialization and more intensive production practices.

  • How to improve small farm access to modern inputs and financial services?
    Since the demise of heavily subsidized public input delivery systems and agricultural development banks, many smallholder farmers have been left with inadequate and costly access to these basic services. The private sector has taken up part of the slack, but has a bias towards servicing larger commercial farms and those located in regions favoured by good agro-climatic conditions and market access. Recent years have seen new innovations in developing public-private partnerships (e.g. loan guarantees to private banks that lend to smallholder farmers), farmer cooperatives, NGO involvement in social enterprise (e.g. franchised suppliers of veterinary services), credit and training programs for small seed and fertilizer distributors (e.g. AGRA), and use of smart subsidies (e.g. fertilizer-seed packs in the Millennium Development Villages). What can be learned from these and similar experiences, and can successful approaches be scaled up to achieve the levels of support needed for large number of smallholder farmers without incurring substantial financial costs for the state?

  • How to improve access to land and water?
    Many smallholder farmers do not have secure access to land and water, making it difficult for them to pursue new business opportunities or to farm on a sustainable basis. Conditions vary widely across cultural, economic and social contexts, but seem particularly challenging in many contexts for women farmers and other disadvantaged groups. Recent years have seen new innovations and experiences in reformulating national land laws to reconcile overlapping and competing rights between the formal and informal systems, and of ways of strengthening the access and rights of women and other disempowered groups. What can be learnt from these experiences and which ones are worth scaling up and how?

  • How to create more entrepreneur farmers?
    Many small farmers respond spontaneously to new market opportunities, but improved education and training and organization into producer groups can be important as they struggle to adjust to a more commercial and competitive business environment. Another concern is the ageing and feminization of farming because relatively few young men find farming an attractive alternative. How can more young men be mobilized to take up farming? Providing attractive new business opportunities would help, but what kinds of schooling, specialized training and support (e.g. young farmers’ clubs) are also needed?

  • Empowering women and vulnerable groups to become successful farmers.
    In many societies, poor people and especially poor women farmers are disempowered and have limited options for developing new business opportunities. Some NGOs (including with IFAD support) have developed successful and innovative programs for organizing such groups and helping them to develop market opportunities. What can be learnt from these experiences and which ones are worth scaling up and how?

  • What can be done to help small farmers prosper despite climate change? 
    Many small farmers will need to be nimble in adjusting their choice of farm enterprises and technologies to remain competitive and sustainable as climates change, and this in turn will require that markets and agricultural R&D systems also adapt. What will be needed beyond the answers determined in previous questions above to ensure that small farmers are adequately served in the face of climate change? Can new forms of weather insurance play a useful role? Are special subsidies warranted to offset the adjustment costs? For example, if production is to become more volatile because of greater weather shocks, should weather based insurance be subsidized for small farmers in adversely affected areas? Are there new opportunities for small farmers through mitigation? For example, might carbon markets provide opportunities for some small farmers to receive compensation for farming practices and reforestation that sequester large amounts of carbon? Might bioenergy offer new business opportunities for small farmers?

  • What can be done to create more rural nonfarm opportunities?
    Given that many smallholder farmers will not remain viable in the future and will either need to sell up or diversify their incomes, how can more business and employment opportunities be created in the rural nonfarm economy? Well-functioning labour markets play an important role, but only where the rural nonfarm economy is growing, and if there are not significant supply side constraints. Skill levels are an important constraint, as are barriers to the employment of women and minority groups, and the cost of commuting to or settling in local towns. In many countries, growth in the rural non-farm economy is constrained by local demand and either needs to be driven by agricultural growth or stronger backward linkages from urban areas. The business environment for small rural firms is also important, and as with smallholder farms, many may need to be nurtured through the supporting activities of large private firms and NGOs, or organized into producer groups of their own. Important issues to address include:

    • What types of education and training best prepare small farm families for successful non-agricultural jobs, either full or part time or wage or self-employment?

    • What can be done to support growth of the rural nonfarm economy, to create more small firm business opportunities, and to help establish and support small businesses?

    • What can be done to help families find new opportunities in towns or regions where they may have no connections, and how to help them resettle?

    • How to overcome the special challenges of small farms based in lagging regions of conflict afflicted regions?

  • Actors and roles: Who does what? 
    If small farms are to have more viable business opportunities, then a concerted and more coordinated effort will be needed by several key actors to level the playing field so that they can better compete against large farms. Within this context, what should the state do for small farms? What are the right roles for the private sector (e.g. own investment plus providing farm credit, developing markets); and for NGOs (e.g. grass roots organization, social enterprise and political lobbying). How can these groups work more effectively together; are there examples of successful partnerships that could be replicated? How can political support for a small farm agenda be strengthened so that it is built into national development plans (e.g. CAADP country compacts)?

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Structure of the workshop

The conference provided for two full days of presentations and discussion on the selected issues, with extensive use of facilitated working groups to seek consensus or convergence of ideas amongst the conference participants. 4

The first session of the conference was dedicated to achieving a common understanding of the concept of smallholder farmers, trends in their size and numbers, their characteristics and livelihood strategies, new threats and opportunities, and the types of smallholder farmers that could be targeted for a business approach. Since there is wide regional variation on these matters, much of the discussion will be organized within regionally defined working groups.

The second and third sessions of the conference addressed the challenge of how to approach smallholder farmers as a business proposition. Working groups were tasked to explore how small farmers can be linked to markets, how they can obtain improved technologies, knowledge, inputs and credit to improve the productivity and sustainable management of their farms, how to improve their access to land and water, how to create more entrepreneur farmers, how to attract more young farmers, how to empower poor women farmers and vulnerable groups so that they participate in new business opportunities, and how smallholder farmers can prosper despite climate change. In each case, participants were asked to share successful examples of innovative new approaches to overcoming these challenges and the conditions under which they might be scaled up.  Each working group session began with a brief presentation of a background paper prepared especially for the group, and a short response from a discussant, and then engaged in a facilitated discussion to seek a consensus that can be reported back to the plenary.

The fourth session addressed the important issue of how to create more off-farm opportunities for smallholder farmers, either full or part time in the local nonfarm economy. The final working session was dedicated to synthesizing the main areas of agreement developed during the two days of discussions and drawing recommendations about how to move forward with a smallholder farmer business agenda, and the roles that need to be played by government, private sector firms, NGOs, farmer organizations and donors. A panel of experts was asked to work as a team in drawing this synthesis together, ensuring that it captures the flow of discussions and opinions that unfolded during the workshop.

The workshop had a strong operational orientation.

About 180 participants from various organisations, academia, governments, farmers’ groups, donors, and the private sector attended the two day conference.
The workshop participants included

  • 16 authors writing and presenting technical evidence-based papers
  • 30 discussants presenting their insights after the presentations,
  • 15 chairpersons animating the discussions,
  • 1 after-dinner presenter at the conference dinner, and
  • 8 panellists in an interactive session facilitated by a high level facilitator (Mishall Husain of BBC) synthesized the findings of the conference and discuss the roles of different actors.

In addition

  • Social media tools were used to the fullest possible extent. The opening and the concluding  plenary  sessions were  webcasted live; 782 tweets reached approximately 190,000 people ; there were 2041 page views on the  conference web page - with the agenda and the conference papers being the most popular pages ; 216 photos uploaded to our Facebook page ; and three blogposts, including an interview with Sir Gordon Conway  have been posted.
  • In addition, a video report has been prepared, and interviews with some key participants will be posted on our websites well as on the website of  the forthcoming SKM Development Research Digest.  

The concluding session was held in an interactive format, where the major issues emerging from the various sessions and breakout groups were put together to engage a distinguished panel of 8 experts in a facilitated interactive discussion. This session was live web-casted; and questions and issues from a much larger virtual audience through twitter were put to the audience for their responses. The proceedings detailed below capture the details of the proceedings in various sessions and sub-sessions.

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The follow-up and the expected outputs

The conference envisages the following outputs:

  • A volume on conference proceedings, comprising a synthesis paper summarizing the main comments, findings and recommendations of the conference, the background papers from the conferences, the presentations as well as the structure of the conference and a full list of conference participants.
  • An edited book comprising the peer reviewed and revised papers presented at the conference.

The outcomes of the conference is envisaged in terms of better understanding of constraints and opportunities facing the future of smallholders, the diversities in contexts and what need and can be done, where different actors can do what, development of partnerships, mobilisation of resources for addressing the issues faced by smallholders, and most importantly, engaging the private sector to work together with the public sector for improving the conditions of smallholders.

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An overview of the Conference outcome

The smallholders: their current status and future challenges (the nature of the problem)

Small farms are very diverse, ranging from commercially oriented smallholder businesses that provide the major if not sole source of livelihood for the family, through part time farmers who combine farming with other sources of employment, to poor people who are trying to subsist on a farm base and who are typically net buyers of food. Small farms are getting smaller as well as more numerous, and are increasingly managed by women. Although small farms gradually diminish in number as countries grow rich, most Asian and African countries have yet to reach a tipping point, and need to continue to provide productive employment in smallholder farming for a significant share of their workforce.

Although there are few economies of scale in farm production, small farms are losing out prematurely to large farms because they face a tilted playing field in accessing land, inputs, credit, technology, and markets. These problems are not new but have become more pronounced with market and trade liberalization, the increasing integration of market chains, and the scaling back of many state agencies and programmes that served small farms. The problems are especially challenging for women farmers and farmers in lagging regions.

Many small farms are also getting too small to provide a viable livelihood, and smallness in combination with poverty can, over time, cause downward spirals of worsening environmental degradation.

If more small farmers are to have a viable future, then there is need for a concerted effort by governments, NGOs, the private sector and donors to create a more equitable and enabling economic environment for their development.

The challenges and opportunities of smallholders vary enormously over countries and regions within countries. The differences and differences in approaches were highlighted between different regions. It was noted that efforts to improve the performance of farm-level agricultural investments in Sub-Saharan Africa need to focus more attention on reducing the physical, and particularly the economic, isolation of smallholders through measures which address those aspects of SSA's comparatively high transport costs which are due to issues of policy implementation - specifically regulation of trucking which facilitates monopolistic rents, and official and unofficial road blocks.  At the same time, rather than focus on the "next big thing" in agriculture growth, returns to current government, private sector and donor investments in agriculture can be significantly improved by focusing much more attention on better coordination and management to ensure that inputs, including credit, and marketed outputs, get to the right place at the right time - a situation which is much more the exception than the norm in most agricultural development projects.

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What could to be done to help the smallholders?

First, a distinction should be made between smallholders with viable business prospects in full or part time farming verses smallholders who are trapped in subsistence modes of production. The contributions that each group can make to agricultural growth and poverty reduction are very different, as are the appropriate intervention strategies. Commercially viable small farms are market driven, generate marketed surpluses which help keep food prices down, and are a powerful engine of rural economic growth, creating jobs for others in both the farm and rural nonfarm economy. Investing in them raises the economic tide in rural areas, indirectly benefiting many landless and urban poor as well as direct project beneficiaries, much as happened during Asia’s green revolution.  Subsistence oriented farming plays important social roles in feeding and employing many poor people and providing them with a home base from which they can diversify their livelihoods. Yet investing in this type of farming has little impact on marketed food supplies, and generates few trickle-down benefits for others including the landless and urban poor. Often, it is little more than a productive safety net approach that helps sustain smallholders near the poverty line. The MDG agenda has emphasised assistance programs like cash transfers for subsistence oriented farms trapped in poverty, while the growth potential of many small farms has been neglected. This balance needs to be rectified.

The dichotomy between subsistence and commercial small farmers however was not subscribed by all the conference participants. Some conference participants saw little value in differentiating between commercial small farmers and subsistence farmers. All small farmers engage with the market place, and there is a continuum in their economic viability.  They ALL need improved labour/income productivity, better ways to engage with value chains with both on- and off-farm activities, and risk-reducing and mitigating protection mechanisms.” And they all need a basic requirement, security of tenure over lands, water, forests they work on.

Second, small farms need to organize to offset their disadvantages in the market place. Although many local market outlets still exist, the best business opportunities often lie with farmers who can organize for urban and export markets. Organization is also important if small farms are to obtain better access to financial services (credit, risk management, savings), modern inputs, and to achieve political clout. Promising alternatives include contract farming arrangements with large farms or marketing and processing agents, voluntary producer groups, and marketing cooperatives. Farm organization needs to be matched by enabling policies that strengthen the ability of the private sector to serve small farm groups. Governments and donors need to invest in strengthening the local private sector (e.g. agro dealer networks, traders and processors) and in supporting financial institutions so that they can take more risk in lending to small farmers. Innovative approaches such as credit guarantees, smart subsidies, index insurance and public-private partnerships seem promising.

Third, small farms need to raise their productivity through access to better technologies and management practices, while at the same time achieving more environmentally sustainable patterns of production. There is urgent need for the kinds of sustainable intensification that significantly raise land and labour productivity while also reversing environmental degradation. This will require the best of modern science, the best of indigenous knowledge and ecological literacy. This kind of knowledge intensive farming requires new approaches to research and extension, as well as an enabling policy environment. Climate change is increasing the urgency of this kind of farming. The private sector has little incentive to invest in this kind of R&D for small farms, and the public sector has to play a bigger role.

Fourth, there needs to be greater investment in human capital in rural areas, through improved schooling, business and vocational training, better health and nutrition, and the encouragement of young farmers. There is need to invest in building capacity and encouraging entrepreneurship across the market chain, not just in farming; in processing, providing credit, selling seeds and fertilizer, traders and retailers, and in exchanging technology. The conference also discussed the ways of improving the agri-extension work of governments and mobilizing farmers through farmer-to-farmer extension work or farmer field schools.

Fifth, in order to help more poor and women farmers move up into business oriented farming, concerted efforts are needed to improve their access to land, inputs, credit, technology, and markets. Promising approaches include changes in land policies that secure their rights to land and water, and organizing them into groups to empower them locally and in the market place.

Sixth, more smallholders need help in finding exit strategies out of farming, whether on a full or part time basis. This need is most important in successfully growing countries to avoid widening rural-urban income gaps, but growth in nonfarm opportunities is also most rapid in these countries. Much productive employment can be created in the local nonfarm economy, but this needs to be driven by local agricultural growth or strong urban-rural linkages. Key interventions that can help include encouraging entrepreneurship across the market chain. Training in business skills needs to be backed with innovative partnerships for investment and credit access, mechanisms for risk management and high enterprise failure rates, and leveraging the collective power of marketing and producer groups.

There are many successful examples of small farm led agricultural development and many past public investments in these strategies have paid off handsomely in terms of growth and poverty alleviation. Helping rural areas to grow out of poverty is more cost effective than continued expenditure on rural safety nets, and more financially sustainable. What is most needed is the scaling up of successful experiences. This will require greater political commitment by governments to a small farm growth agenda, and the creation of an enabling economic environment: good policies plus rural infrastructure plus more proficient public institutions that serve agriculture. Donors also need to line up behind agreed small farm led growth strategies (e.g. CAADP in Africa) rather than inventing new ones.

There also needs to be some backtracking on the withdrawal of the public sector from agriculture, with greater recognition that the private sector cannot do it all. There is need to reformulate institutions and policies that bridge gaps in areas which market actors are not covering, as in research, extension services, natural resource management, and the availability of agricultural credit targeted to the diverse characteristics of smallholders. Interventions should be compliant with market forces and avoid distorting markets or undercutting private players. They particularly need to reach out to women farmers who are most disadvantaged in accessing market chains at all levels. 

Ultimately, it is the small farmers themselves who need to organize themselves for the market and to obtain greater political voice. Others should play supporting and enabling roles, but successful small farm growth depends on unleashing the entrepreneurship of the farmers themselves so that they can grow and prosper despite inevitable changes in their markets and climate.

The main lesson for IFAD is that a more growth oriented agenda for small farms would enhance the contributions of its investments in increasing food supplies, promoting rural economic growth and rising living standards, and indirectly benefiting a much wider range of rural and urban poor. The agenda would require a more business oriented approach and a staffing mix that reflected that need. IFAD would bring an important advantage over other donor agencies because of its long experience in working with some of the poorest farmers and some of the poorest regions. The challenge is to help more of this clientele link into modern value chains.

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1/ This section and the next are drawn from the conference concept notes and the synthesis report on conference proceedings.

2/ Defined as operating less 2 ha. of agricultural land.

3/ See, for example, Collier and Dercon (2009): African agriculture in 50 Years: smallholders in a rapidly changing world?, Expert Meeting on How to Feed the World in 2050, FAO, Rome (June).

4/ Although the conference considered all smallholders in agriculture such as smallholder farmers, small livestock, fishery holders, the conference largely remained confined to smallholder farmers. The conference addressed the core issue: will smallholders survive in the future in the way we envisage today?  What should be the new directions if they are to change to accommodate changing global environment? Who are the major actors and who can do what?

 

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