Future of Smallholder Farming, seminar by Peter Hazell

What challenges do smallholder farmers face today? What are their viable options for growth and prosperity? What is their future? The Office of the Chief Development Strategist invited Peter Hazell, Visiting Professor at Imperial College London and formerly of the World Bank and IFPRI, to share his views on the changing context of smallholder farming. The discussion will help shape the concept of a proposed conference, to be held in November 2010 at IFAD.

Hazell started his lecture by observing that smallholder farming is not only persistent, but there are increasing numbers of smallholder farmers across the globe today . China, for example, has not yet reached a tipping point where the number of its smallholder farmers is decreasing. The trend exists because rural populations keep growing, yet in the face of this growth, many countries cannot create enough productive nonfarm jobs.

A minority of smallholder farmers have increased their incomes by specializing in high-value products, but most smallholders remain poor, face stagnation, and are partially diversifying into nonfarm employment to increase their income. Hazell made the point that this is a pathway of survival, not prosperity—most part-time nonfarm jobs undertaken by smallholder farmers require little skill and are very low wage.

Hazell challenged the audience by saying that an important question to ask when opening any discussion of smallholder farming is, what has changed? He argued that after all, smallholder farms have been present since the advent of settled agriculture. Presently there are several facets of change in smallholder farming.

  • Firstly, small farms are becoming increasingly small.
  • Secondly, new market chains have emerged that present opportunities for profit but which can also be difficult to join.
  • Thirdly, globalization has introduced increased competition into both export and domestic markets.
  • Fourthly, the growing privatization of agricultural research is leading to the neglect of problems specific to small farms.
  • And lastly, climate change may create new problems for smallholder farmers.

Numerous conferences have been held on the state of smallholder farming and we understand the contours of the issues fairly well at this point. What is lacking is an understanding of the operational steps required in the near future. So the challenge is how can we enable smallholder farmers to capture new opportunities and prosper?

The prospects for smallholder farms becoming viable businesses will ultimately depend on their connection to the market. Market access is more important for business development than any other factor, including technology adoption. Smallholder farmers have shown themselves to be naturally entrepreneurial, however, there is an important role for training farmers in the acquisition of business skills. The reality of dealing with a variety of private sector agents such as input sellers, wholesalers, and sourcing agents requires skills and empowerment. Particular attention needs to be paid to vulnerable groups such as women and indigenous populations.

Difficulty lies ahead for the development community in targeting those farms that are potentially viable businesses. How many smallholder farmers can engage in business and how many will be left out? This necessarily excludes a segment of traditional beneficiaries of IFAD and other agencies, and the development approach for this group of people will become a critical issue.

Hazell pointed out that while agriculture is widely regarded as a main driver of economic growth, the debate over small versus large farms continues. There is not necessarily broad popular buy in for a small farm agenda in many countries and the likely solution will involve some mixture of big and small farms. This issue deserves further clarification.

Environmental sustainability will often be at odds with market-driven agricultural development. Consider the case in which the market demands a particular crop that contributes to soil degradation – market forces will dictate specializing in that crop but a cycle of environmental deterioration will ensue. The issue of sustainability and natural resource management will need particular attention within a business context.

Climate change will have a tremendous impact on smallholder farmers, who are already vulnerable due to limited access to technology and resources. However, outside of areas where deforesting is a problem, smallholder farmers are not among the major contributors to climate change and thus mitigation efforts may best be focused elsewhere. One interesting area for mitigation efforts is payments for environmental services, which could improve farmer livelihoods. Overall, smallholder farmers may be best served by adaptation strategies.

Off-farm opportunities are also important when considering smallholder farming and national economic development pathways. Rural-urban migration will have to play a bigger role in Latin America and Africa. In the Asian Green Revolution, agricultural development stimulated the growth of the nonfarm economy, which in turn provided employment opportunities for those moving out of agriculture. Today, however, the backward linkages to the rural economy are urban and industrial rather than agricultural. Backward linkages have been stagnant in Africa, where the nonfarm economy remains flat and exit opportunities are scarce.

New innovations include the rise of producer organizations as a means by which to connect smallholders to modern market chains. Much potential lies in this form of organization and it will be useful to look at which types of organizations have worked and what can be scaled up. Also, social enterprises will allow NGOs to engage on a commercial level while maintaining a development agenda. Innovative ways of supplying inputs and stimulating markets can be explored. Finally, there is a changing role for governments in coordinating investment and growth strategies, but too much involvement (such as in the Asian Green Revolution) is not desirable. The proper role for governments is that of stimulating partnerships. There is a need for innovative partnerships, include public-private and unions linking smallholders with medium and large-scale farms.

Hazell concluded his lecture by saying that with a renewed interest in agriculture at the international donor-community level, it is an exciting time to be involved in rural development. For guidance we need to look at the success stories: the organizations, programs, and interventions that have worked and could be scaled up. Of particular interest are cases that have involved private sector operators, social enterprises, and financial service providers. The challenge for IFAD will be to capture the knowledge that exists here, identify the gaps, and operationalize findings into development strategy.