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Learning Alliance Highlights
Learning Alliance on Small-scale Farming
Module One
Participants discussed Latin American
experiences with market reforms introduced
during recent decades. With a focus on
the impacts on small-scale farming,
participants shared their own
perspectives and assessed how
Latin American experience and
knowledge could be adapted to
their own regions.
SMALL-SCALE FARMING:
SUCCESSES AND LIMITATIONS
OF MARKET REFORMS
SUMMARY
During the four weeks of Module 1, the Moderator, Manuel Glave, focused on
Latin American market reforms and their impacts on small farmers. He also
highlighted some practical experiences related to accessing different markets.
Market liberalisation policies were reviewed so that participants could gain
knowledge of the general framework of the reforms applied in the region in
recent decades. Assessing the impacts of these reforms formed a key part of the
discussions. Participants discussed the benefits of contract farming experiences
in Latin America and its potential in other regions. Finally, the debate centred on
practical experiences of market access.
This document summarises the issues raised each week by the Moderator and in
participant contributions, as well as the Moderator’s main conclusions. Links to
materials shared during this exchange are hyperlinked.
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MODULE 1 KEY CONCLUSIONS:
• The overall effect of market liberalisation on small-scale farmers is twofold. On the one hand,
reforms can reduce poverty and increase smallholder participation in the market economy. On the
other hand, market liberalisation can create pressure upon farmers’ natural resource base, increase
inequality, and produce asymetrical economic and political power relations between private firms
and smallholders.
• Identifying a portfolio of public goods and services (such as rural roads and other forms of overhead
capital, land titling, technical assistance, rural microfinance and agricultural health standards)
appears to be a critical factor in order to reduce spatial inequalities between rural and urban areas
in developing countries.
• Nevertheless, it is important to differentiate analysis of the impacts of market reforms on smallscale farmers depending whether they produce crops for local consumption markets, or for the more
dynamic urban and export markets.
CONTENT
Week 1
Market Liberalisation: An Overview of the Impacts on Small
Farmers (Opportunities and Challenges)
Page 3
Week 2
The Rise of Contract Farming: A Success Story in Helping
Farmers to Escape from Poverty
Page 6
Week 3
Participation of Small-scale Farmers in Dynamic Markets:
Increased Access to Inputs, Outputs, and Services Markets
Page 8
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Week 1: Market Liberalisation: An Overview of the Impacts on Small Farmers
(Opportunities and Challenges)
Moderator’s Introduction
Two of the most important agricultural policies implemented in recent decades in Latin America have been
the economic liberalisation of agricultural markets and the insertion of small-scale farmers into the market
economy.
As shown in the ELLA Brief: Latin America’s Rural Family Farmers: Evolutions in Access to Markets and Rural
Income Structure, efforts to insert family farming into the international and growing domestic markets in Latin
America have created opportunities and led to real increases in earnings for many rural families, while also
diversifying rural income sources and providing food to feed an increasing population.
However, poverty and inequality remain two major issues affecting family farming and landless subsectors to
different degrees. In an exclusive interview, Dr. Maximo Torero provides some insights on these issues based on
Latin America experiences.
Questions posed to participants:
In your country (or region), how have market liberalisation reforms affected small-scale farmers?
What are the main opportunities and limitations faced by small-scale farmers in your country (or region) in the
context of economic liberalisation policies?
Summary of the Exchange
Most participants consider that liberalisation policies have produced more negative impacts on small-scale
farmers than benefits, “in part due to their limited access to markets, especially at the international level, as well
as ineffective regulation and inadequate rural infrastructure” (Simon Shomkegh, Greenwatch Initiative, Nigeria).
On the other hand, some positive effects were highlighted, for example, in terms of diversification of cash crops,
enhancement of smallholder association (especially in the case of some cooperatives), and the emergence of an
array of rural microfinance institutions. Various contributors, such as Shadreck Mungalaba from the Zambian
Ministry of Agriculture, expressed that liberalisation policies affect smallholders differently depending on various
factors: accessibility to road and storage infrastructure, type of crops, access to financial intermediation, and the
quality of collective action organisations (either cooperatives or farmer groups).
Amba Jamir from the Sustainable Development Forum Nagaland (SDFN), India argued that farmers with good
rights and access to land and forest have more resources and are better positioned to face liberalisation policies.
Amba also pointed out that private investments have prioritised high input cash crops and fruits, disturbing
traditional communal based land use systems and their institutions, and reducing local agrobiodiversity. In Latin
America, despite the fact that liberalisation policies were implemented earlier than in other regions, the overall
impacts still depend on similar factors, as pointed out by Chris Boyd, from the IEP and Manuel Champa from the
German Agency for International Cooperation in Peru.
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Several participants raised concerns regarding how liberalisation policies have in fact harmed smallholders
due to the elimination of subsidies and other specific public policies directed towards supporting small-scale
agricultural producers. Likewise, contributors repeatedly pointed to the fact that while developing countries have
removed subsidies, more developed economies continue to support their farmers. This point was initially stated
by Yaw Osei-Owusu, from the Conservation Alliance, Victoria Adongo from the Peasant Farmers Association
in Ghana and Norbert Tchouaffe from the University of Dschang in Cameroon; and continued with several
participants arguing that small-scale farmers were not fully prepared for the liberalisation reforms, which led to
increases in production costs due to a lack of subsidies, as mentioned by Pauline Nduku Mbondo from the Ministry
of Livestock Development in Kenya. In Latin America, where Free Trade Agreements have taken liberalisation
policies even further, there is no clear cut evidence of positive effects on poor agricultural producers. Some
contributors, such as Monica Ojeda from the Rural Support Centre, Peru, argued that the importation of subsidised
products is also now having negative effects on smallholders.
Some participants identified a set of opportunities for smallholders that emerge with liberalisation policies.
For instance, Shalini Kala, Independent Consultant from India highlighted the importance of information and
communication technologies (ICTs) for smallholder to take advantage of new market opportunities, both in the
international trade as well as in domestic markets. Surya Prasad Paudel from Department of Livestock Servce
in Nepal, along with other participants, pointed to the merging of small cooperatives into larger ones as one
institutional innovation that can increase competitiveness and enhance small-scale farmers’ livelihoods.
John Woodend, Independant Consultant from the UK argued in a similar fashion when he posted that small-scale
farmers, if able to source relevant information, can better plan their production to meet demand and realise
higher returns. According to Woodend, smallholders would be able to sell their produce “where they please
and for the best price they can get”, and liberalisation policies therefore open up diverse market opportunities
and alternatives. Various contributors from Nepal indicated the potential that emerges with liberalisation
policies for building a comparative advantage based upon highly diversified agriculture in Nepal’s mountain
ecosystems. Finally, Utkarsh Ghate from The Covenant Centre for Development (CCD), India identified a key
opportunity for the private sector, since companies there can buy direct from farmers without the government
acting as intermediary, while providing loans, insurance, and facilities beyond those which government welfare
programmes are providing.
One important contribution was made by Benard Langat from the Moi University in Kenya who introduced
members to the Guiding Investments for Sustainable Agricultural Markets in Africa (GISAMA) Project which is
being implemented in Kenya, Malawi, Mali, Mozambique and Zambia. Within the context of market liberalisation,
the project aims to identify strategic opportunities and investment potential, assess the potential impact of
specific types of public interventions, disseminate investigation and promote public discussion.
Simon Shomkegh from the Greenwatch Initiative in Nigeria considers that inequality, poverty and unemployment
are still dominant in rural Africa. Some additional constraints were identified in the form of quality standards
(certification) required for products to be exported to the European Union and North American markets, as
raised by Salauddin Palash from the Justus Liebig University Giessen in Bangladesh. In general, contributors
including Teddy Mutoni from the Ministry of Agriculture and Animal Resources in Rwanda concluded that market
liberalisation has not removed these constraints.
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Week 1 Moderator’s Main Conclusions:
• In general, contributors agreed that smallholders have not been able to derive full benefits from market
liberalisation, as Ram Krishna Neupane from Forward Nepal and other participants from Nepal clearly
stated. In Latin America, despite the fact that liberalisation policies were implemented earlier than in other
regions, overall impacts still depend on similar factors as in Africa and Asia, as analysed in the ELLA Brief
Latin America’s Rural Family Farmers: Evolutions in Access to Markets and Rural Income Structure.
• Although not been specifically considered in the content of the Learning Alliance course outline, the Moderator
suggested further reading of two documents: the Brief Notes recently prepared by IFPRI’s Mozambique
Strategy Support Programme on ‘Exit Strategies for Agricultural Input Subsidies’, and on ‘Monitoring and
Evaluation of Agricultural Subsidy Programs’.
• Smallholders face several constraints in their efforts to take advantage of liberalisation policies. Weak rural
infrastructure, lack of credit and capital markets, limited arable land, and even poor public rural education
programmes have all limited the opportunities for the insertion of small-scale farmers into the market
economy.
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Week 2: The Rise of Contract Farming: A Success Story In Helping Farmers to
Escape from Poverty
Moderator’s Introduction
The interactions between small family farms and agribusiness have been at the centre of agricultural policy
debates in Latin America over the last two decades. Contract farming emerged in the 1990´s as one mechanism
through which small family farms could increase their income while maintaining their property rights and control
over their farms. Contract farming refers to the the process in which a large agricultural corporation replaces
or supplements its production of agricultural commodities with purchases from local smallholders through
contracts. The contracts specify a variety of conditions of sale and may require that the corporation provides
technical assistance, inputs and other services.
In an interview prepared for this week’s discussion, Mr. José Chlimper, an economist, top agri-businessman and
former Minister of Agriculture in Peru, provided some insights on the conditions that enable small-scale farmers
to engage successfully in contract farming based upon Latin American experiences. Other background materials
included an overview of Peru´s asparagus agroindustry boom as well as the case of the Andean potato (Papa
Andina), the latter being an interesting example of how the domestic market (and not only exportation) can play a
key role for the development of contract farming.
Questions posed to LEA members:
Do you know any example in your country/region of these kinds of collaborations between a large agribusiness
and small family farms? How successful are these in reducing rural poverty?
What factors have constrained or facilitated the development of these working arrangements?
Summary of the Exchange
Nathan Kanuma from the National University of Rwanda explained that the formal implementation of contract
farming is new and has just been adopted as part of the Rural Sector Support Programme (RSSP). Benard Langat
from the Moi University in Kenya, indicated that contract farming arrangements (or ‘out-growing farming’, as it is
also known in Africa) are successfully being developed in the tea and sugar industries.
Oscar Obasi from the Okpara University of Agriculture shared an interesting overview of recent contract
farming in Nigeria, prepared by the Consortium for Improving Institutions for Pro-Poor Growth (IPPG). In the
case of Rwanda there has been an interesting attempt to transform the coffee value chain, as explained by Jean
Chrysostome Ngabitsinze from the National University of Rwanda, who shared an interesting paper showing the
impact on small farmers of several recent investments in the Rwandan coffee supply chain which are promoting
the production of specialty coffee.
In the case of Nepal, Neeranjan Rajbhandari, Independent Consultant explained that contract farming “has
been traditionally in existence as share cropping, renting land to grow crops and various forms of contractual
obligation under landlord-tenant feudal relationships, which still continues to date in some way. However, the
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type of contract farming popularised by multinationals, and private sector agro-industry led contract farming,
is yet to take root in Nepal”. Other contributors indicated that in fact Nepal is home to some successful examples
of contract farming (understood as an agricultural production carried out according to an agreement between
farmers and a buyer which places conditions on production and marketing) related to sugarcane, coffee, tea,
vegetables and vegetable seeds, fish and fruits, but with a very limited scope and coverage. These contracts are
generally set up for trading the commodity and providing market linkages, not for industrial purposes (with the
exception of sugarcane).
Similar examples were mentioned by Fouzia Nasreen from Swiss Contact, who stated that in Bangladesh nonwritten, informal cases of contract farming exist with the main purpose of ensuring access to the final output by
local traders.
Victoria Adongo from the Peasant Farmers Association in Ghana explained that cotton-buying companies
provide farmers with much needed inputs such as fertilizer, pesticides and even extension services. They then
buy the cotton from the farmers after deducting input costs. As Chris Boyd from IEP, Peru pointed out, similar
arrangements are also found along the Northern Peruvian coast.
Shalini Kala, Independent Consultant from India stated that, in assessing how contract farming can help poor
smallholders escape poverty, “there are many elements that need consideration: negotiating power of the
small farmers, the price differential between what they sell and what they buy, learning curve of farmers and
corporation in creating mutually beneficial relationships, and the role policies can play in ensuring that fair
markets prevail.”
Many contributors indicated the need to strengthen smallholder organisations in different forms. Ekanath
Khatiwada from SNV Zambia shared an interesting two-page brief by Martin Prowse, which presents the
opportunities and risks of contract farming for farms and firms. It argues that given the small size of farms in
developing countries, the strategy of integrating smallholders into global value chains is an important channel
for poverty alleviation. It emphasises the role of producer organisations and conflict resolution mechanisms
between farms and firms in mitigating the risks of this institutional innovation.
Isabel Lapeña, Independent Consultant from Spain raised the issue of quality seeds as an important element for
smallholder food security. She referred to different experiences that have succeeded in providing quality seedsy
involving small-scale farmers in some kind of enterprise initiative. Among several examples she provided are
the promotion and dissemination of indigenous vegetable seeds in Kenya and Tanzania, and agreements among
growers, local seed companies and larger seed companies in India.
Week 2 Moderator’s Main Conclusions:
• The heterogeneity of actors engaged in arrangements between a large agribusiness and small family farms
is a common denominator in Africa, Nepal, India and Bangladesh. This was pointed out by several contributors
from Nigeria, with examples from the milk, cotton, and sugar sectors.
• The modality of contract farming differs in each case. Most contributors agreed that whether small-scale
farmers can benefit from contract farming will depend on the type of crop and business firm, as well as the
public policies environment.
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Week 3: Participation of Small-scale Farmers in Dynamic Markets: Increased
Access to Inputs, Outputs, and Services Markets
Introduction
Several conditions are required for smallholders to become better off through participation in the market
economy. These include a portfolio of public goods and services, such as rural roads and other forms of overhead
capital, land titling, technical assistance and sanitation, which are critical in order that market liberalisation can
have a net positive impact on employment and income.
In this week’s discussion, participants were invited to explore the enabling conditions for smallholders to engage
in successful contract farming arrangements and other forms of increased commercialisation.
Background documents were a paper by Reardon, Escobal and Agreda highlighting institutional innovations that
have emerged with the rapid expansion of agro exports from the Peruvian coast, together with an interview with
Dr. Javier Escobal from GRADE, in which he deepens the analysis by introducing the notion of dynamic markets
in Latin American.
Questions posed to LEA members:
What factors do you consider have facilitated the successful participation of small-scale farmers in dynamic
markets in your country/region?
Based upon examples drawn from your country/region, can you identify specific policy recommendations for the
successful participation of smallholders in dynamic markets?
Summary of the Exchange
Relative liberalisation of inputs markets such as supply of planting materials and fertilizers, access to sales
markets (local and international), provision of credit facilities, and integration with foreign partners on contract
farming and exchanges, are among the numerous enabling conditions identified by the contributors (including
Oscar Obasi from the Okpara University of Agriculture in Nigeria and George Chaima from Malawi New
Restoration Plan). Other factors raised by Moussa Barry from Lutheran World Relief in Burkina Faso and Vidhya
Das from Agragamee in India include franchise stores with flexible procurement options, good communications
and roads, long- term commitment, technical support, interest-free farm loans and diversity in product supply
among farmers.
From Rwanda, Nathan Kanuma, National University of Rwanda and other participants like Mathilda Mukasekuro
from the Gender Agriculture and Livestock Initiative shared views on the role of organising small-scale farmers
into cooperatives, as well as the need to establish micro finance institutions. Government support through
provision of extension services, training, inputs and facilitating linkages between small-scale farmers and
domestic, regional and/or international markets were also named as critical factors. Professor Kanuma also
added the importance of study tours and farmer field schools.
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In the posts from Rwanda, Vestine Uwangabe from the East Africa Dairy Development Project touched on one of
the most important and challenging needs; land consolidation.
Victoria Adongo, Peasant Farmers Association from Ghana stressed that, unlike contract farming, cotton
producers in Ghana are free to negotiate prices and issues, like who bears the cost of transport, with the buyers.
The role of middlemen was also debated on the Learning Alliance networking page, and most contributors,
including Shankar Chatterjee, from the National Institute Rural Development in India, agreed on the importance
of selling directly to consumers, thereby eliminating any need for middlemen.
An interesting innovation regarding transaction costs and the role of mobile phones was also discussed.
Salauddin Palash, from the Justus Liebig University Giessen in Bangladesh, argued that mobile phones constitute
an enabling factor since, “transaction costs are the main barrier for participation of small scale farmers in
dynamic markets”, and mobile telephones can reduce these costs.
Several contributions from Nepal added to the debate on the role of collective action through farmer organisations
to achieve economies of scale and reduce transaction costs. Contributors suggested that value addition through
organic production can increase the cash return.
An interesting point was raised by some contributors regarding the importance of building trust in contexts where
there is weak enforcement of contracts. They stated that mutual trust developed in the interest of both players
over time determines long-term sustainability and growth.
Prashanta Raut from Mercy Corps Nepal added that, based on the “National Tea Policy” (2000), efforts have been
made to enhance market liberalisation, but it has not been enough to ensure the participation of small-scale
farmers in dynamic markets. Policies to strengthen market linkages between producers, traders and industries
are equally important.
Latin American participants, including Anthony Edward from FINCA International, El Salvador, identified a range
of key factors that are facilitating the integration of smallholders into domestic and international markets in the
region, including NGO support through technical assistance, access to supermarket chains, availability of credit,
and local skills in product handling, processing and packaging. Chris Boyd, IEP stated that, in Peru, infrastructure
development has helped the most isolated Peruvian farmers to access markets, but, their participation has not
been really successful since they do not have enough bargaining power.
Salami Oshioki, from the Agricultural Development Project in Abuja, Nigeria, shared with us his views on how to
create an enabling environment for agricultural business to evolve by setting up functional hubs in communities.
He suggested what he called the Community Business Net (CBNet) for Agriculture Concept.
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Week 3 Moderator’s Main Conclusions:
•
Well-organised farmer cooperatives are a key element to the successful participation of smallholders in the
market, along with other conditions like quality of produce (determined through moisture content testing and
post - harvest management), access to credit, risk transfer (farm insurance), market information, storage
facilities and guarantee markets. The role of insurance markets is one issue that needs further research, in
particular around the institutional framework required for the development of this type of market.
•
It is important to note that ICTs have been at the centre of research and public policy aimed at enhancing the
participation of smallholders in the market economy. We can review the Participants are invited to browse the
website of regional research networks working on these issues in both Africa and Asia.
•
Overall, it seems that a broad portfolio of goods and services, including rural credit, rural roads, and capacity
building at the local level, are necessary to build and sustain value chains involving smallholders.
•
In the final analysis, the debate pointed towards the need to build a clear institutional framework to support
the whole value chain from the producers to consumers.
CONTACT GRADE
FIND OUT MORE FROM ELLA
To learn more about Small-scale Farming in Latin America, contact
the Moderator Manuel Glave, Principal Researcher- GRADE,
[email protected].
To learn more about Latin America’s small-scale farming, read
the ELLA Guide, which has a full list of the knowledge materials
available on this topic. To learn more about other development
issues, browse other ELLA Themes.
ELLA is supported by:
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