Download Contract Farming and Adaptation

Contract farming and
adaptation: a blessing or a
curse?
Pieter Q. Terpstra, Abigail Ofstedahl
and Ian Christoplos
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
First, a few caveats…
 I am not an economist
 We haven’t done any research yet
 No empirical data
 I have never met my coauthors
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
But nonetheless…
 The climate change discourse needs to break
out of the “yeoman farmer fallacy” and failures
to recognise the role of contract farming in
climate adaptation exemplifies this
 Simply producing advice on “what farmers
should do” in response to climate change
ignores who and how decisions are being made
 Perhaps nowhere more glaring than in the
failure to recognise how contract farming
frames adaptive capacities within broader
innovation systems
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Climate change and changes in agricultural
systems, both subject to…
 Incremental change
 More frequent extreme events
 Variability
 Uncertainty
Past advice and yield gap assumptions are coming
into question, along with past tendencies to
blame “risk averse farmers” for failures to
achieve production goals
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Institutions influencing adaptive
capacities
 Prevailing focus on national plans/policies
and/or capacities within households and
communities…
 Leads to tendencies to ignore the central
role of meso level institutions (e.g.,
extension, farmer organisations, financial
service providers, etc.)
 These institutions are involved in new
contracting arrangements partly as ways to
deal with local adaptive processes
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
When the meso level is
mentioned…
 Primarily as implementers of national plans
(rather than actors in local contracts)
 Or as the “problem” with regard to meeting
household needs
 Tend to be seen as exemplifying problems of
path dependency
 Normative push distracts from need to
understand dynamics at this level regarding
institutional roles, market dynamics and
adaptive capacity constraints
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Farmers adapt to climate change
as part of adaptation to markets
 Meso level institutions contracted in to
provide both climate and market
information (though rarely integrated)
 Affordable financial services reliant on
information about multiple risk and faith in
farmer capacities to manage this risk
 Farmer organisations, NGOs and others
increasingly recognising that traditional
extension services are not up to the
challenge of integrated response to a range
of risks, therefore…
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Contract farming as a way of
embedding a range of services
 Failures to integrate management of a range
of risks is leading to new interest in contract
farming among those who formerly shunned
the practice as “exploitive”
 Seen as a way of “embedding” a range of
market, climate (etc.) services in a risk
spreading package
 But is this another normative assumption
that is also unanchored in empirical analyses
of these relationships?
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Contract farming “embedded services”
assumed to reduce risk due to:
 Allowing market actors with greater access
to information and scenario planning to
make key decisions
 Improved access to new technologies that
are more appropriate (?) for managing
climate variability and uncertainty
 Reduced transaction costs and assurance
that inputs, finance, etc. will be timely
 Sharing of losses in case of crop failure
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Contract farming “embedded services”
assumed to reduce risk due to:
 Access to inputs of guaranteed quality
 Addresses scale disadvantages
 Price predictability gives households greater
chance to plan their livelihoods (including
off-farm risk spreading)
Above all, contract farming may be the only option
available for smallholders to access markets
with strict requirements for timeliness, bulk and
quality, so if the market is to be part of the
solution…
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
But this also means giving up some of the
autonomy of autonomous adaptation
 Can be a problem, as it is not necessarily
correct that market actors have a better
understanding of climate risk at local level
 When focused entirely on the market, may
not be in tune to need to balance this with
climatic “resilience”
 Market actors have greater capacities to
manage risk than poor farmers, which
implies different inherent adaptive capacity
and failures to respect farmer constraints
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
But this also means giving up some of the
autonomy of autonomous adaptation
 Rigid planting and harvesting times may not
reflect climatic realities
 Autonomous adaptation is often about risk
spreading through diversification, whereas
contract farming tends to favour
specialisation
 A shift to market orientation may leave
producers at greater risk in relation to food
price spikes when they rely on food
purchases rather than subsistence (shift
from local to global risks)
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
The devil is in the details
 Does the contract include technical assistance?
 Does it include input/credit provision?
 Is there a force majeure clause and if so, what
does it include?
 Does the production system lock the farmer
into a given set of investments (stranded assets,
literally and figuratively)?
 Skewing of benefits towards men’s (high risk)
rather than women’s (risk spreading) strategies?
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Incentives and disincentives for
buyers to uphold contracts
 Reputational incentives if buyers reliant on
trust from farmers to maintain a production
base (NB! climate pressures to gain control
over production for national food security)
 Capital incentives if contract involves
considerable investments (may be significant
if infrastructure involved)
 Over-supply (due to favourable weather)
can lead to over-production and lower
prices, leading buyers to break contracts
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Incentives and disincentives for
farmers to uphold contracts
 If the contract is perceived as contributing
to predictability in relation to livelihoods
and food security, contracts likely to be
respected by farmers
 Overly restrictive contracts that stand in the
way of adaptive measures may be a
disincentive to upholding contracts
 Climate (un)aware design of packages of
services likely to be a determining factor
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Ways to enhance climate relevant
contract farming
 Inclusion of weather and seasonal forecasting in
mutual decisions
 Allowing for flexibility in planting schedules
(within market parametres)
 Working with farmers and local extension
services in selection of varieties
 Appropriate force majeure clauses
 Including longer term climate adaptation advice in
packages
 Insurance related innovations
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES
Getting from here to there
 Recognise that these meso level processes
of which contract farming is a part are
central to the climate change adaptation
agenda in agriculture
 Bury the yeoman farmer fallacy, but
recognise that subsistence and risk spreading
strategies are still important
 Get some real data on these issues!
DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES