Smallholders' perceptions and preferences for market attributes promoting sustained participation in modern agricultural value chains

Connecting smallholder farmers to modern agricultural value chains (henceforth high-value markets [HVMs]) represents a credible pathway to improving the welfare of farmers in developing countries. Smallholder exit rates from HVMs remains high, raising concerns about their sustained participation of smallholders in HVMs. We conduct a Best-Worst Scaling choice experiment with horticultural farmers in Kenya to understand their perceptions and preferences for market attributes that could promote sustained participation in HVMs. A unique feature of our study examines smallholders' best or worst choice consistency as means to further understand their thought process. Our results reveal that smallholders mostly expressed preference for a flexible incentive-based pricing option and long-term formal relationships with their buyers. Delayed payments and high investment requirements were the worst market attributes chosen by smallholders. Preference heterogeneity was driven by the farming experience, gender, income and location of the farmers. We find that smallholders are well aware of conditions that might motivate exit from HVMs relative to conditions that facilitate participation in HVMs. Our findings demonstrate the relevance of various key market attributes central to participation in HVMs, while teasing out the various coordination roles cooperatives, non-governmental organisations can play in facilitating sustained smallholder participation in HVMs.     

Aid,collective action and benefits to smallholders: Evaluating the World Food Program's purchase for progress pilot

Agricultural commodity markets in developing countries often operate in a constrained environment of prohibitive transaction costs. Consequently, smallholder farmers are only partly integrated into these markets, a situation that keeps them in a lower level of development equilibrium (poverty trap). Although cooperative institutional alternatives such as Farmers’ Organizations (FOs) may reduce transaction costs and revitalize agricultural production and commercialization, they rarely have been successful in fully delivering on these promises. Against this backdrop, the World Food Programmed (WFP) has recently implemented a multi-year and multi-country pilot to increase smallholder participation in commodity markets. The projects involved investing in physical and human capacities of Farmer Organizations (FOs) to aggregate commodities and add value, as well as locally purchasing food aid from the same. The combination of interventions was expected to increase the relative price of agricultural products, particularly staple crops. In this study, using Ethiopian panel survey data, we estimated the causal income and investment effects of the Ethiopian P4P intervention among smallholders. Using an entropy balancing (EB) model and semi-parametric difference-in-difference (DID) model, we show that the P4P intervention has increased per capita consumption by smallholders. Our additional analysis confirms that this effect is heterogeneous owing to elite capture within Farmer Organizations. We also find evidence of increased food consumption scores, increased investments in child schooling, and increased asset holding among program-participating smallholders relative to comparison farmers. Policy implications are discussed.     

Smallholder market participation under transactions costs: Maize supply and fertilizer demand in Kenya

This paper assessed the effects of transactions costs—relative to price and non-price factors—on smallholder marketed surplus and input use in Kenya. A selectivity model was used that accounts for the effects of transactions costs, assets, technology, and support services in promoting input use and generating a marketable surplus. Output supply and input demand responses to changes in transactions costs and price and non-price factors were estimated and decomposed into market entry and intensity. The results showed that while transactions costs indeed have significant negative effects on market participation, institutional innovations—such as group marketing—are also emerging to mitigate the costs of accessing markets. Output price has no effect on output market entry and only provides incentives for increased supply by sellers. On the other hand, both price and non-price factors have significant influence on adoption and intensity of input use. Overall, the findings suggest that policy options are available other than price policies to promote input use and marketed surplus. The paper concludes with implications for policy to induce greater input–output market participation among smallholders in Africa.     

Zimbabwe’s Agricultural Recovery Programme in the 1990s: an evaluation using household survey data

During the 1990s, the Government of Zimbabwe implemented an Agricultural Recovery Programme to help smallholder farmers recover from repeated severe droughts. The programme aimed to provide drought-affected smallholders with crop packs (free seeds and fertiliser) and mechanised tillage services. This article evaluates the coverage, poverty-sensitivity and impact of the programme using a more in-depth analysis of household survey data than has been done to date. The programme’s tillage component was unsuccessful, repeatedly reaching less than 5% of its target group; the crop pack component, however, reached four-fifths or more of its target group. Most of the poorer households received crop packs, but richer households were slightly more likely to get them. Those who did receive crop packs planted larger areas under staple crops, regardless of their poverty status. These findings are generally robust for a range of poverty proxies. Unfortunately, there is no clear evidence on the impact, if any, of crop packs on grain yields. Crop packs—properly attuned to local agro-ecological conditions—may serve a useful role in post-drought recovery. Steps must be taken, however, to ensure that all the poor receive crop packs. Attempts by government to provide mechanised tillage to hundreds of thousands of smallholder households are not recommended.     

Assessing the impact of improved agricultural technologies on household income in rural Mozambique

In many areas of Africa, rural livelihoods depend heavily on subsistence farming. Using improved agricultural technologies can increase productivity in smallholder agriculture and thus raise household income and reduce poverty. Data from a nationally representative rural household survey from 2005 is used to assess the impact of four technologies – improved maize seeds, improved granaries, tractor mechanization, and animal traction – on household income in Mozambique. To ensure the robustness of the results, three econometric approaches were used: the doubly-robust estimator, sub-classification and regression, and matching and regression. The results show that, overall, using an improved technology did not have a statistically significant impact on household income. This may be associated with a widespread drought that occurred in 2005. Despite drought, distinguishing between households based on propensity score quintiles revealed that using improved technologies, especially improved maize seeds and tractors, significantly increased the income of those households who had better market access. Thus, to allow households to benefit from the use of improved technologies, policy makers need to reduce structural impediments to market participation by ensuring adequate road infrastructure and enabling access to markets.     

Collective action for smallholder market access

The opportunity for smallholders to raise their incomes increasingly depends on their ability to compete in the market; yet there are many failures in rural markets in developing countries that make it difficult for them to do this. Understanding how collective action can help address the inefficiencies, coordination problems or barriers to market access is particularly important. This paper draws on the case studies in this special issue and on other literature to examine the conceptual issues and empirical evidence on the role of collective action institutions in improving market access for the rural poor. Applying insights from studies of collective action in natural resource management, the paper examines what conditions facilitate effective producer organizations for smallholders’ market access, with special attention to the characteristics of user groups, institutional arrangements, types of products (staples, perishables and other commodities), markets (local, domestic and international), and external environment. The paper also identifies policies and interventions that facilitate collective action for market access among smallholders, and examines whether the public sector, private sector and/or civil society is best positioned to provide such interventions.     

Agricultural commercialization and nutrition revisited: Empirical evidence from three African countries

The transition from subsistence to commercial agriculture is key for economic growth. But what are the consequences for nutritional outcomes? The evidence to date has been scant and inconclusive. This study contributes to the debate by revisiting two prevailing wisdoms: (a) market participation by African smallholders remains low; and (b) the impact of commercialization on nutritional outcomes is generally positive. Using nationally representative data from three African countries, the analysis reveals high levels of commercialization by even the poorest and smallest landholders, with rates of market participation as high as 90%. Female farmers participate less, but tend to sell larger shares of their production, conditional on participation. Second, we find little evidence of a positive relationship between commercialization and nutritional status. As countries and international agencies prioritize the importance of nutrition-sensitive agriculture, better understanding of the transmission channels between crop choices and nutritional outcomes should remain a research priority.     

Welfare effects of vegetable commercialization: Evidence from smallholder producers in Kenya

We investigate whether smallholder horticultural commercialization is able to, as often stipulated, reduce poverty in developing countries with the help of panel household survey data from Kenya. We find evidence for a positive association between vegetable commercialization and household welfare, even when controlling for unobserved heterogeneity across households. Interestingly, the effect differs depending on which market vegetables are being produced for: commercialization through the export market is consistently positively associated with income but not wealth, while there is some limited evidence for commercialization through the domestic market channel being positively related to welfare measured by asset holdings and income, depending on the specification.     

Monetary policy and food inflation in South Africa: A quantile regression analysis

Although optimal monetary policy stabilizes food inflation theoretically, empirical studies remain limited not only in the context of volumes and the estimation approaches, but are focused on selected advanced and emerging countries to the neglect of Africa where poverty and dominance of food in the consumption basket are more pronounced. We provide empirical evidence in the context of South Africa using quantile regressions. Rising food prices are destabilized even further by restrictive monetary policy; a finding that has ramifications for inflation targeting, especially given that a quarter of the country’s population is food poor.     

Subsistence production,markets, and dietary diversity in the Kenyan small farm sector

Undernutrition and low dietary quality remain widespread problems in poor population segments, especially among smallholder farmers in sub-Saharan Africa. Hence, the question how smallholder systems can be made more nutrition-sensitive is of particular relevance for research and policy. Recent studies analyzed whether increasing farm production diversity may help to improve nutrition. Most existing studies found a positive but small effect on dietary diversity on average. The underlying mechanisms were not examined in detail. This article tests the hypothesis that the effect of farm diversity on nutrition is small because production diversity is positively associated with dietary diversity obtained from subsistence production but negatively associated with dietary diversity obtained from the market. This hypothesis is confirmed with data from Kenya, using different indicators of production diversity and dietary diversity scores at household and individual levels. The results underline the important role of markets for smallholder diets and nutrition. Hence, strengthening markets and improving market access should be a key strategy to make smallholder systems more nutrition-sensitive.     

Smallholder income and land distribution in Africa: implications for poverty reduction strategies

This paper provides a micro-level foundation for discussions of land allocation and its relation to income poverty within the smallholder sectors of Eastern and Southern Africa. Results are drawn from nationally-representative household surveys between 1990 and 2000 in five countries: Ethiopia, Kenya, Rwanda, Mozambique, and Zambia. The paper shows that farm sizes are declining over time; that roughly a quarter of the agricultural households in each country are virtually landless, controlling less than 0.10 hectares per capita, including rented land; that non-farm income shares are below 40% even for the households in the bottom land quartile; and that because of this, there is a strong relationship between access to land and household income, particularly for farm sizes below 1.0 hectares per capita. Land distribution within these small-farm sectors appears to be becoming more concentrated over time, and their Gini coefficients are comparable to those of many Asian countries at the time of their green revolutions. Lastly, the largest part of the variation in per capita farm sizes within the small-farm sectors is, in every country, predominantly within-village rather than between-village. Realistic discussions of poverty alleviation strategies in Africa need to be grounded in the context of these land distribution patterns and trends.     

Linking smallholder farmers to markets on extensive and intensive margins: Evidence from Nicaragua☆

Access to modern commercialization channels is key for smallholder farmers to move away from subsistence farming and overcome poverty. However, achieving that goal is challenging for smallholders given their lack of appropriate managerial practices, production technology and infrastructure. This paper examines the association between receiving trainings in two distinct entrepreneurial practices, one direct at the individual and farmer-association level and another indirect at the community level, and commercialization in non-local markets at the extensive and intensive margins. We exploit a panel dataset of bean producers in Nicaragua that participated in an NGO program implemented between 2007 and 2012. We find opposite results for the two market-linkage activities, especially on the intensive margin or volume of sales. While reciving direct training on entrepreneurial practices (EP) is positively associated with commercialization, training on municipality engagement (ME) activities is negatively associated. These correlation patterns are mainly observed among entrant farmers as opposed to those already participating in commercial markets prior to the program implementation. We also find varying results for ME activities by plot size and leadership position. Additional estimations show that training activities that are positively correlated with bean commercialization are not necessarily correlated with the commercialization of other crops, and vice versa.     

Measurement of competitiveness in smallholder livestock systems and emerging policy advocacy: An application to Botswana

Farm level cross sectional data of 556 randomly selected livestock producers were used to investigate the competitiveness of smallholder beef farmers in Botswana. The results show the presence of inefficiency, with about 74% of the variation in actual profit from maximum profit (profit frontier) between farms mainly arising from differences in farmers’ practices rather than random variability. Further the mean profit efficiency level of 0.58 suggests that there is a substantial scope to improve beef profitability in Botswana. Significant profit efficiency drivers include, among others, education, distance to market, herd size, access to information and access to income from crop production. Considering the importance of livestock sector for wealth creation and poverty eradication in the rural areas where poverty is more pronounced, there is a need for appropriate development strategies and policies directed towards addressing these factors. In particular there is need to invest in market infrastructure in order to improve market access, hence profit efficiency of smallholder livestock farmers.     

The food security challenge for southern Africa

This paper considers food security aims and instruments against a background of changed circumstances internationally and regionally. The international changes discussed are: a sharper focus on achieving macro-economic stabilization, which inter alia has led to closer scrutiny of what the public sector should be financing, and a decline in funding for agriculture; a reduced role for governments in commercial-type activities; the shift towards greater integration of world markets; and changing prospects for international aid flows. Regionally, southern Africa is moving away from a past of conflict and inward-looking economies, towards greater cooperation and trade, and less interventionist economic management.The commendable SADC food security strategy paper of June 1997 is considered, and its implications drawn out. The main messages are that (a) household food insecurity results from poverty, (b) national food insecurity results from faltering development and weak external trade performance, and (c) future strategies must therefore lie with greater efficiency in the use of resources and with patterns of development which are most effective in creating employment and incomes. Arguably there is therefore no case for a food security agenda that is separate from broad-based development aimed at poverty alleviation. This understanding of food security is at variance with some of the policies and development programmes in the region. Promotion of self-sufficiency in grains, specific food-security instruments, and controls over and interventions in markets may all be counter to improving food security for the region if they hinder policy and institutional reforms called for by the wider development agenda.The main roles for governments in promoting food security are discussed in terms of creating an enabling environment for development, correcting for market failures, and targeted measures to achieve social objectives. Food security needs both an urban and a rural focus, and involves all economic sectors. For rural areas, governments' roles may usefully be defined in terms of supporting household strategies aimed at raising and stabilizing incomes through livelihood diversification, intensification of farming, and migration.Two priority policy areas which are central to achieving food security objectives are discussed at some length: trade policy and the promotion of smallholder farming. The roles of government in these areas are discussed in the light of economic theory and past experiences in the region. A vision for a future trade regime is outlined, and strategic interventions by governments are identified. The challenge for governments in supporting smallholder farming is, first, to define with greater rigour than in the past the priority uses for public funds, and, second, to find much more efficient ways of delivering services than in the past. It will otherwise be difficult to make a case for reversing the decline in public funding for the sector.The paper ends with brief discussions of the roles for aid and for SADC in promoting food security, and with a question of whether a new initiative is needed to strengthen trade policy skills in the region.     

Prospects for integrated soil fertility management using organic and inorganic inputs: evidence from smallholder African agricultural systems

This paper reviews current organic nutrient management practices and their integration with mineral fertilizers in Sub-Saharan Africa with a view to understanding the potential impacts on a range of input markets. A number of different organic nutrient management practices have been found to be technically and financially beneficial, but they differ considerably as to their effectiveness and resource requirements. A review of African smallholder experiences with integrated soil fertility management practices finds growing use, both indigenously and through participation in agricultural projects. Patterns of use vary considerably across heterogeneous agroecological conditions, communities and households, but are stimulated by profitable commercially oriented agricultural opportunities. The potential for integrated soil fertility management to expand markets for organic inputs, labor, credit, and fertilizer is explored. We found that there are few direct analyses of these links and indirect evidence at this point in time is inconclusive.     

Feeding the famine? American food aid and the GMO debate in Southern Africa

The inclusion of genetically modified maize in food aid shipments to Southern Africa during the 2002 food crisis rekindled debates over agricultural biotechnology. As the region edged ever closer to famine – putting the lives to some 14 million Africans at risk – corporate pundits, government officials and biotech’s critics debated the health and environmental dangers posed by the new technology.By situating the decision to send genetically modified maize to Southern Africa in the context of US–European debates over agricultural biotechnology, it becomes clear that the promotion of biotechnology has nothing to do with ending hunger in the region. Indeed, American food aid shipments to Southern Africa have little to do with the famine at all. Instead, I argue that US food aid policy following the 2002 crisis was intended to promote the adoption of biotech crops in Southern Africa, expanding the market access and control of transnational corporations and undermining local smallholder production thereby fostering greater food insecurity on the Continent.     

Can biotechnology reach the poor? The adequacy of information and seed delivery

The paper examines the expectation that biotechnology can provide significant benefits for smallholder farmers. It uses evidence from current seed systems and variety choice in developing countries. In particular, it examines the adequacy of information flow and the performance of seed markets. Many of the biotechnology innovations proposed for use by smallholders feature qualities that may not be immediately obvious to farmers; implications are drawn for the potential demand for these transgenic varieties. The adequacy of seed systems is also examined, including the characteristics of local seed diffusion and the experience of commercial seed enterprises. The paper concludes that investments in public biotechnology must be accompanied by policies that encourage commercial seed system development and that empower farmers to be able to take full advantage of new technology.     

Changing asset endowments and smallholder participation in higher value markets: Evidence from certified coffee producers in Nicaragua

This paper examines the capacities of smallholders in Nicaragua to exploit new linkages to certified coffee markets following the coffee crisis. Data on livelihood assets were collected from 292 households, which were clustered to test how differences in outcomes (asset building) reflect variations in initial asset endowments. The results suggest that most households built particular elements of their asset base and increased their resilience to future shocks. However, households struggled to make effective use of the gains for intensifying their livelihoods. Of the least-endowed households, few made investments in the scale or productivity of coffee, and most continued to depend heavily on subsistence production and seasonal off-farm income for survival. In conclusion, improved market access alone, even under relatively favorable market conditions and with considerable external support, will have uncertain impacts on rural poverty if the underlying constraints on household assets and investments are not addressed concurrently.     

New perspectives on farm size and productivity

The farm size and productivity debate has been limited by the focus on land or labor productivity, generally showing respective productivity advantages to smaller or larger sized farms. Our purpose is to provide new perspectives on the debate by bringing together evidence from a set of novel case studies in both rich and poor countries. Common to them are the adoption of total factor productivity (TFP) as the comparative performance measure, and the reliance on panels of farm micro data. The present article presents a synthesis of findings from five case studies in (i) Malawi, Tanzania, and Uganda; (ii) Bangladesh; (iii) Brazil; (iv) Australia; and (v) the United States. The preponderance of evidence from these studies suggests that there is no single economically optimal agrarian structure; rather, it appears to evolve with the stage of economic development. Certain farm sizes face relative productivity advantages, such as small farms in Africa. But with economic and market growth, that smallholder advantage will likely attenuate, moving toward constant and eventually increasing returns to size. Yet, importantly, small farms may be quite dynamic, and need not be a drag on agricultural growth until perhaps well into the development process.