Small not always beautiful

A chapter in the latest IFPRI Food Policy Report 2014-2105, highlights the importance of family farms. There are a 570 million farms in the world, but the majority of them are small – 80% operate on less than 2 hectares and occupy just 12% of the worlds farmland.  Three-quarters of farms are in Asia, and 60% are in just two countries – India and China.  Over 90% of farms are family operations, where they are owned or managed by family members who also provide a minimum share of labour.

In Asia 85% of farmland is cultivated by family enterprises compared to just 18% in South America. For North and Central America the figure is 83%, Europe 68% and Africa 62%. There are as expected wide variations in farm size. The contribution of small farmers towards food security is of critical importance in many developing countries.

Economies of scale clearly exist in farming, however small family farms can have competitive advantages, lower labour supervision costs, better local knowledge, more intensive use of inputs are listed in the report. The image of the family farm as opposed to ‘commercial agribusiness’ can also provide a competitive advantage, especially for farmers selling directly to the public. Families have a habit of sticking together and pulling together in times of hardship, and this does often make the family farm a resilient entity. Family farms remain the bedrock of farming in developed countries, of the 2.1 million farms in the US – according to the USDA 97% are family owned businesses.

However, in developing countries small farmers are hampered by lack of access to financial services and capital investment. Poor farmers in developing countries often do not have access to savings accounts and loans. Poor rural infrastructure is also a barrier to access to markets and to development. Whilst in most parts of the World we see a trend towards the consolidation of small farms into larger units, in Africa a growing rural population is leading to inheritance based land fragmentation, and a declining average farm size. In Europe and other developed countries many family farm businesses do not have a clear successor, with young people put off farming careers by a poor image and low incomes.

Access to markets is critical for the profitability of small farmers in developing countries, and is influenced by factors such as access to roads, co-operatives, finance and levels of education.

The pressure on small family farms is increasing, price shocks, extreme climatic events such as drought and flooding. Half of the worlds hungry are small scale farmers. There is no one size fits all policy, those farms that are able to access high value markets and improve profitability should ‘move up’, those that can’t should be given assistance to ‘move out’, and seek opportunities for work in other sectors. Weak property rights are often a barrier to farm consolidation, the lack of functioning land rental and sales markets prevents the formation of larger holdings.

Small is not always beautiful and the report presents two options for small farmers – move up or move out.