Behind small farm transformation

| Updated: October 24, 2017 07:01:59

Behind small farm transformation
The Center for Development Research (ZEEF) of Bonn, Germany is an internationally reputed research organisation. It is devoted to empirical research mostly on rural economy and mainly in Africa. Led by eminent economist Dr Joachim von Braun, former Director General of the International Food Policy Research Institute (IFPRI), the ZEEF has already attracted worldwide attention for its role in moulding policies through research. In a recent study, after reminding us that there seems to be a positive-negative relation between farm size and productivity, Joachim von Braun and Alisher Mirzabaev take us to the story of transformation of small farms. The fundamental forces which are driving farm change, according to them, can be broadly clustered into exogenous and endogenous factors. Exogenous forces drive patterns and changes by location and geography, ecology and nature, and infrastructure. The latter is largely determined by opening up of production potentials through infrastructure improvements and rural-urban linkages. Endogenous forces are driving (and constraining) change due to current and inherited agrarian and political institutions. The researchers also reckon that technological and institutional innovations are partly endogenous and exogenous. For example, despite similarly small-farm sizes in China, Japan, India, Thailand and South Korea, agricultural growth rates have varied significantly among these countries and over time, pointing to the role of policy and institutional environment in shaping the level of viability of small farms. 
According to the researchers, there are six mega trends shaping farm economics. Each of these trends plays a role in shaping the scenario for future of farms and Bangladesh may not be an exception to this development. We discuss bellow the trends, often paraphrasing them.
 Currently, the world population is slightly more than seven billion. It is estimated to increase by a third over the next 40 years. The farm population will increase, but at reduced number and with increased aging. Second, the world would become more and more urbanised, thus reducing the share of the total population living on farms. A mega-driver of change is the change in global employment. The total number of employed people will increase from 3 billion to 3.5 billion people by 2020. The number of those employed in farming will decrease by 0.3 billion. This means an increase of employment outside agriculture by 0.8 billion. However, all of those will not be employed in urban areas. At least half of them will find their employment in industry and services sectors in rural areas, namely in small rural centres and towns. 
CHANGE IN DEMAND FOR FOOD AND NON-FOOD PRODUCTS: The world population is estimated to reach about nine billion by 2050 and these people will want to eat like 12 billion compared to the present time, because they will be richer and more urbanised. The volume and patterns of consumption will change. The Western middle income society is the trendsetter. People will eat more packaged, more diverse and more fast food. The consumption of income-elastic products such as animal products including milk, eggs and meat will increase. Some of these products in high demand have declining returns to scale, such as vegetables; others have increasing returns to scale, such as poultry, and are of diminishing opportunity for small holders. 
 PRICES OF OUTPUTS AND RESOURCES: Agricultural prices determine viability of small farms to a significant extent. These prices have increased and have become more volatile. Volatile prices are adverse for small farm growth as they increase risks (and small farms have low risk-coping capacity) and impair investments. Financial and food markets have started to become linked, and especially more so in the last five years. Recall the food price spikes of 2008 as well as wheat and maize price increase in 2010. The consequences of these trends towards higher prices and their volatility influence the costs of natural resources. As food prices increase, the pricing of natural resources is affected with prices for land and water rising as a consequence of expected higher output prices. 
There is now an active global demand for land. Currently, most such land acquisitions take place in Africa although it occurs also in parts of Asia, such as in Cambodia and Pakistan. We now observe an internationalisation of land markets and that impacts the viability of small farms, especially when property rights are insecure. Local government also plays a role in this in Asian countries (i.e. China and India) when land becomes a source of indirect fiscal enrichments. 
 INFRASTRUCTURE, ICT, AND RURAL SERVICES: The mega trend of increasing access to information and communication technology cannot be emphasised enough. It gives a boost to rural areas, and it will change the whole landscape of infrastructure. Cell phones are in everyone's possession all over the world. Currently, there is a fast expansion in smart phones with internet access. This development changes the environment also for small farms. It will facilitate access to rural services and revise the idea of a region being landlocked. This will certainly change the future of farms and the landscape of agricultural productivity. 
AGRICULTURAL SCIENCE AND TECHNOLOGY: Investments in agricultural science will have a fundamental impact on what level of food prices the next generation will have to pay, and what extent of hunger it will experience. There is an urgent need for increased investments in agricultural research and enhanced natural resources management and market efficiency together with effective policies. The major technological changes in the next decades will probably not be in the grain sector, but in meat and dairy and horticulture sectors and in non-food bio-economy related diversification. .
The writer is Professor of Economics at  Jahangirnagar University. 

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