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Smallholder Agriculture and Market Participation discusses the evolution of policies for smallholder development, including the role of value chains, and the linkages that exist with the Sustainable Development Goals. New, innovative financial mechanisms and linked initiatives are outlined, and their potential to improve the availability of financial services and reduce market transaction costs. Risk management for agricultural smallholders is covered, together with the increasing role of insura nce as a mechanism for risk management among smallholders. Empirical data are used to illustrate the more conceptual work. The last part of the book provides case studies of selected commodity value chain investments involving smallholders in Africa (Ethiopia, Tanzania and Zimbabwe) and South America (Peru), implemented by FAO. The lessons concern project design and targeting, product and market analysis, regulatory issues, sustainability and improved natural resources management.
The emergence of rural land rental markets in Sub-Saharan Africa is recognized as a key component of the region’s ongoing economic transformation. However, the evidence base on land market participation relies on survey-derived measures, which do not always cohere when compared and triangulated, suggesting the possibility of non-trivial measurement error. We report the results of a priming and list experiments designed to shed light on a persistent mystery in rural household survey data from Africa: why there are so many fewer self-reported landlords (renters-out) than tenants (renters-in)? Our design addresses two hypotheses using experimental data from Ethiopia. First, rented-out and rented-in land may be systematically underreported because enumerators and respondents are typically primed to emphasize parcels that are actively managed/cultivated by the household. Second, rented or sharecropped-out land may be systematically underreported because of respondents’ reluctance to acknowledge an activity for which public disclosure may have negative repercussions. We address the first hypothesis with a priming experiment by exposing a random subset of respondents to a nudge that explicitly reminded them to fully account for all land, including rented/sharecropped-in and rented/sharecropped-out. We address the second hypothesis with a double-list experiment, designed to elicit true rates of land renting and sharecropping-out. We find that nudging induces about 4 percentage points increase (or 13% in relative terms) in the share of households participating in renting in or sharecropping-in practices but has negligible effects on reported rates of renting and sharecropping-out. Interestingly, our list experiment indicates much higher revealed rates of renting-out (14-15%) than is reflected in the nominal parcel-roster responses (3%). The magnitude of the latter finding fully explains the apparent difference in renting in versus renting-out rates derived from the regular parcel roster responses. These results indicate that efforts to document land market participation rate and associated impacts must overcome large systematic reporting biases.
This book includes examples of achieving wider change in smallholder agriculture, through influencing policy decisions, linking smallholders to value chains, innovating service provision for small farmers, with an emphasis on promoting equitable livelihoods and developing rural women's economic leadership.
The Innovation for Agribusiness (InovAgro) project, which launched with its first three year phase in 2010, uses a market system development (MSD) approach towards the goal of increasing incomes of men and women small-scale farmers in northern Mozambique. InovAgro interventions promote improved agricultural productivity, participation in selected high-potential value chains and the development of inclusive and sustainable market systems, such that impacts are expected to last long beyond the termination of the project. This paper presents results from a midline quantitative impact evaluation of the second phase of the InovAgro project interventions (2014-2017). In it, we use a carefully designed and executed quasi-experimental study design to credibly attribute changes in market engagement and welfare of participating farmers to exposure to the InovAgro II project, identifying and testing in what respects the intervention was most successful, and what regard it had less impact. Although InovAgro II projects operate in 11 districts of Zambézia and Cabo Delgado provinces, this impact evaluation focuses on two districts in Zambézia province (Alto Molócue and Molumbo), and in terms of value chains, focuses on the soybean and pigeon pea high-potential value chains, while the InovAgro II project interventions focus on these in addition to maize, sesame and groundnut. A baseline survey was undertaken in 2015 covering the 2014/2015 agricultural season and a midline follow-up survey was conducted in 2017, covering the 2016/2017 agricultural season and reaching 1,749 households of the original 1,886 households interviewed in the baseline survey. Using difference-in-difference estimation and propensity score matching, we find that exposure to the InovAgro II project is associated with an increase in the proportion of households selling soybean and pigeon pea by approximately 5% and 16%, respectively (significant at the .01 level). Exposure to the InovAgro II project also results in significantly higher shares of smallholder farmers using improved seed for soybean and pigeon pea (an increase of 6% for soybean and 2% for pigeon pea). We find that the InovAgro II project is also associated with significant increases in access to agricultural output market information from formal sources (5%) and hired labor for farming activities (8%). Despite the significant impacts on short term outcome variables, exposure to the InovAgro II project had limited impact on long term outcome variables, such as on rural-urban migration as well as engagement in the non-farm sector (two proxies for assessing potential welfare implications of the project) however this finding is not surprising given the impact evaluation covers only two years-a short period of time to bring about the long-term impacts expected to eventually emanate from an MSD project.
The literature on commercial transformation of smallholders makes little distinction between market orientation (production decision based on market signals) and market participation (sale of output). This paper analyzes the determinants of market orientation and market participation in Ethiopia separately and examines if market orientation translates into market participation. Empirical results show that market orientation translates strongly into market participation. The key implication of this study is that policy, technological, organizational and institutional interventions aimed at promoting commercial transformation of subsistence agriculture should follow two-pronged approach: improving market orientation of smallholders at production level, and facilitating market entry and participation of households in output and input markets. Focusing on either may not be as effective in achieving the transformation.
This open access book discusses the current role of smallholders in connection with food security and poverty reduction in developing countries. It addresses the opportunities they enjoy, and the constraints they face, by analysing the availability, access to and utilization of production factors. Due to the relevance of smallholder farms, enhancing their production capacities and economic and social resilience could produce positive impacts on food security and nutrition at a number of levels. In addition to the role of small farmers as food suppliers, the book considers their role as consumers and their level of nutrition security. It investigates the link between agriculture and nutrition in order to better understand how agriculture affects human health and dietary patterns. Given the importance of smallholdings, strategies to increase their productivity are essential to improving food and nutrition security, as well as food diversity.
Transaction costs, one of the most significant barriers to market participation, may vary by buyer type. Depending on who a farmer sells their produce to, they may alter their potential transaction costs consequently influencing their market participation. This study examines the effect of buyer type on smallholder market participation in Northern Ghana where poverty is still endemic and often exacerbated by fewer opportunities for commercialization such as limited access to markets. The analysis is based on data from the agriculture production survey conducted in 2013 and 2014 and the Population based Survey conducted in 2012 in northern Ghana. Analysis is performed using the Double Hurdle approach to control for self-selection bias, ensure more flexibility on the variables affecting the decision to sell and how much to sell as well as to provide unconditional effects of the variables on market participation. The results reveal greater market participation of cash crop producing farmers than those producing a lower value food crop - Maize. The results also show that farmers selling to aggregator-type middlemen and other buyers have a propensity to sell more. The aggregators and 'other buyers' buy in bulky, offer lower prices and are associated with lower transport, loading and offloading costs than consumers. Farm output, access to information and price also have a significant positive impact on intensity of market participation. These findings support policy initiatives such as supporting aggregator-type middlemen, increasing the provision of information, promotion of cash crops as well as supporting more interventions focusing on increasing production and yields.
Despite the growth of agrifood markets, and gradual structural transformation, smallholders persist in Asia. Such patterns are at odds with the views that market growth should encourage more specialization whereby smallholders’ transition to either larger farmers or specialized non-farm households. Using the panel household data in Vietnam, this study investigates how participation in agrifood markets affect smallholder households’ economies of scope (EOS) in diversifying into agriculture and non-agricultural income-earning activities. We find that, greater agrifood market participation proxied by the increased food purchase generally increases EOS between agriculture and non-agricultural activities at the household level. Moreover, it leads to greater labor productivity in agriculture, and also increases female household members’ diversifications into both agriculture and non-agricultural income-earning activities. These effects are relatively stronger and more consistent than conventional indicators of agrifood product sales or proximity to the market. The results shed more light on how exactly smallholders in Vietnam persist in the face of agrifood market growth, and what kind of their relations with such a growing market can be promoted in ways that enhance their livelihoods in the short- to medium- terms.