Enhancing Profitability of Smallholder Family Farms

Bangladeshi dairy farmer (Source: IFPRI)

Bangladeshi dairy farmer (Source: IFPRI)

As the International Year of Family Farming moves past its halfway point, various discussions at the national, regional, and global levels have focused on solutions for supporting sustainable family farming.

One such discussion was a Regional Consultation for the Asia-Pacific region in Chennai, India, from August 7-10, 2014, titled the “Role of Family Farming in the 21st Century: Achieving the Zero Hunger Challenge by 2025.” The consultation was organized by the M. S. Swaminathan Research Foundation, (MSSRF), in partnership with FAO, IDRC Canada, WFP, IFAD, DFID UK, UN Women, and other national and international organizations.

I participated as the lead speaker for the plenary session on Enhancing Profitability of Family Farms. So what do we know about family farms? Most smallholder farmers are family-based—of the world’s 570 million farms, 88 percent are family farms and 84 percent are smallholder farms. Smallholder family farms are critical in achieving food security and nutrition. They provide livelihoods for about 2.5 billion people and account for 80 percent of the food consumed in Africa south of the Sahara and Asia.

You may ask, is small still beautiful? The answer is: it depends. The old wisdom—that small is always beautiful because of efficiency gains—cannot be sustained. As food systems transform, optimal farm size will vary. Small is still beautiful where nonfarm growth is weak and the rural population is increasing. But bigger is better where the nonfarm sectors are booming and the urban population is increasing. However, many countries artificially control farm size. Optimal farm size should be treated as a dynamic concept that reflects different types of smallholders and economies.

We must always remember that not all smallholder farmers are the same. These farmers differ based on: i) their potential to commercialize, which depends on the types of constraints that they face, whether soft (such as limited access to information and capital) or hard (such as high population density vis-à-vis land availability or low-quality soil) and ii) the stage of economic transformation of their countries—assessed based on level of productivity in and out of agriculture and level of economic diversification and growth. These countries could be agriculture-based, transforming, or transformed.

As stakeholders continue to deliberate on action plans for supporting sustainable smallholder family farms, it is important to recognize that policies should differ across these farms—smallholders should be supported to either move up to produce more nutritious and profitable foods for their families and the market or move out to nonfarm employment, a strategy that I call “move up or move out”.

Pathways to enhancing the profitability of smallholder family farms should include:

  • institutional reforms that strengthen land rights and help facilitate land transactions (particularly through rental markets),
  • increased linkages between smallholders and value chains,
  • provision of smallholder-friendly financing,
  • promotion of price stabilization mechanisms, and
  • development of programs that target young farmers.

For example, increasing access to information and communication technologies (ICTs) is crucial to link farmers to value chains. IFPRI research has found that ICTs connect rural smallholders to markets, providing farmers with technologies that increase the amount, timeliness, and quality of market information.

Land, capital, and skill-building, together with improved rural infrastructure, are critical to develop the next generation of farmers, especially in Africa and South Asia. Providing young people with productivity- and profitability-enhancing opportunities will create a “youth dividend” that will help leverage smallholder family farms for the achievement of multiple development goals, including the elimination of hunger and undernutrition by 2025.