In the period 1996 to 2011 I worked a lot with various efforts to link smallholder farmers to markets, mainly organic, in developed countries. The biggest engagement was in EPOPA. By 2008, 80,000 farmers contracted by EPOPA have sold organic products to exporters for approximately US$ 15 million per year. All farmers received higher prices due to the organic premium, which ranges from 10-25% over the conventional price. Taking into account the size of households, 600,000 people have benefited from the programme. You can read a whole book about this successful project here. Overall EPOPA was a success.
Today, linking farmers to markets is an overarching policy for almost all development agencies as well as governments. It also fits very well with a development model that assumes that more markets and more capitalism is the best path to development. While I do think it works quite well under certain conditions, it has, unfortunately, been oversold.
A report from Hivos, Small Producer Agency in the Globalized Market, looks deeper into if and how smallholders can benefit from globalized markets. In short the answer is that a few of them will - and they will soon not be smallholders as the recipe for success is to grow, mechanize and buy up your neighbours farms. This should be no surprise, this is how the farm sector developed in other parts of the world. The report estimates that linking farmers into modern value chains (be they organic, fair trade or normal) may benefit only about 2-10 percent of the farms - and it will be those with the greatest assets. Of the farmers forced off their farms, some will become farm labourers at the farms of the more successful, or in huge agri-business plantations, others will only get a better life if there is some place for them to go – but in many places the prospects in the cities are not too promising and the future as an economic migrant is uncertain.
A recent report from the FAO, The State of Agriculturarl Commodity Markets, does a good job in untangling the contradictory views on the impacts of agricultural trade on food security. Trade affects each of the four dimensions of food security: food availability, food access, food utilization and stability of food suply. The effect of of trade is complex and depends on a variety factors, which makes it difficult to generalize. Among others it is influenced by the way food markets work, by the ability and willingness of producers to respond to the changing incentives that trade can bring, and by the geography of food insecurity, each of which needs to be accounted for in the formulation of trade policy interventions.
The report clarifies that theory of comparative advantage builds on assumptions that
do not hold in today’s global economy. Capital and labour is highly mobile between countries through global value chains while the agriculture sector is highly inflexible, and mobility of agricultural labour and capital is low. Competitive advantage prioritizes short-term conditions versus long-term structural transformation and efficiency gains are prioritized over other social goals. Meanwhile, self-sufficiency is not feasible for all countries and agriculture protection measures may have extraterritorial impacts that can harm food security of others.
Perhaps surprisingly to some, the majority of hungry people live in rural areas; many of them are farmers, others are landless laborers. According to the FAO, 50% of those suffering from hunger and malnutrition are small-scale peasants, 20% are landless, 10% are pastoralists or fishermen and 20% live in city slums. Clearly these groups are affected differently by the increasing globalization of food. Low food prices may initially look like a good proposition for the poor as it makes food more affordable. Falling prices, however, can lead to a worse situation for the rural poor, who make up the majority of those hungry. Most of them are dependent on farm incomes, either as smallholders or as landless individuals seeking employment by farmers. A surplus of food, with falling prices, creates a bigger problem as it drives small farmers off the market so that they cannot buy the things they need for production or for their families.
There are many side effects of the integration of farming in global markets, and those side effects may have far reaching implications. For instance, modern markets and global competition force farmers to adopt uniform high-yielding types of plant or animal. But when food producers abandon diversity, valuable traditional varieties and breeds may die out, along with their specialized traits. For the poorest farmers, the diversity of life can be their best protection against starvation.
This is the fourth post on the trade theme.