Zero Hunger Challenge through Family Farming

Click to edit Master title style
Enhancing profitability
Transforming smallholder family
farms
Shenggen Fan
Director General | International Food Policy Research Institute
Asia Pacific Regional Consultation
Chennai, India | August 9, 2014
Shenggen Fan, August 2014

Key messages
 Most smallholders farmers are family-based
 Smallholders have a big role to play in achieving
global food security and nutrition
 Not all smallholders are the same and they face
an emerging set of challenges and opportunities
 Strategies should be tailored to different types of
smallholders and country’s level of transformation

Global hunger and undernutrition persist
Prevalence of micronutrient deficiencies
+2 billion people are micronutrient
deficient
Source: Data from FAO 2013, HarvestPlus 2011
Prevalence of undernourishment %
Source: Data from FAO 2013
Smallholders make up 50% of world’s undernourished
people, and live off 2 ha of cropland or less
Source: UN 2005

Smallholder achieving Click to edit family Master farms are critical in
food security title and style
nutrition
 Most smallholder farms are
family-based
 Of the world’s 570 million farms
• 88% are family farms
• 84% are smallholder farms
 Smallholder farms provide
• Livelihoods for 2.5 billion people
• More than 80% of food consumed
in Asia and Africa south of Sahara
Share of farm size less than 2 ha (%)
Source: FAO 2014
Note: Most recent data on holdings used; Data for Algeria in 2001, Burkina Faso in 1993, Egypt in 2000,
Iran in 2003; Ivory Coast in 2001; Morocco in 1996; Yemen in 2002
Source: IFAD 2013; FAO 2014

Is small still beautiful?
 Old wisdom: small is beautiful → efficiency benefits
 As agriculture and food systems transform, optimal farm
size varies
 Small is still beautiful: weak nonfarm growth and
increasing rural population
 Bigger is better: booming nonfarm sectors and
increasing urban population
 However, many countries artificially control farm size
Optimal farm size is dynamic concept that reflects
different types of smallholders and economies

Not all smallholders are the same
Differences exist on
 Potential to commercialize
• Soft constraints
— E.g. access to info and financial capital
• Hard constraints
― E.g. high population density and low quality soil
Stage of economic transformation
• Level of productivity in and outside of agriculture
• Economic diversification and growth
Source: Fan et al. 2013
Agriculture-based
Transforming Transformed

Emerging challenges facing smallholders
 Food price volatility
 Rising agricultural-related risks to health
 Climate change and higher frequency /
intensity of extreme weather events
 Land and water constraints
 Limited access to finance and capital

Food price increases and volatility
Food price increases can be positive or negative…
Improves long run agric. growth, reduces poverty
Short run/
volatile
Hurts net sellers and buyers
of smallholders
Long run/
secular
Price increase
Access to
inputs
Infrastructure
Markets and
services
Capacity to
convert high
food prices
to high
income
Price volatility can have harmful effects on the poor, but long run
impacts of higher food prices can increase smallholder income and
stimulate poverty reduction
Source: Headey 2014, Christiaensen et al. 2011
Capacity
…but smallholders require support for long-run gains

Rising agriculture-related risks to health
Human health
increasingly
affected by intense
food production
Affects smallholders’ ability
to undertake more
productive and innovative
activities
Picture Source: ILRI 2013
Food safety risks
• Unregulated food production
• Increasing proximity of industrial
and agricultural activities
• E.g. milk and rice contamination
Animal-borne diseases
Source: ILRI 2012

Limited access to finance and capital
 Limited access to financial options for savings and loans
 Incompatibility of microcredit with
• Risks that affect whole communities
• Seasonality of smallholder production and income cycles
• Smallholders’ long-term needs for more productive capital investments
 Uncertain impact of resource-seeking FDI on smallholders
Source: Motes 2011
Agricultural investment needs, investment flows, and the remaining gap
in developing countries (excl. infrastructure), 2008

Policies should differ across smallholders
Smallholders should be supported to either
MOVE UP
• Smallholders with profit potential move from
subsistence farming to profitable farming systems
• Already profitable smallholders scale-up commercial
activities
OR
MOVE OUT
• Smallholders with no profit potential move out of
agriculture for non-farm employment
Source: Fan et al. 2013

Policies of Click should also reflect country’s stage
transformation
to edit Master title style
Increased
productivity among
smallholder farmers
(e.g. smallholder-friendly
investment and access to
finance)
Institutional reform
to facilitate
consolidation of
farms and
movement out of
agriculture
High-value agriculture
Improved links to global and
urban markets
Cross-sectoral social safety nets to protect during shocks and acquire
skills to undertake more productive activities

Pathways smallholder Click to edit to enhancing family Master profitability of
farms
title style
Economic
Promote market based price stabilization mechanisms that encourage
smallholder profitability
Support institutional reforms that link smallholders to value chains
Ensure smallholder-friendly financing and investment
Develop programs and projects that target young farmers
Strengthen land rights for smallholders and promote optimal size of
operations through land rental markets
Environmental and Social
Advance smallholder-friendly climate-smart and sustainable
agricultural technologies
Scale up productive and cross-sectoral social safety nets

Developing Click to edit youth Master in title agriculture
style
 Land, capital, and skill-building are crucial to develop next
generation of farmers
 Improve rural infrastructure to increase access to services,
goods, jobs, and leisure
 Young people + opportunity = “Youth dividend”
Percentage of Rural Youth Workforce in India by
Sector (Age 15-24)
Source: Brooks, Zorya, and Gautam 2012
Source: Motkuri 2013

Linking smallholders to value chains
Author Type Innovation Region /
Country
Actual / potential beneficiaries and
impact
Saenger et al.
2012
Dairy Contract
farming
Vietnam Small farmers and processors
•Higher productivity
•Better milk quality with quality-dependent
pricing
•Lower per-unit transaction costs with
independent quality control
Chenevix
Trench et al.
2011
Perishable
foods
Modified risk
analysis
framework
General Poor small farmers and consumers
•Higher incomes from producing high-value
foods
•Lower health risk
Hawkes & Ruel
2011
Multiple incl.
fortified
foods
Nutrition-sensitive
chains
Developing
countries
Poor and marginal popula-tions
•Better nutrition
•Improved access to nutritious foods
(availability, affordability, and
acceptability)
Bernard &
Spiel-man 2009
Grains Producer
coop-eratives
Ethiopia Smallholders
•Positive spill-overs from cooperative
activities

India: Linking smallholders to dairy grid
 Linked small dairy producers to urban consumers
• Chain of production, procurement, processing, and marketing
 Created national milk grid of village cooperatives,
district unions, and state marketing federations
 13 mil. participants, 3.7 mil. women in 2008
 Dairy production rose by 4.5% per yr,1970-2001
Source: Cunningham 2009
Increase bargaining power; provide demand information; and
reduce transaction costs and risks

In conclusion
 Smallholder family farms are key to ending global
hunger and undernutrition
 Priority-setting in policymaking must include
transformation of smallholder family farms
 Strategies to enhance profitability should be
tailored to different types of smallholders and
country’s level of transformation

Zero Hunger Challenge through Family Farming

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