Looking at the role of farm size in agricultural growth

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News
  • 2010•12•24     Helsinki

    Globally, in both poor and rich countries, agriculture is one of the few industries that remains largely owner-operated and reliant on family labour. Family farms typically achieve a high degree of efficiency, benefitting from the commitment of family workers, a flexible labour supply to cope with seasonal and annual variability of production, and an intimate knowledge about local soil and climate.

    In some countries, however, the limited success of smallholder-based efforts to improve productivity, among other factors, has led to policies that promote large-scale mechanized farming. Many crop-based farms in developing and transitional countries have operational units that exceed 10,000 hectares — often further horizontally integrated into “superfarms” that control hundreds of thousands of hectares.

    In “The Rise of Large Farms: Drivers and Development Outcomes”, the featured article in the November/December issue of the WIDER Angle online newsletter (UNU-WIDER), Derek Byerlee and Klaus Deininger examine the trend toward large farms and the potential development impacts.

    The authors note that while growing private-sector interest in agriculture presents an opportunity for developing countries to capture much-needed access to capital, modern technology and new markets (and thereby spur agricultural growth and employment), the reality is that development outcomes to date often have been less favourable than expected, with investments infringing on the rights of traditional users and negatively impacting local communities.

    Other concerns addressed in the article include the negative effect of a growing inequality in land ownership on broad-based rural development and growth, the detrimental environmental impacts (especially where land expansion occurs at the expense of forests), and the harmful effects of land speculation and inadequate technology on potential financial and economic benefits. Early investments in Africa, for example, often failed, while many recent acquisitions have not resulted in action on the ground.

    The article goes on to discuss the factors behind the trend toward increasing farm size. These include the efficiency of plantations for some crops; the role that large farms play in opening new agricultural frontiers; recent innovations in crop breeding, tillage and information technology that favour large farms; and the effect of demands by buyers in high-income countries for certification of social and environmental sustainability.

    The authors note that large farms have emerged partly in response to policy distortions or market failures related to availability of infrastructure, technology, finance, property rights and insurance. Where markets do not work well, large firms comprising many operational units can reduce transactions costs and risks through vertical and horizontal integration.

    In terms of the policy implications, the authors conclude that providing a level playing field is the best way to ensure family farms can continue to compete, and to enhance social and environmental outcomes. To take advantage of rising private investment in farming, countries need to design rural development strategies that fit factor endowments and provide opportunities for small-holders and job creation, with special attention given to policy frameworks that provide rights to current users and the capacity to implement such policies.

    Read the full UNU-WIDER article here.