The Family Business

The Inoussa family in Sahel region of Niger.

The Inoussa family grows millet on about 2 hectares of land in
the Sahel region of Niger. © Panos/D. Rose

Most farms are family farms. Should we be helping small family farmers to stay in agriculture, or to move up and out?

In most parts of the world, if you’re a farmer, you probably cultivate a small or medium-sized tract of land alongside your next of kin. Farming is one of the last economic activities performed largely by families working together. These common features of farming—small size and management by families—are often taken for granted, but the United Nations has declared 2014 the International Year of Family Farming to shine a light on these farmers’ key roles in improving food security and protecting natural resources.

Many development experts believe that smallholder farmers have great productive potential and can increase their output quickly with access to modern technologies, inputs, credit, and markets. As evidence, they cite the rise in productivity that occurred in Asia during the Green Revolution of the 1960s and 1970s, when farmers planted high-yielding seed varieties, used synthetic fertilizers and pesticides, and applied modern irrigation techniques.

But others contend that targeting support to small-scale farmers is not an effective way to promote economic growth or reduce poverty. Instead, they call for helping smallholders move out of agriculture and from rural areas to urban areas.

These dueling perspectives have spurred energetic debate for several decades. Ultimately, however, no one strategy applies for all small-scale farmers.

Small-scale and family farmers contribute heavily to global food and nutrition security, says IFPRI Director General Shenggen Fan, “but we shouldn’t view them as a homogenous group. They’re a diverse set of households, and they need different development pathways out of poverty, malnutrition, and vulnerability.” In many cases, policy choices will help determine whether that pathway leads to the farm or the city.

Small farms with a big footprint

Based on agricultural census data, the Food and Agriculture Organization of the United Nations (FAO) estimates that there are more than 570 million farms in the world, of which families own more than 500 million. Countries define family farms in different ways; according to FAO, family farms are managed and operated by a family and rely mainly on family labor. On average, family farms are smaller than nonfamily farms. In Brazil, for example, the average family farm is 18 hectares, compared with 309 hectares for the average nonfamily farm. Worldwide, more than 475 million farms measure less than 2 hectares.

“Small is still beautiful in countries with a growing rural population and weak nonfarm growth.”
—Shenggen Fan

Copy of INF_Feature_FamilyFarm_01_lo-res-01Family farmers in developing countries operate differently from commercial farms in significant ways. “They rely heavily on household labor, make farming decisions based on family considerations—for example, what to grow given household labor constraints—and make family decisions, such as how many children to have, based on farming issues,” says IFPRI Research Fellow Derek Headey. “They’re also highly risk averse in order to protect their families, so they diversify production more than they would if they were just maximizing profits.” Many family and smallholder farmers are poor and earn income both from agriculture and from nonfarm activities.

FAO and other development organizations see family farmers and smallholders as key to reducing poverty and hunger for several reasons. First, small farms produce about 80 percent of food consumed in the developing world, so helping them expand production increases food supplies and lowers prices. Second, smallholder farmers typically spend their earnings locally, so their profits benefit others in their communities. Third, smallholder farms are labor-intensive, so helping them produce more is an effective way to generate jobs in rural areas.

“Hunger, food insecurity, and poverty are concentrated among people who depend on agriculture for a living,” says Stephanie Burgos, a senior policy adviser at Oxfam America. “By investing in small-scale farmers and food producers, you can address the problem of poverty directly by improving their livelihoods, and also improve production at the same time. The largest untapped potential for yield growth is among small-scale farmers, so investing in them will also promote growth.”

Constraints and challenges

Smallholders—a category that includes most family farmers—face various obstacles to profitability. IFPRI’s Fan distinguishes between “soft” constraints, such as limited capital and poor access to market information, and “hard” constraints, such as marginal lands that have poor-quality soil and are far from markets. Soft constraints can be addressed through policies, programs, and reforms, but farmers who face hard constraints are less likely to become profitable.

Over the past several decades, a cluster of broader challenges has emerged. Climate change is making smallholder farmers vulnerable to extreme weather events, changing precipitation patterns, and raising the risk of pest infestations and crop diseases. Globalization is concentrating buying power in the hands of large supermarket chains, which often require suppliers to meet strict food quality and traceability standards. And total investment in agriculture, including foreign direct investment, development assistance, and domestic savings, currently falls far short of needs.

These trends affect farmers at all scales, but smallholders are especially vulnerable because many farm on marginal lands and have little or no access to credit. Smallholders often struggle to sell to large supermarkets because they have trouble providing on the scale that these businesses require or meeting traceability standards. Some smallholders can still grow and prosper under these circumstances, but others will be better served by policies that help them move from agriculture into jobs off the farm, either in rural areas or in cities.

Smallholders’ options are also influenced by the level of economic development their countries have achieved, and the availability of other work options. “Small is still beautiful in countries with a growing rural population and weak nonfarm growth,” says Fan. These countries, he says, should work to make smallholder farmers more productive. For example, they can develop financing tools that are friendly to smallholders. They can promote agricultural technologies that improve productivity, conserve scarce natural resources, and address climate change. But, says Fan, “in countries where the nonfarm sector is booming and the urban population is increasing, smallholders should be encouraged to transform into larger operations or move out of agriculture.”

“Consolidating the micro farms might make more sense, but again, only if these families have something better to do.”
—Derek Headey

Is bigger better?

These choices loom especially large in Africa, where more than one in five people (one in four in Africa south of the Sahara) are undernourished and more than 60 percent of the population lives in rural areas. Some experts argue that successful economic development in Africa cannot be achieved through programs targeted to smallholders. Rather, they contend, growth will require massive population migration from rural areas to cities, along with a shift to large-scale mechanized farming.

“Large commercials farms are likely to be close to the frontier of technology, finance, and logistics,” Oxford University economists Paul Collier and Stefan Dercon argue in a forthcoming article for World Development. “The innovations of recent decades have made the rapid adaptation of technology, access to finance, and high-speed logistics more important, and in the process given commercial agriculture a substantial advantage over the smallholder mode of production.”

IFPRI’s Headey agrees that commercialized agriculture, large-scale farming, and internal migration all can play roles in development. But he warns that these approaches also can have harmful impacts. “Large commercial farms may have significant potential, but unless they exploit virgin lands, they will displace smallholders, who often have little viable alternative to family farming,” Headey points out. “Moreover, while large farms may contribute to economic growth, it’s much less obvious that they contribute to poverty reduction. Large farms often are mechanized and hire very little labor. And their profits are concentrated among fewer people, so they have smaller spillover impacts on the local economy than smallholder farmers who buy local goods and services and hire local workers.”

Competition for land

In April 2014 Oxfam America released a report that documented many of these negative outcomes in areas of Colombia, Guatemala, and Paraguay where large agribusiness companies had established monoculture farms. In Guatemala, oil palm production displaced family farms that had raised corn and beans for local sale. Smallholders living near large soy plantations in Paraguay reported that herbicides and pesticides from the soy farms were harming their crops and animals. And in Colombia, multinational giant Cargill had used front companies to buy property that had been reserved for smallholder households, accumulating more than 52,000 hectares of land.

“Land is the most fundamental asset for agricultural production, so when investors go into developing countries, you have to ask whether they are displacing small-scale farmers and rural communities,” says Oxfam America’s Burgos. “At a minimum, the goal should be to do no harm to people who are living off the land and have potential to increase their production.”

Land availability in Africa varies greatly across countries. Some countries, including the Democratic Republic of Congo, Madagascar, and Mozambique, have abundant land, so large farms could be established without displacing smallholders. “Allowing investment in large farms makes sense for regions and crops where there are increasing returns to scale,” says Headey. “But economic growth should not be the only yardstick for assessing these strategies. Environmental, labor, legal, and community development issues should also be weighed.”

Other African countries, such as Burundi, parts of Kenya, Nigeria, Rwanda, and Uganda, have little available arable land. Farms in these areas typically are a mix of medium-sized commercial farms and micro-farms that are far too small to sustain even a family, especially when they are located on degraded land. “Displacing commercially viable medium-sized farms with larger farms makes no economic sense if Africa’s industrialization process continues to be rather stunted. Consolidating the micro-farms might make more sense, but again, only if these families have something better to do,” Headey says.

A plantation worker in Sayaxche, Guatemala loosens a bunch of oil palm fruit.

A plantation worker in Sayaxche, Guatemala loosens a bunch of oil palm fruit.


Needed: Jobs for ex-farmers

That “if” is crucial. In many developing countries, workers have left farms to seek higher-paying opportunities in cities—a pattern often termed labor pull. But Africa has urbanized without generating enough manufacturing and service jobs to employ many of the millions who have moved to cities like Lagos and Nairobi. This pattern is called labor push: migrants move because there simply are no good options at home.

Under these conditions, government investments that help African smallholders become more productive may be a cost-effective way to help people support themselves without leaving rural areas. That’s especially important now because Africa is just starting to approach the demographic transition—the shift from high birth and death rates to low birth and death rates as countries industrialize.

“Africa has a demographic window of opportunity coming up: the number of children per family is falling, and the number of older people is not rising yet,” says Colin Poulton, a research fellow at the University of London. During this phase, countries have a large cohort of working-age adults moving through their population, with relatively few children and elderly people depending on those workers for support. “If you can employ those new workers productively, you can increase growth and reap a big dividend. But if you don’t, you’ll have lots of unrest and discontented people,” Poulton observes.

Giving farming a new image

Under the 2003 Maputo Declaration, African Union member states pledged to renew national commitments to building strong, dynamic agricultural sectors by spending at least 10 percent of their national budgets on agriculture and rural development programs. Only 13 countries have met or surpassed the 10 percent target in one or more years since 2003.

“African governments and their development partners often spend paltry amounts on agriculture compared to the vast number of African people who depend on it,” says Headey. However, he notes, those few countries that have made sustained investments in agriculture and rural infrastructure have achieved high rates of agricultural growth and poverty reduction. Ethiopia, which has spent about 14 percent of its yearly national budget on agriculture over the past decade, is a notable example.

Those investments could have impacts beyond their monetary value. According to a recent working paper from the Institute of Development Studies (IDS), young people in developing countries are turning away from farming as a way of life—especially skilled, educated young people who could become innovators and make smallholder farming more productive. Many participants in the survey, which included nearly 1,500 people in 11 countries, saw farming as a difficult, low-status, low-paying occupation.

But in some countries where governments were investing in agriculture and improving production processes, young people saw farming as an opportunity to bring about change and help their communities develop.

“I want to work hard. I want to get involved in irrigation work and produce vegetables. I want to breed animals,” one young Ethiopian man told interviewers for the IDS study. “I want to accept the advice from agricultural extension workers and to change their advice into practice. I want to follow in the footsteps of model farmers.”

For more information on this topic:

In This Issue

Building Bigger Dreams

Can we improve people’s well-being by raising their aspirations?

Into the Spotlight

The grain teff has been consumed as a staple in Ethiopia for centuries but is little known outside the country. Now, researchers are training their attention on this understudied crop.

Untangling the Asian Enigma

Although South Asia has the highest concentration of undernutrition in the world, in the past two decades Bangladesh and Nepal have both achieved striking improvements in the nutrition of their citizens. How did they do it?

Does Money Talk?

FEATURE: Millions of poor people around the world are enrolled in safety net programs that hand out cash or food. What’s the best way to design these transfer programs?

  • MJ Chappell

    It's worth noting, in terms of small farmers and their livelihoods, that many are likely underpaid compared to their societal benefit--e.g. suffering from market failures and not receiving prices that actually reflect the total value they provide to society. Things like payments for ecosystem services attempt to get at this and may be part of the answer, but another part is the fact that larger farms (and much of industry in the cities) are *NOT* paying for the externalities associated with their activities. (To be fair, neither are small farmers, but their per person impact is likely to be much smaller). If Jules Pretty's numbers are even approximately correct (in 2001, he and colleagues calculated ~US$35 billion in negative externalities in US agriculture, and $US2-4 billion in Germany and the UK) then proceeding about as if current job and agriculture markets should be taken for granted as appropriately valued is a bit off.