Whose poverty does smallholder agriculture reduce?

Having been raised among some of the poorest smallholder farmers in the world and having acquired skills in assessing the contribution of smallholder agriculture to smallholder farm livelihoods through my training in agricultural economics, I seem to get the feeling smallholder agriculture does not significantly contribute to poverty reduction at household level.
Don’t get me wrong; I am not saying smallholder agriculture has no “power” to alleviate farmers’ poverty. On the contrary, I very much agree with World Bank’s World Development Report of 2008 when it is says that agriculture has about four times the power of any sector in poverty alleviation (The World Bank, 2007). What I’m saying is that currently, agriculture is not unleashing this power to improve the welfare of smallholder farmers in most of Africa. I know of uncles, grannies, neighbors and millions of smallholder farmers who have been involved in smallholder agriculture from as far back as 1960s and they are still categorized as poor or worse up to date. So, I have been asking myself for the past few weeks why most smallholder farmers aren’t breaking out of the cycles of poverty if agriculture indeed has the power the World Bank and others talk about.
The agricultural economist in me tells me there is a multitude of factors that perpetuate the status quo. Some of the factors include farmers’ production for subsistence purposes, high levels of technical inefficiency amongst smallholders [especially in Africa south of the Sahara], poor and thin market linkages, failure by smallholders to take advantage of economies of scale due to land and capital constraints et cetera. However, my interactions with smallholders (and I interact with smallholder farmers quite often) point out to one dominant factor; very low farm gate prices.
Every smallholder farmer I interact with seem to feel they are being exploited when it comes to commodity pricing. As you may know, the way agricultural markets function in most of the developing world is such that farmers do not have the right to price their own commodities. They produce and that’s it. Buyers decide how much they’ll buy the commodity at. Because there are many smallholder farmers, and because they mostly produce and market their produce individually, the farmers generally lack bargaining power to have a significant say in produce pricing. I know agricultural ministries in some countries (including Malawi) try to intervene by setting up farm gate prices annually but experience seems to suggest this is not having a significant impact as there tends to be little or no policing to ensure that smallholder produce is being bought at these prices. So, smallholder farmers are still forced to sell their produce at exploitative prices that can barely lift them out of poverty.
For example, I came across a canny case last week in Mchinji district (Central Malawi) where vendors were misinforming farmers that soy prices would drop this week in a plot to force the farmers sell their soy at US$0.40 a kilogram. Normally, soy prices reach a minimum of US$1/kg starting from September to February when supply is low [the vendors sell the soy during these months and make a “killing” out of the soy]. Since most smallholder farmers solely rely on agriculture for their livelihoods, the rational decision they make when misinformed like this is to sell when prices are “apparently still high”, losing potential income in the process.
The foregoing case illustrates that in as much as agriculture has the power to reduce poverty, it reduces “poverties” of players higher in agricultural value chains rather than “poverties” of smallholder farmers. And this is the case chiefly because smallholders are being exploited at the produce price front which is limiting the amount of income households earn from their agricultural activities; in turn limiting agriculture’s power to lift farmers out of poverty.
Now, if we are serious about using agriculture as a development tool, we have to make sure everyone gets an acceptable reward from their activities in agricultural value chains. It would not hurt anyone if smallholder farmers were handsomely rewarded from their industry. This is actually what should be done [rather than just being merely talked about in conferences and policy documents]. In pursuing agriculture for development agenda, let’s also consider ways through which smallholder farmers can get better prices for their produce.
As a way forward, I encourage any projects that aim at increasing smallholder farmers bargaining power in agricultural commodity marketing. This may be through setting up functional cooperatives et cetera. Announcing commodity prices through mass media can also help farmers make well-informed marketing decisions.
P/S: I suspect current farm gate prices play a significant role in discouraging the youth to participate in agriculture. For example with soy going at US$0.40 per kg, it would take great deal of convincing to have a young man to go into soy farming especially when they have an iPhone 6 plus on their “must have” list. He’ll surely search for “quicker and better” alternatives sources of income.

The World Bank. (2007). World development Report 2008: Agriculture for Development. Washington: The International Bank for Reconstruction and Development / The World Bank. doi:10.1596/978-0-8213-7233-3

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