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9.5 What is the Outlook for Independent Smallholder Livestock Farming?

What then does all of this mean for smallholders? Summarizing in informal and general form the empirical results of the hypotheses tested we conclude: (a) smallholders have higher profits per unit; (b) they are more profit efficient, at least within the range of production where there family labor input per unit of output is still high; (c) smallholders have less of a negative impact per unit of output on the environment than do large farms; (d) large farms that are more environmentally responsible are also more competitive. within the class of large-farms, but reverse is true for smallholders; (e) the competitiveness of smallholders is largely determined by farm-specific abilities to overcome barriers to information and assets; among these, credit and market information are especially important; (f) contract farmers have higher profits per unit of output than do independent farmers in some but not all cases; (g) contract farmers tend to be more profit efficient than independent farmers at all scales.

From (a) and (b) we conclude that smallholders have a chance; they are actually more competitive for low-end local markets than are large-scale farmers, and the low-end has expanded enough in recent years to allow them to expand production rapidly. As markets gravitate to higher end concerns of quality and safety, smallholders will need help competing by being associated with institutions that can both supply the necessary technology, inputs, information, and accreditation for competing in higher-value markets.

From (c) and (d), we conclude that environmental concerns are not incompatible with promoting small-scale livestock production; and that large-scale producers have an incentive to clean up their act. It seems plausible that over time enforcement of environmental regulations will be more similar to enforcement of health regulations, both as a way for large producers to force small ones to bear the same costs that they do, but also to promote a public good for all producers. From (e) we conclude that the key to pro-poor livestock development is institutional development that overcomes the disproportionately high transaction costs that smallholders face in securing quality inputs and getting market recognition for quality outputs.

From (f) and (g), we conclude that contract farming has real potential to help better incorporate smallholders in high-value supply chains that require specialized inputs and sell to markets for specialized outputs. However, the country studies revealed that contract farming covers a multitude of arrangements, some of which are more beneficial to smallholders than others. The concluding section will reflect further on what to do here, along with other insights for environmental policies.

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