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Re: HLPE consultation on the V0 draft of the Report: Investing in smallholder agriculture for food and nutrition security

Cornelia van Wesenbeeck Centre for World Food Studies, Netherlands
18.01.2013
Cornelia van Wesenbeeck

The present version of the report Investing in smallholder agriculture for food and nutrition security has five chapters: (1) introduction, (2) significance of smallholder agriculture, (3) a framework for smallholder agriculture and investments, (4) constraints to smallholder investments and (5) recommendations. Insertion of the concluding section is pending.

While Chapters 1 and 2 describe the present situation, Chapter 3 starts with the important observation that investments in smallholder agriculture are currently made from households’ own savings, as opposed to being financed from external sources. In view of the limited availability of financial savings, they are predominantly effectuated in kind as labor investments during the off season say, in construction and land management. However, since labor investments have only limited impact on labor productivity, smallholder farmers are unlikely to escape poverty in this way. Next, the chapter discusses policies to improve smallholder wellbeing. These include public investments in education, health and infrastructure in rural areas, but also investments made by processing industries. Chapter 4 focuses on constraints, and identifies first and foremost the lack of institutional power of the group. In addition, poverty and lack of access to input and output markets are mentioned. A typology of smallholders is presented, in the three dimensions “assets”, “markets”, and “institutions”. Chapter 5 lists recommendations that directly follow from the identification of constraints. These are more of the nature of a wish list that each of the constraints should be alleviated than of actual recommendations. Fortunately, the discussion on specific priority domains that follow seems more thorough, as it touches upon some of the issues related to financing the agricultural sector from external sources and to enhancing institutions that provide access to markets.

Overall, the report gives a broad survey of the present situation in smallholder agriculture, with a typology of smallholders following from the three dimensions of characteristics (assets, markets and institutions) introduced in Chapter 4. Various constraints and recommendations are presented, with a brief discussion of the rationale and some examples.  

We would like to mention the following limitations.

First, the report focuses on smallholder agriculture per se, and is not - as its title and introduction would suggest - a study that considers smallholder agriculture in the context of food and nutrition security. In the introduction, both food insecurity of smallholders themselves and their potential contribution to future food security for the world at large are covered, but the remainder of the study hardly addresses the issue of smallholders’ contribution to world food production.

Second, the report implicitly assumes that smallholder farms are there to stay irrespective of whether they are successful in achieving substantial productivity increases. Given their large numbers, it is indeed certain that many of them will continue to exist, and do so in dire circumstances. These will need safety nets and supporting measures  for humanitarian reasons  and to prepare them and their children for a better future outside agriculture, thereby also creating room for neighbors to expand their holdings. Alternatively, those who remain can engage in higher value chains such as animal husbandry and horticulture, so as to become large farmers on small holdings. Both are forms of business expansion without which the smallholders’ families will never be able to escape from poverty.

Of course, infrastructural works and irrigation may help raising yields, and so can improved provision of seeds, fertilizers and plant protection products, but unless these measures are embedded in a process of deeper integration of the rural sector in the national economy, and the purchasing power of cities itself is rising, measures that primarily target production run the danger of leading to price falls that worsen smallholders’ condition rather than improving it.

It is at this juncture that the report’s emphasis on power relations in the chain could be put in a clearer perspective. Whereas the report extensively points to the weak position of smallholders preventing them from reaping benefits of investments, and transaction costs preventing banks and investors from overseeing needs and opportunities of every individual farmer, it insufficiently points to a way out of this situation say, by enlargement of farms or by organizing better cooperation among smallholders to form units that jointly decide on input use, share transport and storage facilities and mechanical equipment, and jointly negotiate with processors and financing institutions.

In short, Investing in smallholder agriculture for food and nutrition security amounts to triggering rural transformation, and raises a host of questions including design of appropriate financing options (bank loans, FDI, domestic private investment); formulation guidelines for creation of the mode of organization that may achieve the required productivity gains, accounting for the impact this may have on the social fabric in rural areas; effects of new production techniques such as GMOs on biodiversity and animal welfare.

It may well be that many of these questions fall beyond the Terms of Reference of this report, but the report definitely needs a better embedding within the overall process of economic growth and development, and link better to the question how smallholder agriculture may contribute to food and nutrition security. This would more effectively set the stage for a motivated selection of topics.

We already wrote in our reaction to the Terms of Reference  that in our view the CFS, because of its limited political mandate,  should, to be effective, focus on the aspects  that raise most controversy in public debate, with the aim to make this debate more balanced and better informed. While the report touches upon some of these controversies, it fails to highlight the tensions and dilemmas. For example, with respect to finance, section 3.3.1. mentions the problem of “developed agriculture overinvestment” (p. 38), presumably referring to the current situation in many European countries where farmers have become highly indebted, while box 11 mentions the advantages of the Rabobank’s financing of the agricultural sector. The recommendations on the finance and banking system (p. 65-67) include new elements that have not been discussed before, such as informal arrangements and also emphasize the possibility for partners in the chain to invest in agriculture, while this option had been criticized in Chapter 3, emphasizing the danger of unfair treatment of the farmers because of the lack of clout.

Concluding

The report stresses the hardship that characterizes the lives of nearly half a billion of smallholder farmers, caught in a vicious cycle of poverty, lack of means to invest, low yields and low revenues, leaving them with hardly any opportunity to provide for a better future for themselves or their children. By accepting and implicitly even endorsing the fact that they will remain smallholders for the foreseeable future, the report arrives at recommendations that do not fundamentally change the prospects of these farmers.

Particularly in the light of the UN RIO+20 report’s reaffirmation of the importance of the CFS in designing national policies for sustainable food production and food security, this report, and with it the HLPE and CFS should show more ambition in alleviating the plight of the poor and enact changes that will strengthen the social and economic status of smallholders.