3.3.1 Production systems and market integration
3.3.2 Basic relationships within a farming system
3.3.3 Policy entry points at farm level
In most African countries, the livestock subsector comprises several or all of the following major small- and large-scale production systems:
· Small-scale:- pastoralism
- mixed smallholder farming.
· Large-scale:- ranching
- large-scale commercial farming
- co-operative farming
- state farming.
The large-scale system, introduced only during this century, still accounts for a relatively small proportion of agricultural output in sub-Saharan Africa. The bulk of production occurs in the traditional small-scale system. Devising appropriate policies for such systems is therefore of utmost importance in increasing African food production.
Smallholder farming in Africa is predominantly carried out by small, autonomous family units with a labour force averaging between one and three adult-equivalents, cultivating an area ranging from 0.5 to 5 ha (somewhat larger in drier parts of the Sahel) under an individual land tenure system (module 7). The degree to which each farm is integrated into the market economy varies according to a host of factors, perhaps the most important of which is geographical location.
The influence of geographical location on market integration is twofold: partly agro-ecological and partly infrastructural. Some areas may have a higher degree of market integration because rainfall and soil conditions are conducive to cash cropping and the production of surpluses; others may lack one or both of these advantages but are compensated by their relative proximity to urban markets and other facilities. In terms of market integration, three broad subsystems of the mixed smallholder farming system may thus be described:
· Mainly subsistence-oriented producers. Such producers are typically remote from urban markets and more than half a day's walk from a main road. Often they are resource-poor farmers inhabiting drier areas where crop production is risky. The bulk of their production is consumed at home, but small surpluses are sold or bartered locally in good years. Access to purchased inputs is low or non-existent and demand for them is also low (for reasons of risk aversion).
· Semi-subsistence producers. These producers are typically closer to main roads and urban markets. Subsistence cropping remains the major enterprise, but surpluses of a wide range of products are more frequently available for sale and significant efforts may be devoted to a minor cash-crop enterprise. Such farmers are somewhat wealthier and tend to inhabit more productive areas, but access to inputs and credit remains low. They continue to spread risk through diversification.
· Mainly commercial, specialized producers. Such producers are typically close to (or within) major urban markets. Most of what they produce is sold at market, but small amounts are consumed at home. Most labour is devoted to a specialised enterprise such as feed, dairy, coffee or vegetable production, for which purchased inputs are available. If they inhabit dry areas, such farmers usually have access to irrigation. Typically, however, they inhabit high-potential subhumid, humid or highland areas where both soils and climate are favourable.
Pastoralism in Africa is also practiced predominantly by small family units. Herds and flocks are raised that vary considerably in size, from a few sheep and goats in the poorest families to many hundreds of cattle and/or camels in the wealthiest. The size of the herd/flock determines the share of feed resources obtained from pastures grazed communally under an open access or common property tenure system (module 7) characterised by mobility (nomadism or transhumance) as a survival strategy. The degree to which each family unit is integrated in the market economy varies according to a host of factors, but is generally less related to geographical location than in the case of smallholder farming. There may be forced integration in the market economy during times of drought, as herders are compelled to sell for slaughter animals which might die of natural causes.
Agropastoralism in Africa is carried out by pastoral families or their descendants who have, to varying degrees, settled and taken up cropping. Often inhabiting dry areas where cropping is a high-risk enterprise, agropastoralists live under conditions resembling those of the mainly subsistence-oriented smallholder farmer. Apart from ethnic differences, the only major difference between the two groups in terms of production is the emphasis on livestock, which will be greater among agropastoralists, who frequently retain some degree of mobility as a survival strategy. The degree of market integration will be similar to that of the mainly subsistence-oriented producer, but again there may be emergency sales of livestock during droughts.
There are exceptions to the general rule that the market integration of agriculture increases with proximity to urban centres. Sometimes the reverse is true: the closer to the city, the more its superior employment opportunities draw labour (usually male) away from agriculture. In such cases, surplus production for market may be almost non-existent, but some subsistence cropping around the homestead may be continued as before (usually by women and children). This tends to happen particularly in economies where agriculture is disadvantaged compared to the manufacturing sector. Moreover, in the case of livestock, the city may act as a magnet for the sale of animals trekked over longer, rather than shorter distances, as urban and pert-urban dwellers increasingly turn to livestock as a way of investing their cash savings.
As infrastructure and markets expand with rising population, the degree of market integration varies through time and in space. Thus, each producing household occupies a point in a continuous transition through time from pure subsistence to pure commercial production. Pure subsistence production is now virtually non-existent in Africa, a greater or lesser degree of market integration having occurred almost universally in areas where cropping is practiced, as well as in those areas where livestock only are raised. Pure commercial production is also still rare, however, and the vast majority of households occupy an intermediate point in the continuum. Within the long-term trend towards increased market integration through time, there are substantial short-term fluctuations according to year and season.
Figure 3.1 depicts the main economic relationships governing activities in mixed smallholder farming systems. Two major circuits can be identified: the physical circuit, with flows of factor services and products and the cash flow or monetary circuit. Each will play a different role in determining a household's response to policy measures, depending on the point the household occupies in the continuum between subsistence and commercial farming.
Figure 3.1. Basic relationships in mixed smallholder farming systems.
Mainly subsistence-oriented production systems
For the subsistence-oriented household, land and labour are the principal factors of production. Capital investment is limited to non-monetary self-produced equipment, land improvement and livestock raised through natural reproduction. Increases in production are mainly dependent on the weather and on the quantity and quality of those factors of production controlled by the household. These, for example, may include:
· use of surplus labour for bush clearing and erosion control
· use of animal manure to raise soil fertility
· better livestock management practices.
Progress in production is likely to be slow but improvements are possible through farming systems research, education and extension programmes. There are few local off-farm employment opportunities. The monetary circuit plays little role in the economy of the mainly subsistence-oriented household. For the subsistence-oriented farm, output and consumption are identical. Such households thus remain largely (but not wholly) unresponsive to price and market signals.
Families living under these conditions rarely aim to maximise production, since this would imply specialisation, with its attendant risks. Rather, the goal is to maximise the chances of survival. A mainly subsistence-oriented farmer will be reluctant to shift from a traditional practice to a new technology if doing so incurs greater risk of failure (Box 3.1).
Box 3.1: Subsistence, risk and innovation.
Figure 3.2a depicts a case where a new technology is associated with both higher potential production and higher risk of failure. The new technology in Figure 3.2b, on the other hand, both reduces the risk of failure and raises mean production above the level of the traditional technology. To mainly subsistence-oriented farmers, this technology will be preferable, although its potential is not as high as the new technology in Figure 3.2a.
Figure 3.2. Income and risk of innovation.
a. Innovation with higher mean production. but higher probability of failure below minimum consumption.
b. Innovation with higher mean production and lower probability of failure.
f(y) = relative frequency of level of production
= minimum mean value under traditional production system
= maximum mean value under traditional production system
= expected mean value under new production system
Attitudes towards risky innovations will depend on how close to bare survival current production lies. This is illustrated in Figure 3.3. Farm A, due to its limited production potential, has always produced close to its minimum consumption requirement (MCR). Farm B. on the other hand, has operated closer to (though always below) its minimum desired consumption level (MDCL). Farm A will have more incentive to minimise risk than farm B. which is more likely to innovate because the chances of falling below its MCR are relatively low. Despite its higher yield variability, the new technology will be attractive to farm B provided adoption increases output above MDCL.
Whether or not it adopts new technology, farm A is unlikely to produce a surplus for sale. Farm B. on the other hand, is much more likely to do so, and may eventually move out of the mainly subsistence-oriented group of producers to become a semi-subsistence farm.
Source: Adapted from Miracle (1986).
Semi-subsistence production systems
A semi-subsistence household produces a considerable proportion of its consumption requirements (60-80%). In addition, it will produce cash crops such as vegetables, coffee and tea and keep livestock for sale. The semi-subsistence producer will therefore be confronted with the risks associated with price fluctuations and with variations in the natural environment. The monetary circuit thus assumes an important role in the semi-subsistence production unit (Figure 3.1). Such units tend to be more responsive to market and price signals than the subsistence-oriented producers. The higher the share of output being sold on the market, the greater the importance of the monetary circuit in the semi-subsistence production system. The impact of market and price signals will ultimately depend on the degree of market integration.
What are the reasons behind a household's desire to enter the monetary circuit? Answering this question will help us understand the factors which influence production responses. The first step in the transition process from subsistence to more commercialised production may be a need to obtain cash to meet legal or social obligations, such as the payment of school fees or the hosting of a wedding reception. Insofar as such needs are the only purpose of sales, there will be a negative relationship between price and market supply. In other words, the higher the market price, the smaller will be the amounts that need to be sold and vice versa.
As the transition process continues, market supply responses become positive as producers recognise that increasing their cash income enables them to buy other consumer goods which improve their welfare. If these goods are regularly available at local markets, income growth may become an important family goal. Higher income also enables a household to purchase more external inputs (fertiliser, seeds etc), thus increasing output still further in the future. Finally, cash can also be used to pay interest and principal on credit, opening up greater opportunities for investment and hence the development of new enterprises.
Thus, the transition from pure subsistence, through semi-subsistence to more commercial farming will have two interrelated effects on consumption and production in the rural household, namely:
· the direct acquisition of consumer goods and services
· the further growth of income through increased use of external inputs.
For families living under these systems, risk aversion remains an important determinant of household decisions. These producers confront the risks associated with price fluctuation as well as those resulting from climate. Sometimes these will offset one another, as when low yields lead to scarcity, causing market prices to rise, and vice versa. At other times, factors bearing no relationship to yield variations will influence prices. For semi-subsistence producers, innovations with minimal input of external factors of production could be offered.
Mainly commercial, specialised production systems
In these systems, the monetary circuit becomes more important than the physical one, which may become less complex as a result of specialisation. These production units tend to be highly responsive to price and market signals, switching enterprises and increasing or decreasing their market involvement in accordance with them. Increases in production are almost certain to involve the use of external inputs and services. Progress in production can be rapid, but dramatic setbacks may occasionally occur. Off-farm employment opportunities are more common and are found nearer home.
For families living under these conditions, the allocation of resources will be determined largely by the profit rather than the survival motive. However, although risk aversion plays a smaller part in decision making, households will tend to refrain from fully commercial production if markets are unreliable or if institutional support (access to credit, price stabilisation schemes, animal health services etc) is inadequate.
The number of effective entry points for policy interventions increases as we move across the continuum from subsistence to commercial farming. For mainly subsistence-oriented producers, interventions should be geared to making it both possible and attractive to enter the market. Convenient market outlets for their products, easy access to consumer goods and the rapid payment of good prices against sales would help achieve this; In the case of producers whose degree of market integration is unlikely to increase, equity-oriented interventions such as improving rights of access to water may be beneficial. Guaranteeing the provision of famine relief or wage employment in hard times may reduce the need to keep large herds in pastoral societies and persuade resource-poor producers to take the risk of adopting new technology.
For semi-subsistence producers, interventions geared to the producer prices of outputs are probably more important than measures concerned with the price of inputs. This is because the value of purchased inputs still forms a relatively low proportion of the total value of outputs in semi-subsistence systems. Interventions increasing labour productivity, which accounts for a relatively high proportion of the output value, would also be important. The provision of a wider range of goods and services on which to spend cash earned should stimulate further market integration.
For commercially-oriented producers, the relative prices of both inputs and outputs are crucial determinants of profitability, since purchased inputs account for a much larger proportion of the total value of output. Stable supplies of inputs and reliable services will also be important.
Important points (3.2-3.3)
· Livestock farming in Africa can he divided into two broad categories: small-scale and
· Small-scale production systems comprise pastoralism, agropastoralism and mixed smallholder farming.
· In terms of market integration, mixed smallholder farming systems are divided into: mainly subsistence-oriented systems; semi-subsistence, systems; and mainly commercially-oriented systems.
· Location is one of the main determinants of market integration. The influence of geographical location is twofold, being partly agro-ecological and partly infrastructural.
· With the expansion of infrastructure and markets, there is more or less continuous transition of farming systems from pure subsistence through semi-subsistence to commercially-oriented systems.
· Farm household responses to policy initiatives can be explained in terms of physical factors and monetary factors.
· The higher the share of output being sold on the market, the greater the importance of the monetary circuit in farm household systems. The impact of market and price signals will thus depend on the degree of market integration of the household.
· Policy entry points at the farm level differ according to the farming systems being examined.