Chapter_3 Lecture.pptx Agricultural Marketing Extension

Agricultural Marketing Extension

1. Chapter Three Smallholder Commercialization and Extension December 31, 2020 1 ?

2. What are smallholder farmers/producers? December 31, 2020 2 Why need to emphasize on smallholders?

3. The contribution of smallholder farmers to the Agenda 2030 • Smallholder farmers (SHF) are core for the 2030 agenda • They are at the centre of several SDGs but mostly SDG1, SDG2 and SDG15 The contribution of smallholder farmers Smallholder farmers (SHF) are core for the 2030 agenda T h ey are at the centre of several SDGs but mostly SDG1, SDG2 and SDG15

4. The contribution of smallholder farmers to SDG • Goal 1: End poverty in all its forms everywhere • Goal 2: End hunger, achieve food security and improved nutrition, and promote sustainable agriculture • Goal 15: Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss Smallholder farmers are the main link between these SDGs

5. Why targeting SHF would make a difference? Proportion of national food production • About 90 % of the world’s from smallholder farms 570 million farms are small • Produce food for a substantial proportion of the world’s population – in developing countries , producing 60 and 80 % of the total food consumed • Smallholders produce food in order to consume most of it: they are the people requiring food and nutritional security Why targeting SHF would make a difference? • About 90 % of the world’s • Produce food for a substantial proportion of the world’s population – in developing countries , producing 60 and 80 % of the total food consumed • Smallholders produce food in order to consume most of it: they are the people requiring food and nutritional security

6. Why targeting SHF would make a difference? • Most of the world’s poor live in rural areas – rural poverty is acute in sub-Saharan Africa and South Asia. Poverty headcount ratio at national poverty line • Poverty among rural small farmers is higher than the national average • Studies show a strong positive relationship between growth in agriculture and poverty reduction • 1 % increase in agricultural per capita GDP reduces poverty gap five times more than a 1 % increase in GDP per capita in other sectors, especially among the poorest people Why targeting SHF would make a difference? • Most of the world’s poor live in rural areas – rural poverty is acute in sub-Saharan Africa and South Asia. • Poverty among rural small farmers is higher than the national average • Studies show a strong positive relationship between growth in agriculture and poverty reduction • 1 % increase in agricultural per capita GDP reduces poverty gap five times more than a 1 % increase in GDP per capita in other sectors, especially among the poorest people

7. Why targeting SHF would make a difference? • SHF include ET 60-80 million peoples • Custodians of biodiversity , conserving many different crop varieties and livestock breeds • Custodians of indigenous knowledge – through agricultural practices and techniques • Productivity contributes to growth by: – Reducing the price of staple food – increasing the demand for labour in rural areas

8. Diversification in smallholder farms • SHF produce a wide range of foods while maintaining their main staple • With constrained choices and limited assets, they diversity their farming systems and take on multiple economic activities (farm and non-farm activities and employment), to enhance their income and reduce their risk from external shocks (climatic and market) • Diversified production enhances diets, soil fertility and efficiency in farming activities and spreads the risks over several crop and livestock products in case of climatic and biotic shocks (droughts, floods, pests, diseases), and adverse market prices

9. Production efficiency in small farms • Studies show that within their countries smallholder farmers achieve higher yields than their larger counterparts. Inverse relationship between farm size and yield • Studies report evidence almost universally of an inverse relationship between farm size and productivity • “Technical efficiency” studies reach the same conclusion: smallholders are indeed more efficient and produce amounts closer to the maximum output, as compared to larger holders. Production efficiency in small farms • Studies show that within their countries smallholder farmers achieve higher yields than their larger counterparts. • Studies report evidence almost universally of an inverse relationship between farm size and productivity • “Technical efficiency” studies reach the same conclusion: smallholders are indeed more efficient and produce amounts closer to the maximum output, as compared to larger holders.

10. • High yield gaps : In 2005, yield gaps were estimated between 11% in East Asia to 76% in Sub- Saharan Africa • Weak extension systems: weak technology adoption, knowledge, productivity growth and innovation • Low literacy and numeracy: low adoption and productivity • Intensive use of family farm labour : use more labour than capital to produce food

11. Future challenges facing SHF • Land fragmentation – reduced farm size and economies of scale. Diminishing the comparative advantage in efficiency of small farms • Changing market system and sophistication in standards, regulations and delivery systems (urbanization and globalization resulting in changes in food processing and agrifood industries, procurement systems, etc)

12. Interventions in support to the future of SHF • Extension and advisory services • Support to the establishment and capacity development of farmer organizations • Investment in adaptive research for the development of: – adapted and high yielding crop varieties – good agricultural practices enhancing productivity, livelihood and resilience to climate change and market shocks

13. Interventions in support to the future of SHF • Support to the development of adapted rural finance products as well as weather and crop insurance products • Investment in rural infrastructure- irrigation schemes, soil and water management structures, rural roads, rural markets and market infrastructure • Proper policy incentives : supporting productivity enhancement, environmentally friendly and sustainable, without affecting the further land fragmentation

14. Defining Smallholder Agriculture/ Producers At least half of members must be small producers If members produce less labour intensive products (e.g.., cereals, oilseeds, coffee,..),farm work is mostly done by members and their family &They do not hire worker all year round. Most of their income comes from farm The land cultivated equal to or below average of the region Spend most of their working time doing agricultural work They hire less December 31, 2020 14

15. Role of Smallholder Agriculture/ Producers December 31, 2020 15 Smallholders, whose output supports a population of roughly 2.2bn people Manage about 85% of the world’s farms. Agriculture is a source of livelihood for an estimated 86% of rural people worldwide and comprising 2.5bn people and provides jobs 1.3bn smallholders and landless workers (Lundy et al., 2005)

16. Characteristics of Smallholder Agriculture/ Producers December 31, 2020 16 Affected by Disaster (Flood, Drought) / Low Productivity Lack of Agricultural Land Lack of Capital/ Money/ Fund Crops Destroyed (Diseases, Insects etc.) Insufficient Food / Lack of Irrigation / Lack of Electricity Poor Households/ Poverty/ Poor Situation of Villagers Lack of Agricultural Technology/ Low Productivity

17. M arketing models December 31, 2020 17 Smallholder/producer Cooperative - union of two or more people for common goal Contract farming- a system in w/c agricultural commodities are produced and supplied to particular buyers, mostly producers under negotiated arrange about price. Commercialization -

18. 3.2 What i s commercialization ? . December 31, 2020 18 Commercialization of agriculture is a phenomenon where agriculture is governed by commercial consideration i.e. certain specialised crops began to be grown not for consumption in village but for sale in national and even in international market.

19. Agricultural Commercialization ? December 31, 2020 19 In most literature, a farm household is assumed to be commercialized if it is producing a significant amount of cash commodities, allocating a proportion of its resources to marketable commodities, or selling a considerable proportion of its agricultural outputs. Commercialization is not restricted only to cash crops. The commonly accepted concept of commercialization is, therefore, that commercialized households are targeting markets in their production decisions, rather than being related simply to the amount of product they would likely sell due to surplus production

20. …… Commercialization ? December 31, 2020 20 Commercial agricultural production is likely to result in welfare gains through R ealization of comparative advantages, E conomies of scale, and F rom dynamic technological, organizational and institutional change effects that arise from the flow of ideas due to exchange-based interactions

21. December 31, 2020 21 Measuring Commercialization There are different indices used to measure commercialization HCI i is household commercialization index defined as the ration of gross value of crop sales by hhi in year j to gross value of all crop production by hhi in year j. .

22. The Role of Commercialization for Agricultural Development December 31, 2020 22 Increseased income in agriculture increseases demands for manufactured goods and services in the other sectors of the economy thus stimulating further growth. It has multiplier effect on the other sectors! On the otherhand, favourable macro and micro-level economic policy reforms that potentially dissolve input subsidies and output support programs could result in sustainable management of the agricultural resource base by allowing the actual opportunity costs of resources to be better reflected in market prices Macroeconomic effects: the large population in developing countries can generate more income, hence economic growth possible linkage of smallholder commercialization to the export market could enhance foreign currency earnings and improve the balance of payments Environmental effects: it can have both positve and negative effects. E.g. if commercialization uses large amount of herbicides, pesticides, more irrigation water…etc, it negatively affects human health and the environment.

23. The Role of Commercialization for Agricultural Development December 31, 2020 23 Increseased income in agriculture increseases demands for manufactured goods and services in the other sectors of the economy thus stimulating further growth. It has multiplier effect on the other sectors! Linking of agriculture to the world market Decreased self sufficiency of village economy and acted as major factor in declining rural economy Linked Ethiopia with the world economy Brought about regional specialization of crops on an efficient basis

24. Commercialization and Extension Service December 31, 2020 24 Smallholder welfare effects: It can have either positive or negative effects on household welfare Income: many case tudies show that commercialization enhances hh income. The draw back with income is that, it comes and go in short period of time. This could have adverse effect if financial system is not well integrated Employment: it depends on whether the commercialization is labor intensive or labor saving Health and nutrition: negative-resources are diverted from food crop to cash crop and the income from cash crop is mostly controlled by male and spent on non-food than food commodities.

25. Commercialization and Extension Service December 31, 2020 25 Effects of commercialization on value chain actors: Through increasing household market participation, commercialization of smallholder agriculture has a direct and usually positive impact on value chain actors such as input suppliers, output traders, transporters, processors, financiers and others. Commercialization, in general, creates a variety of opportunities for value chain actors who add different forms of value to commodities on their way from the point of production to final consumption. Actors may change the forms of products via processing, storing or transporting from one point to another based on market demands Effect on gender: the impact of smallholder commercialization on the gender dimension depends on a commodity’s gender-specific labour demand and on who controls the income generated. E.g. according to some evidences, the shift from maize to vegetable increases the proportion of women working as employees.

26. Processes in Agricultural Commercialization Characteristics Of Food Production Systems With Increasing Commercialization December 31, 2020 26 . Source: Pingali (2001, 485) cited in Jaleta et al. 2009

27. Commercial agriculture in Ethiopia December 31, 2020 27 Ethiopia has adopted commercialization of smallholder agriculture as a strategy for agricultural development. It has acted as a catalyst in increasing agricultural productivity but at the same time only rich farmers are benefited and this in turn added inequalities of income in the rural society. The agricultural services of extension, credit and input supply are expanding significantly to support commercial transformation, although the dominant player in these services still remains to be the public sector. The expansion of the agricultural services had significant impact on: the intensity of input use, agricultural productivity and market participation of Ethiopian smallholders.

28. Group Assignment 1 December 31, 2020 28 Contract farming ( Literature review and presentation) Commercial farming (Literature review and presentation)