Smallholding

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According to conventional theory, economies of scale allows agricultural productivity, in terms of inputs versus outputs, to rise as the size of the farm rises. Specialization has also been a major factor in increasing agricultural productivity, for example as commodity processing began to move off the farm in the 19th century, farmers could spend more effort in primary food production.[12]

Although numerous studies show that larger farms are more productive than smaller ones,[13] some writers state that whilst conventional farming creates a high output per worker, some small-scale, sustainable, polyculture farmers can produce more food per acre of land.[14]

A smallholder coffee farmer in Colombia contributing her coffee to an agricultural cooperative. Cooperatives give small farmers an opportunity to be more competitive in markets, especially markets like coffee and cocoa where many of the purchasers are large businesses who can manipulate markets.

Small farms have some economic advantages. Farmers support the local economy of their communities. An American study showed that small farms with incomes of $100,000 or less spend almost 95 percent of their farm-related expenses within their local communities. The same study took into comparison the fact that farms with incomes greater than $900,000 spend less than 20 percent of their farm-related expenses in the local economy.[15]

Small-scale agriculture often sells products directly to consumers. Disintermediation gives the farmer the profit that would otherwise go to the wholesaler, the distributor, and the supermarket. About two-thirds of the selling price would actually be lost for product marketing. If farmers sell their products directly to consumers, they receive a higher percentage of the retail price, although they will spend more time selling the same amounts of product, which is an opportunity cost.

Because smallholding farms frequently require less industrial inputs and can be an important way to improve food security in less-developed contexts, addressing the productivity and financial sustainability of small holders is an international development priority and measured by indicator 2.3 of Sustainable Development Goal 2.[10][3] The International Fund for Agricultural Development has an ongoing program for Adaptation for Smallholder Agriculture.[16]

During the global COVID-19 pandemic, and the attendant disruptions of food systems, their role has become more important.[17]

While historical focus on smallholders has been increasing global food supply under climate change and the role played by smallholder communities, climate adaptation efforts are still hindered by lack of information on how smallholder farmers are experiencing and responding to climate change. There is lack of detailed, context-specific information on what climate change portends to smallholder farmers in different and widely varying agroecological environments and socio-economic realities, and what management strategies they are employing to deal with these impacts.[18][19]

Especially for smallholders working in commodity crops, climate change introduces an increasing amount of variability to farmer economic viability; for example, Coffee production globally is under increased threat, and smallholders in East Africa, such as in the Ugandan, Tanzanian or Kenyan industries, are rapidly losing both viable coffee land and productivity of plants.[20]

In some cases, smallholders are an important source of deforestation. For example, smallholders are an important component of the oil palm industry of Southeast Asia, contributing 40% of the production. Because such farmers are less able to access financing than larger businesses, they are unable to fund methods to increase the productivity of their farms when yields decline, increasing their need to clear more land.[21] Increasing productivity, especially amongst smallholder farms, is an important way to decrease the amount of land needed for farming and slow environmental degradation through processes like deforestation.[11][21]

In India, there is five sizes classification for smallholders. These are 'marginal' less than 1ha (2½ acres), 'small' between 1 and 2 ha (2½ and 5 acres), 'semi medium' between 2 and 4 ha (5 and 10 acres), 'medium' between 4 and 10 ha (10 and 25 acres), 'large' above 10 ha (25 acres). If we use 4 ha (10 acres) (marginal + small + medium) as a threshold, 94.3% of holdings are small and these constitute 65.2% of all farmland.[5] The bulk of India's hungry and poor people are constituted of smallholder farmers and landless people. 78% country's farmers own less than 2 ha (5 acres), which constitutes 33% of total farmland but at the same time, they produce 41% of the country's food grains. 20% of the world's poor live in India, although the country was self-sufficient in food production in 2002 due to the first Green Revolution started in the latter half of the twentieth century, numerous households lacked resources to purchase food. Holdings less than 2 ha contributed 41% of total food grain production in 1991 compared to 28% in 1971, which means a substantial increase, whereas medium holdings registered a mere 3% increase in the same period and large holdings registered a decline from 51 to 35%. This signifies the importance of smallholders in the Green Revolution and the attainment of national food security. Smallholder families are becoming more vulnerable and more disadvantaged due to the expansion of international trade liberalisation. The needs and aspirations of small farmers must feature prominently in policies of market reform that seek to improve food and nutritional security. India's total increase rate of productivity across the farming sector was far less in 1990's when compared to previous decades.[29]

Kenyan smallholder dairy farmer

Kenya's smallholder production accounts for 78 percent of total agricultural production and 70 percent of commercial production.[30] Majority of the smallholder population work in farm sizes averaging 0.47 hectares (1¼ acres).[31] This represents the vast majority of Kenya's rural poor population who depend on agriculture for their livelihood.[32] Adverse risk events during the period 1980–2012 led to production losses in smallholder farms resulting in a drop in agricultural gross domestic product (GDP) of 2 percent or more.[32] Increasing the productivity of smallholder farmers is encouraged due to its potential of improving food availability, increasing rural incomes, lowering poverty rates, and growing the economy.[32] Diversification of crops in smallholder farms is one of the potential strategies in sustaining agricultural productivity, and copping with marketing risks.[33] It is also a transitional step from subsistence to commercial agriculture. Age, education of household head, type of crops, cropping system, amount of credit, and irrigation facilities are some of the factors influencing diversification in smallholder farms.[34]

Along the upper and middle reaches of the Nduruma River in the Pangani River Basin, Tanzania, there is not enough water to go around. Smallholder farmers address inequities in land and water distribution by enforcing existing traditional local rules. Whilst larger estate farms may have governmental licences guaranteeing rights to the water, a study found that those large-scale farms which adhere to the traditional water rights structures fare better in terms of social reputation, which better ensures their access to water. Adhering to the water law in order to enforce their permits is less effective, as regional Tanzanian local governments generally attempt to avoid conflict with their populace. On a larger scale, however, existing traditional rules are ineffective in maintaining cooperation among users along the Nduruma River.[35]

In 1975, there were 4.2 million smallholder farming households in Thailand. In 2013, Thailand had 5.9 million smallholder farming households. The average area of these smallholdings had shrunk from 3.7 hectares (9¼ acres) to 3.2 hectares (8 acres) over that period. Instead of farms getting larger and less numerous, as has been the case in the Global North, the reverse happened: they got smaller and more numerous.[36]