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Trade-Related Agenda, Development and Equity (T.R.A.D.E.) Occasional Papers 4

South Centre,June 2001

 

 

Agriculture in Developing Countries:

Which Way Forward?

This occasional paper was written by

Aileen Kwa

Focus on the Global South

Preface

 

 

The South Centre, with funding support from the UNDP’s TCDC Unit, has established a project to monitor and analyse the work of WTO from the perspective of developing countries. Recognizing the limited human and financial resources available to the project, it focuses on selected issues in the WTO identified by a number of developing countries as deserving priority attention. As hoped, the project has helped in establishing a medium term work programme by the South Centre on issues related to international trade and development. The work programme includes many sub-projects on specific WTO Agreements/issues, under the over all South Centre/UNDP project.

An important objective of the South Centre under programme on international trade and development issues is to provide short and timely analytical inputs on selected key issues under negotiations in the WTO. The publication of concise analytical papers under the T.R.A.D.E. occasional paper series is an attempt to achieve this objective. These occasional papers will provide brief analyses of chosen topics to assist developing country negotiations but will not aim to offer exhaustive treatment of each and every aspect of the issue.

It is hoped that the T.R.A.D.E. occasional paper series will be found useful by developing country officials involved in WTO discussions and negotiations, in Geneva as well as in the capitals.

The text of these occasional papers may be reproduced without prior permission. However, clear indication of the South Centre's copyright is required.

 

 

 

 

South Centre, June 2001

 

 

Small Farmers and the Need for Alternative,

Development-friendly Food Production Systems

 

 

I. Introduction

 

  1. The structure of agricultural production in developing countries has radically changed in the last two decades. Since the late 60s and 70s, the World Bank and its various agricultural research institutes have actively promoted the adoption of industrial (high chemical input) agricultural methods such as the Green Revolution ‘miracle’ seeds, promising landfall yields. These high technology methods were expected to benefit all farmers, including the poor. Since yields would increase, incomes were also expected to increase.
  2. However, the heavy dependence on imported inputs could not be sustained economically by developing countries. This was compounded, in the 1970s and 1980s, by the oil crisis and the debt crisis. The economic and financial crisis in developing countries led to the proliferation of loan packages from the international financial institutions. Structural adjustment policies were then introduced as a condition for loans borrowed by countries. Since the 1980s, close to 100 countries have been forced to take on structural adjustment packages. The policies included on the one hand forced liberalization, and on the other, the conversion of domestic agricultural production for exports.
  3. Over the last two decades, the experience of small farmers from Central to South America, Africa and Asia have been strikingly similar. Many have been pressured to switch from diverse traditional polycultures to monocultures for overseas markets. For example, the provision of extension services and credit were often conditioned upon farmers accepting the new technologies in export crops that were promoted. Farmers have been likewise forced to switch to export crops when local prices in staples and traditional crops have plummeted as a result of cheap subsidized imports often from the industrialized countries flooding the local markets. For the majority of small farmers, the process has been one of systematic impoverishment. Many have even been squeezed out of farming altogether. Instead of abating food scarcity, which has always been the reasoning for public investment in agricultural technology and hybrid seeds, food surpluses are increasing on the world market, yet ironically, for those most in need, hunger and food insecurity remains more of a problem.
  4. The Green Revolution technical fix focused narrowly on increasing yields is clearly not the answer. The Gene Revolution today, is headed towards compounding the already serious problems faced by the rural sectors in developing countries.
  5. This paper will explore how the industrialization of agriculture, the increasing concentration in production, the emphasis on exports, and the removal of barriers even for staples have been detrimental for small farmers’ livelihoods and also food security in developing countries. The market does not respond to those in need but to those with financial prowess and bargaining power. The paper will also look at alternative food production methods for small farmers in developing countries that can ensure their livelihoods, their food security, as well as the long-term sustainability of food production. The final section will be on recommendations for the WTO’s Agreement on Agriculture (AoA).

 

 

 

II. Small Farmers and the Market

 

  1. Why focus on small farmers? In developing countries, agriculture continues to be the main source of employment, livelihood and income for between 50% - 90% of the population. Of this percentage, small farmers make the up the majority, up to 70 – 95% of the farming population. Small farmers are therefore a significant proportion of the population. They have traditionally survived on subsistence production. Many in the last 2 decades have experimented with export crops with occasional initial success but many disastrous failures.
  2. The industrialization and export orientation of agriculture has not benefited them. In the globalised market, the small players have been marginalised, as will be illustrated below. Yet economically, they should not be ignored. Policies which have led to their marginalisation has meant the continuation of the vicious cycle of poverty for sectors of society, highly uneven development and hence the inability of many developing countries to attain satisfactory levels of overall development.
  3. Analysts Conroy, Murray and Rosset (1996) write about how many developing countries cannot achieve a satisfactory level of development because their small farmers have been sidelined:

‘It is our belief, and that of respected economists (Janvry 1981) and Jeffrey Sachs (1987), that the sort of inequity and poverty the peasantry must face actually blocks true development. The rural masses are so poor that they have little purchasing power. They thus do not constitute an important market for domestic industry. This in turn means that domestic markets are too small to stimulate much economic activity, so production is largely directed toward foreign markets and urban elites. As a consequence, the level of demand in the economy is too narrow to sustain broad based, effective development. This creates a high degree of dependence on foreign markets and a lack of structural incentives (nationally, that can bring about) better living standards for the poor. In short, poverty becomes a vicious circle that is itself an obstacle to development.’

  1. Prior to Bretton Woods and WTO liberalization, many farmers in developing countries were protected through a combination of policies such as tariffs, quantitative restrictions especially on staples, through subsidies which artificially reduced the costs of inputs, or through support prices which increased the price farmers got for their commodities. These policies had the effect of protecting the livelihoods and employment of those in the rural sector.

 

 

 

III. Are Industrial Agricultural Methods Alleviating Hunger?

 

  1. Industrial agriculture generally means the dependence of food production on high inputs -- chemical fertilizers, pesticides, water, as well as the increasing use of machines. Industrial farming entails extracting maximum output from the land in the shortest possible time. Food production becomes similar to a ‘mining’ operation.
  2. A landmark in the spread of industrial agricultural methods was the Green Revolution, which brought the advent of ‘miracle seeds’ in the 1960s and 1970s. It was found that these improved varieties dramatically increased yields as compared to traditional varieties.
  3. According to analysts Lappe, Collins and Rosset, the main reason why ‘modern varieties’ produce more than traditional varieties is that they are more responsive to controlled irrigation and petrochemical fertilizers, hence allowing for much more efficient conversion of industrial inputs into food. Other researchers such as Palmer of the UNRISD has termed them ‘high-responses varieties (HRVs), rather than high yielding seeds. In the absence of the fertilizers and irrigation, the new seeds in fact have lower yields than indigenous varieties.
  4. The miracle seeds were first cultivated for cereals, such as rice, wheat, maize and cassava, but were broadened to a list of 27 commodities later. By the 1990s, almost 75 per cent of Asian rice was sown with the new varieties. The same was true for almost half of the wheat planted in Africa and more than half of that in Latin America and Asia, and about 70 per cent of the world’s corn as well. It has been estimated that about 40 per cent of all farmers in developing countries were using Green Revolution seeds by the 1990s, with the greatest use found in Asia, followed by Latin America.
  5. Did the Green Revolution reduce hunger? Comparing the number of hungry people in the world in 1970 versus 1990 (spanning the two decades of major Green Revolution advances), a first glance seems to indicate significant progress. The total food available per person in the world rose by 11 per cent. The number of chronically undernourished fell from 942 million to 786 million, a 16 per cent drop.
  6. However, on closer examination, and if China was eliminated from the analysis, the number of hungry in the world actually increased by more than 11 per cent, from 536 million to 597 million. In South America, where per capita food supplies rose almost 8 per cent, the number of hungry people went up by 19 per cent. In South Asia, there was 9 per cent more food per person by 1990, but there was also 9 per cent more hungry people. It was also not due to increased population that brought about greater hunger. The total food available per person in fact increased. It seems that greater hunger was the failure to address unequal access to food and food-producing resources.
  7. Analyst Vandana Shiva terms the effects of the Green Revolution and the industrialization of agriculture as ‘inequality-generating’.

 

 

 

IV. The Social and Ecological Costs of Industrial Agriculture

 

  1. The following sections will explore the social and ecological costs of modern industrial agriculture as experienced by many developing countries. Particular emphasis will be paid to the effects on the rural poor / small farmers, and food security.

 

A. The Social Costs of Industrial Agriculture

  1. How does agricultural industrialization and production for the export market lead to the uprooting and destruction of small farmers while benefiting the large farms? According to Shiva, agricultural industrialization and exports increases single commodity harvests. With all farmers growing the same commodity over large areas, the prices farmers receive from their crops come down, while the costs of inputs which are imported have been on an upward spiral. As a result, farmers’ profit margins get drastically narrowed. As costs of production increase, farmers experience a cost-price squeeze. In this process, only the larger farms can survive.
  2. The market is such that the costs for small farmers to use the high input system are larger than for big farmers. Poor farmers cannot afford to buy fertilizer and inputs in volume. Big growers get discounts for large purchases. Poor farmers cannot hold out for the best price for their crops, while larger farmers whose circumstances are less desperate can. Big farmers can afford to pay for irrigation services, which may not be within reach of small farmers.
  3. This ‘inequality-generating’ process is clearly evident by the case study below:

 

 

Case Study: Experience of Central America’s Peasants in the Conversion from Tradition Agriculture to Non-traditional Agricultural Exports in the 1980s and 1990s.

As a result of Central America’s debt crisis in the 1980s and with all countries in the region having an average debt of 51% in proportion to export earnings (ie 51 cents of every export dollar was used for debt repayment), a cornerstone of US economic development policy for that region in the late 1980s and 1990s was the promotion of non-traditional agricultural exports (NTAEs) using high input intensive agricultural methods. This policy was implemented by the US Agency for International Development (USAID) which encouraged exports from the region to markets worldwide, but especially to the US. These NTAEs included melons, strawberries, broccoli, cauliflower, snow peas, squash and other products often shipped fresh directly to supermarkets in the US. The policy was implemented also during the time where many countries were undergoing structural adjustments.

Many small farmers had little choice but to convert to the new crops. Even if they did not wish to do so, their livelihoods were already compromised because ‘the viability of traditional corn and bean cultivation had been undercut by trade policies, leaving the rural poor without the peasant safety net of basic grain production for the domestic market and their own consumption’. In this environment, only the big farms producing traditional crops were able to survive the competitive prices.

The export drive in new crops led to some impressive increases in production and exports in some countries. However, for most of the region’s poor rural majority, the policy failed to provide any improvement in their dismal living conditions. Instead, researchers Conroy, Murray and Rosset found that conversion to NTAEs ‘have tended to undermine small farmers’ economic position, drawing them into increased debt and sometimes leading to significant land concentration.’

Some of the commonalities of this ‘inequity-cultivating’ process included the following:

1) Fluctuation in Prices and Services Offered

Early adopters of new non-traditional crops and technology promoted by foreign agencies (in this case through USAID) would be provided high levels of support – credit, a full-time extensionist, certified disease-free seed, and a purchase contract with an export company. The first year of conversion would be an outstanding success. However, in the second year, seeds and marketing contracts were no longer provided. Yet more local farmers would plant the new crop, based on the experience of their colleagues the year before. The prices would drop in the US in response to new competition from other countries with lower production costs. Farmers often also suffered heavy disease losses due to the poor quality seeds used. Furthermore, some would not be able to find a buyer for their meager production. About 50% would default on their credit. In the third year, this percentage may reach 100%. Subsequently, the market would show a bias against the small producers. Packers and exporters tended to offer contracts to a few large producers whom they felt had better quality control, then to pay the costs of contracting with dozens of small farmers.

  1. Rising Rents and Land Values

Many peasants are not legal owners of the land they farm. They are often renters, sharecroppers, or simply squatters. When a new and potentially high-return alternative is introduced into a locality, the opportunity costs associated with traditional peasant land use rises. Landlords earn more by renting their land to those who grow high-value crops. Thus, land values rise while sharecropping opportunities become scarce. If rising land values are accompanied by declining profitability of traditional activities, even landowning peasants may be displaced as it becomes no longer possible to live off traditional production. The situation is aggravated if the start-up capital needed for export production is beyond their means. Peasants may have no alternative but to sell their lands and join the ranks of the landless labourers or migrate to the cities.

3) Capital and Credit: Barriers to Entry

The start up costs for NTAEs were much higher than for traditional crops. In one country, the initial cost barrier for small poor farmers in snow pea production was nearly 15 times the cost of planting basic grains. The poorest farmers would therefore require credit. However, this would be difficult for them to attain as there were strict criteria attached (eg the need for the property title as collateral, official letter stating that one does not have outstanding debts etc), and interests rates charged to them were invariably higher.

4) The Market: A Question of Bargaining Position

It was found that the market place presented not only price fluctuation risks. Farm size was a significant determinant of price. The smaller the farmer’s scale of production, the weaker was his or her bargaining power, and the greater the vulnerability to exploitation by intermediaries. Every additional hectare that a farmer planted to melons, for example, translated into payment that was 1-6 per cent higher for the overall produce.

The researchers conclude that nontraditionals offer the worst possible marketing scenario for the small farmer. They are perishable crops that are not usually consumed locally. Should the contract with the importer not materialize, the crops would not fetch a good price locally. In contrast, a farmer who produces a crop for the local market is more likely to have more control over the market. He or she may be at the mercy of middlemen, yet these intermediaries are local people, so that face-to-face complaint and conflict resolution would at least be possible.

5) Knowledge and Technology

Non-traditional crops often require considerable technological sophistication relative to traditional crops, as they are new to the region, or require special care at harvest because of perishability or the need to meet demanding cosmetic standards. The risk of crop failure due to insect pests, disease or inadequate agronomic practices is much higher than in traditional crops. Access to technology, however, is biased against the small-scale producers. Large farms can afford to hire the foreign expertise and buy the equipment needed, whereas small farmers usually rely on extension services which may or may not be provided.

Quality control is also a new problem for small farmers not accustomed to the exigencies of foreign markets. It favours those producers who are able to hire foreign consultants. Peasants may have grown a certain product all their lives. However, the family and local markets had very different standards for appearance, insect presence and damage. In extreme cases, export to foreign markets may be closed to small farmers who do not have the technical knowledge or money to meet the appearance and quality standards required.

6) Need for High Inputs

Many studies have found that new high yielding varieties such as those of the Green Revolution responded to costly inputs. In the absence of such inputs, their yields were actually inferior to traditional varieties. Those farmers who adopted these varieties and who could afford more inputs benefited disproportionately. Those who could not suffered, often eventually losing their land.

The researchers concluded that together with the cutbacks accompanying structural adjustment, combined with dumped US food aid which undermined the historical basis for the survival of the peasant sector, these factors led to ‘unprecedented rural strife’ and an ‘explosive social situation.’

Reference: Conroy, Murray and Rosset 1996 ‘A Cautionary Tale: Failed US Development Policy in Central America’, Rienner Publishers, London.

 

 

 

B. Industrial Agriculture’s Need for More Chemical Inputs for Decreasing Outputs

  1. Yield increases from high yielding Green Revolution technologies have been decelerating, and in some cases stagnating and even contracting. The highest yields have been obtained by using ever larger inputs of fertilizer and irrigation water, which in many places have passed the point of diminishing returns. Greater use of these inputs is becoming less productive.
  2. In comparison to traditional varieties, outputs are small. Traditional rice farming in Asia produced 10 times more energy in food than was expended to grow it. Today’s Green Revolution rice production cuts the net output in half. According to Cambridge University Geographer, Bayliss-Smith, the gains drop to zero in a fully industrialized system such as that of the US.
  3. In India, adoption of the new Green Revolution seeds led to a six-fold increase in fertilizer use per acre. Farmers used an average of 12.7 kg/ha of fertilizer in 1970. By 1995, usage had gone up to 76.6 kg/ha. While food grain production increased 84 per cent from 82 million tones in 1961 to 185 million tones in 1997, consumption of chemical fertilizers rose from 292 thousand tones in 1961 to 16,422 thousand tones in 1996-97, a 15,000 per cent increase.
  4. Similarly, in the Philippines, rice production increased in the late 1970s, and early 1980s as a result of the Green Revolution, but has since been on the decline. Analysts attribute it to these ‘high yielding varieties’.
  5. Why is this happening? Experts are concluding that clearly, chemical fertilizers are destroying the quality of the soil. Yields are falling because chemical fertilizers are not a sustainable source of soil fertility. In the long run, these methods encourage desertification, soil erosion, pesticide contamination and the depletion of groundwater. Yet these ecological problems are ignored because of the difficulty in quantifying and assigning monetary values to ecological degradation. These remain hidden costs behind the yields obtained in conventional farming.

 

C. Industrial Agriculture’s Inefficient Resource Use

  1. One of the myths about industrial agriculture is that it is a land-saving system. In fact, monocultures and the separation of crops from livestock necessitate much higher amounts of land than traditional polycultures, and systems integrating crops and livestock.
  2. Since monocultures eliminate diversity and the multiple uses of land, and instead provide a single output, additional acres are required to produce the output which would otherwise have been produced on the same piece of land.
  3. Shiva explains it as follows: If traditional varieties produce 1000 kg/acre grain and 1000kg/acre fodder, then industrial varieties produce 1200 kg/acre of grain and 0 kg of fodder. Thus another acre has to be used for fodder production. The two acres, without chemical inputs and new seeds, could have produced 2000 kg grain plus 2000 kg of fodder on 2 acres.
  4. Likewise, crop production strategies which ignore livestock as an important source of soil fertility leads to the intensification of agriculture through the use of non-sustainable chemical inputs for fertilizers.
  5. In addition, industrial livestock farming in fact consumes three times more acres of land than ecologically rearing livestock. Analysts have calculated that Europe in fact uses seven times the area of Europe in Third World countries for cattle feed production. For fodder alone (including that used to produce food products for export) the Netherlands appropriates 100,000 to 140,000 square kilometers of arable land. This is often referred to as ‘shadow acres’ and much of it comes from developing countries. This is 5-7 times the area of agricultural land in that entire country.

  1. It has been concluded that the combination of industrial plant breeding and industrial animal breeding increases the pressure on land-use by a factor of 400% while separately increasing output of grain and milk by only a factor of 20%.
  2. Shiva concludes that one acre of a farm that only uses inputs derived from the farm itself with integrated livestock and crop production can support a family and two farm animals. If both crop production and livestock are made to rely on intensive inputs, the same family and two animals require additional shadow acres of land to produce the inputs and absorb the pollution.
  3. The other resource which is overused by industrial agricultural methods is water. As mentioned earlier, high-response seeds grow well only when water is plentiful. The water tables, however, are falling in key food-producing countries. 480 million of the world’s 6 billion people are fed with grain produced by overpumping aquifers. This is already creating serious water shortages in various countries today. Regions suffering from aquifer depletion include central and northern China, northwest and southern India, parts of Pakistan, much of western United States, North Africa, the Middle East and Arabian Peninsula. Besides constraining future food supply, groundwater overpumping is widening the income gap between the rich and poor. The poor cannot afford to deepen their wells or buy stronger pumps. As the shallower wells dry up, some of the small-scale, poorer farmers end up renting their land to the larger well owners and become labourers on these larger farms. Agronomic systems of agricultural production, for example, intercropping to maximize use of soil moisture, as well as better matching crops to climate conditions can reduce the pressure on water supply, and increase the opportunities for small farmers to maintain their livelihoods.
  4. The point made here is that extra resources used by the industrial systems, such as Green Revolution techniques, could have gone to feed people. These systems are resource wasteful and rely on intensive external inputs, including water and land. The emerging Gene Revolution (which is similarly input-intensive) promises to be as resource wasteful. These systems take away the entitlements from those most in need, and add to food insecurity and poverty in developing countries.

 

D. Monocultures, Pesticide Poisoning and Overuse

  1. Another significant issue that must be addressed as a result of industrialized food production systems is the increasing dependence on pesticides. Monocultures erode diversity. It is diversity that increases resistance to pests. In a holistic system, a problem in a part of the system can be absorbed or counter-balanced by the entire system. This is why the polycultural system is widely recognized as more stable. This is not the case with monocultures. Without the advantages of a balanced eco-system, pest infestations are common, so that the entire crop can be easily destroyed.
  2. Chemical pesticides are in fact creating more pests than controlling pests. By contributing to the emergence of resistance in pests and by destroying natural enemies and predators, pesticides increase pest problems. Globally, 450 species of insects and mites, 100 species of plant pathogens, 48 species of weeds have become resistant to one or more pesticide products. In California, of 25 insect pests, 72 per cent are resistant to one or more pesticides and 96 per cent are pesticide created or aggravated.

 

 

 

Case Study: Pesticide Problems in Guatemala’s Nontraditional Sector

 

Research in the Guatemalan highlands where nontraditional crops have been cultivated showed that as farmers were increasing pesticide use, pests were becoming ‘stronger’. Comparison of crops organically grown and those under chemical intensive methods showed that pests were commonly absent in vegetables such as organically grown snow peas, while chemical intensive plots showed relatively high levels of these pests.

When comparing damage due to plant disease of both groups, it was found that damage was considerably lower in organically grown broccoli and snow peas than in fields where they were grown chemically with herbicides, pesticides and fertilizers. Indeed, for snow peas, the damage was 10-times greater for chemically treated plots.

Similarly, in terms of soil quality and soil erosion (the most powerful indicators of ecological well-being), it was found that these were much better for traditional crops (corn and beans) than the nontraditionals. For example, the research found far fewer earthworms (their quantity is an indicator of soil quality) in broccoli fields than in corn, and no earthworms in snow pea fields (those with the heaviest uses of pesticides). The researchers have concluded that ‘heavy and inappropriate uses of chemicals worsen the conditions they were designed to remedy, creating an ecological imbalance for continued production of the same crop.’

Here again, the problems of heavy pesticide use have not affected all players alike. When the ecological problems have reached crisis-generating levels, such as the collapsing of the entire sector due to pesticide residues and pesticide-resistant pests, transnational operators and exporters are quick to close down their operations overnight and move to another locality or region to set up their export operations free of the ecological problems they have created. In contrast, the thousands of farming families left behind have to deal with an ecological crisis on their hands.

Reference: Conroy, Murray and Rosset 1996 ‘A Cautionary Tale: Failed US Development Policy in Central America’, Rienner Publishers, London.

  1. The strengthening and growing resistance of pests is hardly surprising given that 4.7 billion pounds of pesticides are used annually throughout the world. World pesticide use has increased 26 fold in the last 50 years. In 1996, total pesticide sales topped $33 billion. The value of world exports of pesticides increased more than eight times in less than four decades, from $1.3 billion in 1961 to $11 billion in 1997. Most exports originate from industrial countries.
  2. The other facet of the pesticide problem are the costs to human health. Estimates of pesticide poisonings in the third world are as high as 25 million people yearly. Many cases go unreported, partly because growers’ actively prevent reporting.
  3. The most harmful chemicals end up in developing countries. Many industrialized countries continue to export chemicals that are deemed too deadly for domestic use. Despite the awareness of bioaccumulating chemicals (ie, each link or species in the food chain takes up the previous link’s exposure, adding it to their own and magnifying the effects), this trend is getting worse. Between 1992 and 1996, US chemical companies increased exports of domestically prohibited pesticides by 18 per cent. The rate of exports of pesticides that have never been registered jumped 40 per cent during this time. More than 14 per cent of all US pesticide exports are in some way restricted from use within the country itself.
  4. Beyond causing cancer, new evidence suggests that pesticides may have many other dangerous effects. For example, many pesticides fall into a category of chemicals called ‘endocrine disrupters’, some of which directly affect the reproductive system.
  5. Much of the problem with the use of pesticides has to do with meeting the cosmetic standards of consumers in the export markets, particularly the industrialized countries. Lappe, Collins and Rosset estimate that in the US, from 60-80 per cent of the pesticides applied to oranges and 40-60 per cent of that applied to tomatoes are used only to improve appearance. Less than 0.1 per cent of the pesticides applied to crops actually reach target pests. The rest moves into ecosystems, contaminating the land, water and air.
  6. Unfortunately, it is again the poor farmers who are much less able to weather the increasing costs. As pests become more resistant to chemicals, larger amounts of pesticides are required – what is referred to as the pesticide treadmill. In the research in Guatemala mentioned above, pesticide costs for melons ranged from $735 to $2,206 per hectare. These high costs have left small-scale producers counting on unusually high international market prices, or left in a state of deep debt.
  7. There are other organic alternatives to chemical pesticides, such as the various integrated pest management methods. These include crop rotation and mixtures to increase diversity, introduction of natural enemies of pests, and the application of natural organic pesticides, for example, some African farmers use cow urine on certain crops.

 

 

 

V. How Much of the Consumer Dollar Does the Farmer Get?

 

  1. The industrial agricultural system has been evaluated on its social and ecological costs above. However, another aspect to it is that with its export orientation and accompanying trade liberalization policies, the commodity chain has broadened, so that farmers are small players amongst the big transnational seed, chemical, export, processing, shipping and retailing companies. This has drastically cut down the returns accruing to farmers, as well as the control farmers have over the prices they get.
  2. The entire commodity chain can be broken into three parts, prefarmgate, inside-farmgate and postfarmgate. Prefarmgate refers to the manufacture, procurement and delivery of all goods and services the farmer needs to produce the crop. Inside farmgate includes all the activities carried out by the farmer. Postfarmgate operations include all actions between the farm and the final consumer.
  3. While the farmgate prices paid to farmers have been on the decline in the recent years, there has been no or little decline in consumer prices. Where is the consumer dollar going and who receives the bulk of it?
  4. Conroy, Murray and Rosset observe that in industrial agricultural systems when commodities are exported, as opposed to more traditional systems, the vast bulk of the value-added, and consequently, the lion’s share of the profits tend to lie at the extreme: the pre and post farmgate segments. In fact, the overwhelming bulk of value is added postfarmgate (eg. up to 89 per cent for melons from El Salvador exported to the US). For each pound of melon produced by a small El Salvadoran farmer and retailed in the US for 65 cents, the farmer reaps at best 0.6 per cent of that revenue. More than 90 per cent of the revenue accrues outside the country -- 75 per cent goes to US shipping, wholesaling, advertising and retailing.
  5. The experience of small farmers in the North is similar, although they are in a slightly better situation. According to the Canadian National Farmers Union, farmers in 1975 used to obtain 13 per cent of the retail value of bread. Today, this is a mere 4 per cent. If these amounts take into consideration assets and debts of farmers, then farmers earn 0.7 per cent equity on average between 1994-98 in the commodity chain. In 1998, this percentage was only 0.3 per cent on average for all farmers. Indeed, the Union has calculated that while farmers growing grains – wheat, oats, corn – earn tiny or negative returns, the companies that make breakfast cereals reap huge profits. In 1998, Kellogg’s, Quaker Oats, and General Mills enjoyed return on equity rates of 56 per cent, 165 per cent and 222 per cent respectively. That is, these cereal companies were 186 to 740 times more profitable than the farmers.
  6. Clearly, small farmers are being squeezed hard while the exporters and transnational corporations carrying out the processing and retailing are making a disproportionate amount of profits in the commodity chain.
  7. It is therefore small wonder that for developing countries, food production for exports has not brought in the revenues expected, especially as the pre and post farmgate operations are dominated by corporations from the industrial countries. In addition, developing countries are constrained from entering into higher value processing of their commodities (post farmgate processing) due to the tariff structure and tariff escalations in developed countries.
  8. In contrast, production of food products for the local market immediately cuts down the number of intermediaries, provides the farmer opportunities to have more direct access to the consumer / market, and therefore much greater control over the pricing and their level of profitability.

 

 

 

VI. Equality-generating, Affordable and Agroecological Food Production Systems

 

  1. If the small farmers in developing countries are to survive -- and they must if broad-based development is to take place in developing countries -- we need more equality-generating forms of food production, which can continue to provide small farmers with a viable source of livelihood, and access to their daily food needs.
  2. Small farmers are the losers when food production systems erode the environment and soils, while transnational operators move to greener pastures. We need more environmentally sustainable forms of farming that nurture rather than exploit the resources needed for long-term food production.
  3. We also need production systems which rely more on locally available inputs. Farmers cannot benefit from technologies and inputs which are not available, affordable, or appropriate to their conditions. In particular, purchased inputs such as pesticides, fertilizers and even ‘high technology’ seeds, present special problems and risks for less-secure farmers, especially when they need to borrow in order to make their purchases.
  4. Rather than chemical intensification, as the industrial methods promote, Shiva has suggested a shift towards other forms of intensification that can address the ecological needs and the affordability criteria for small farmers:

i) the intensification of biodiversity rather than use of external inputs

ii) the intensification of crop-livestock integration and cooperation rather than that of competition between crops, livestock and humans

iii) the intensification of internal inputs for both crops and livestock, such as local labour and knowledge.

 

  1. To move beyond industrial methods of agriculture involves evaluating productivity on an entire farm system, rather than in terms of specific commodities. This would include the farm’s year to year stability, its sustainability and the productivity of its diverse elements, instead of thinking in terms of this year’s output of the top cash crop.
  2. Agroecological approaches to agriculture include methods such as intercopping, crop rotations, agroforestry systems and, as referred to above, the integration of plant and animal production – all time-honoured practices of farmers.
  3. With intercropping, several crops grow simultaneously in the same field. Rotating cereals with legumes (with fix nitrogen in the soil for use by other plants) and interplanting low-growing legumes with a cereal helps to maintain soil fertility without costly purchased fertilizers. Intercropping also works better because different plants have different needs and different timings of those needs. It therefore takes better advantage of available light, water and nutrients so total growth takes place. Instead of depleting the soil, as does monocropping of row crops (with the soil between the rows exposed to rain and wind erosion), intercropping increases the organic matter content of soils. The land taken to cultivate the crops together is therefore also less than if the crops were cultivated separately. Traditional methods have been known to accommodate as many as twenty-two crops in the same field.
  4. Integrating crops and animals on the same farm allows the return of organic matter to the fields. Using ducks or geese in rice farming, for example, can reduce weeds without herbicides.
  5. These alternative methods are sometimes referred to as low-input technologies. However, as was mentioned above, this designation refers to the external imported inputs required. The amount of labour, skills and management required as inputs to make the land productive is in fact quite substantial.

 

 

 

VII. The Benefits of Alternative Food Production Systems

 

  1. The benefits of these alternatives can be summed as follows:

 

A. Yield Increases

  1. Some may wonder whether the small farmers will be able to produce sufficient food for themselves with agroecology. Projects in alternative production methods in fact commonly result in increases in production of 50 – 100 per cent. In some of these systems, yields of crops that the poor rely on more – rice, beans, maize, cassava, potatoes, barley – have been increased by several-fold, relying on labour and traditional know-how more so than on expensive purchased inputs. For example, some projects emphasizing green manures and other organic management techniques can increase maize yields from 1-1.5 tones per hectare (a typical highland peasant yield) to 3 – 4 tones per hectare.

 

B. Yield Stability, Resistance to Pests and other Ecological Benefits

  1. Not only are yields increased, but crops in fact display more stable levels of total production per unit area than the industrial systems. For example, the yield variability of cereal / legume polycultures is much lower than for monocultures of the components.
  2. Furthermore, agroecological systems protect and conserve the soils as well as ensure better water management and harvesting. These methods also enhance biodiversity. Genetic diversity in turn increases resistance to pests and diseases.
  3. These benefits ensure the long-term sustainability of food production. Because they are not easily quantifiable, they have been left out of conventional agriculture’s much more linear, single-dimensional method of calculating costs, outputs and profits.

 

  1. Provides a Sustainable Livelihood, Poverty Alleviation and Rural Development

  1. Perhaps the most important dimension of agroecological food production is that they can provide a decent livelihood for small farmers, with fair returns to their labour - if there is a supportive larger policy environment. These systems have the potential to offer economically favourable rates of return since the costs of inputs are not exorbitant.
  2. The potential benefits to small farmers include increases in food supply, increases in incomes, reduction of poverty, reduction of malnutrition and general improvement to small farmers’ overall livelihoods.
  3. This therefore would go a long way towards poverty alleviation, as well as bringing about overall rural development.

 

 

 

VIII. Developing Countries CAN Produce Enough Food With These Alternative Methods

 

  1. The big question that many skeptics would ask is: why then is there so much food scarcity in developing countries? If industrial agriculture and cheap subsidized imports from the North eliminated, can developing countries produce enough food for themselves?
  2. Analysts Lappe, Collins and Rosset explore this question with regard to Africa. Africa is home to 213 million chronically malnourished people (25 per cent of the total in developing countries). By 1995, over one-third of the continent’s grain consumption apparently depended on imports. However, according to researchers, Africa has enormous, still unexploited potential to grow food. In countries notorious for famines, the area of unused good-quality farmland is many times greater than the area actually farmed. A central reason for Africa’s lack of food production is due to the colonial land grab that has continued into the modern era. It has displaced peoples and production of foodstuffs from good lands toward marginal ones. The good land is mostly dedicated to the production of cash crops for export or is even unused by its owners. Also, public resources, including research and agricultural credit, have been channeled to export crops to the virtual exclusion of peasant-produced food crops. Since the 1980s, the pressure to export to pay interest on foreign debt has reinforced this imbalance.
  3. The other factor which has greatly impoverished African peasants is the subsidized food surpluses from the developed countries which are dumped on Africa. This often takes away the entire local market for the local producers, who end up in debt, landless or even bankrupt.
  4. Today, agribusiness companies are promoting the ‘life sciences’ and its genetically modified seeds and production methods as the new revolution that will answer the question of hunger in the world. There are promises of yield increases, pest resistance, and even foods that are more nutritious (e.g. Vitamin A rice). Unfortunately, like the last revolution, the hunger problem has been premised wrongly, with the assumption that there will not be enough food to feed the world, rather than the more pertinent question about food distribution and access.
  5. Genetically modified (GM) seeds and production methods will bring about outcomes for small farmers which are similar to the Green Revolution experiences. GM crops are also high chemical input crops. The socially inequitable outcomes will be the same and may be even worse, since the technology is patented by transnational corporations. Small farmers will be in the same position in the commodity chain. They will be at the mercy of intermediaries, contractors and exporters and will have to bear the brunt of all weather and crop risks. They will receive similarly meager returns, if any, in contrast to the players in the pre and post farmgate operations -- i.e. the transnational food, transport and retail corporations.
  6. In addition, the ecological risks are likely to be as damaging. All the evidence to date points to as much or increased pesticide use. Weeds and pests are also likely to gain genetic resistance to pesticides. GM crops will also be planted as monocultures, hence the ecological problems associated with the hazards for biodiversity will be present. The damage may be even more pronounced given the as yet unknown metabolic effects of genetically modified crops and their spread to their wild relatives, not to mention the still unknown health effects it could have on consumers.
  7. Rosset, Collins and Lappe conclude that

‘Introducing any new agricultural technology into a social system stacked in favour of the rich and against the poor -- without addressing the social questions of access to the technology’s benefits -- will over time lead to an even greater concentration of the rewards from agriculture’.

 

  1. In a similar vein, experts Altieri and von der Weid observe that ‘If the root causes hunger, poverty … are not addressed, hunger will persist no matter what agricultural technologies are used. Most modern agricultural technologies have the potential to deal with the issue of quality and quantity of food, but does not address the distributive and access aspects of food which are at the heart of the hunger problem.’

  1. They conclude that to insist on only technological solutions to hunger ignores the tremendous complexity of the problem of food scarcity.
  2. Indeed, the UN has projected recently that there will be ‘drastic deceleration’ in world demographic growth. The world population is expected to be 8 billion in 2030. The growth rate of the world population, which had peaked in the second half of the 1960s at 2.1 per cent per annum had fallen to 1.3 per cent by the late 1990s will fall to a mere 0.3 per cent by 2050. A very recent FAO study has concluded -- without taking into consideration any production differences that may result from genetically modified crops -- that ‘for the world as a whole there is enough, or more than enough, food production potential to meet the growth of effective demand, i.e. the demand for food of those who can afford to pay farmers to produce it’. That is, the residual hunger problems will be largely poverty, rather than production related.
  3. According to Amartya Sen, famines have occurred not because of shortage of food, but because people’s claim to food is disrupted. When people are denied the resources to grow or retain enough of their own harvests to meet family needs, and when only buying power / money, gives people claim to additional food, many will go hungry, and even starve if their income falls or food prices dramatically rise.
  4. People’s incomes are very vulnerable to fluctuations. They may fall because they lose their means to produce. Poor people might have to sell their land or animals because of a death in the family, or mounting debts might mean that they lose their land after a single bad harvest. Often the price of what the poor produce suddenly drops, leaving them unable to buy enough food.
  5. In short, if the people’s claim to food is only through the market, yet the prices they get remain volatile as a result of not having control over prices, then people will die in famines, no matter how much food is produced. Global food security is therefore not a substitute for domestic or local food security.
  6. The main reason why people go hungry is not due to a shortage of food, but remains an issue of access and whether they have the entitlements needed to produce their own food for their families’ consumption.
  7. Alternative egroecological methods of producing food for family and local consumption is, in contrast to industrial high-input systems, an option that can provide the rural poor with stable food supplies, adequate access to food, livelihood security and ecological sustainability for continued long-term food production.

 

 

 

IX. Policy Recommendations

 

  1. It is critical for small farmers in developing countries to have adequate protection from drastic liberalization measures since the market does not work in their favour, but in favour of the big players.
  2. Trade policies must therefore provide small farmers and the rural poor in developing countries the protection needed to ensure the continued viability of their livelihoods. They also need protection against dumping and unreasonable competition from subsidized producers abroad. Providing greater security for the rural masses will bring about more even and equitable development for countries as a whole.
  3. Furthermore, for reasons of food security, national, political and economic security, as well as due to the special place of agriculture in developing countries’ economies (see paper on ‘Special and Differential Treatment and a Development Box’, G/AG/NG/W/13, June 2000), developing countries also need policy flexibility to ensure that existing production of staples and food crops for domestic consumption are not threatened, and, if insufficient, can be increased.
  4. To these ends, we recommend the following:

 

A. Demolish WTO’s Single Undertaking Structure:

  1. The WTO’s present single undertaking structure should be modified into a more flexible and development friendly, plurilateral, a la carte structure. Developing country members should be given the flexibility to sign-on to only those agreements which their economies and industries are ready for and which they can benefit from. This should be considered a central component of effective and real Special and Differential Treatment.
  2. (This suggestion should not be confused with the present EU suggestion to include new issues as plurilateral agreements. There should not be inclusion of further new issues not only because the system is overloaded, but because they are go beyond the trade arena and infringe on countries’ domestic sovereignty. Developing countries today need more policy space to chart their development direction, not less).
  3. In terms of agriculture, such a plurilateral structure would mean that those developing countries whose agricultural sectors are not ripe for competition, and whose small farmers and food security will be severely affected, will be able to opt out of the agreement until such time their farmers and economies are ready. This is particularly important given the unfair competition and dumping which characterizes a large part of developing countries’ trade with the industrial countries. This is not to recommend countries to close up, but to acknowledge that big bang liberalization has caused much damage for the most vulnerable sectors, and that developing countries, with a host of different development needs, should have the flexibility to carefully time and structure their own integration with the world economy.

 

B. Create a Development Box for Developing Countries

  1. A Development Box should be added to the existing Agreement on Agriculture (AoA) with the following components for developing countries:

a. Members signing on to the Agreement should be able to use a positive list approach to declare which agricultural products or sectors they would like disciplined under the provisions of the Agreement. That is, only the products which are declared by a country are subject to AoA commitments.

b. The reduction of tariffs has had detrimental impact on many developing countries. They must be allowed to re-evaluate tariff levels, and to revise them as and when the need arises in order to increase their domestic food production capacity, as well as protect livelihoods, employment and also local biodiversity. It is important that a country is able to act immediately and autonomously.

c. An appropriate safeguard clause that is only for developing countries in order to protect products that are important for domestic consumption and to protect the livelihoods of small farmers.

d. The minimum access import opportunity developing countries now currently have to provide should be abolished.

e. Flexibility in the area of domestic supports for food security, protection of rural livelihoods and for maintaining and increasing domestic food production for domestic consumption.

 

 

 

 

C. Market Access

  1. Tariff peaks in developed countries should be reduced. High OECD tariff peaks exceed 100 per cent. According to UNCTAD / WTO, this level of tariff peaks is rare in developing countries. A formula, such as the Swiss formula could be used to bring down the extremely high tariffs of developed countries by larger amounts to more reasonable levels.
  2. Eliminate tariff escalation of developed countries. This is extremely important if developing countries are to diversify their economies. A harmonisation formula should be designed to eliminate tariff escalation, including the provision of the full liberalisation for tropical products in processed forms by developed countries.

 

D. Domestic Supports

  1. Collapse all domestic support categories into one ‘General Subsidies’ box. This means the elimination of the Green Box, the Blue Box and the Amber Box. One category of subsidies will bring rationality and structure to the Agreement. It will also ease the unnecessary administrative burden on under-resourced developing country delegations.
  2. A common level of supports should be allowed eg.10 percent of production for all countries. This level of subsidies should be non-actionable. Subsidies of 5 per cent above this level will be ‘actionable’ for developed countries. Subsidies beyond this level are not permissible. Developing countries will be allowed additional flexibility under the ‘Development’ box to protect food security and to increase domestic production for domestic consumption.
  3. Developed countries wishing to provide subsidies over and above this 10 per cent value must be prohibited from exporting these products. Even if these programmes are classified as non-trade distorting, they do invariably increase production levels.

 

E. Export Subsidies

  1. All forms of export subsidies – direct and indirect – must be eliminated immediately. This must also include export credits and other forms of export promotion programmes.

 

F. Market Structures

  1. The consolidation by transnational corporations in the commodity food chain, especially at the pre and post farmgate operations, is anti-competitive and highly undesirable. Size no longer brings efficiency if there are only a handful of players. The coming negotiations must put in place appropriate policies to stop the abuse of market structures by the big companies. These regulations must eliminate the manipulation of prices and increase transparency in market conduct. They should also provide developing countries with an easily accessible mechanism to protect themselves against the abuse of monopoly power and to seek compensation.

 

G. State Trading Enterprises (STEs)

  1. State Trading Enterprises have been criticized by some to distort markets and prices, especially in the case of single desk importers or exporters because they are seen to have control over their markets, are less transparent in pricing, and obtain special privileges bestowed by governments. However, it has been pointed out that these criticisms in fact apply equally or even to a greater extent to the transnational agri-businesses. Many multinationals set prices and operate in a non-transparent fashion. They control not only the domestic but also the international markets as a result of consolidation and mergers, as well as because they have access to huge supplies in many exporting countries.
  2. Today, STEs in developing countries continue to play an important development role. In their import, export, and other operations, they ensure stable food supply and access to food, stabilising prices and stimulating production.
  3. The removal of STEs will not bring about competition in international markets but we might be eliminating one of the few forms of marketing that is able to withstand the pressure of the currently dominant market players. Instead of a healthy number of private companies emerging to take the place of the STEs in developing countries, it is more likely that the multinational agri-businesses will expand their operations to absorb the newly created market.
  4. Article XVII of the GATT already sets out the parameters by which STEs are to operate in a manner consistent with GATT principles. For developing countries, due to development and food security reasons, Special and Differential Treatment should be applied so that there are no disciplines on STEs beyond those already set out in Article XVII of the GATT. Disciplines on market structure must instead be applied to multinational agri-businesses.

 

 

The South Centre

 

In August 1995, the South Centre became a permanent intergovernmental organization of developing countries. In pursuing its objectives of promoting South solidarity, South-South co-operation, and coordinated participation by developing countries in international forums, the South Centre has full intellectual independence. It prepares, publishes and distributes information, strategic analyses and recommendations on international economic, social and political matters of concern to the South.

The South Centre enjoys support and co-operation from the governments of the countries of the South and is in regular working contact with the Non-Aligned Movement and the Group of 77. Its studies and position papers are prepared by drawing on the technical and intellectual capacities existing within South governments and institutions and among individuals of the South. Through working group sessions and wide consultations which involve experts from different parts of the South, and sometimes from the North, common problems of the South are studied and experience and knowledge are shared.

 

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