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
Focus on the Global South
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
II. Small Farmers and the Market
‘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.’
III. Are Industrial Agricultural Methods Alleviating Hunger?
IV. The Social and Ecological Costs of Industrial Agriculture
A. The Social Costs of Industrial Agriculture
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.
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
C. Industrial Agriculture’s Inefficient Resource Use
D. Monocultures, Pesticide Poisoning and Overuse
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.
V. How Much of the Consumer Dollar Does the Farmer Get?
VI. Equality-generating, Affordable and Agroecological Food Production Systems
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.
VII. The Benefits of Alternative Food Production Systems
A. Yield Increases
B. Yield Stability, Resistance to Pests and other Ecological Benefits
VIII. Developing Countries CAN Produce Enough Food With These Alternative Methods
‘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’.
IX. Policy Recommendations
A. Demolish WTO’s Single Undertaking Structure:
B. Create a Development Box 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
D. Domestic Supports
E. Export Subsidies
F. Market Structures
G. State Trading Enterprises (STEs)
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.