Small Farm Modernization & the Quiet Revolution in Asia s Food Supply Chains. Thomas Reardon

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1 Small Farm Modernization & the Quiet Revolution in Asia s Food Supply Chains Thomas Reardon

2 Part 1 of Talk: Introduction to research issues and method

3 1. Introduction to Research Issues 1. Research past 10 years on China, Bangladesh, India, Indonesia, Philippines, Vietnam 2. On eve of Green Revolution, debate in these countries on development path to choose: a) large-farm development path a.1) with supporters saying large estate farms = fast development a.2) supporters saying (1) there are no good technologies for small farms; (2) and small farms won t adopt new technologies

4 b) small farm development path With supporters saying b.1) Green Revolution provides technology that makes small farmers as or more productive than large estate farms b.2) small farm path fits land scarce, labor abundant situation b.3) failure of big collective farm (early) path of China b.4) small farm path promotes broad-based rural income growth Via local production linkages Via local consumption linkages

5 c) All six countries adopted small farm development path starting with the Green Revolution in the 1970s to now: massive investments in rural infrastructure massive investments in wholesale markets massive investments in agriculture R&D and extension gradually gave land control rights to small farmers as incentive to invest long-term liberalized food markets to create incentive for small farmers to invest and modernize

6 2. Issues of our research on the 6 countries a) What progress have they made in small farm modernization? b) What progress have they made in developing supply chains from small farms to domestic market (95% of the food market in Asia), especially the rapidly growing cities (urban areas are 75% of food market in Asia) and export markets?

7 3. Summary of findings based on detailed survey evidence.. In past 10 years in the 6 countries large sample surveys in all segments of food supply chains farmers, farm input suppliers, traders, mills, cold storages, and retailers nearly 10,000 farmers and supply chain actors surveyed

8 4. Found surprising findings: rapid and widespread modernization AND diversification of small farms rapid modernization of food supply chains.. upstream from farm: in supply of inputs and services to farms, downstream, services after the farm-gate, in wholesale, processing, and retail with small farms benefited, sandwiched between the modernizing upstream and downstream 4 sets of points as follows

9 Part 2 of Talk: Survey Findings

10 1) Rapid modernization of small farms (1-3 hectares) Our findings in farm surveys: a) Rapid Commercialization of small farms shifted from subsistence farms to small commercialized farms selling 70-90% of output rice in India, China, Vietnam, Bangladesh small farms rapidly becoming small businesses

11 b) Rapid Intensification of small farms Shifted into high use of new varieties, purchased seed, fertilizer, pesticide, herbicide Shrimp in Indonesia: small farmers into vannamei (pacific white) + feed Mangoes in Indonesia/Philippines: new commercial varieties + high use inputs Rice in India, China, Vietnam, Bangladesh)

12 c) Rapid mechanization of small farming: rapid shift to high use of farm machinery to free labor from grain farming to higher income activities (horticulture, rural nonfarm jobs) very rapid increase in rental of machines (rice, Vietnam, India) very rapid development of farm machine services small enterprises) (China, Indonesia, Philippines) rice harvest services; mango sprayer-traders

13 2. Rapid Diversification of Small Farms a) Small farmers: climbing the value ladder! b) Shifting from rice/wheat into vegetables, fruit, fish, livestock, dairy, grams/pulses... Wheat potato (Uttar Pradesh, India) rice mango (Java, Indonesia; Luzon, Phil.) rice vegetables (Shandong, China) rice vegetables fish (Comilla, Bangladesh) Earn 4-8 times more than in rice farming

14 c) Shifting from low-quality rice high quality rice (50-100% higher returns) (Vietnam, China) d) Shifting from just farm income to farm + rural nonfarm income (now 50% of farm household incomes)

15 3) Quiet Revolution in food supply chains: upstream + downstream from farms a) Mainly grassroot revolution: small/medium enterprises b) Driven by private sector (not government intervention) c) Emergence of 1000 s of small enterprises in input and services supply sprayer-traders in mango, Indonesia clusters of small enterprises for machine-harvesting of grain in China feed traders and mills in Indonesia, Bangladesh in fish/shrimp areas

16 d) Rapid spread of cold storages amazing case of boom in potato cold storages Uttar Pradesh, India, & Bogra, Bangladesh! e) Rapid modernization of wholesale markets and traders! most amazing case is China: private sector wholesale development extremely fast f) Rapid modernization of rice mills g) Spread of supermarkets in all 6 countries Supply chain development important because it forms 50-70% of food costs to consumers

17 4. Role of Government: IMPORTANT a) In all 6 countries (except grain in India) government role in direct intervention is VERY SMALL tiny role in input supply tiny role in crop marketing

18 b) In all 6 countries the role of government as enabling farmers and grass-roots private sector is VERY LARGE agricultural research: seed varieties roads ports electricity grids permitting cell phone expansion information and extension

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