Enhancing Smallholder Farming Through Economies of Scale and Cooperative Models
Smallholder farming in developing countries is crucial for food production and the livelihoods of many individuals. However, to compete effectively in the market, small farms need to adopt cooperative models, economies of scale, and advanced agricultural technologies. By forming farming cooperatives and integrating modern practices, small farmers can improve their competitiveness, access resources more efficiently, and enhance their overall sustainability.
- Smallholder Farming
- Cooperative Models
- Economies of Scale
- Agricultural Technology
- Developing Countries
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Small Holders and the Need for Economies of Scale Contract Farming, Farming Cooperatives, Producing Companies Daniel Ray Lewis, Economics, Chulalongkorn
Farms in Developing countries can play important roles Farms in Developing countries can play important roles besides producing food producing food besides Farms are Farms are The haven of last resort for an aging population Diminishingly small as families have children and subdivide A daycare option for working parents A way to work for women with children An alternative for less capable members of the family An opportunity to build a sense of self-respect and pride
Bi-Polar Communities A Particular City Neighborhood A Particular Farm Village Grandparents, Small Children & Auntie and her kids Sister Cities Mother & Father & Uncle
Farms are commercial enterprises and need to be able Farms are commercial enterprises and need to be able to compete in terms of price with agri to compete in terms of price with agri- -business business Small Farms Agro-business Higher cost of inputs Debt financing Cannot grade crops Basic Ag. Technology Sell to Middleman No Storage or Transport Buy Inputs in Bulk Self financing Grade and prepare crops Advanced Ag. Technology Market own Products Own Storage and Transport
Middle Men Cooperative Contract Farming Input Wholesaler Final Marketing Small Farms Banking Rent Equipment Wholesale Level Crop Aggregator Storage Crop Wholesale Subsidies??
Solution 1 Farming Co-operatives when Need Local Economies of Scale, Cooperation and Management Cooperative Provides Marketing Storage Equipment Inputs Cooperatives are Often Subsidized by Government Loan Example of Problems Free riding on loan repayment or crop quality Incentive: Access to loans at decreasing interest rates over time in exchange for good behavior (repay loans and always supply right quality of fruit) loan rate: 8.5% first year, 7.5% next two years, 6.5% next two years 5.5% after 5 years
Solution 2 Contract Farming when Need Processing, Technology, Price Stability, Marketing & Branding Contracting Company Provides Marketing and Branding Processing Fixed Price Training and Technology Inputs Prices are negotiated before growing season Loan Example of Problems Fairness and trustworthiness of the contracting parties When incentives match, the system works well e.g. technology transfer both benefit Farmers have an incentive to sell outside of contract if price is high Company has to raise agreed price if prices are high, but cannot lower agreed price if market price is poor. Complicity: Farmers use illegal land to grow corn while company profits without liability.
Solution 3 Producing Company when Technical Expertise in Production and Marketing (but no Factory) Producing Company Provides Marketing Management Coordination Training and Technology Inputs Professionals Often Provided by the Government Loan Example of Problems Farmers retain ownership but surrender control over their farms in exchange for professional management and technology Farmers may feel like subcontractors with little power. Low flexibility for individual needs But standardized higher quality product
