The State of Food and Agriculture Report 2014 (#SOFA2014)

Editor's Notes

• #2: The State of Food and Agriculture report (SOFA) is FAO’s flagship report. SOFA has been produced since 1947. Each edition explores an issue of interest to policy- and decision-makers in the field of agricultural development and food security.  The full collection of SOFA editions since 1947 is available at: http://www.fao.org/economic/es-home/sofa/en/ In recognition of the International Year of Family Farming, the 2014 edition focuses on how to promote innovation among family farms to achieve sustainable food security and poverty alleviation.
• #3: In brief, what are the broad messages of the report? Family farms are key to achieving food security and sustainable development. They represent the majority of the world’s farms. They are the stewards of the world’s agricultural resources and the source of most of its food supply. They need to produce more with fewer resources. Many family farms are themselves poor and food-insecure. Innovation in family farming is urgently needed to lift farmers out of poverty and help the world achieve food security and sustainable agriculture. Innovation is the process through which farmers improve their production and farm management practices. This may involve planting new crop varieties, combining traditional practices with new scientific knowledge, applying new integrated production and post-harvest methods and practices, changing the organization and management of the farm, and/or engaging with markets in new, more rewarding ways. But innovation requires more than action by farmers alone. The public sector – working in concert with the private sector, civil society and farmers and their organizations – must create an innovation system that links these various actors, fosters the capacity of farmers to innovate and provides incentives for them to do so.
• #4: What do we actually know about family farms? How many farms are there in the world and how many of them are family farms? Agricultural censuses allow us to come up with a rough estimate that there are at least 570 million farms in the world. This estimate is based on 167 countries and territories worldwide. They are home to 96% of the world’s population and contain 90% of agricultural land worldwide. For each country, the most recent census available was used. For about 50 countries this was the 2010 round census. For the remaining countries the estimates are older. There is a rising trend in the number of farms in most low- and middle-income countries. We can therefore say that there are likely to be more than 570 million farms worldwide today. The number of 570 million is a lower bound estimate.
• #5: How many of these more than 570 million farms are family farms and how much land is farmed by family farms? The answer to these questions is complicated by the lack of a universal definition of a family farm. FAO reviewed different definitions of family farms and the criteria used. Most definitions contain a reference to ownership and/or management of the farm by a family. Many also to the use mainly of family labour. From censuses, we have a sample of 52 countries with information on farm management. In almost all these countries, more than 90 percent of the farms are managed by an individual, a group of individuals or a household. In many cases, the share is close to 100 percent. These farms occupy about 75 percent of farmland and produce more than 80 percent of the food in these countries. Agricultural censuses also show that most farms rely to a much larger extent on family labour than on permanent hired labour. We can therefore safely say that - based on the most common definitions - more than 90 percent of the world’s farms are family farms. They operate most of the land and produce most of the world’s food. In other words, family farming is by far the prevalent form of farming in most places in the world. Promoting innovation among these farms is therefore crucial for sustainable development and food security. But family farms are very diverse in terms of size, access to markets and household characteristics. They have different needs if they are to innovate.
• #6: First of all, they differ in terms of size. Most of the world’s farms are very small. Of course, what can be considered a small farm depends on the agro-ecological and socio-economic context as well as the farming system used. But often a simple definition based on physical size is used. Cut-off points of 1 or 2 hectares are common. Worldwide, about 72 percent of all farms are less than 1 hectare in size. This corresponds to at least 410 million farms. About 84 percent of the world’s farms are less than 2 hectares in size. This corresponds to more than 475 million farms. At the other end of the size spectrum, only 2 percent of the world’s farms are larger than 20 hectares, and only 6 percent are above 5 hectares.
• #7: Small farms certainly dominate in terms of numbers. But most of the world’s farmland is managed by larger farms. The graphic shows: In blue - the distribution of farms worldwide by farm size categories. The y-axis shows the percentage of holdings (or farms) falling in each farm size category. In red - the percentage of the agricultural area that is operated by farms in each land size class. Farms above 50 hectares are very few in numbers, but they occupy two-thirds of the world’s farm land. Farms up to 2 hectares account for more than 80 percent of all farms but cover only twelve percent of the farmland. As we can see, farm land distribution is very unequal at the global level.
• #8: However, the unequal distribution of land at the global level reflects the dominance of very large farms in high-income countries and upper middle-income countries and in countries where extensive livestock grazing is important (as seen in the two graphics at the bottom). Land is much more evenly distributed in a sample of low-income and lower-middle-income countries (shown at the top). In these countries, small and medium-sized farms are important in terms area cultivated and production. In low- and lower-middle-income countries, more than 95 percent of all farms are smaller than 5 hectares. These farms occupy almost three-quarters of all farm land in the low-income countries and almost two-thirds in the lower middle-income group. Thus, not only are the majority of farms smaller than 5 hectares; they also operate the majority of agricultural land. Their share in food production is likely to be at least as large. Below some level, a farm may be too small to constitute the main means of support for a family. Agriculture may make an important contribution to these families’ livelihoods and food security; but they also need other sources of income through off-farm employment, public transfers or remittances if they are to live decent lives. On the other hand, many small or medium-sized family farms in the low- and middle-income countries could make a much greater contribution to global food security and rural poverty alleviation, depending on their productive potential, access to markets and capacity to innovate. Through a supportive agricultural innovation system these farms could transform world agriculture.
• #9: Family farms – and farming families - are also very diverse in terms of other characteristics. Household survey data from 8 different countries allow us to look at different characteristics of farm households by farm size. First of all, we must remember that for most farming families agriculture is only one of several sources of income. Farm households engage in a wide range of off-farm activities. Smaller family farms tend to rely more on off-farm-income than larger farms, partly because their small plots usually yield insufficient incomes. This graphic shows composition of household income by farm size. Farms have been organized by quartiles. For each of the countries, the smallest 25 percent of farms (the first quartile) are shown on top and the largest (the fourth quartile) at the bottom. On the graphic, the different colours represent Blue: income from crop and livestock production. Red: agricultural wages Green: non farm income Purple: transfers and remittances In all countries, the share of income from farming declines as farms get smaller. For several of the smallest, the share is well below 50 percent. One implication is that for the smallest family farms escaping poverty requires not only increasing farm productivity; it also requires the creation of non-farm employment opportunities through rural development, more efficient labour markets and strengthening of their skills and capacities.
• #10: The small farms depend less on farming for their income, but their land productivity is higher than that of larger farms. This is confirmed by data on crop yields by farm size for selected crops in the household survey countries. Also here, farms have been organized by quartiles. For each of the countries, the smallest 25 percent of farms are shown on top and the largest at the bottom. In all countries, the smallest farms have higher yields per hectare than the largest farms.
• #11: On the other hand, the smallest farms exhibit much lower labour productivity than do the largest farms. The graphic shows the value of agricultural production per worker for the different farm size categories (NB no data exists for Bangladesh). We can see that it is systematically lower for the smaller farms. The lower agricultural labour productivity on small farms implies lower per capita incomes from farming and lower household incomes. Low labour productivity may reflect an excessive use of farm labour – generally unpaid family labour – due to scarcity of alternative employment, which is also one of the factors explaining the higher yields and land productivity on smaller farms. Increasing labour productivity on small farms is a key challenge for poverty alleviation. But for many small farms, on-farm innovation is not enough. They also need alternative or additional employment opportunities along with the skills needed to access them.
• #12: In most of the countries, smaller farmers sell a smaller share of their agricultural production than do larger farmers. This is illustrated by the graphic, which shows the percentage of farm production that is sold. The share is clearly larger for the larger farms. This reflects their greater availability of marketable surplus, but also to some extent the choice of farm products (e.g. food crops versus cash crops). Many small farms grow food only or mostly for their own consumption, but there is often scope for increasing their productivity and output. For this to happen, it is crucial that farms can enter markets – local, national or international. Farmers with access to markets for their produce – whether it be food staples or cash crops – have a strong incentive to innovate. Market entry may involve greater specialization or improved marketing of their diversified product mix.
• #13: Summing up, key conclusions from the preceding analysis of family farms are: Family farms are central to global food security and sustainable productivity. In low- and middle-income countries small and medium-sized family farms occupy most of farmland produce most of the food We need to design an agricultural innovation system that recognizes the importance of family farms and supports these farmers in innovating and achieving sustainable productivity increases. However, family farms are very diverse in terms of many characteristics such as size, production patterns, agro-ecological and socio-economic conditions, household composition. They face different needs. This calls for tailored policies and targeted reforms for different types of family farms.
• #14: Innovation happens when individuals and groups adopt new ideas, technologies or processes that, when successful, spread through communities and societies. The innovation process is complex. It involves many actors, and it cannot function in a vacuum. As already mentioned, one fundamental driver for all innovators – including family farmers – is access to markets that reward their enterprise. But farmers also need to be supported by an effective innovation system. Among other things, an agricultural innovation system includes the general enabling economic and institutional environment required by all farmers. Effective agricultural producers’ organizations are an important element of the institutional environment that can further innovation. Other key components of an innovation system are agricultural research and development as well as agricultural extension and rural advisory services geared to the needs of family farms.
• #15: Public agricultural R&D is particularly effective in promoting sustainable agricultural productivity growth and alleviating poverty. An extensive body of empirical evidence confirms the high returns to public investment in agricultural R&D. Private investment in agricultural R&D is growing rapidly, primarily – but not only - in high-income countries. But private agricultural R&D focuses on products with a commercial market. Public-sector investment remains indispensable to ensure adequate research in areas that are of little or no commercial interest to the private sector, including more basic research, research focusing on environmental sustainability, and – often - research to meet the needs of smallholder farms. Some countries spend substantial amounts of public agricultural research and development. Most public investment in agricultural R&D is concentrated in relatively few countries. The graphic shows the distribution of public investment in agricultural R&D. Most of it takes place in high-income countries and a few middle-income countries - China, India, Brazil. These countries together account for almost 80 percent of total public expenditure on agricultural R&D.
• #16: But many countries spend far too little on agricultural R&D. The graphic shows public R&D expenditure as a share of agricultural GDP (this is referred to as the agricultural research intensity - ARI). The graphic presents the agricultural research intensity for the world and country income groupings by decade. Clearly the agricultural research intensity has grown world-wide, but most strongly in the high-income and upper middle-income countries. Especially in high-income countries it is very high, as much as 3 percent in recent years. In contrast, low- and lower-middle-income countries continue on average tend to spend very little on agricultural R&D relative to the GDP of the sector. Countries must maintain, and in many cases increase, expenditure on agricultural R&D to ensure continued productivity growth and environmental sustainability.
• #17: Agricultural R&D also needs to be made more effective. This can be done in several ways. Agricultural R&D can be strengthened through partnerships among national and international research agencies. Basic scientific research is needed to enhance the overall long-term potential for sustainable production. International public research institutes – as well as larger countries with more financial resources - are well placed to carry it out. Countries with limited financial resources may choose to build on research results from larger countries or international institutes and focus their own efforts on adaptive research. Agricultural R&D also needs to build more on farmers’ own knowledge. Farmer-led innovation and formal research are complementary. Combining traditional knowledge with formal research can yield truly innovative approaches to support sustainable productivity growth among family farms. Farmers’ participation in formal R&D projects can help ensure that the resulting technologies fit their needs. There are many examples of successful approaches, but researchers may need incentives to engage in research together with farmers.
• #18: Another key area for the agricultural innovation system is agricultural extension and advisory services (NB we use the two terms interchangeably). Agricultural extension and advisory services are essential for increasing productivity on family farms and ensuring widespread adoption of more sustainable agricultural practices that preserve natural resources and provide crucial environmental services. There is little comprehensive data on trends and patterns of extension at the international level, in terms of expenditures and outreach. But limited evidence from some individual low- and middle-income countries suggests that only a small share of farms interact with government extension agents. In the sample of ten countries shown on the graphic, in none does the share exceed 25 percent. There is also evidence to show that: small farms have less access to extension than large farms; women farmers have less access to extension than men.
• #19: Major changes have taken place in the way advisory services are delivered, by whom they are delivered and what they cover. Increasingly, agricultural advisory bodies are called on to offer a much broader range of services than before. Globalization, economic growth and urbanization have resulted in the development of more formal market outlets, where farmers are increasingly part of value chains that extend from input suppliers to consumers. Consumers are demanding more information on the quality and safety of foods, and private-sector standards for food quality and safety are becoming more stringent. Environmental threats and constraints, including climate change, also require farmers to adapt their farming systems to sustain both productivity and income over the long term. Diversification of sources of farm household income is another factor that broadens the demand for advisory services to cover more activities and involve different members of the farm household – men, women and youth – in different ways. Increasingly, extension services are provided by multiple actors in addition to, or instead of, public extension services. This includes different types of private sector providers. Also NGOs and producers’ organization can play an important role.
• #20: However, in spite of the growing importance of other actors, there is still a clear role for government in extension. Governments must recognize the importance of pluralistic advisory services in which different actors play different roles and provide different services to different groups of farmers. They must support and facilitate private-sector advisory services with private goods characteristics. The public sector is responsible for creating the proper conditions for private investment, such as the presence of infrastructure, education and training, as well as the right incentives and good governance. Another important role for government is coordinating and regulating services in a pluralistic environment. Governments have a responsibility for ensuring that advisory services provided by the private sector and civil society are technically, socially and economically appropriate, especially as the private sector usually has few incentives to look after the public good. It is particularly important to consider the possible environmental impacts of practices recommended and promoted by private extension service providers.
• #21: Governments also have a direct responsibility to provide extension and advisory services where the private sector is unlikely to do so. Many types of advisory services can generate important public goods – such as lower food prices, increased sustainability and poverty reduction – that call for government intervention. Core areas for government involvement are sustainability and environmental concerns, confronting the spread of crop and livestock diseases, and food safety issues. Concerns over food security and poverty eradication also call for strong public engagement in ensuring extension services. A critical concern for governments is to ensure that services are available for small family farmers, especially in remote or marginal areas. Private extension providers are more likely to serve large commercial farms than small and sometimes remote farmers, who may be costly to reach and who may not be able to pay for services. A further rationale for a public sector role is that farmers may frequently not be aware of the benefits of extension and advice and thus be unwilling to pay the full costs, even when able to do so. However, governments also need to consider trade-offs between broad delivery of extension services and the cost of reaching large numbers of small farms, especially in remote areas. In some cases, other policy instruments may be more cost-effective for ensuring poverty alleviation. Governments need to make their own decisions based on their domestic policy objectives and strategies. However, governments have a responsibility for ensuring that small family farms are not forgotten.
• #22: In addition to research and extension, we need to enhance the capacity to innovate more broadly. Capacity development for innovation must be be based on a long-term strategy covering three interconnected dimensions: individual innovation capacity, organizational innovation capacity, and the creation of an enabling environment. At the individual level, greater investment is needed in human capital and education to support participants in the innovation system in developing their capacity to innovate – family farmers, service providers, traders and processors, researchers, policy-makers, etc. Special attention to youth and women is important. At the organizational level, networks and linkages among different actors in the innovation system can facilitate the exchange of information and knowledge and foster collaboration. Effective and inclusive producers’ organizations are particularly important. They can support innovation by their members. They can facilitate linkages with other actors in the innovation system – researchers, advisory service providers, value chains, etc. Particular emphasis must be put on women’s inclusion in producers’ organizations. The creation of an enabling environment for innovation is essential. This means that policies, incentives and governance mechanisms must improve the capacity of all actors in the innovation system to respond to change. Involving representative producers’ organizations in policymaking can ensure that public policies take into account the needs of family farms.
• #23: In conclusion, different family farms need different things from an agricultural innovation system. We can synthesize by looking at some very broad categories of family farms. Some family farms are large commercial enterprises. They are likely to be already integrated into agricultural innovation systems and need little from the public sector. Their main requirements are an enabling environment, infrastructure and public agricultural research. They may also need appropriate incentives and regulations to adoption of sustainable practices (e.g. climate change mitigation, watershed protection, biodiversity conservation). Some small and medium-sized family farms are already market-oriented and supply local, national or international markets; others have the potential to become commercial, given the right incentives, access to markets and support. Helping this group of farmers to innovate can have a major impact on food security and can transform global agriculture. Special attention must be given to improving the innovation capacity of small and medium-sized farms and integrating them into innovation systems that are responsive to their needs, including rural advisory services. Farmers’ organizations can play a central role in integrating small and medium-sized farmers into effective innovation systems. Small subsistence family farms have many of the same needs as small and medium-sized farms with commercial potential. However, most of them depend to a large extent on other, non-farming sources of income. They are unlikely to be able to emerge from poverty through agriculture alone. Collective action through farmers’ organizations can help also these farmers to innovate in agriculture and contribute to their livelihoods and food security. However, for most of them, escaping from poverty requires efforts beyond agriculture and agricultural innovation. Efforts to promote innovation in agriculture must go hand in hand with efforts to promote employment and income generating opportunities through broader rural development and effective social protection programmes.