Commercialising Smallholder Farming

Last Updated: 13 Mar 2020
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The role of agriculture in low income developing countries is highly significant. In many developing countries the rural populations rely on subsistence farming to survive (Morton 2007; Baiphethi and Jacobs 2009). However, under increasing global populations and potential future climate change it is vital that agricultural practices are adapted to ensure that all individuals are provided for. One potential method for agricultural development is the commercialisation of smallholder agriculture in developing countries. There are several arguments that support this and they include:

The development of agriculture is the most effective method of decreasing poverty in those deemed the poorest of the poor (those individuals that exist on less than US $1 per day) in comparison to other sectors of industry (Christiaensen et al 2011).

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The growth of agriculture has been linked with a subsequent growth of the rural non-farm economy (Haggblade et al 2007). This is due to several factors including an increase in available jobs leading to an increase in taxable earnings that can then be invested in improvements to the local infrastructure and services (Devereux et al 2005).
When smallholder agriculture is commercialised, typically the agricultural land productivity increases, for example, Chirwa (2006) reported variance in maize yields in Malawi. It was found that households that sold the smallest proportion of their crop reported yields of 693 kg per ha. Whereas, households that sold the greatest portions of the maize crops reported yields of 1,530 kg per ha (Chirwa 2006). A potential explanation for this yield variation is the increased use of fertilisers by households that sold more of their crop (Chirwa 2006). The increased yields seen with increasing commercialisation of agriculture have important implications for future food security given the increasing magnitude of the global population.

There are many challenges that are associated with the commercialisation of agriculture, including (but not limited to) the following:

Limited market access. In order for smallholders to sell their crop they must have access to markets, in many developing countries this does not currently exist in rural areas and will require extensive improvements in local infrastructure and services (Leavy and Poulton 2007).
The small size of land holdings. The extent of land held by families/individuals is very small in many developing countries – many countries have less than 1 ha per person. The reasons for this vary and include increasing land fragmentation that occurs with increasing populations necessitating that individuals have less land to enable all to have land (Chirwa 2006). The small the area of land that is held the less likely it is that there will be excess crop to sell and/or a decreased likelihood of cash crop being planted.
Generally low levels of education in rural areas. This can cause barriers to the uptake of new technologies (for example farm machinery) and can also adversely affect the potential for yield improvement (for example, a low level of education has been linked with a lower occurrence of fertiliser use, therefore the productivity per ha is lower; Chirwa 2006).
A lack of coherent government policies and subsidies. For example, subsidies for fertiliser. If the government is not supportive of commercialised smallholding then there is little chance of implementation as many farmers in developing countries will not be able to afford the necessities to enable them to develop their smallholding to a commercial level.

Case Study: Ethiopia

In recent decades the leaders of Ethiopia have carried out several land redistribution policies based on equalisation with a prohibition against land accumulation (Devereux et al 2005). However, it is this policy that was initially designed to promote equality that is thought to be the major contributor to food poverty in Ethiopia. The current government has recognised the issues and in recent years has developed several action plans in a bid to increase agriculture in Ethiopia. These plans include, Agriculture development led Industrialisation, the Sustainable Development and poverty reduction programme and most recently a Plan for Accelerated and Sustained Development to End Poverty (PASDEP; Bernard and Taffesse, 2012; Gebreselassie and Ludi 2008; Devereux and Guenthe 2009). One of the principle components of PASDEP is the promotion of an increase in the economy via the commercialisation of agriculture (Gebreselassie and Ludi 2008). The following bullet points summarise Ethiopia’s current situation.

96 % of the land is farmed by smallholders
On average this equates to less than 1 ha per person and more than 65% of the crops produced are consumed by the farmer and family (Gebreselassie and Ludi 2008; Goshu et al 2012).
Current issues that prevent commercialised agriculture include:
Limited markets access – this increases the transaction cost to farmers (Gebreselassie and Ludi 2008).
Limited land area available per person – farmers are prohibited from buying and selling land (Devereux and Guenthe 2009; Goshu et al 2012).
PASDEP promotes commercialised of agriculture primarily by:
The promotion of high value cash crops that can be marketed and exported
Increasing crop diversification (Gebreselassie and Ludi 2008; Devereux and Guenthe 2009).

Baiphethi, M. N., & Jacobs, P. T. (2009). The contribution of subsistence farming to food security in South Africa. Agrekon, 48:4, pp. 459-482.

Bernard, T., & Taffesse, A. S. (2012). Returns to ScopeSmallholders’ Commercialisation through Multipurpose Cooperatives in Ethiopia. Journal of African Economies, 21:3, pp. 440-464.

Chirwa, E. 2006. Commercialisation of Food Crops in Rural Malawi: Insights from the Household Survey. Working Paper 2006/04, Department of Economics, University of Malawi, Chancellors College, Zomba, Malawi. Available online at (Accessed 26/03/2013).

Christiaensen, L., Demery, L., & Kuhl, J. (2011). The (evolving) role of agriculture in poverty reduction—An empirical perspective. Journal of Development Economics, 96:2, pp. 239-254.

Devereux, S., Teshome, A., & Sabates?Wheeler, R. (2005). Too much inequality or too littleInequality and stagnation in Ethiopian agriculture. IDS Bulletin, 36:2, pp. 121-126.

Devereux, S, and B. Guenther (2009), “Agriculture and Social Protection in Ethiopia”, FAC

(Future Agricultural Consortium) Working Paper No. SP03. pp 1 – 14.

Gebreselassie, S., & Ludi, E. (2007). Agricultural commercialisation in coffee growing areas of Ethiopia. Ethiopian Journal of Economics, 16:1, pp. 89-118.

Goshu, D., Kassa, B., & Ketema, M. (2012). Measuring Smallholder Commercialization Decisions and Interactions in Ethiopia. Journal of Economics and Sustainable Development, 3:13, pp. 150-160.

Haggblade, S., Hazell, P. B., & Dorosh, P. A. (2007). Sectoral growth linkages between agriculture and the rural nonfarm economy. Transforming the rural nonfarm economy: Opportunities and threats in the developing world. Johns Hopkins University Press.

Leavy J and C Poulton (2007) “Commercialisations in Agriculture: A typology” Ethiopian Journal of Economics. 16:1, pp. 3-41.

Morton, J. F. (2007). The impact of climate change on smallholder and subsistence agriculture. Proceedings of the National Academy of Sciences, 104:50, pp. 19680-19685.

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Commercialising Smallholder Farming. (2018, Dec 24). Retrieved from

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