Small-scale farming—the cash crop alternative

Most poor people in poor countries farm. Those who are fortunate enough to have access to their own land might be subsistence farmers—growing enough on their small plots of land for their families. When they have a surplus, these families will sell or trade it for other necessities. Those who could make subsistence agriculture work are usually not poor—no matter what their actual cash income is. Those who can’t are poor—by definition

Today, it seems that fewer and fewer farming families can make subsistence farming work. Population increases, less land to go around. Urbanization further puts additional pressure on farmland. The rich will sometimes take some more, and sometimes use that land for frivolous purposes. Environmental changes can break what had long been a sustainable system.

When considering the increasing difficulty of subsistence agriculture, most mainstream economists prescribe scaling up. Combine land, add capital and technology to make labor more productive. More production can generate a viable livelihood, generating capital for more consolidation. Those who can do this well buy the land of those who can’t. Those who can’t must find opportunities locally, or will move on to other opportunities in the cities.

In the mainstream conception, only by achieving economies of scale and adding technology can farmers thrive.

But following this prescription creates lots of problems. Farmers lose their land—even if they do so voluntarily by selling it. In doing so, they hope to find work in the cities. They become unskilled labor, shifting to the vagaries of the urban market. If they are fortunate, they can find work in the city—if there are jobs there that they can do. Otherwise, they do informal work, providing services. (The discussion about the ins and outs of urban employment as a tool for poverty reduciton—that’s another post.)

(There are alternatives. If rural development becomes a priority, landless farmers might find employment off-farm, though still in rural areas. Many countries have successfully developed rural areas, much to the benefit of poor rural residents. Some of the most successful have done so in a way that is consistent with the tenants of the micro-oriented approach. But a full discussion of rural development will require a further post.)

Land consolidation can also harm social conditions in rural areas. Power shifts as farming becomes larger-in-scale and more corporatized. Such firms often reply on large-scale application of chemical fertilizers and pesticides. To be sure, landless farmers can sometimes find seasonal work as hired hands, but this too is often a powerless and precarious profession. (Yet a third post I owe you!)

These unanticipated issues spur us to ask, are there alternatives? Are there ways to pull farmers out of poverty without concentrating land and reducing the number of farming families?

Sure, there are many ways.

One way that has worked is to shift to cash crops. Instead of growing grain, farmers can shift to other crops, farming it on the plots they had previously used for subsistence farming. I have met thriving farmers who grew vegetables, grapes, oranges, coffee, and even Japanese horseradish—the raw material for Wasabi. I even met farmers who were barely surviving by growing grain on their rocky, hilly land. So they said, “Forget this. Let’s grow grass instead of grain, and then raise cattle by using harvesting the grass for them.” There was more to it, but these farmers thrived long-term.

Instead of consuming their produce and selling their surplus, farmers growing cash crops (or livestock) sell their entire crop, and purchase their basic necessities with the cash.

That practice often works, and allows farmers to stay in farming. It also allows small plots to become more productive—and viable. But three problems emerge. First, shifting to cash crops usually requires capital—and capital must come from somewhere. If financial markets work properly—a big if—farmers can sometimes use their land as collateral for loans that will allow them to shift. However, even when presented with this opportunity, most farmers are reluctant to do this. If the crop fails or the market collapses—problems that are generally out of the farmers’ control— these farmers can’t pay back their loan. Disaster strikes as these farmers lose their land and their livelihoods.

A second problem is know-how. Producing grain requires some important skills. Howver, these skills don’t directly translate to other crops. If cash crops are novel to the area, farmers will need some help to learn how to do grow and manage them successfully. In the absence of such know-how, they’d be foolish to shift. These techniques are hardly rocket science, but they are generally not easy either.

A third problem is hinted to above—if the markets fail, farmers lose everything. If farmers shift to a cash crop, and they can’t sell it, they have a problem. If the market for grain collapses, they can use that grain to feed their family. If many farmers shift at once, supply can increase too quickly and outpace demand. If the market for Japanese horseradish fails, their families can’t survive. Even with financing and know-how, farmers will not shift to it if they don’t have a reasonable degree of assurance that the crops will be profitable. (Mainstream economists—who often work in stable jobs, secured by tenure—will often label such farmers as ‘risk averse.’ I might label such farmers as ‘prudent.’) However, if a stable market can be demonstrated, farmers will generally shift.

Sometimes these problems can be solved by the farmers themselves. I’ve met farmers who finance a shift to cash crops themselves, by using savings or borrowing from relatives. The grape farmers solved the know-how problem by borrowing how-to DVDs from the library. Generating a stable market can sometimes be a chicken and egg problem—sometimes if farmers grow cash crops, the market, or some middlemen, will come to them, providing a stable market only after the farmers have shifted. These examples are rare—but they happen.

But usually, shifting to cash crops requires outside assistance to solve these three problems. A government. An NGO. A social enterprise. A philanthropist. Such organizations and individuals can bring the necessary skills and qualities to solve these and other problems and thus help farmers shift to more lucrative production. More lucrative production while staying small in scale, and by applying technology and techniques that farmers can reasonably handle.

Shifting to cash crops usually requires an outside impetuous. And this underscores the message that the micro-oriented approach is an approach—one that often needs to be nurtured.

(I owe you posts on finance, on know-how and on generating a market. But more important than these, I want to remind you: shifting to cash crops is just one solution. Are there more? Next post.)