Emerging Challenges Facing Smallholders
A
large body of literature has traditionally analyzed smallholders’ produc- tive capacity in the face of several interrelated socioeconomic challenges (Hazell et al.
2007; World Bank 2008). Tese challenges include insufficient access to markets, infrastructure, and technology; high marketing and transport costs; and limited resources (land and human capital). While these traditional challenges persist, increasingly complex natural and human- caused shocks are making smallholders more vulnerable.
Smallholders oſten have limited access to markets for both inputs and outputs, and this has a significant effect on their production activities. In part, the geographic disper- sion and limited access to infrastructure (including trans- portation networks and market facilities) in many rural areas drive up transaction costs, lower smallholders’ profit margins, and lead many smallholders to pursue more subsistence-oriented production practices. Similarly, small- holders’ limited access to productivity-enhancing technolo- gies is grounded in an environment where national research systems do not sufficiently prioritize smallholder-friendly technologies and extension systems fail to help smallhold- ers gain access to and adopt such technologies. Distorted land tenure structures—including insecure property rights and underdeveloped land rental and sales markets— have been linked with less efficient land use and lower productivity-enhancing investments. Smallholders’ produc- tivity is also affected by lack of access to education, which could help build the skills needed to manage on- and off- farm production systems more efficiently and raise small- holder adoption of innovative and high-return technologies.
6 Smallholders have become increasingly vulnerable to
a spectrum of emerging climatic, health, price, and finan- cial risks and challenges as well. Tese emerging challenges lead many smallholder farmers to pursue livelihood strate- gies that involve lower-risk and lower-yielding agricultural activities. Such responses can help smallholders cope with adverse events, but they also cause poverty to persist, trap- ping smallholders in a cycle of litle or no profits, with limited opportunities to undertake more productive and innovative activities.
FOOD PRICE VULNERABILITY
Te recent food price crisis is by definition associated with adverse welfare effects, but the increase in food prices also generated potential opportunities for smallholder farmers in developing countries by creating incentives for them to increase production and profits. Te magnitude and direc- tion of the impact of price volatility on smallholder farm- ers depend on a number of variables. Tese include the concurrent increase in production and consumption costs, whether the farmers are net buyers or sellers of food, and
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