defining smallholders (clara aida khalil, fao)

Criteria to define smallholders and their implications

RuLIS Expert Consultation: 08 November 2016

Aida KhalilFAO Statistics Division

Background

Need for an international definition of smallholders:

Target 2.3: “By 2030, double the agricultural productivity and incomes of small-scale food producers, inparticular women, indigenous peoples, family farmers, pastoralists and fishers, including through secure andequal access to land, other productive resources and inputs, knowledge, financial services, markets andopportunities for value addition and non-farm employment”

FAO proposed as custodian agency of indicators:2.3.1: The volume of production per labour unit by classes of farming/pastoral/forestry enterprise size2.3.2: The average income of small-scale food producers, by sex and indigenous status

Both indicators are classified as Tier III : lack on an internationally agreed methodology

Pre-requisite: International harmonized definition of “small-scale food producers”

Smallholder agriculture is one of RuLIS “qualifiers”: indicators are presented separately for smallholder andnon-smallholder farms

Outline

Characteristics of a workable definition

Overview of existing definitions

Based on single criteria Factors of production (land, labour)

Market orientation

Economic size

Based on multiple criteria

Absolute versus relative approaches

A numerical simulation

Final remarks

Presenter

Presentation Notes

Image source: http://www.ethicalteapartnership.org/category/key-areas/smallholder-tea-farmers/

Characteristics of a workable definition

The selected definition should be based on criteria that: Can be operationalized in the largest possible number of countries; Can be used to define the entire distribution of farms (as a continuum from small to large farms);Are not dependent from the outcomes to be measured (i.e. income and labour productivity).

Steps for identifying a workable definition: Selection of the variable used as definitional criterion (e.g. land, labour, market orientation, etc.); Use of one or multiple criteria; Assessment of data availability and accessibility; Choice between an absolute or a relative approach; Selection of a threshold to separate smallholders from other farms.

Presenter

Presentation Notes

Two clarifications: 1- Target 2.3 referred to small-scale food producers: focus on the holder of an enterprise and not the holding. 2- Pre-requisite for defining smallholders: availability of an agreed concept of what is a farm

Definitions based on land endowment

Limited access to land is the most widely used criterion: about 70% of the literaturereviewed defines smallholders in terms of the physical size of the farm, primarily in terms ofhectares of operated land or number of tropical livestock units (TLU).

Focus is on operated land, instead of cultivated land or owned land.

Most popular: small farms are those with less than 2 hectares of land.

Definitions based on land endowment (2)

• Data on land size is generally available from:

Agricultural censuses Agricultural surveys Integrated household surveys (e.g. the LSMS and other multipurpose surveys)

• Land measurement methods are well established in the statistical practice. Techniques based on the use ofGPS devices are gaining popularity.

But:

• The same land size can correspond to highly heterogeneous socio-economic outcomes.

• Land size needs to be combined with other information: e.g. land quality and land use parameters.

• Small can mean different things in different countries.

Presenter

Presentation Notes

Land size does not account for : quality of resources; types of crops grown; institutional and market arrangements available to farmers; access to key social services; other factors that might affect efficiency and productivity.

Definitions based on input use: labour

A smallholder is likely to use little labour input but measuring labour input in agriculture is notstraightforward

• High prevalence of seasonal and part-time workers, whose contribution is difficult to capture insurveys

• Need to compute labour units – full time equivalents associated with each worker of the farm(e.g. the Annual Working Units computed by the EU).

Further considerations:

• Better data on labour input are also needed for monitoring SDG2.

• The implementation of a set of integrated agricultural surveys (AGRIS) can improve data availability.

• The same labour input can correspond to different socio-economic and agro-ecological conditions.

Presenter

Presentation Notes

Data availability is an issue: few surveys and censuses report information on labour input (especially for hired labour). This information is often limited to cropping activities.

Definitions based on the share of contributing family workers

Small holdings rely largely on family labour – overlap with the “familyfarm” concept

Widely used :IFAD (2009): less than 2 hectares, relying on household members formost of the labour”.Hazel et. al. (2007): “those depending on household members formost of the labour, or those with a subsistence orientation, where theprimary aim of the farm is to produce the bulk of the household’sconsumption of staple foods”

Lipton (2005): “units that derive most of labour and enterprise fromthe farm family”.

Issues:• Family farms and small farms may overlap, but do not coincide: some family farms can be large holdings.

Large contribution of family members is not necessarily typical of small holdings.

• The labour contribution of family members is difficult to capture accurately (LFS vs HH surveys ).

Presenter

Presentation Notes

Image source: http://www.fao.org/zhc/detail-events/en/c/270855/

Definitions based on market orientation

Example: OECD (2015): smallholders are farmers that “struggle to be competitive and hence to produce anincome to support themselves and their families”. Furthermore “they often live in poverty and produce at leastpart of their produces for self-consumption”.

Possible criterion : share of agricultural production devoted to own-consumption.

Provides information on economic conditions: high level of own-consumption usually implies lowrevenues.

Provides indirect information on competitiveness.

Data on own-consumption is often available (HBS, LSMS, other integrated surveys)

but

Only information on own-consumption does not capture vulnerability.

Presenter

Presentation Notes

Let’s consider two extreme cases, the first being a subsistence farm that uses all its production for own consumption and to generate income for the family; the second being a farm operated by a family, where all the members work in the farm only marginally during their leisure time from the main employment, which is also their source of income. In both cases, the production of the farm is mainly used for own-consumption. Using this approach we would classify these two completely different farms as smallholdings, i.e. holdings needing support in order to improve their income and productivity. One possibility to overcome such problems could be the definition of a minimum income share threshold for defining “farmers”. In the RuLIS, for instance, farmers are implicitly arbitrarily defined as those who derive at least 30 percent of their income from agriculture.

Definitions based on economic size

Some national definitions use concepts related to the economic size of the holding.

Examples:

USA: farm size is defined on the basis of the “gross cash farm income”, which is the annualtotal sales of the holding. A small farm is defined as one that grows and sells less than$250,000 per year.

EU: the economic size is progressively replacing the land size as a criterion for definingsmallholders and it is measured through the Standard Output (SO).

• SO: Average monetary value of the agricultural output (crop or livestock) at the farm-gate price. It is aunit value expressed in euros per ha or per head of livestock

Presenter

Presentation Notes

The SO coefficients for each products in each region are computed as an average over a reference period of five successive calendar or agricultural years. The sum of all the SO per hectare of crop and per head of livestock in a farm is a measure of its overall economic size, expressed in euro.

Definitions based on multiple criteria

Examples:

CFS HLPE (2013): a small farm is “..an agricultural holding run by a family using mostly (oronly) their own labour … [that] relies on its agricultural activities for at least part of the foodconsumed …[and] with limited reliance on temporary hired labour … ”.Narayanan and Gulati (2002): a smallholder “is a farmer (producing crop or livestock)practicing a mix of commercial and subsistence production…, where family provides themajority of labour and the farm provides the principal source of income”.

But:• Different criteria may be in conflict with each other, and interpretation could be less

straightforward.

• Never operationalized in the statistical practice

Absolute versus relative approaches

Thresholds to separate large from small holdings can be either absolute or relative:

An absolute approach assigns, for a given criterion variable, the same threshold for allcountries;

A relative approach assigns, a threshold that corresponds to the same point of thedistribution of the criterion variable in each country.

Example on land endowment:

Absolute approach: the 2-hectare threshold;

Relative approach: Parameters describing the distribution are used to set the threshold;e.g. a weighted median or weighted percentile approach – the threshold is the farm sizethat accounts for a given share (50% if median) of the total acreage.

Presenter

Presentation Notes

threshold that covers the smallest farms whose operated acreage accounts for e.g. 10%, 20% or 50% of the total hectares of operated land in a country (weighted percentiles or median).

Absolute versus relative approaches (2)

Absolute approaches enhance comparability across countries.

Relative approaches recognize countries’ specificity, while reducing comparability

The two approached could co-exist, with each country identifying a standardized relativethreshold together with the international absolute one

A numerical exercise to show the difference between the two approaches: data fromsurveys processed in the RuLIS

Presenter

Presentation Notes

It does not neglect country’s specificity: with an absolute definition, some countries may not have any smallholder as they may not have any poor or food insecure person. This is in line with the SDG policy agenda, and consistent with the concepts of absolute poverty and severe food insecurity

Country % of smallholders - 2 ha approach

% of smallholders -land wm approach

land weighted median

Albania 2005 87.7 72.1 1.09

Armenia 2010 37.7 38.6 2.21

Burkina Faso 2014 40.4 83.0 6.00

Ethiopia 2014 80.1 78.0 1.90

Georgia 2010 91.8 79.4 1.10

Ghana 2013 45.5 70.7 4.04

Guatemala 2011 87.3 85.7 1.75

Iraq 2012 54.1 82.4 8.50

Kenya 2005 88.7 86.9 1.62

Malawi 2013 87.4 73.0 1.09

Mali 2014 33.2 90.2 21.00

Nepal 2011 44.2 62.8 3.76

Nicaragua 2014 22.8 43.0 42.25

Niger 2011 26.4 79.6 8.00

Nigeria 2013 86.5 86.9 2.05

Pakistan 2014 11.1 88.1 24.71

Peru 2014 73.2 97.0 18.00

Tanzania 2013 35.1 88.0 9.79

Timor-Leste 2007 81.2 76.0 1.20

Uganda 2010 55.2 82.7 4.40

Vietnam 2010 91.1 83.1 1.00

Presenter

Presentation Notes

Note wide differences in Mali, Burkina, Niger, Pakistan, Uganda

Final remarks

Need to balance accuracy and data requirements: The most widely used approach is the 2-hectares threshold of operated land: easy to measure

The economic size helps to take into account different economic outcomes of the same land size: dataquality and availability however is problematic.

Multiple criteria could be promising if combined hierarchically: A unique standard criterion – e.g. land size - can be used in countries where other data sources are not

available. In countries where data on the economic size are available, a more complex definition can be adopted

and farmers with small land size can be divided in 2 categories:1) small land size with small economic size;2) small land size with large economic size.

Projects like AGRIS, the LSMS-ISA and RuLIS could increase data availability and facilitate theadoption of progressively more refined criteria.

Choice between absolute and relative approaches: needs to be taken, and specificthresholds need to be identified

Presenter

Presentation Notes

Main conclusion from the review is that there is a trade-off between accuracy and data requirements Ventuiring into proposing something. Referece to the BBSeminar, (Gennari) Choice between absolute and relative approaches and specific thresholds need to be further discussed

Thank you for your attention

RuLIS Expert Consultation: 08 November 2016

Definitions based on economic size (2)

The Standard OutputWhat is it: The SO is the average monetary value of the agricultural output (crop or livestock) at the farm-gateprice. It is a unit value expressed in euros per ha or per head of livestock. The SO coefficients for each productsin each region are computed as an average over a reference period of five successive calendar or agriculturalyears. The sum of all the SO per hectare of crop and per head of livestock in a farm is a measure of its overalleconomic size, expressed in euro.

Which data is needed: Yield; Physical quantities produced; Farm-gate prices; Cultivated area; Number ofanimals present and slaughtered; other technical information.

Main limitations: Larger data requirements. Data accuracy and reliability.More calculations are needed compared to other criteria.

Presenter

Presentation Notes

The SO: • includes sales, farm use, farm consumption and changes in stocks, • includes both the value of the principal and any secondary products. The principal product is usually the one with the highest value; the other products are taken as secondary ones, • excludes direct payments, value added tax and taxes on products: no direct payments (coupled, decoupled and other payments) are to be taken into account when calculating SO. The farm-gate price means the price of a product before any deduction for transportation or marketing costs. If in a region a product cannot be sold without being packed, the farm-gate price used should reflect the price of the packed product.


Example of SO calculation for wheat in Lithuania for 2005Data

Calculation of the SO

The computation of the economic size for year N will be based on a coefficient obtaibed as avarage of the SOsfor years N, N-1,.., N-4

Presenter

Presentation Notes

SO covers both winter and summer wheat produced for milling, feed, seed, etc. The most reliable data was selected as a source for SO calculation. Areas of wheat were taken from FSS 2005, physical output was obtained from annual crop survey at Statistical Office, and average price from price statistics. In the case of wheat, a secondary product is straw. There is no reliable statistics on this product, therefore, some FADN farms were surveyed and estimates were done by experts. In 2005, the average yield of wheat straw was 40 q/ha. However, only one quarter of the straw was collected for sale or farm use, therefore appropriate coefficient was applied (0.25). Average price is estimated to 1 Euro per q.


Example of SO calculation for livestock (other pigs) in Lithuania for 2005Weighting per category of product

Calculation of the SO

Observation: fattening period = 175-180 days

Presenter

Presentation Notes

According to the FSS 2005, there were 819 850 other pigs: 816 739 fattening pigs and 3111 boars. The boars represent 0.38% of all other pigs, therefore, SO of other pigs was limited to the SO of fattening pigs. The basic calculation was done per animal. Fattening lasts approximately 175-180 days, therefore, the final result was multiplied by the rotation factor in order to give the SO per twelve months of production. The average carcass weight was taken from Statistical Department. Value of piglets for replacement of pigs (or internal transfer) was taken from the FADN accounts.

Absolute versus relative approaches (3)

The weighted median approach: example of calculation

Operated land (ha) Cumulated land (ha)

Farm 1 2 2 Farm 2 5 7 Farm 3 7 14 Farm 4 10 24 Farm 5 20 44 Total operated land 44 Median ha 22

Presenter

Presentation Notes

To compute the acre-weighted median, farms are ordered from the smallest to the largest. The mid-point of the total operated land – 22 hectares – would correspond, in this case, to the farm that operates 10 hectares. This would be the threshold, thus all holdings operating less than 10 hectares will be classified as small. This approach was used to identify smallholders in the FAO’s Smallholder Data Portrait project (Rapsomanikis, 2015).

defining smallholders (clara aida khalil, fao)

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