Structure of Agriculture

Abstract

Development and trends in agriculture often reflect a changed structure: Fewer, larger and more specialized farms are pervasive trends in agricultural development—at least in high-income countries. The structure of agriculture and not least the structural development are visible signs of a changing industry. Structural development in agriculture can be defined and described in many different ways: the total number and size of the individual farms, specialization, concentration, types of ownership, vertical integration, globalization and farmer demographics. Clear global trends in the structural development of agriculture can generally be observed. However, in certain areas, there are significant differences in the development between low- and high-income countries.

2.1 Introduction

Development and trends in agriculture often reflect a changed structure: Fewer, larger and more specialized farms are pervasive trends in agricultural development—at least in high-income countries. The structure of agriculture and not least the structural development are visible signs of a changing industry.

Structural development in agriculture is important for several reasons:

Firstly, relatively clear megatrends in the structural development of agriculture can be identified. Development follows the same track across national borders, which makes it possible to predict the direction of structural development.

Secondly, structural development is a way of improving competitiveness in agriculture. Structural development is often the result of exploiting economies of scale, so it creates improved efficiency, earnings and competitiveness.

Thirdly, structural development, e.g., fewer, larger and more specialized farms, is the visible manifestation of the industrialization of agriculture. In many cases, structural development is controlled or limited by socio-economic or socio-political considerations and preferences.

Fourthly, socio-economic and societal development is affected by the structural development of agriculture. The agricultural labor force is released and can be used in other industries with stronger growth and work intensity. Furthermore, structural development also leads to a demand for technology in other sectors.

Structural development in agriculture can be defined and described in many different ways, but it is more than just the total number and size of the individual farms. For example, factors such as specialization, concentration, types of ownership, vertical integration, globalization and farmer demographics can help to describe the structure.

In recent years, structural development in agriculture has assumed even broader meaning. With a greater focus on vertical integration, structural development now encompasses all the links in the value chain from research and development, supply and agricultural production to processing, refining, distribution, marketing, retail and consumption, so that today, the entire food system is involved.

The structural development now takes place in new dimensions, where industrialization, commercialization and business development are in focus.

A number of indicators can be used to describe the structural development of farms:

The number of farms is an important parameter in terms of the structural development of agriculture. While structural development in developed and developing countries is rather similar, it is very different between developed and developing countries. The development in the number of farms is also a trend which is very visible to the rest of society.

Farm size is also a very visible result of structural development. Although the average size of the farms conceals a widespread, and although size can be measured in several different ways, it is still an important yardstick. In terms of national regulations, farm size is one of the structural parameters which is regulated.

Size can be measured as:

• Land (owned or operated)

• Labor

• Livestock units

• Turnover

• Value added

• Capital

Specialization describes the production setup of individual firms. Specialization increases if, for example, there is a shift toward less diversified production on the individual farms. Specialization in livestock production also occurs when, e.g., there is a reduction in the number of farms with mixed livestock, i.e., farming with both cows and pigs. Also here we are dealing with a very significant development.

Increasing concentration will occur if large farms secure an increasing share of the total production. For instance, one can analyze whether the largest 20 percent of farms are accounting for an increasing share of total production. Similarly, one can analyze whether the small farms are becoming relatively smaller.

In general, the concentration is becoming more widespread. Concentration takes place on individual farms with the big farms acquiring an increasing share of total production.

Concentration also occurs geographically with production becoming more concentrated in areas that have the greatest comparative advantage. Livestock production can develop very differently between areas. Indeed, livestock density has been increasing substantially in certain geographical regions.

Forms of ownership is central as it describes the ownership structure of the farms with distinctions being made between different types, e.g., private, tenancy, limited liability company, cooperative, fund, etc.

Vertical integration including specific contract production highlights the food industry’s connection and dependence on suppliers of raw produce (farmers) and buyers (retail). The entire value chain from research and development to the final end user is often involved. With increasing vertical integration, farms become increasingly part of the industrial process, which arises from consumers’ demand and can be traced back through the value chain to the farmers. Vertical integration and the value chain are discussed in more detail in Chapter 4.

Input factors in agriculture are also rapidly changing and are also an essential part of structural development. Input factors in this context include labor, capital and education. The change in input factors manifests itself in, e.g., the share of full and part-time farmers and off-farm earnings.

Globalization/internationalization are also sometimes included in the description of structural development. The farms’ relative sales on the export markets often increase over time, so international orientation is an important structural characteristic of the farm changes. Farmers’ investments in foreign agriculture and cooperation with farmers abroad can also be included in the description of the structural development in agriculture.

Although clear global trends in the structural development of agriculture can generally be observed, in certain areas, there are significant differences in the development between low- and high-income countries. Therefore, structural development in low- and high-income countries is treated separately in the areas in which there are significant differences.

When analyzing megatrends in the structural development of agriculture, it is important to identify the underlying driving forces. If the driving forces are stable and constant, the structural development will probably continue in the same direction—all other things being equal.

Theoretically, it is easy to identify a number of drivers of structural change, but it is much more difficult to demonstrate any statistical causality. Therefore, in practice, it is difficult to identify and document the specific causes of structural development.

Several explanations for the difficulty in demonstrating a causal relationship can be identified:

• Firstly, many permanent and many different factors may impact agriculture, and it may be impossible to separate the individual effects and their consequences.

• Secondly, a long or short period may occur between exposure and a visible consequence. Lags are important in structural development.

• Thirdly, in general, agriculture and farms are so heterogeneous that responses to the impacts may vary considerably between farmers.

• Fourthly, to some extent, farmers may expand and buy farms for non-economic motives. Incorporating such motives in an empirical explanation of agricultural structural development is difficult.

• Finally, a stimulus (e.g., an income increase) may have very different and perhaps contrasting effects depending on the circumstances.

As structural development encompasses several aspects, several reasons for the development can also be identified. Contract production occurs for special reasons, while changes in, e.g., ownership or agricultural structures have other causes.

Based on the theoretical and empirical assessments of the structural impacts on agriculture, a general overview of the causes of structural development in agriculture is provided in Table 2.1.

Table 2.1 Structural development in agriculture: Drivers and impacts

2.2 Developed Countries: Number of Farms

Structural development calculated in terms of the number of farms is largely uniform in the high-income countries. Over an almost hundred-year period, the number of holdings in countries as diverse as Denmark, Sweden, the Netherlands, Canada and the USA exhibited fairly similar development, cf. Fig. 2.1.

Fig. 2.1

(Sources Own calculations based on USDA [several issues b], Statistics Sweden [several issues] and statistical data from FAO, Jordbruksverket [Sweden], Statistics Canada and Statistics Denmark)

Development in the number of agricultural holdings in selected countries

As can be seen, the development in the number of farms is almost identical development in the five countries. It is remarkable that the number of agricultural holdings in Denmark remained almost constant right up until the beginning of the 1960s. This was mostly due to agricultural policy regulation, which delayed structural development and maintained a relatively large number of farms. The development was fastest in the USA and in Canada, which was due to more advanced agricultural technological development and mechanization as well as a greater demand for labor from other industries, which pulled labor out of agriculture. The number of farms in the USA has remained almost constant in recent decades, which is, to a certain extent, due to changed definitions and methods of calculation.

The figure also shows that the development began in earnest in the 1950s. When considering the entire period, the development in the number of agricultural holdings in the five countries was virtually identical and with the same result: The number of agricultural holdings reduced to 20–30 percent of the previous level in all countries. It seems that the industrialization and mechanization of agriculture in the 1950s and 1960s influenced structural development to a significant extent.

When analyzing structural development over the very long term, it becomes apparent that it is not just a linear trend, but rather involves different phases and an almost cyclical process. Examples from Sweden and Denmark, which publish relatively consistent long-time series on the structural development of agriculture, illustrate this, cf. Fig. 2.2.

Fig. 2.2

(Sources Own calculations based on Statistics Sweden [several issues] and statistical data from Jordbruksverket [Sweden] and Statistics Denmark)

Long-term development in the number of farms: Denmark and Sweden

The development can be divided into the following three phases: In the second half of the nineteenth century, the number of farms increased; in the first half of the twentieth century, the number was relatively constant, while subsequently it has been continuously decreasing. The latest development can largely be explained by technological change: By using machines (tractors, combines, milking machines, milking robots, etc.) economies of scale arise, which can only be exploited on increasingly large—and thus also fewer—farms.

Showing the change in the number of farms over a long period is complicated because the definition of a farm has changed over time: In some periods, “houses with just a very small plot of land” are included as farms. However, in recent decades the definition of what constitutes an agricultural holding has been tightened. Therefore, the time series are not become completely consistent or comparable over time. Nevertheless, despite these uncertainties, some relatively clear trends can be identified.

In all EU countries, the number of agricultural holdings is decreasing year by year. In the period 1950–2020, approx. 75 percent of all farms were closed when analyzing the original six EU countries as one group, cf. Fig. 2.3.

Fig. 2.3

(Note Definitions are not consistent throughout all years. Source Own presentation based on European Commission [several issues] and statistical data from Eurostat)

Number of agricultural holdings in the EU 1959–2020

Regardless of the period or number of member states included, the trend toward fewer and fewer holdings is clear.

It is noteworthy that, in recent years, the development is strongest in the least developed countries, while the most developed countries exhibit far weaker structural development. This is largely due to the fact that as early as the 1960s and up to the 1990s, the rich countries experienced strong development toward fewer agricultural holdings, and the pressure for further structural development diminished. However, for all countries, the number of agricultural holdings in the period decreased significantly.

2.3 Developed Countries: Farm Size

The size of the agricultural holdings is a very visible manifestation of structural development. The availability of technology and the utilization of economies of scale, which are important driving forces behind structural development, create a trend toward larger agricultural holdings.

Size is an imprecise term because it can be calculated in many ways. Therefore, several methods of calculating farm size must be used to obtain a fair picture of the trends.

The average size of agricultural holdings—measured in several different ways—varies considerably between countries—even within the EU. The agricultural holdings in the Netherlands are many times larger than they are in, e.g., Romania—depending on how size is calculated. Furthermore, the Netherlands also has by far the largest average holdings in terms of production value, but in terms of the number of hectares, the country is far lower cf. Table 2.2.

Table 2.2 Different measures of the average size of farms in the EU, 2020

The pattern is clear—the largest farms are to be found in Northern and Western Europe, while the smallest are found in Eastern and Southern Europe. Therefore, the general picture reveals that the richest countries have come furthest in terms of structural development, while small farms are typically found in the poorest countries.

In the Western world, the trend is generally very clear in the direction of ever-larger holdings—a development that has especially gained momentum in recent decades, cf. Fig. 2.4.

Fig. 2.4

(Sources Own calculations based on USDA [several issues b], Statistics Sweden [several issues] and statistical data from FAO, Jordbruksverket [Sweden], Statistics Canada and Statistics Denmark

Size of agricultural holdings (hectares/holding) in Denmark, the USA, Sweden, the Netherlands and Canada. Index 1920 = 100

Figure 2.4 illustrates that the five countries have developed almost identically when considering the entire period. The agricultural holdings have become approx. 3–5 times larger, although the development during the twentieth century has been different.

Furthermore, the development in the size of livestock holdings has also largely followed international patterns, cf. Fig. 2.5.

Fig. 2.5

(Note Logarithmic Y axis. Sources Own calculations based on USDA [several issues b], European Commission [several issues], DairyNZ [several issues] and statistical data from Eurostat and Statistics Denmark)

Long-term development in the number of pigs and the number of dairy cows per holding in selected countries

As can be seen, the countries have apparently followed a relatively uniform pattern. Especially in recent decades, structural development has been strong, but even when viewed over a longer period, structural development in, e.g., pig production has been almost exponential. In the figure, the Y axis is logarithmic, and the development almost follows a straight line for all three countries in recent past decades.

The conclusion is that the development reflects clear international trends, and that the development has been relatively uniform and almost predictable.

The figures illustrate the change in size in selected industrialized countries. However, a characteristic is that the development has been particularly strong in the economically highly developed countries, while lower and lower-middle-income countries do not appear to have undergone similar rapid structural development. By comparing the countries' level of economic development and their farm size—calculated as both land size and number of livestock per farm—it becomes apparent that there is a clear correlation: Farm size and herd size increase with increasing economic development, cf. Fig. 2.6.

Fig. 2.6

(Note Structural data for 2010 or last year with available data. GDI data for 2017. Some countries with deviant positions are indicated. Logarithmic scale on both the X and Y axis. The vertical lines illustrate two levels: “Low-income countries” [<996 USD per capita] and “Lower-Middle-Income countries” [996–3896 USD per capita], cf. definitions by World Bank: World Development Indicators. Source Own presentation based on statistical data from FAO and World Bank)

Size of farms and herds and GDI per capita

Figure 2.6 presents the size of farms and herds as a function of GDP per capita for up to 140 countries. As can be seen, for livestock in particular, there is a clear correlation between the countries' economic welfare (GDI per capita) and herd size. However, a few countries do not follow this pattern, but this is often due to political conditions, which lead to the regulation of structural development.

The figures also demonstrate that the correlation is highest for livestock, and that there seems to be no clear correlation for the lower and lower-middle-income countries. The correlation seems to be lowest for pig holdings in the poorest countries.

Although the analysis is based on cross-sectional data, a dynamic interpretation is possible, and we can assume that the development in each country over time will follow the pattern shown in Fig. 2.6 as the countries become increasingly rich. This dynamic interpretation is supported by the development, in which the size of farms and livestock herds have shown for a long period in the developed countries.

2.4 Developed Countries: Specialization

Specialization in agriculture—and in many other industries—has been increasing in recent years. In this context, specialization occurs on the individual farms, whereby production becomes less mixed and less diversified, so that farmers can focus on one single branch of production.

Increased specialization is due to technological developments that are increasingly creating economies of scale. Furthermore, increasing demand for specialized knowledge means that farmers focus on fewer or perhaps only a single branch of production.

One example is poultry production, which previously took place on almost all farms. With increasing specialization and division of labor, poultry production is now occurring on increasingly fewer farms. The remaining poultry production now takes place on larger often very specialized farms. This development is not an indication that poultry production has lost importance, but rather it is an indication of industrialization and specialization.

The development is visible in many countries. For example, Fig. 2.7 presents the share of farms with poultry in the USA, Sweden and Denmark over a long period.

Fig. 2.7

(Note USA: With chickens. Denmark: With hens. Sweden: With hens, without chickens. Sources Author’s own presentation based on USDA [several issues a], Statistics Sweden [several issues] Eurostat [several issues], and statistical data from Eurostat, and Statistics Denmark)

Share of farms with poultry

The constant or even increasing share after 2000 is mainly due to several very small farms with a relatively small number of animals.

The general trend toward greater specialization and less diversified agriculture depicted in Fig. 2.8 is quite common in the Western world.

Fig. 2.8

(Sources Author’s own presentation based on USDA [several issues a], Statistics Sweden [several issues] Eurostat [several issues], and statistical data from Eurostat, and Statistics Denmark)

Specialization. Share of farms with laying hens

Similarly, pig production has become highly specialized with a focus on specific parts of pig production in agriculture. For example, in Denmark, which is among the largest exporters of pork in the world, continuous specialization dominates, whereby full-line farms with both sows and fattening pigs represent an ever decreasing share of the farms, cf. Fig. 2.9.

Fig. 2.9

(Sources Own calculations based on statistical data from Statistics Denmark)

Specialization: Integrated pig farms (farrow-to-finish) as a percentage of the total in Denmark

In a full-line (integrated) system, a pig producer has control over all stages of production from sows to fattening pigs and can fatten all his pigs for slaughter. In contrast, and instead of full-line, other pig producers specialize in the production of either piglets or fattening pigs.

A similar trend can be seen in the USA, where the farrow-to-finish approach is becoming less important, cf. Fig. 2.10.

Fig. 2.10

(Source McBride & Key, 2013)

Hog operations by type in the USA, 1992–2009

From 1992 to 2009, the number of US pig producers who used the farrow-to-finish approach, decreased from 50 to 25 percent. In the same period, the number of pig producers specializing in feeder-to-finish increased from 20 to 50 percent.

Focusing on the development in the EU countries, a similar trend can be observed. Furthermore, in the EU, the trend toward greater specialization and less diversified agriculture is evident, cf. Fig. 2.11.

Fig. 2.11

(Note Holdings with mixed livestock [mainly granivores and mainly grazing livestock] as a percent of all holdings with livestock. Eurostat’s definitions are used. Source Own calculations based on statistical data from Eurostat)

Extent of mixed livestock (percent of total)

The trend toward increasing specialization is visible in several areas. For example, in Denmark, in 1950, around 90 percent of all holdings had diversified production, defined as holdings with both pigs and cows, cf. Fig. 2.12. However, this share has since fallen and in 2021 it was only approx. 2 percent.

Fig. 2.12

(Source Own calculations based on statistical data from Statistics Denmark)

Share of farms with both cattle and pigs in Denmark

This development is driven by significant advantages to be gained from both specialization and economies of scale. At the same time, a well-developed market for inputs has supported the development.

A similar pattern can be seen in other developed countries, although the extent and speed of the development has varied.

Specialization can also be seen in other areas in the USA, where the development, especially in the latter half of the twentieth century, has been significant, cf. Fig. 2.13.

Fig. 2.13

(Note The average number of commodities per farm is a simple average of the number of farms producing different commodities [corn, sorghum, wheat, oats, barley, rice, soybeans, peanuts, alfalfa, cotton, tobacco, sugar beets, potatoes, cattle, pigs, sheep and chickens] divided by the total number of farms. Source USDA, 2005)

Specialization in agriculture in the USA 1900–2002

Figure 2.13 illustrates that farm operations have become increasingly specialized and less diversified—from an average of about five commodities per farm in 1900 to about one per farm in 2000. This development reflects the production and marketing advantages that can be gained by concentrating on fewer commodities. The development is also supported by farm price and income policies that have reduced the risk of depending on the returns from only one or a few crops (USDA, 2005).

2.5 Developing Countries: Number of Farm Holdings

While the trend is very apparent in the EU and other developed countries, when examining structural development from a global perspective, the picture is not so clear. On the one hand, there are countries which exhibit relatively uniform development in the direction of ever fewer farms—a trend that has been in progress since the mid-1900s.

On the other hand, there are the developing countries, where we see the opposite trend, i.e., the emergence of an increasing number of new farms, resulting in an increase in the total number of farms. Demographics, relatively low emigration away from agriculture and very small growth in the agricultural sector are the main explanations as to why structural development is so different in most developing countries compared to developed countries.

For example, major countries such as India, Egypt, Indonesia and the Philippines have experienced a significant increase in the number of farms, see Fig. 2.14.

Fig. 2.14

(Source Own calculations based on statistical data from FAO)

Trends in the number of farms in selected countries

The figure also includes data for African countries with shorter statistical documentation, although the trends are still relatively consistent.

In general, the trend toward an increasing number of farms can be identified in several developing countries. A very clear international picture can be drawn in which the number of holdings is increasing in the poorer countries, while it is decreasing in the richer countries, see Fig. 2.15.

Fig. 2.15

(Note Change 1990–2000 or last recent decade with available data. Source Author’s own presentation based on statistical data from FAO and World Bank)

Percent change in number of holdings 1990–2000 and GDP per capita

The figure illustrates that the number of holdings in developing countries is increasing, while it is decreasing in more developed countries. The pattern and correlation can be explained by several factors, which are discussed in the introduction. The emigration of farmers to other sectors in developed countries is a major factor.

Both “push and pull factors” are present: Labor is being pushed out of agriculture due to low wages and because workers are being replaced by technology, and labor is being pulled away from agriculture by industries with labor shortages. The utilization of economies of scale and mechanization are also important factors that explain both emigration and structural development toward fewer and larger holdings in the most developed countries.

2.6 Developing Countries: Size of Farm Holdings

The general increase in the number of holdings in developing countries is also affecting the structure of agriculture including the size of the agricultural holdings. On the whole, a correlation between the size of farm holdings and the countries' level of economic development is also apparent in developing countries: In the poorest countries, the holdings are small, and they are generally becoming smaller over time.

At the global level, there is a clear trend toward an increasing number of farmers and others who are economically active in agriculture. As the total amount of agricultural land is only increasing slightly, the agricultural land per farmer is decreasing.

This trend is particularly pronounced in Asia and in the least developed countries, cf. Fig. 2.16.

Fig. 2.16

(Source Author’s own presentation based on statistical data from FAO)

Farm structure: Arable land per economically active individual in agriculture

Calculating the amount of arable land per economically active individual in agriculture is a method of illustrating farm structure. However, a more detailed analysis, which examines the total area per farm, reveals an almost identical picture: On average, the agricultural holdings are becoming increasingly small in developing countries, see Fig. 2.17.

Fig. 2.17

(Note Medians of averages. Source Own presentation based on FAO [2013] and other statistical data from FAO)

Farm structure: Average number of hectares per holding

Figure 2.17. presents the average global trends in farm size, in the world and in Asia. The figures for continents and the world include a selection of countries as data is only available for a limited number of countries. Therefore, the figures for the world and Asia are supplemented by selected countries for which a longer time series is available.

2.7 Concentration

Concentration is also an important aspect of structural development. Concentration is a measure of whether the production, agricultural area, livestock, etc., are distributed relatively equally, or whether, e.g., a relatively small number of farms account for a large share.

Increasing concentration can be illustrated by calculating, e.g., the total output produced by the largest 5 percent or 20 percent of agricultural holdings. If these largest farms are obtaining an increasing share, it is a sign of increasing concentration.

Concentration can also be illustrated by calculating the number of farms needed to produce, e.g., 75 percent of the total production. Concentration at the farm level—or rather inequality—can also be measured using the Gini coefficient, whereby a high coefficient illustrates high inequality and high concentration.

Concentration in agriculture is changing, although no clear unambiguous megatrends can be identified. Significant differences are apparent between countries, branches of production and years. An important explanation is that, in almost all countries, legislation is used to control structural development in agriculture—in many cases to avoid concentration becoming too high. From a political perspective, allowing just a few individuals or companies to own a substantial share of the agricultural land is undesirable. Such restrictions on the size or growth of other businesses have not been applied unless there was a risk of reduced competition on the market or even the formation of a monopoly.

The consequences of such restrictions are that the economic and technological driving forces behind increasing concentration (including especially economies of scale) are limited or restricted.

The global picture in terms of concentration in the agricultural sector has many dimensions and exhibits a widespread. The largest 5 percent of holdings account for as little as 8 percent (Republic of Korea) and as high as 89 percent (Barbados) of the total agricultural area. Therefore, Fig. 2.18 illustrates concentration in agriculture for approx. 60 countries ranked by the countries' income per capita.

Fig. 2.18

(Note The largest 5 percent of farms’ share of the total agricultural area. Trend line included. Source Own presentation based on FAO [2001] and statistical data from World Bank)

Concentration in agriculture and countries’ income per capita

The countries with the lowest concentration are Finland (12 percent), Luxemburg (14 percent), Switzerland (16 percent), Norway (17 percent) and Denmark (22 percent). The Nordic region is thus characterized by a very even and non-concentrated agricultural structure.

With regard to the global picture, Europe—together with Asia and Africa—is characterized by low concentration, while South America, in particular, has a highly concentrated agricultural structure. Important countries with very high concentration in South America include Peru, Paraguay and Venezuela.

There is not necessarily any direct causality between the level of economic development (income) and concentration in agriculture. Instead, while the two processes can be considered to be parallel, they are more or less independent of each other.

In countries with a very significant agricultural sector, the distribution of wealth in society also depends on the level of concentration in agriculture. If a very small proportion of the population owns a large share of the agricultural land, they will also account for a significant share of the country's total wealth. As can be seen in Fig. 2.19, there is a significant correlation between concentration in society as a whole and in agriculture.

Fig. 2.19

(Note Gini coefficient for agriculture: Distribution of agricultural land between farmers. Gini coefficient for society: Distribution of income among all inhabitants. Source Own presentation based on [FAO, 2001] and statistical data from World Bank)

Concentration in agriculture and in society as a whole: Distribution of agricultural land and income of the whole society

It should be noted that the Gini coefficients for agriculture are based on the distribution of agricultural land among farms, while the Gini coefficients for society as a whole are based on income, or in some cases, consumption. Despite these methodological differences, the correlation is strikingly high. The conclusion is that concentration in agriculture can probably be explained by conditions both internal and external to the agricultural sector.

Calculating the change in concentration at the global level or for larger regions is challenging as the data must be rather consistent and comparable between countries and over time. However, data for the USA and for the EU countries make it possible to show longer-term trends.

Figure 2.20 presents the percentage of farms required to produce 75 percent of the market value of agricultural products in 1987–2017. In general, the share has exhibited a downward trend since 1987, which means increasing concentration. In 1987, 13 percent of farms produced 75 percent of sales, but the share had decreased to 5 percent by 2017.

Fig. 2.20

(Note 1987–1997: Poultry and poultry products. 2002–2017: Poultry and eggs. Source Own presentation based on USDA [several issues b])

USA: Fewest number of farms accounting for 75 percent of sales

Figure 2.21 shows the very long-term change in concentration in agriculture in the USA.

Fig. 2.21

(Note Data for the years: 1900, 1940, 1969, 1987, 1992, 1997, 2002, 2007, 2012 and 2017. Sources Peterson and Brooks [1993], USDA [several issues a], USDA [several issues b])

USA: Fewest number of farms accounting for 50 percent of sales

In the EU countries, the change in concentration is more varied, which is due to several factors including differences between the countries’ legislation and the transition from a planned to a market economy. However, there is a clear pattern toward greater concentration (inequality), although this trend is the least pronounced in the economically most developed countries, cf. Fig. 2.22.

Fig. 2.22

(Note Concentration measured by Gini coefficient for the distribution of the agricultural area. Source Own calculations based on statistical data from Eurostat and World Bank)

Concentration in agriculture in the EU (2016)

The conclusion is that concentration in agriculture is changing, although no clear unambiguous megatrends can be identified. In the USA, concentration is increasing substantially. Economic development (income) and concentration in agriculture seem to be negatively correlated in some groups of countries. Concentration in agriculture in a country can probably be explained by conditions both internal and external to the agricultural sector.

2.8 Polarization

There is a general global trend toward increasing polarization in agriculture. In this context, polarization means greater differences between groups of farmers. The polarization can cause extreme political groups of farmers to emerge.

Polarization may take the following forms:

• Full-time/part-time farming

• Family owned/investor owned

• Subsistence/market-based agriculture

• Large/small holdings

• Diversified/specialized agriculture

• Organic/conventional agriculture

• Small scale/large scale

• Local markets/international markets

• Short/long value chains

• Hobby agriculture/commercial and industrial agriculture

Several of the listed polarization trends are analyzed in more detail in subsequent sections of this chapter.

Polarization is not only the result of—or part of—increasing concentration, whereby relatively few large farms account for an increasing share of production. It is also the result of different business models, goals, production systems and greater heterogeneity.

While the relative extent and the form of polarization may vary, Fig. 2.23 is an illustration of the different types of polarized agriculture.

Fig. 2.23

(Source Own presentation)

Illustration of increasing polarization in agriculture

The degree of polarization varies between countries and often depends on the countries' level of economic development. Whereas Fig. 2.23 presents idealized polar opposites, in reality of course, many farmers and farms will occupy intermediary positions on the continuum, which is not necessarily static as some farmers may be, e.g., in the process of transitioning to a different form of agriculture.

On the one hand, there is a relatively small number of very large farms which are run as commercial ventures and which account for more than 80 percent of production. On the other hand, there is a large number of smaller farms which may be in the process of being closed and which are dependent on external income, and cannot be described as commercial farming. The differences between the two groups are increasing.

With increasing polarization, groups of farmers may have particular preferences and interests, which may create tension between farmers in the same country. Farmers in one country may decide to collaborate with groups of farmers with similar interests in other countries.

Polarization between small family-based and, to a certain extent, self-sufficient and subsistence agriculture and large, often company-owned, industrial agriculture is often observed in livestock production. Such a phenomenon occurs in, e.g., transition countries, where large industrial pig and poultry farms—largely run and owned by processing companies and foreign investors—account for a very large share of the country’s total production. Parallel to this, there are a large number of very small farms.

Figure 2.24 illustrates an example of such polarization.

Fig. 2.24

(Source Statistical data from Eurostat)

Structure of pig farms in Romania (2016)

The figure shows that 87 percent of all pig holdings have 1–2 pigs, and they produce 34 percent of all pigs. However, only a few very large holdings—0.01 percent or 110 holdings—produce 45 percent of all pigs. The middle group, which consists of medium-sized pig farms, is almost non-existent in terms of the number of farms and the number of pigs.

Another example of the reduction in the size of the middle group is provided in Fig. 2.25, which illustrates the change in the number of very small, medium and large holdings in Denmark from 1982 to 2020.

Fig. 2.25

(Source Own calculations based on statistical data from Statistics Denmark)

Change in the number of very small, medium and large holdings in Denmark 1982–2022

The figure shows the share of holdings in relation to their size, measured in hectares per holding. As can be seen, the very small and the very large holdings account for a relatively large share of the total number of holdings, and the share is increasing, while the share of medium-sized holdings is decreasing. The large farms are becoming even larger, while the middle group is coming under pressure and the very small hobby and part-time farms are continuing and are almost unaffected by the development. While these very small farms are increasing in number, their relative importance in terms of production and employment is decreasing.

A similar development is occurring in the USA, where the middle group is also becoming smaller, while the market share of the large holdings is increasing and the small holdings are maintaining the status quo, cf. Fig. 2.26.

Fig. 2.26

(Source Own presentation based on MacDonald [2020])

Change in the number of very small, medium and large holdings (acre) in the USA 1987–2017

Polarization is also apparent in the division between full-time and part-time agriculture. These two forms of farming may be based on completely different business models. A clear trend toward an increasing number of part-time farms can be seen in several countries, cf. Fig. 2.27.

Fig. 2.27

(USA: Principal operator by primary occupation: Other. Denmark: Full-time means at least 1665 hours of work on the farm per year. Source USDA [several issues b], OECD [1999] and statistical data from Statistics Denmark)

Part-time farming in the USA, Korea and Denmark

The definition of part-time farming varies between countries and also over time. Nevertheless, the figure illustrates a fairly clear trend for the three countries.

The trend toward increasing polarization is not just random because a number of underlying driving forces which can explain the development can be identified.

On the one hand, excess labor is occurring in agriculture due to technological development. At the same time, higher salaries and better working conditions in other industries are attracting labor away from agriculture, which means there are both push and pull effects.

On the other hand, labor is often locked in agriculture. Labor is a fixed asset which, to a large extent, is very specific and has a low alternative value in other businesses. Therefore, agricultural labor is not particularly mobile and is relatively difficult to move out of the sector. In addition, for many, farming is not just a profession, but also a home, a network and sometimes also an asset. The countryside and rural culture can also contribute to maintaining the rural population and reducing emigration.

These two opposing driving forces create excess labor in agriculture, on the one hand, but at the same time, create conditions that mean that labor tends to remain in agriculture, which results in the emergence of hobby and part-time farming.

Polarization is likely to continue as objectives for international competitiveness, on the one hand, and rural development and multifunctionality, on the other, must be addressed. Polarization is thus necessary to meet the very different agricultural policy goals at the same time.

When widely different agricultural policy goals must be met (cf. Sect. 6.2), it is difficult to consider the agricultural sector as one industry. It may be necessary—and useful and appropriate—to introduce specific agricultural policy initiatives that target particular types of agriculture. Some types of agriculture will be most appropriate for developing rural areas and biodiversity, while others will be most suitable in terms of agricultural production and employment. In this way, agricultural policy can contribute to a more heterogeneous and polarized agriculture.

2.9 Transnational Land Acquisitions, Foreignization or Land Grabbing

Agricultural land is becoming an increasingly scarce resource (Sect. 9.2), which means there is growing interest in buying and investing in it. Therefore, the phenomenon of “Transnational land acquisitions”, otherwise known as “Foreignization” or “Land grabbing”, is now higher up on the agenda. There are several definitions of the concept including:

Transnational land acquisitions refer to the procedure of acquiring land (and freshwater) resources in foreign countries. It is often called ‘land grabbing’. Most commonly, investors or investing countries are located in the developed world, while the ‘grabbed’ land is usually in developing countries. (EEA, 2016)

“Land grabbing” is generally understood to mean a process of large-scale acquisition of agricultural land without consulting the local population beforehand or obtaining its consent. Ultimately, this diminishes the scope of the local population to manage a farm independently and to produce food. The owner also has the right to use the resources (land, water, forest) and the profits arising from their use. This can lead to a situation in which established agricultural land use is abandoned in favour of other activities. (EESC, 2015)

Land grabbing may involve both direct acquisitions and leases/concessions. In Africa, it almost exclusively involves leases or concessions, while direct acquisition is more prevalent in the Americas. In Eastern Europe, both forms are common. Concessions primarily concern forestry but also mining.

Transnational land acquisitions in developing countries have increased. The following drivers explain this development:

• The financial crisis created greater interest in investments in stable less volatile assets with no or very little downside.

• The food crisis in 2007–2008 and the higher prices of a number of agricultural commodities made investments in agricultural land more attractive.

• The potential for growth in agriculture in many industrialized countries has been limited by increasing environmental legislation, which has resulted in more land being taken out of production for the benefit of nature and limited the supply of agricultural land, etc., which has stimulated interest in investing in agricultural land in less developed countries.

• Improved logistics and global value chains have also supported this development. European investments in, e.g., the flower industry in Africa have demanded an efficient transport route for the flowers back to the markets in Europe.

• Increasing prices for agricultural land in many developed countries have also made investment in agricultural land in less developed countries more attractive.

• In line with the rising share prices worldwide after the financial crisis, investors have “ been increasingly demandingalternative investments”, i.e., investments in assets other than listed shares and bonds. Forests and agricultural land belong to this group of investments.

• A need to broaden the spread of the portfolio—diversification—geographically has also made the acquisition of land in less developed countries more attractive.

• Liberalization of the capital markets including opportunities to acquire agricultural land and assets abroad has also supported the development.

• A focus on food security and global value chains has been an important driver for countries with a major net import of food. China and countries in the Middle East have invested heavily in the agricultural sector in, e.g., Africa in order to secure future food supplies, cf., for example, Walsh (2018). Food-importing countries can no longer rely on sourcing food on the market and are, therefore, attempting to gain more direct control of their food supply.

• With increasing interest in bioenergy and biodiesel, investing in palm oil plantations is also becoming more attractive. In Asia, the palm oil sector is the primary target of investments (Lay et al., 2021).

Transnational land acquisitions have both advantages and disadvantages: On the one hand, foreign investments may lead to the transfer of technology, efficiency, modernization, employment and a number of other direct or indirect benefits. On the other hand, transnational land acquisitions may also result in the uncontrolled use of resources to the detriment of the local population as the potential for securing a local food supply is often reduced.

The extent of foreign investment in agricultural land is often difficult to calculate. The acquisitions are not always registered, and intermediate forms also exist such as shared ownership or long-term leases, which are similar to acquisitions.

However, the following sources suggest that foreign investment in agricultural land has occurred to a significant extent:

• According to von Braun and Meinzen-Dick (2009), large-scale land deals accounted for 20 million hectares between 2005 and 2009.

• According to Zagema (2011), the total was 227 million hectares in 2000–2010.

• According to Müller et al. (2021), foreign investors have acquired approximately 90 million hectares of land for agriculture during the past two decades.

As can be seen, the estimations of the total amount of land vary widely. However, another source exists in the form of the Land Matrix Initiative (LMI), which is an independent global land monitoring initiative that continuously collects data on and documents transnational land acquisitions in low- and middle-income countries with a focus on transnational deals in the agricultural sector.

Figure 2.28 presents an estimate of the longer-term extent of transnational land acquisitions in the form of both the purchase and lease of agricultural land.

Fig. 2.28

(Note The survey only covers large-scale international [cross-border] agreements. Source Lay et al., 2021)

Concluded agricultural deals, 2000–2020

The 10 most important target countries according to contract size are, in descending order, Indonesia, Ukraine, Russia, Brazil, Papua New Guinea, Argentina, the Philippines, Ethiopia, Myanmar, and South Sudan. The investors come primarily from the EU, the USA, China and India (Lay et al., 2021).

As can be seen in the figure, there was a substantial increase up to and including 2012 followed by a period of stagnation and then a more gradual increase. This can probably be explained by changes in both supply and demand: several countries have introduced restrictions on the foreign acquisition of agricultural land, which has limited the supply.

According to Toulemonde (2021), during the last 20 years, upward of 35 million hectares of land in Africa have been sold to foreign investors, which corresponds to 14 percent of Africa's total arable land.

The development during the past few decades has caused concern in several places, cf. Baker-Smith and Attila (2016), Lay et al. (2021), UNCTAD (2021), von Braun and Meinzen-Dick (2009), World Bank (2018).

Figure 2.28 raises the question of whether this development is a blip or part of a long-term trend. The answer depends on how the underlying drivers will develop.

On the one hand, continued significant differences in productivity between agriculture in developed countries and less developed countries will make investments in agriculture in developed countries attractive to investors. Technology can be transferred and exploited. At the same time, the market for agricultural land in developed countries will also be under pressure: The agricultural area is not expanding and demand is high, which may shift the focus to less developed countries. Major net food importing countries will continue to attempt to increase their access to food through, among others, making investments in countries that can potentially supply food.

On the other hand, the pressure on the market for agricultural land is stronger in most less developed countries: the population is increasing (e.g., Africa's population is expected to double by 2060) and incomes are rising, both of which will increase demand for food and thereby demand for agricultural land. The agricultural land area per capita is much smaller in less developed countries than it is in developed countries, so agricultural land is an even more scarce resource in the former. Finally, biofuels produced on large plantations in less developed countries but owned by foreign investors are unlikely to increase significantly in the future for political and regulatory reasons.

Transnational land acquisitions will probably continue, but future growth will be modest compared to the previous situation.

2.10 Ownership

Forms of ownership in agriculture are also changing, and megatrends can also be identified here. These changes are a natural consequence of the structural development toward ever larger and more industrialized farms: Family ownership is coming under pressure due to the increase in farm size as it is becoming increasingly difficult for individuals to gain access to sufficient capital and financing—by acquisition and during subsequent production and operation.

The change in forms of ownership including self-ownership has not been well documented statistically at the international level, which is probably because the concept of forms of ownership has not been clearly defined and insufficient information has been collected in the individual countries. Concepts such as “family farm”, “leased” and “partnership” may apply to the same company. In addition, information about the real owners (the owners behind the companies) is not available in all cases.

However, studies and statistics do exist which can be used to provide an overview of the different forms of ownership in agriculture.

Lowder et al. (2014) map forms of ownership and structures in agriculture based on data from the FAO. However, the data is uncertain as it, e.g., may be difficult to distinguish between agricultural holdings and subsistence farming. In the study, the conclusion is, among other things, that there are more than 570 million agricultural farms in the world, of which more than 500 million are family owned.

Data from 52 countries reveal that in 48 of the countries, more than 90 percent of holdings are owned by an individual, a group of individuals or a household. In the remaining four countries, between 80 and 90 percent of the farms are owned by households or individuals with only a very small proportion being owned by a company, a cooperative or by the state. In terms of agricultural land, the share owned by households or individuals is lower (on average around 70 percent) in most countries.

Data presented by Lowder et al. (2014) indicate that the extent of family ownership does not appear to be correlated with a country’s level of economic development, and no trends can be identified.

In the USA, the USDA (several issues b) monitors any changes in the number of farms, their size, form of ownership, structure, etc. Selected time series for significant forms of ownership are presented in Fig. 2.29.

Fig. 2.29

(Source Own presentation based on USDA [several issues b])

Ownership in US Agriculture

As the figure shows, corporate ownership increased in importance in the period. Conversely, the extent of individual and family ownership decreased.

In general, the share of family and individual farms is decreasing, but the extent of the decrease depends on how it is calculated: While the share of holdings is almost constant, the share of land and sales including the sale of pigs is falling considerably. In terms of pig production, family and individual farms’ share halved during the period, cf. Fig. 2.30.

Fig. 2.30

(Source Own presentation based on USDA [several issues b])

Family and individual farms’ share of the total in the USA

As can be seen, corporate-owned farms are relatively large in terms of both area and production, although family and individual farms are still important forms of ownership in terms of the number of farms. The market shares of the remaining forms of ownership including partnerships remained rather constant during the period.

The conclusion of an analysis by Zhang et al. (2018) of agriculture in the State of Iowa, USA is that there has been a continuous shift away from family ownership and tenancy toward more industrialized ownership structures such as trusts and corporate ownership. Therefore, the proportion of agricultural land in family ownership or tenancy halved from 80 percent in 1982 to approximately 40 percent in 2017.

A survey of agriculture in the EU in 2020 found that almost 95 percent of all agricultural holdings were classed as family farms, defined as farms on which 50 percent or more of the regular agricultural labor force is provided by family members (Eurostat, 2022). Family farms were the dominant farm type in all member states, although in France, a sizeable minority was non-family farms (43 percent).

Another statistical calculation by Eurostat for 2016 found only slight changes in forms of ownership over time. The share of agriculture which the EU defines as family farming only fell from 97 to 96 percent, cf. Eurostat (2018). However, the share of family-owned farms and agricultural land exhibits a long-term downward trend, cf. Fig. 2.31.

Fig. 2.31

(Notes Family ownership = “Single holder holding” or “holder's being a natural person”. The EU is a weighted average of countries with data for the entire period: Belgium, Denmark, Germany, Ireland, Greece, Spain, Luxembourg, Netherlands, Austria, Portugal, Sweden and Finland. Source Own presentation based on statistical data from Eurostat)

Share of family ownership of agricultural farms and land 1997–2016

The figures show that the share of family-owned farms is greater than the share of family-owned agricultural land and that family-owned agriculture is, on average, much smaller than the other farms, which are typically owned by corporations.

The importance of family-owned farms vs. company-owned farms in the EU varies significantly depending on several factors: company-owned farms are significantly larger in terms of total area and livestock intensity. Family ownership is the dominant form of ownership for small and medium-sized farms, while company ownership is dominant when it comes to farms with a large area, cf. Fig. 2.32.

Fig. 2.32

(Note Family-owned holdings are defined here as those that are run by a single owner or their spouse or other family member. Source Own calculations based on statistical data from Eurostat)

Share of family-owned holdings in the EU as a share of all holdings depending on the size (standard output) of the holdings (2016)

In line with the trend toward increasingly large and intensive livestock farming, corporative ownership of large livestock farms has also increased. Fig. 2.33 shows that traditional family-owned farms are declining in importance with increasing herd size in pig production.

Fig. 2.33

(Note Family-owned holdings are defined here as those that are run by a single owner or their spouse or other family member. Source Own calculations based on statistical data from Eurostat)

Share of family-owned specialized pig holdings in the EU as a share of all specialized pig holdings depending on the size (standard output) of the holdings (2016)

About half of the large specialized pig farms are family owned, while the remainder are company owned. Assuming that the company-owned farms are among the very largest, an even larger share of the pig population will come from company-owned farms in line with the continuous structural development and utilization of economies of scale.

2.11 From Subsistence Farming to Market-Based Farms

As a result of economic development, industrialization and increasing economic welfare, the focus of agriculture changes from self-sufficiency to a market orientation, which involves a transformation from subsistence agriculture to commercial, or market-based, agriculture. The trend is rather clear.

Subsistence agriculture is self-sufficient agriculture, whereby the farmers only produce enough food to feed their own families and possibly the local area. Subsistence agriculture thus differs from commercial agriculture (industrial agriculture, market-based agriculture) in that, in the latter, all or most of the production is sold on a market.

In subsistence farming, the needs of the family and not market prices determine what the farmer produces on the farm.

Subsistence agriculture is not clearly defined and the term semi-subsistence agriculture is also used. Different degrees of subsistence farming occur when a part of the production is sold to local people.

Subsistence agriculture in its various forms is very important in global agriculture: Subsistence agriculture is most widespread in sub-Saharan Africa, Southeast Asia and in parts of South and Central America. In East Africa, subsistence agriculture accounts for between 70 and 90 percent of total production (European Parliament, 2007).

In 2013, on almost 75 percent of the very small farms in the EU, more than half of the production was consumed on the farm. 43 percent of the very small farms were considered subsistence farming. A very large proportion of the very small farms in Latvia, Romania and Slovenia were considered subsistence farming (Eurostat, 2016). In this context, very small farms are those with a standard production of < €2000, of which there are approx. 4.2 million in the EU, which corresponds to almost 40 percent of all farms. Therefore, calculated in terms of the total number of farms and people involved, subsistence agriculture is relatively important, but in terms of production and turnover, the importance is relatively limited.

Small farms, which in a development perspective are often synonymous with subsistence agriculture, account for 80 percent of total food production in developing countries (Gustavsson et al., 2011). At the same time, they account for approx. 2/3 of the world's rural population of just over 3 billion people, the majority of whom live in absolute poverty, and they comprise half of the world's undernourished population (Fan et al., 2013). According to von Braun and Lohlein (2003), around 440 million farmers in developing countries still practice subsistence agriculture to a significant extent.

In general, subsistence agriculture is declining in terms of its relative importance while market-oriented agriculture is becoming increasingly important. The potential for a transformation from subsistence agriculture to market-oriented agriculture is closely related to economic development and agricultural structural development: Low income, small farms, weak industrial development and subsistence agriculture are often linked. Several factors may explain the extent of subsistence agriculture, but examples indicate that there is a correlation between the level of economic development and the importance of subsistence agriculture, cf. Fig. 2.34.

Fig. 2.34

(Note 2013 or latest year with available data. Source Own calculations based on statistical data from Eurostat and World Bank)

EU: Share of all farms where more than half of the production is for self-sufficiency—as a function of GDP per capita

The graph only includes EU countries for which the share (percentage of all farms on which more than half of the production is for own consumption) > 0. This means that countries that do not report production for their own consumption are not included. However, the countries that are not included are typically high-income countries, which strengthens the correlation.

The figure confirms that subsistence farming is most important in countries with relatively low-income per capita and that the share decreases with increasing income.

When examining the development over time in the EU, a relatively clear trend toward the declining importance of subsistence agriculture emerges, cf. Fig. 2.35.

Fig. 2.35

(Note GDP-weighted average for EU countries where the proportion > 0. This means that countries that do not report production that is consumed on the farm are not included. Source Own calculations based on statistical data from Eurostat)

Shares of all EU agriculture where more than half of the production is for self-sufficiency

The figure shows that the share of farms with significant (>50%) production for self-sufficiency fell in the period 2005–2016.

Figures 2.34 and 2.35 highlight the importance of subsistence agriculture in agriculture as a whole. However, its relative importance decreases with increasing farm size, but it remains important among the very small farms. In Greece, which has been through a very tough economic period with high unemployment, subsistence farming has been increasing in importance among the very small farms, cf. Fig. 2.36.

Fig. 2.36

(Note Small farms =  < €2000 per year in standard output. GDP-weighted average for EU countries where the proportion > 0. This means that countries that do not report production that is consumed on the farm are not included. Source Own calculations based on statistical data from Eurostat and World Bank)

Small farms where the share of consumed production > 50 percent (2005–2016)

The increase in the EU since the 2010s mainly occurred in Italy, Spain and Portugal, where the number of small subsistence farms increased both in percentage and in absolute terms, which is probably a consequence of the particularly deep economic recession that affected these countries. Generally speaking, subsistence agriculture is a possible buffer in recessions, when falling earnings and employment push labor back into agriculture, thereby ensuring people have the very basic necessities.

Von Braun and Meinzen-Dick (2009) calculated that the total number of subsistence farms in Central and Eastern European Countries (CEEC) and in the “New Independent States” (NIS) was approx. 42 million in 1999. The authors also find that the number of subsistence farms per 1,000 inhabitants and as a percent of the total number of farms is correlated with a country’s level of economic development, cf. Fig. 2.37.

Fig. 2.37

(Note The authors define subsistence agriculture as farms with < 1 ha. Comparing the total number of farms across countries is uncertain due to different calculation methods. Source Own presentation based on FAO [2013], OECD [2000], von Braun and Meinzen-Dick [2009] and statistical data from Eurostat, FAO and World Bank)

Number of subsistence farms in CEEC and NIS as a function of the countries’ GDP per capita

At the global level, the change from subsistence agriculture to market-based agriculture and industrial agriculture is occurring in several ways. In some cases, the change is supported by government initiatives, while in others, the change is occurring automatically in step with the country’s industrial development. Finally, in some countries, the change is taking place very slowly because the right conditions are not present or because a change away from subsistence agriculture is undesirable or unfortunate from a political or a food security perspective.

A number of factors or conditions must thus be present—to a greater or lesser degree—in order to enable and facilitate the commercialization and market orientation of agriculture and ensure that a global trend continues:

2.11.1 Infrastructure and Market Access

In order that commercial market-oriented agriculture is viable, it is crucial that there is a market for the goods that the farmers produce. The market may be anything from a local marketplace or a local butcher to a larger cooperative dairy or an international customer. Roads, possibly cold stores, transport facilities, veterinary control, no unnecessary middlemen, etc., may also be prerequisites for the development of commercial agriculture.

2.11.2 Education and Advisory Services

In many cases, large-scale production demands that the farmers acquire new skills as they will have to become business managers.

2.11.3 Supporting Legislation and Judiciary

An increase in market-oriented agriculture implies increasing trade in raw materials, machinery, services, agricultural products, etc. This presupposes the possibility of short- and long-term agreements and contracts and that non-compliance has consequences. Opportunities to buy land and secure ownership through legal documents are also important. Corruption and bribery may also be barriers to the development of market-oriented agriculture.

2.11.4 Access to Capital

Commercial farming and market-oriented agriculture are typically relatively large, and capital is needed to purchase inputs such as seed, machinery, fertilizer, buildings, animals, etc. Furthermore, it will often be necessary to obtain loans for the acquisition of agricultural holdings and to finance the daily operations.

2.11.5 Political Stability

Business development—which a transformation from subsistence farming to market-oriented farming basically is—involves investment and long-term economic initiatives, and it requires a certain degree of predictability, which means that political stability is an important factor in this context.

Whether a transformation from subsistence farming to market-oriented farming will be a global trend in the future also depends on whether the development is supported and stimulated. Several arguments for and against a move away from subsistence agriculture toward more market-oriented agriculture can be put forward.

The arguments in favor of a move away from subsistence agriculture toward market-oriented agriculture include the following:

• Subsistence agriculture is vulnerable in the event of a poor harvest or poor growth, which reduces the families’ primary food base.

• Subsistence agriculture foregoes the potential benefits that could be derived from optimal specialization and division of labor. Subsistence agriculture is typically diverse.

• Subsistence agriculture cannot increase yields or production at the same pace as other forms of agriculture, as access to better varieties, plant protection, commercial fertilizers, etc., is limited.

• Subsistence farming means that there is no significant income from the sale of goods, which makes it difficult to pay for the family's education, health care, etc.

• A large workforce is engaged in subsistence agriculture, which in the short or long term could obtain a higher salary in other sectors.

• The growth in the world's population with 57 percent now living in urban areas necessitates a market-oriented agriculture that can supply the urban population. Subsistence agriculture does not produce enough food to supply the urban population.

The arguments in favor of preserving and supporting subsistence agriculture include the following:

• Families in subsistence farming are not negatively affected by food crises or large increases in food prices.

• Subsistence agriculture retains and utilizes labor that might otherwise be unemployed in the cities.

• Subsistence farming can secure the family's food when family members are hit by unemployment in other sectors and seek to return and work in agriculture. Subsistence agriculture is thus a buffer that can absorb some labor.

• Subsistence farming is diverse and does not depend on the use of pesticides or fertilizers, which can have a beneficial effect on the environment.

• Subsistence agriculture can result in significant yields per hectare using labor as the major input.

• Maintaining subsistence agriculture reduces the risk of agriculture and agricultural land being taken over by external investors in the long term. Subsistence agriculture also protects family-owned agriculture and limits the potential disadvantages (environmental, cultural, animal welfare, etc.) of industrial agriculture.

The conclusion is that a megatrend in the form of a gradual global transformation from subsistence agriculture to commercial and market-based agriculture can be identified. The change is occurring gradually and there are many intermediate forms of agriculture on the continuum with subsistence agriculture at the one end and market-oriented agriculture at the other. Governments and other stakeholders can either encourage or hinder such a development through economic and political interventions.