The Big Debate on Farmer Income

Millions of smallholder farmers feed the world population but can hardly feed properly their own family or satisfy their basic needs. Rural poverty is a sad paradox of our time. Yet, the daily hard work of women and men in the field generates of lot of economic, social and environmental value in the supply chains. There are multiple causes and certainly not a simple solution to eradicate rural poverty. Some companies have realized that a major transformation is needed to make farming sustainable and attractive to younger generations. The journey is complex but solutions exist to find a way out of farmers’ poverty.


Is smallholder farmer income mainly linked to productivity issues? If yes, then, improving productivity would result in better income.  It is obviously the case in many areas where the output per hectare or per cow is low and where focus on improving farmer knowledge (especially on empowering women and youth), by implementing best practices, investing in farm equipment, introducing adapted technologies, will have a direct impact on income if production costs are mastered to increase margins.

It looks quite straightforward. Therefore, why aren’t things moving ahead more rapidly?  A closer look shows that the situation is more complex than it looks and there is a diversity of factors that impact poverty.

The experience of the Livelihoods Funds and the Livelihoods Fund for Family Farming in particular, shows that solving the poverty issue requires deep transformations and the involvement of many actors within the supply chain. To name a few of them:

  1. LAND: land rights, farm size, access to land, are a major bottleneck in many countries where governments should take courageous reforms to improve land security, avoid land fragmentation in very small unsustainable farms, support young farmers to start their business with proper land conditions.
  2. MARKET: connection to markets is often inefficient with many intermediaries, complex informal networks of middlemen that capture a significant part of the value. Stronger and well governed farmer organizations, direct sourcing and traceability are major levers to be tackled at every step of the value chain.
  3. PRICE: ups and downs of global prices are a threat for farmers but also for all private and public actors engaged in reducing poverty. Farmers need security and visibility. Hectic prices destroy the effort to build trust and a stable relationship between farmers and off-takers. Floor prices and price mechanisms that are profitable for farmers should be encouraged. Beyond, in-depth thinking has to be conducted on what a fair price should be and the true cost of food, raw material, including the environmental/social positive or negative impacts of agriculture.
  4. FINANCE: access to finance at an affordable cost remains a challenge for most smallholder farmers. Equity investment or long-term loans in agri-business primarily benefit processors, instead of farmers who are a complex target group put at risk by banks and financial institutions. Efficiency of public funding could be improved through result-based models and should reach farmers in priority instead of intermediaries as it is too often the case. Micro-insurance models to protect smallholder farmers are emerging and should be strongly encouraged in the context of climate change.
  5. DIVERSIFICATION: farm specialization in one cash crop has helped improve efficiency but it has also trapped farmers in monoculture within entire areas and generating negative impact on soils and biodiversity. More balanced models should be developed, including a broader range of vegetal crops and husbandry, of food and cash crops in order to increase economic and ecological resilience. Offtakers from the private sector should look at a farm as an ecosystem instead of just focusing on the commodity they purchase.


Which role could the private sector play within the value chain, from consumer brands multinationals to global or local suppliers and processors? What is their responsibility and their power?

Sourcing raw material from agriculture has been dominated by a “commodity” model in the last 50 years. Commoditization meant that wheat, rice, cocoa or milk mass production is equivalent or nearly so, regarding their quality or who produced them: price led purchasing, short term, limited consideration of the location of the product and the farm. This model led to a disconnection of the supply chain, ignoring the conditions and impacts of farming practices. A growing number of companies realize that this “commodity” paradigm is increasingly under pressure. With the current progress in traceability, knowing the origins of its sourcing and its ecological and social impacts is becoming a priority. This reconnection of the supply chains will help change the relationship between farmers and off-takers.  As an example, companies in the Livelihoods Funds invest in programs that support farmers to make deep changes in their practices and they take long-term commitments to purchase products from organized farmers who are engaged in this transformation.

How to address both social and environmental issues?

For companies whose business depends on agriculture and farming, the challenge of the coming decades is about winning several battles at the same level: the fight against global warming that will impact dramatically their supply, the fight against biodiversity loss, land degradation or water resources to preserve future opportunities, the fight against poverty with millions of smallholder farmers who are currently struggling to make a decent living. Naturally, companies may tend to prioritize and focus on one of the above challenges.  But for many farmers, it is only one and same battle since they are all connected at farm level: droughts or floods, extreme temperatures, soil fertility loss, decrease of plant resistance, etc. have a direct impact on productivity per hectare and farmer income.  Sustainable or unsustainable farming practices tend to amplify or reduce the impacts of these dramatic changes in the farm ecosystem. There are plenty of examples where poor practices worsen the ecological and social conditions of farming. But the same time, there is a growing number of examples of farmers engaged in concrete implementation of “regenerative agriculture”, “smart agriculture”, “ecologically intensive agriculture” with promising results. The transition towards a more sustainable agriculture has started and needs to be massively amplified.

There is one point on which we can all agree: the transformation of the model will not succeed without the farmers who play a key role. And farmers will engage in the transformation if they have a good reason to do so, especially smallholder farmers who are facing poverty issues with limited resources. In many cases, social and environment are two sides of the same coin. Therefore, the economic, social and ecological battles must be handled in an integrated manner. Solutions must benefit farmers and articulate short-term benefits and longer-term investments.



Photo credits: Masy Andriantsoa