Scale and access issues affecting smallholder hog producers in an expanding peri-urban market: southern Luzon, Philippines

Research has shown that gainful participation in livestock markets is an important means of reducing poverty in developing countries, particularly for rural and periurban households. The rapid growth in demand for meat and milk, along with the corresponding expansion of livestock markets to connect consumers and suppliers, presents real opportunities for smallholders to generate income by raising livestock. Nevertheless, the structural changes associated with increasing urbanization taking place in these markets, the greater integration between domestic and global markets, and the emergence of a more stringent regulatory environment also present significant threats to participation by poor households. Further, as the market for livestock products rapidly grows, smallholders have to compete with large-scale commercial producers for market share, particularly at the domestic level, and if market forces and policy environments are biased toward larger-scale producers, smallholders are often displaced. IFPRI has identified research on the future of smallholder farming as a priority for improving our understanding of the relationship between livestock sector development and poverty reduction, thereby enhancing opportunities for smallholders, and countering threats. To this end, this study begins by examining the market forces, structural factors, and policies that affect the scale of pig production, and then goes on to identify strategies for enhancing smallholder participation and competitiveness in a rapidly growing livestock market. The study offers a new way of conceptualizing the problems that lead to the exclusion of smallholders from live hog and pork markets, explaining why some smallholders participate successfully, while others do not. Determinants are identified using limited-dependent variable models based on the hypothesis that transaction costs, such as access to credit and market information, affect market participation. The report also presents a contemporary approach to measuring profit efficiency in hog production for the case of Southern Luzon, Philippines. Although the findings of this study are specific to the Philippine context, many of the issues confronted are common to the challenges of participation, upscaling processes, and policy interventions across the developing world. The research has generated solid empirical perspectives of the changing situation of poor smallholder producers in a high-value market situation. IFPRI thus continues to examine the effect of mechanisms like contract farming on collective action as a means of increasing smallholder participation in high-value markets, particularly in developing countries in Asia and Africa, where small farms continue to dominate the landscape.