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Commercializing Small Farms: Reducing Transaction Costs

Author

Listed:
  • Prabhu Pingali

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Yasmeen Khwaja
  • Madelon Meijer

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

Abstract

Broad changes are taking place in agrifood systems worldwide. These changes are driven by economic development, increase in per caput incomes, changing technology and urbanization. Consumers are changing their dietary preferences and shopping habits, resulting in substantial organizational and institutional changes throughout the food marketing chain. Growing concentration at all levels is taking place, particularly in the retail sector, and private sector standards for food quality and safety are proliferating. Increasingly exchange is arranged through the use of contracts. These changes have significant implications for growth, poverty and food security. For the small farmer in particular there are difficulties to meet the standards and contractual requirements. They are faced with a new set of transaction costs that emerge from dealing with a food system characterized by different rules, regulations and players. Increased transactions costs deter entry of small farmers into the market. This paper looks at required interventions aimed at reducing transaction costs to encourage increased farmer participation in competitive markets.

Suggested Citation

  • Prabhu Pingali & Yasmeen Khwaja & Madelon Meijer, 2005. "Commercializing Small Farms: Reducing Transaction Costs," Working Papers 05-08, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  • Handle: RePEc:fao:wpaper:0508
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    References listed on IDEAS

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    Cited by:

    1. Herbert, Ainembabazi & Asten, Piet & Vanlauwe, Bernard & Ouma, Emily & Blomme, Guy & Birachi, Eliud & Manyong, Victor M. & Macharia, Ibrahim, 2015. "Improving the adoption of agricultural technologies and farm performance through farmer groups: Evidence from the Great Lakes Region of Africa," 2015 Conference, August 9-14, 2015, Milan, Italy 210939, International Association of Agricultural Economists.
    2. Pingali, Prabhu, 2007. "Westernization of Asian diets and the transformation of food systems: Implications for research and policy," Food Policy, Elsevier, vol. 32(3), pages 281-298, June.
    3. Lighton Dube & Revaux Numbwa & Emmanuel Guveya, 2016. "Determinants of crop diversification amongst agricultural co-operators in Dundwa agricultural camp, Choma district, Zambia," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 6(1), pages 1-13, January.
    4. Salil Bhattarai & Michael C. Lyne & Sandra K. Martin, 2015. "Analysing the robustness of spice chains in Nepal from a smallholder perspective," Asian Journal of Agriculture and rural Development, Asian Economic and Social Society, vol. 5(4), pages 88-102, April.
    5. Bhattari, Salil & Lyne, Michael & Martin, Sandra, 2013. "Analysing The Performance Of Two Export-Oriented Spice Chains In Nepal: Taking The Smallholder Perspective," 2013 Conference, August 28-30, 2013, Christchurch, New Zealand 160194, New Zealand Agricultural and Resource Economics Society.
    6. Ratner, Blake D. & Meinzen-Dick, Ruth Suseela & Hellin, Jonathon & Mapedza, Everisto & Unruh, Jon D. & Veening, Wouter & Haglund, Eric & May, Candace & Bruch, Carl, 2013. "Addressing conflict through collective action in natural resource management:," CAPRi working papers 112, International Food Policy Research Institute (IFPRI).
    7. Cuevas, Agham C., 2014. "Transaction Costs of Exchange in Agriculture: A Survey," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 11(1), June.
    8. Collier, Paul & Dercon, Stefan, 2014. "African Agriculture in 50Years: Smallholders in a Rapidly Changing World?," World Development, Elsevier, vol. 63(C), pages 92-101.
    9. Hou, Jianyun & Huo, Xuexi, 2015. "Transaction Costs and Farm-to-Market Linkages: Empirical Evidence from China Apple Producers," 2015 Conference, August 9-14, 2015, Milan, Italy 211746, International Association of Agricultural Economists.
    10. Ndoro, Jorine & Mudhara, Maxwell & Chimonyo, Michael & Hitayezu, Patrick, 2015. "Farmers' Choice of Cattle Marketing Channels in Rural South Africa: A Transaction Cost Economics Perspective," 2015 Conference, August 9-14, 2015, Milan, Italy 212526, International Association of Agricultural Economists.
    11. Vellema, W. & Buritica Casanova, A. & Gonzalez, C. & D’Haese, M., 2015. "The effect of specialty coffee certification on household livelihood strategies and specialisation," Food Policy, Elsevier, vol. 57(C), pages 13-25.
    12. Ebata, Ayako & Velasco, Pamela & von Cramon-Taubadel, Stephan, 2015. "Distance to market and farm-gate prices of staple beans in rural Nicaragua," Discussion Papers 197540, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    13. Sharma, H.R., 2011. "Crop Diversification in Himachal Pradesh: Patterns, Determinants and Challenges," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 66(1).
    14. Ebata, Ayako & Pacheco, Pamela Alejandra & Cramon-Taubadel, Stephan von, 2015. "Distance to market and farm-gate prices of staple beans in rural Nicaragua," 2015 Conference, August 9-14, 2015, Milan, Italy 211582, International Association of Agricultural Economists.
    15. Valdes, Rodrigo & Von Cramon-Taubadel, Stephan & Engler, Alejandra, 2015. "Transaction costs and trade liberalization: An empirical perspective from the MERCOSUR agreement," Food Policy, Elsevier, vol. 55(C), pages 109-116.
    16. Birthal, Pratap S., 2008. "Linking Smallholder Livestock Producers to Markets: Issues and Approaches," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 63(1).
    17. Hellin, Jon & Lundy, Mark & Meijer, Madelon, 2009. "Farmer organization, collective action and market access in Meso-America," Food Policy, Elsevier, vol. 34(1), pages 16-22, February.
    18. Edward Martey & Prince Etwire & Alexander Wiredu & Wilson Dogbe, 2014. "Factors influencing willingness to participate in multi-stakeholder platform by smallholder farmers in Northern Ghana: implication for research and development," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 2(1), pages 1-15, December.

    More about this item

    Keywords

    Food systems; Agricultural commercialization; Transaction costs; Small farmers; Policy.;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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