Small farms, large farms

Of all food consumed worldwide, 70 percent comes from small family farmers, according to the Food and Agriculture Organization of the United Nations.

In the Philippines, 88 percent of all farm holdings are under 3 hectares, with those under one hectare comprising the bulk (57 percent), based on the last Agricultural Census in 2012.

What’s remarkable is that our average farm size has shrunk from 2.84 hectares in 1980 to less than half of that (1.29 hectares) by 2012, as the number of farms jumped by 62.6 percent from 3.42 to 5.56 million.

Clearly, partitioning of farms among offspring as they are passed on to the next generation is leading to increased farm fragmentation through time.

While this is not unique to the Philippines, some countries have the practice of having only the firstborn or a designated offspring inherit land from the parents, thereby preventing such fragmentation. A major challenge to our own agricultural development has been this continuous natural fragmentation.

What this all means is that we, along with the rest of the world, simply have to plan our agricultural futures on the basis of small family farms dominating the landscape.

There are upsides and downsides to this. On the upside, it makes for a more “democratized” farm sector where there is much wider participation and sharing of benefits among the rural population.

It is also more consistent with greater farm diversification, with all the benefits of better soil conservation, reduced vulnerability to widespread pest infestation, and richer biodiversity.

This is in contrast to large-scale monoculture plantation farming, where these upsides are the downside. Smaller farm holdings are also expected to drive the farmer to make more intensive (hence more productive) use of the land, as opposed to having a large landholding to work with, where scale and volume could make up for lower farming intensity.

This was in fact a major efficiency argument for agrarian reform, beyond the social justice and equity argument that was the primary basis for the political support behind it.

The reason it did not actually happen in the Philippines was that our agriculture finance system failed our agrarian reform beneficiaries (ARBs), depriving them of the capability to access the working capital needed to apply right levels of the needed inputs to farm their land more intensively, and productively.

On the other hand, it is large agribusiness players who receive the bulk of loans lent by the banks to comply with mandatory allocations to farm lending under the Agri-Agra Law.

If we cannot realistically expect substantial improvement in making credit widely accessible to most of the country’s small farmers, then we would do well to encourage commercial-scale farming as well.

This is to take advantage of what is the downside to small farms, but an edge for large ones: productivity gains from economies of scale.

With better access to bank loans and probably deeper pockets to begin with, large players are better positioned to apply up-to-date technologies to improve productivity via improved seeds, mechanization, and superior farm management systems.

We are seeing this in sugarcane production, for example, where consolidation into large farming units is done either by wealthy players leasing lands from ARBs, or by the ARBs organizing themselves into block farms.

Major dailies recently reported on business leader Manuel V. Pangilinan’s intention to invest in agriculture. The Zobel-Ayalas have already been working with the Department of Agriculture (DA) since 2017, when the conglomerate piloted DA’s Corporate Rice Farming Project through the Ayala Multipurpose Cooperative and Seda Atria Hotel in Iloilo.

If more of our top business titans follow suit, we may yet see our farm sector catch up with that in our agriculturally dynamic neighbors Thailand, Malaysia, and Vietnam, where the same small farm-large farm dichotomy prevails.

And if we provide the right environment for it, those big players can hold the hands of our far more numerous small farmers, for a synergistic partnership leading to a truly productive, competitive, and food-secure Philippine farm sector.

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