Semi—subsistence farming: a
remnant from the past or a provider
of public goods and a cultural asset?
Sophia Davidova, School of
Economics, University of Kent
Context
•
•
•
The last two enlargements brought millions of small farms into the EU,
most of which semi-subsistence (SSFs):
– The persistence of SSFs has been explained by market failure and
particularly high transaction costs
– SSFs market integration and competitiveness are low
– The lack of engagement in markets is seen as an impediment to
economic growth and contributor to rural poverty (World Bank,
2007); BUT
– SSFs populate rural areas often the most fragile ones; maintain local
rural communities; provide cultural and environmental services
(public goods)
Similar issues affect all small farms (they may or may not be SSFs but are
equally important for rural areas)
Therefore, the current situation and the effects of structural change
on the survival (or disappearance) of SSFs and small farms in
general are of great significance for rural development
A visual context: where can we see the importance
of SFs and SSFs?
Landscape
HNV pastures
Farmers
markets,
local food
Traditional lifestyle, cultural heritage
Outline
•
•
•
•
•
Definitional and measurement issues
Main barriers to market participation
SSFs role in rural development
Typologies
Policy implications
This presentation benefits from the collaborative work on
EU FP6 SCARLED project together with L. Fredriksson
(University of Kent) and M Gorton (University of
Newcastle)
Concepts
• What are SSFs? How to define these farms?
• Lack of consensus on definition (Barnett et al. 1996; Kostov and
Lingard, 2004)
• Production versus consumption approach
• Wharton (1970) use 50% of output sold as threshold for classifying
farms as mainly subsistence /semi-subsistence or mainly
commercial
– Farms placed on a continuum from 0 to 100% depending on proportion of
output sold
– Extremes are purely subsistence and purely commercial operations
• Lack of adequate data. Some evidence from EU Farm Structural
Survey, however not comprehensive
Measurement issues
• Three main criteria:
– Physical measure - e.g. UAA: McConnell and Dillon (1997)
suggest 0.5-2.0 ha of cultivated land as a good indicator of semisubsistence farms
– In the EU for policy purposes small farms are defined as <5ha
– BUT land fertility and farm specialisation vary
– Economic size (ESU) – less than 1 ESU (SFs); 2-8 ESU – small
(SSFs?) (Eurostat)
– Market participation – the share of output sold -Council
Regulation EC No. 1698/2005: SSFs are “agricultural holdings
which produce primarily for their own consumption and also
market a proportion of their output”
• Other e.g. standard labour requirement (SLR) used in the UK which
allows to differentiate between hobby farms with SLR less than 0.5
person-years; part-time farmers 0.5-<1 person-years; small fulltime - 1<2 person-years
The importance of SFs, SSFs and small
farms within farm structure
Some aggregate facts, EU-27 in 2007
Number of holdings (million)
Share in the total number of holdings(%)
UAA (million ha)
Share in total UAA (%)
ESU <1 ESU 1<8 0<5 ha
6.4
4.7
9.6
46.6
34.4
70.4
11.7
27.2
14.4
6.8
15.8
8.4
Total
13.7
100.0
172.5
100.0
Calculations based on Eurostat Agriculture database, FSS data
Measurement (cont)
Market participation criterion: Share of holdings producing
primarily for their own consumption and the share of UAA they
manage, 2005 and 2007 (excluding holdings <1 ESU)
What are the barriers to market
participation specific for SSF?
• Transaction costs (Goetz, 1992; Swinnen, 2005; Gorton
et al. 2006)
• Costs of gaining certification and meeting standards –
public and private (Dries et al. 2004; Reardon, 2006)
• Non-pecuniary benefits (hobby farming) (Holloway,
2002)
– Subsistence mindedness (Mellor, 1970)
Role of small and SSFs in agriculture
and rural development
• At least three important functions:
– Buffer against poverty - safety net
– Basis for diversification and pluriactivity in rural
areas
– Provision of environmental public goods;
maintaining rural traditions and cultural heritage
Contribution of the value of non-marketed output
(subsistence production) to household income (%)
Households Households
below
above
poverty line poverty line
Bulgaria
Hungary
Poland
Romania
Slovenia
41.7
19.2
39.0
58.5
23.1
24.5
5.7
22.7
31.5
9.0
Country
average
Households
shifted from
below to
above
poverty line
29.0
7.6
24.2
32.9
12.5
17.1
3.5
7.4
2.8
8.4
Source: SCARLED
Diversification
• The West European experience shows that if small
farms are to survive, they need to decrease their
reliance on farm incomes and combine their farming
with diversification of their activity or with off-farm
employment
• Normally it is thought that diversified enterprises
require capital or rich farm assets which are beyond
the reach of SSFs, particularly in NMS
• However there are several success stories of small
farms’ diversification
Diversification examples
Environmental and cultural benefits
stemming from SFs and SSFs
•SSFs support HNV farmland (Birdlife International,
2008)
•Lower stocking densities and lower use of chemical
inputs support higher biodiversity
Environmental and cultural benefits
stemming from SFs and SSFs (cont)
• Case study Romania (Page, 2010):
– SFs and SSFs are associated with the management of large
areas of semi-natural grassland
– This forms the basis for low intensity HNV livestock
farming
– Due to their small size and mixture of grazing and field
crops, SFs and SSFs contribute to a landscape rich in
biodiversity
HOWEVER
– It is difficult for policies to reach this group despite their
importance for environmental benefits as most of SFs are
not registered
– In the Romanian System of National Accounts these farms
are located in the sector ‘non-observed/non-registered
economy’
How to maintain and enhance the delivery of
public goods by SSFs in EU?
• What incentives should be in place for SSF to continue the provision
of environmental public goods?
• How can policies compensate the smallest farms (often not
registered) for the provision of public goods? Is it necessary?
• How can policy CAP/national help decrease the barriers to
diversification faced by SSFs and small farmers?
• Two major issues:
– Despite the CAP, evidence from various Member States indicates that
after the accession to the EU those exiting the sector were
disproportionally weighted to small farms
– SSFs are not homogenous
Structural Change: Spain
Economic size
(ESU)
<2
2-8
8-6
16-40
40-100
>100
1989
% farms
%
SGM
63.4
9.5
24.3
23.1
7.4
18.9
3.7
20.4
0.9
12.9
0.3
15.1
1999
%
farms
47.1
28.6
11.0
9.1
3.2
1.1
%
SGM
3.8
12.9
13.4
23.9
20.1
25.9
Source: Iraizoz (2008)
Structural Change: Poland
Farm size (ha)
0-1
1.01-2
2.01-5
5.01-10
10.01-15
15.01-20
20.01-50
> 50 ha
Total >1 ha
Source: Wołek (2009)
Index 1996 = 100
2005=100
2002
2005
2007
2007
111,8
94,3
81,9
70,2
93,7
127,7
192,1
94,2
96,7
87,6
74,5
77,2
86,2
131,3
210,8
87,3
91,4
92,0
76,8
76,7
86,8
136,7
270,8
88,6
81,5
94,6
105,0
103,1
99,4
100,6
104,1
128,5
101,4
Typologies of farmers: EU-15 (Hawkins et al., 1993) 24
areas in 12 EU countries
Typologies of farmers: NMS, Davidova et al
(2009) 15 regions in 5 NMS
Policy implications – can one-size-fit all?
• SSFs are heterogeneous
• Most are small, run by older farmers who are either
unwilling to change or intend to disengage from
farming altogether
• However, there is also a significant minority of SFFs
who are seeking to develop the business, either
agriculturally or through some form of diversification
• There is also a group tending to become more reliant
on off-farm income
• And there are hobby farmers who will hardly
respond to any policy measures or market signals
• Are the policy needs of different types of SSF
different?
Policy Implications (2): how to decrease the barriers to
market participation specific for SSFs and small farmers
• The benefits of SFs and SSFs can hardly be seen in measures
of agricultural productivity and efficiency
• However they are important providers of environmental,
cultural and community benefits valued by European citizens
• Current CAP is not effective for SSFs and small farms
• Problems:
– i) difficulty to identify them as a large fraction are not registered
– ii) prohibitive transaction costs to reach millions of tiny SFs and SSFs
– iii) difficulty to reach them by policies requiring formal co-operation
due to farmers’ reluctance to co-operate
– iv) eligibility thresholds for some CAP measures
– v) need to fill forms and/or develop business plans
Examples of difficulties to reach SSFs/small farms by CAP
measures: Pillar I
Minimum thresholds
Minimum thresholds
Value
Value € Ha
400
2
200
0,5
Belgium
Bulgaria
Czech
Republic
Denmark
Germany
Estonia
Ireland
Greece
Spain
France
Italy
Finland
Sweden
UK
200
300
300
100
200
400
300
300
400
200
200
200
€
Cyprus
Latvia
Lithuania
Luxemburg
Hungary
Malta
Netherlands
Austria
Poland
Portugal
Romania
Slovenia
Slovakia
5
5
4
3
3
0,4
2
4
0,5
3
4
5
Ha
300
100
100
300
200
500
500
200
200
200
200
300
200
0,3
1
1
4
0,3
0,1
2
2
0,5
0,3
0,3
0,3
2
Source: DG Agri
e.g. in Romania around 3 million SSFs are not eligible for SAPS as they do
not fulfil the eligibility criteria (Guirca, 2008)
ha
Average size of SAPS beneficiaries (ha)
200
180
160
140
120
100
80
60
40
20
0
186
186
165
159
146
148
127
120
10
11
24
42
8
8
2004 2005 2006 2007 2004 2005 2006 2007 2005 2005 2005 2007 2007 2008
Czech
Slovakia
PL
LI
HU
BG
Source: Davidova, 2008
e.g. in Bulgaria SAPS beneficiaries only 20% of the total No of holdings
reported by Eurostat Farm Structure Survey
RO
Examples of difficulties to reach SSFs/small
farms by CAP measures: Pillar 2
Target for the number of farms to benefit from the
measure ‘Support to SSFs undergoing restructuring’
Target number as
% of all farms
between 1 and 8
ESUs (2007)
Bulgaria
Hungary
Latvia
Lithuania
Romania
19.7
2.7
6.9
4.7
9.0
Key policy questions for discussion
•
•
•
•
•
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There are several issues concerning the design and delivery of CAP Pillar 1
and Pillar 2 measures relevant to SSF and small farms
Is there a case to define specific policy measures/policy packages to
facilitate SSF market participation/commercialisation?
Is there a justification not to pursue commercialisation but to pay
(compensate) SSFs for the delivery of public goods?
If the answer is yes, HOW?
– New CAP Pillar? New RD Axis? Some social/cohesion RD package for
SSFs and small farms?
Co-operation between small farmers is central to improve their access to
markets but SSFs, particularly in the NMS, are reluctant to cooperate:
– Reported in case studies on Hungary, Romania, Poland
In view of this, should networking be given a high priority for SSF, and if
so, what forms would be the most effective? (so far very low interest in
the support to producer groups in NMS)