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DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES Contract farming and adaptation: a blessing or a curse? Pieter Q. Terpstra, Abigail Ofstedahl and Ian.

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Presentation on theme: "DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES Contract farming and adaptation: a blessing or a curse? Pieter Q. Terpstra, Abigail Ofstedahl and Ian."— Presentation transcript:

1 DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES Contract farming and adaptation: a blessing or a curse? Pieter Q. Terpstra, Abigail Ofstedahl and Ian Christoplos

2 DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES First, a few caveats…  I am not an economist  We haven’t done any research yet  No empirical data  I have never met my coauthors

3 But nonetheless…  The climate change discourse needs to break out of the “yeoman farmer fallacy” and failures to recognise the role of contract farming in climate adaptation exemplifies this  Simply producing advice on “what farmers should do” in response to climate change ignores who and how decisions are being made  Perhaps nowhere more glaring than in the failure to recognise how contract farming frames adaptive capacities within broader innovation systems DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

4 Climate change and changes in agricultural systems, both subject to …  Incremental change  More frequent extreme events  Variability  Uncertainty Past advice and yield gap assumptions are coming into question, along with past tendencies to blame “risk averse farmers” for failures to achieve production goals DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

5 Institutions influencing adaptive capacities  Prevailing focus on national plans/policies and/or capacities within households and communities…  Leads to tendencies to ignore the central role of meso level institutions (e.g., extension, farmer organisations, financial service providers, etc.)  These institutions are involved in new contracting arrangements partly as ways to deal with local adaptive processes DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

6 When the meso level is mentioned…  Primarily as implementers of national plans (rather than actors in local contracts)  Or as the “problem” with regard to meeting household needs  Tend to be seen as exemplifying problems of path dependency  Normative push distracts from need to understand dynamics at this level regarding institutional roles, market dynamics and adaptive capacity constraints DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

7 Farmers adapt to climate change as part of adaptation to markets  Meso level institutions contracted in to provide both climate and market information (though rarely integrated)  Affordable financial services reliant on information about multiple risk and faith in farmer capacities to manage this risk  Farmer organisations, NGOs and others increasingly recognising that traditional extension services are not up to the challenge of integrated response to a range of risks, therefore… DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

8 Contract farming as a way of embedding a range of services  Failures to integrate management of a range of risks is leading to new interest in contract farming among those who formerly shunned the practice as “exploitive”  Seen as a way of “embedding” a range of market, climate (etc.) services in a risk spreading package  But is this another normative assumption that is also unanchored in empirical analyses of these relationships? DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

9 Contract farming “embedded services” assumed to reduce risk due to:  Allowing market actors with greater access to information and scenario planning to make key decisions  Improved access to new technologies that are more appropriate (?) for managing climate variability and uncertainty  Reduced transaction costs and assurance that inputs, finance, etc. will be timely  Sharing of losses in case of crop failure DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

10 Contract farming “embedded services” assumed to reduce risk due to:  Access to inputs of guaranteed quality  Addresses scale disadvantages  Price predictability gives households greater chance to plan their livelihoods (including off-farm risk spreading) Above all, contract farming may be the only option available for smallholders to access markets with strict requirements for timeliness, bulk and quality, so if the market is to be part of the solution… DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

11 But this also means giving up some of the autonomy of autonomous adaptation  Can be a problem, as it is not necessarily correct that market actors have a better understanding of climate risk at local level  When focused entirely on the market, may not be in tune to need to balance this with climatic “resilience”  Market actors have greater capacities to manage risk than poor farmers, which implies different inherent adaptive capacity and failures to respect farmer constraints DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

12 But this also means giving up some of the autonomy of autonomous adaptation  Rigid planting and harvesting times may not reflect climatic realities  Autonomous adaptation is often about risk spreading through diversification, whereas contract farming tends to favour specialisation  A shift to market orientation may leave producers at greater risk in relation to food price spikes when they rely on food purchases rather than subsistence (shift from local to global risks) DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

13 The devil is in the details  Does the contract include technical assistance?  Does it include input/credit provision?  Is there a force majeure clause and if so, what does it include?  Does the production system lock the farmer into a given set of investments (stranded assets, literally and figuratively)?  Skewing of benefits towards men’s (high risk) rather than women’s (risk spreading) strategies? DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

14 Incentives and disincentives for buyers to uphold contracts  Reputational incentives if buyers reliant on trust from farmers to maintain a production base (NB! climate pressures to gain control over production for national food security)  Capital incentives if contract involves considerable investments (may be significant if infrastructure involved)  Over-supply (due to favourable weather) can lead to over-production and lower prices, leading buyers to break contracts DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

15 Incentives and disincentives for farmers to uphold contracts  If the contract is perceived as contributing to predictability in relation to livelihoods and food security, contracts likely to be respected by farmers  Overly restrictive contracts that stand in the way of adaptive measures may be a disincentive to upholding contracts  Climate (un)aware design of packages of services likely to be a determining factor DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

16 Ways to enhance climate relevant contract farming  Inclusion of weather and seasonal forecasting in mutual decisions  Allowing for flexibility in planting schedules (within market parametres)  Working with farmers and local extension services in selection of varieties  Appropriate force majeure clauses  Including longer term climate adaptation advice in packages  Insurance related innovations DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES

17 Getting from here to there  Recognise that these meso level processes of which contract farming is a part are central to the climate change adaptation agenda in agriculture  Bury the yeoman farmer fallacy, but recognise that subsistence and risk spreading strategies are still important  Get some real data on these issues! DIIS ∙ DANISH INSTITUTE FOR INTERNATIONAL STUDIES


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