1. Agricultural Systems and Their Determinants Dr. George Norton Agricultural and Applied Economics Virginia Tech Copyright 2009 AAEC 3204

2. Objectives 1. Identify determinants of agricultural systems 1. Identify determinants of agricultural systems 2. Explore various types of farming systems, including examples from China and India 2. Explore various types of farming systems, including examples from China and India 3. Consider factors that cause changes in farming systems over time 3. Consider factors that cause changes in farming systems over time

3. Determinants of Farming Systems Anywhere

4. Classification of Farming Systems

5. Examples of farming systems

7. Planting in Ghana

8. Weeding in Ghana

9. Feeding goats in Mali

10. Intensive vegetables and poultry in India and Bangladesh

11. Bangladesh Magic Trap

12. Ecuador Potato – Pasture System

13. Objectives today 1. Examine changes in agricultural systems in large developing countries 1. Examine changes in agricultural systems in large developing countries ChinaChina IndiaIndia BrazilBrazil 2. Consider determinants of the changes

14. Major factors affecting change in agricultural systems over time Population and income growth Population and income growth Changes in relative endowments of land and labor Changes in relative endowments of land and labor New technologies New technologies Changes in political system Changes in political system

15. Reforms in India and China Both India and China had lower per capita income than sub-Saharan African countries in the 1970s, but have outpaced them greatly since then. Both India and China had lower per capita income than sub-Saharan African countries in the 1970s, but have outpaced them greatly since then. Chinese agriculture has grown more rapidly than India. Why? Chinese agriculture has grown more rapidly than India. Why? China liberalized its institutions in agriculture first, while India focused more on Macro policies

16. Indian reforms o Green revolution in seventies with productivity increases slowing by the eighties o Macroeconomic reforms in early nineties o More recent agricultural sector and trade reforms (still a ways to go) o Investment in research increasing

17. India

18. Chinese Agriculture ½ the cropland of the United States ½ the cropland of the United States ¾ acre per Chinese farm worker compared to 120 acres in the United States ¾ acre per Chinese farm worker compared to 120 acres in the United States 800 million farmers in China compared to about 7 million in the United States 800 million farmers in China compared to about 7 million in the United States United States uses substantially more machinery United States uses substantially more machinery

19. China has been changing

20. What Changed in Chinese agriculture? 1. Institutions (but what institutions?) 1. Institutions (but what institutions?) 2. Technologies 2. Technologies Which do you believe was more important in spurring growth, institutions or technologies? Which do you believe was more important in spurring growth, institutions or technologies?

21. Types of Chinese farms 1) Communes – Major reforms began in 1979: Households within communes were assigned individual pieces of land. These individual pieces often organized into cooperatives. 2) State farms (very small percent of total) 3) Individual farms (significant share of the farms with land leased from the government). Almost all farms now run under a “contract responsibility system” This system was in place by 1985, but still tinkering with the leasing system

22. China

23. China

24. Economies in transition: Effects on Farming systems Why has China’s (much) slower political transition allowed agricultural productivity to increase more rapidly than the former Soviet Union’s more complete but rapid political transition? Why has China’s (much) slower political transition allowed agricultural productivity to increase more rapidly than the former Soviet Union’s more complete but rapid political transition? Property rights through contract responsibility systemProperty rights through contract responsibility system Freeing up of markets and secure institutions (including wholesale and retail marketing institutions)Freeing up of markets and secure institutions (including wholesale and retail marketing institutions)

25. The importance of the rural non- farm sector Extremely important when an agricultural sector has is many small farms Extremely important when an agricultural sector has is many small farms Input suppliers, machinery repair shops, consumer goods, and many other small industries absorbed workers and spurred growthInput suppliers, machinery repair shops, consumer goods, and many other small industries absorbed workers and spurred growth

26. What institutions are necessary for agricultural growth to occur? 1. Property rights 1. Property rights 2. Rule of law – ability to enforce contracts and rules to maintain market mechanism 2. Rule of law – ability to enforce contracts and rules to maintain market mechanism 3. Financial 3. Financial 4. Insurance 4. Insurance 5. Input supply and marketing 5. Input supply and marketing

27. What about Brazil? o Dualist structure in agriculture o Rapid growth in large scale agriculture o One of the few countries still bringing in large new tracts of land o Investing in agricultural research o Large exporter and potential to be bigger o Environmental issues

28. Conclusions Farmers are rational and relatively efficient Farmers are rational and relatively efficient Traditional and all farming systems are inevitably changing Traditional and all farming systems are inevitably changing Many technical and institutional factors are driving these changes Many technical and institutional factors are driving these changes As systems such as those in China, India, and Brazil change, the effects spill over to the rest of the world As systems such as those in China, India, and Brazil change, the effects spill over to the rest of the world