Elsevier

Food Policy

Volume 89, December 2019, 101792
Food Policy

Do farmers’ organizations enhance the welfare of smallholders? Findings from the Mozambican national agricultural survey

https://doi.org/10.1016/j.foodpol.2019.101792Get rights and content

Highlights

  • I use panel data to investigate effects of membership in farmers’ organizations.

  • I use difference-in-difference estimators to control for unobservable selection bias.

  • Membership increases marketed surplus, the value of production and total income.

Abstract

Farmers’ organizations have been used as a tool to improve the living conditions of farmers in many countries by improving market access, access to information and capacity to increase production. I employ panel data from Mozambique to investigate how membership in farmers’ organizations impacts smallholders’ welfare. Using difference-in-difference estimators that control for unobservable selection bias, I find a positive impact of membership on the marketed surplus (25%), the value of agricultural production (18%) and on total income (15%, and more than 20% for those whose main source of cash income is the agricultural sector).

Introduction

The majority of the world’s poor are rural inhabitants who depend on agriculture for their livelihoods. Raising the income of the smallholders is therefore crucial to reduce poverty. It is widely recognized that increased commercialization among smallholders’ leads to higher production, specialization and higher incomes (Barrett, 2008). One policy to increase specialization and commercialization has been to form and support farmers’ organizations in developing countries (Bernard and Spielman, 2009, Lele, 1981, Rondot and Collion, 2001). This paper examines whether membership in farmers’ organizations increase farmers’ welfare. Specifically, I investigate the impact of membership on the income, the value of agricultural production and the marketed surplus of the members of farmers’ organizations in Mozambique.

Farmers’ organizations can play an important role in making agricultural development both broad based and pro-poor (World Bank, 2007). In particular, farmers organizations’ can improve smallholders livelihood by: (1) reducing transaction costs in output and input markets (Barrett et al., 2012, Kelly et al., 2003, Markelova et al., 2009, Nilsson, 2001, Poulton et al., 2010), (2) strengthening the bargaining power of the farmers in relation to buyers (Glover, 1987, Sivramkrishna and Jyotishi, 2008), (3) providing information about and access to technology and thereby increase productivity (Caviglia and Kahn, 2001, Devaux et al., 2009, Ma and Abdulai, 2016) and (4) being their voice in the political landscape (Jayne et al., 2010, Poulton et al., 2010). For farmers’ organizations to be pro-poor they must be inclusive as well as income enhancing, meaning that they are open for participation of the poorer part of the population and that all the members experience an increase in income (Verhofstadt and Maertens, 2014, Fischer and Qaim, 2012). Furthermore, farmers’ organizations can be a good way for government and non-governmental organizations (NGOs) to reach the rural poor (Bernard and Spielman, 2009, Nyyssölä et al., 2014).

There is an increasing number of empirical studies evaluating the impact of membership in farmers’ organizations using primary data (Cunguara and Darnhofer, 2011, Fischer and Qaim, 2012, Ma and Abdulai, 2016, Tolno et al., 2015, Verhofstadt and Maertens, 2014). These studies find a positive income effect of membership in agricultural cooperatives focused on apple production in China (Ma and Abdulai, 2016); dairy production in Selale, Ethiopia (Chagwiza et al, 2016); smallholder banana production in Kenya (Fischer and Qaim, 2012), potato production in Middle Guinea (Tolno et al., 2015) and maize and horticultural production in Rwanda (Verhofstadt and Maertens, 2014). Earlier empirical economic studies focus on the impact of a particular activity organized by a farmers’ organization, but not the membership as such. Typical market activities studied are organic farming, fair trade, export products and products sold in supermarkets (Bacon, 2005, Becchetti and Costantino, 2008, Carletto et al., 2011, Moustier et al., 2010). The main finding is that participation in these activities is related to enhanced economic welfare (Bacon, 2005, Becchetti and Costantino, 2008, Carletto et al., 2011, Moustier et al., 2010).

However, there are few, if any studies, that evaluate the impact of membership at the national level based on national representative survey data. One contribution of this paper is that it evaluates the overall and general welfare impact of membership in farmers’ organizations. Thus, the results show the overall impact of farmers’ organization on economic welfare among smallholders without linking the results to a particular farmers’ organization, activity, crop or region in the country.

I investigate the impact of farmers’ organization membership on a household’s marketed surplus, agricultural production and total income. An obvious challenge is the selection of farmers with certain valuable characteristics into farmers’ organizations. To solve this issue, I use the panel structure of the Mozambican agricultural household survey (Ministry of Agriculture, 2002, Ministry of Agriculture, 2005). First, following farmers in and out of membership using a difference-in-differences estimator eliminates the effect of all unobserved farmer characteristics. To further eliminate potential selection biases, I also employ a matching difference-in-differences estimator where initially comparable farmers are followed along different membership paths.

I find a significant and positive impact of membership in farmers’ organizations on the marketed surplus of 25% and the value of production of 18% in the full sample. The effect on total income seems to be around 15%, which is a significant increase in income for a smallholder in Mozambique. For those who mainly depend upon agriculture for their livelihoods, the effect is even larger and the coefficients are respectively 40%, 28% and 20%. Thus, farmers’ organizations seem to reduce transaction costs, and increase market integration and agricultural production for smallholders in Mozambique. Despite this positive welfare impact, I find a surprisingly erratic membership pattern among the smallholders.

This paper is organized as follows. Section 2 gives a short overview of the literature on farmers’ organizations. An overview of Mozambique and its farmers’ organizations is presented in Section 3, and Section 4 presents the theoretical framework and the empirical strategy. Section 5 introduces the data. The results are presented in Section 6. Possible mechanisms behind the results are discussed in Section 7, while Section 8 discusses the erratic membership pattern in farmers’ organizations. Section 9 concludes the paper.

Section snippets

Farmers’ organizations

Farmers’ organizations are by definition a member owned business (Nilsson, 2001) and they usually focus on issues such as marketing, production or credit (Lele, 1981). Historically, they have a good track record of strengthening the position of the farmer in the developed world, and recently they have received renewed interest as a tool to increase market participation and welfare among smallholders in developing countries (Bernard and Spielman, 2009, Fischer and Qaim, 2012, Verhofstadt and

Poverty, agriculture and farmers’ organizations in mozambique

Agriculture is the main economic activity for the majority of the Mozambican population and poverty rates are higher in rural areas (Arndt et al., 2012). Increased agricultural production was one of the contributing factors for the 15 percentage points reduction in poverty rates in the six-year period prior to 2002/2003 (Arndt, James, and Simler, 2006). In the subsequent six-year period, poverty rates did not fall further. Low growth in agricultural productivity, weather shocks and high

Analytical framework and empirical method

  • (a)

    Analytic framework

An analytical framework is developed to clarify and discuss possible impact of membership in farmers’ organizations on the outcome variables. This framework is based upon the literature review and knowledge of how farmers’ organizations work in Mozambique. In the framework, a farmer with a vector of characteristics z and membership status m0,1 obtains income:Ym=pmQn;z,m-n'rm-Fee.

Here, production Q depends on agricultural inputs used (n), as well as characteristics (z) and

Data and descriptive statistics

  • (a)

    Data source

The data come from the official agricultural household survey produced by the Ministry of Agriculture in Mozambique with the assistance of Michigan State University. I use panel data collected in 2002 (Ministry of Agriculture, 2002a) and 2005 (Ministry of Agriculture, 2005), which represents the only panel in the data. This is the latest panel available from Mozambique. The sampling is based on the Agricultural and Livestock Census from 2000 and use the National Statistics

Results

  • (a)

    Difference-in-difference estimator

Table 3 presents the results of the difference-in-difference estimators presented in equation15 (2) for the full and the restricted sample. I have estimated five different specifications of the model (A–E) based on inclusion of different controls.

From Table 3, we see

Possible mechanisms explaining the results

From the analytic framework we know that membership in a farmers’ organization can affect both product and input prices, market access and sales volumes, production volume, yield levels and production technology of the members. These factors affect my outcome variables; the marketed surplus, the value of agricultural production and the overall income of the household; directly, but differently. I use these differences, my data and the overview of farmers’ organizations in Mozambique to discuss

Erratic membership pattern in farmers’ organizations

My results show that membership in farmers’ organizations increase the overall income of members, particularly for smallholders whose main cash income is from agriculture. Given the positive impact on all the outcome variables of being a member in a farmers’ organization, it is surprising to see that as many as 64% of the members in 2002 in the full sample left their farmers’ organization before 2005, and as many as 76% in the restricted sample. Two possible explanations are that the farmers

Conclusion

My results show that there is a positive causal impact of membership in a farmers’ organization on the marketed surplus and the value of agricultural production. The results also hold for the total income of the household, though the significance of this result varies. The impact on the value of agricultural production and total income is around 18% and 15%, respectively, which is a significant increase in production and income for poor smallholders in Mozambique. The impact on marketed surplus

Acknowledgements

I would like to thank the editor and two referees for useful comments. In addition, I am grateful for comments and encouragement from a number of people including Frode Alfnes, Arild Angelsen, Cristopher B. Barrett, Therese Dokken, Caroline Wang Gierløff, Jo Thori Lind, Carl-Erik Schulz and Sofie Skjeflo. Furthermore, I am grateful to the Mozambican Ministry of Agriculture, which has granted me access to the data. Any mistakes that reminds are my own.

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