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Xinshen Diao - "An Evolving Paradigm of Agricultural Mechanization Development. How Much Can Africa Learn from Asia?"

Xinshen Diao
An evolving paradigm of agricultural mechanization development: How much can Africa learn from Asia?
FEB 9, 2021 - 09:30 AM TO 10:30 AM EST

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Xinshen Diao - "An Evolving Paradigm of Agricultural Mechanization Development. How Much Can Africa Learn from Asia?"

  1. 1. An Evolving Paradigm of Agricultural Mechanization Development How Much Can Africa Learn from Asia? Xinshen Diao, Hiroyuki Takeshima and Xiaobo Zhang Development Strategy and Governance Division International Food Policy Research Institute Washington DC | February 9, 2021
  2. 2. Background Growing interest among governments and other stakeholders in Africa • Mechanization has been integrated into agricultural development strategy documents at continental and country levels “Africa’s agriculture will be modern and productive, using science, technology, innovation and indigenous knowledge. The hand hoe will be banished by 2025 …” (Agenda 2063, p3, 2015) “Goal #5 commits countries to banish the hand hoe by 2025 …” (Malabo Montpellier Panel, p24, 2018)
  3. 3. Research Questions • Has demand reached the level necessary to justify public support for mechanization? • Can that demand be met through the mechanization market (particularly hiring market)? • Are there market failures in the mechanization market and what are they? • What can governments do to support mechanization? • Should we be concerned about a repeat of government failures that happened in the 1970s?
  4. 4. Structure of the Book ▪ Part 1 develops an updated theoretical framework that is used to synthesize past lessons • The framework integrates Pingali, Bigot, and Binswanger’s 1987 hypothesis, which centers around the theory of farming systems developed by Boserup (1965), with the induced innovation theory of Hayami and Ruttan (1970, 1985) • The framework is expanded to account for market failures in both agricultural machinery investment and mechanized service provision ▪ Parts 2 through 4 are devoted to country studies, covering 8 Asian countries (Parts 2-3) and 5 African countries (Part 4)
  5. 5. The Theoretical Framework ▪ Demand for plowing with animals or tractors is the result of farming systems evolution • With a shortened fallow period, burning to remove emergent grasses between seasons becomes infeasible • Land preparation labor requirements become too high for manual hoeing alone (Boserup 1965; Ruthenburg 1980) ▪ Driving factors for farming system evolution • Population growth • Rising market demand for agricultural products ▪ Induced technological and institutional changes with farming systems evolution • Agricultural intensification through adopting modern inputs – improved seeds, fertilizers, and agrochemicals • Labor saving technology through mechanization • Institutional innovations, including agricultural R&D, changes in property rights, and land tenancy Sequential adoption of mechanization according to Pingali, Bigot, and Binswanger (1987) Intensification level Low (forest and bush fallow) Medium (short fallow) High (annual cultivation) Industrialization Source of power Human Human and animal Animal and machine Machine Functions mechanized None Plowing (animal) Seeding, weeding, winnowing, harvesting Plowing, threshing, harvesting, milling
  6. 6. Rising Ruthenburg’s R-value, Population Growth, Urbanization & Expansion of Nonagricultural Economies 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1 1.2 ZMB MOZ KEN SEN NER ETH UGA GHA TZA BFA CMR MWI NGA RWA R-value: Harvested areas / Arable land + permanent pasture & meadows 1960s 2000s 2010s 0.0 10.0 20.0 30.0 40.0 50.0 60.0 0 20 40 60 80 100 120 140 RWA SEN ZMB MWI BFA NER CMR MOZ GHA UGA KEN TZA ETH NGA Urban share (%) Population, million Total population and urban share Population, 1970 Population, 2019 Urban share, 1970 Urban share, 2019 0 20 40 60 80 100 Share of agricultural employment (Employment in total economy = 100) 1970s 2010s
  7. 7. Supply of Mechanization and Market Failures ▪ Hiring market in smallholder dominant agriculture • Hiring in services – the only way for many farmers to access mechanization • Hiring out services – some medium and large farmers who own tractors want to hire out services to help them recoup their machinery investment as their farm sizes are not large enough to fully utilize their machinery ▪ Market failures in machinery investment • Available financial instruments for a lump-sum investment • Size of tractors highly associated with the price • Knowledge gap in appropriate machinery • Opportunities for multi-functionality ▪ Market failures in hiring service provision ▪ Coordination among small farmers in a community ▪ Infrastructure and logistical conditions and information coordination for migratory services
  8. 8. Small harvester in China Larger harvester in Ethiopia Large tractor in Ethiopia Smaller tractor in Myanmar Large tractor in Ghana Power tiller in rainfed area of Bangladesh
  9. 9. The Role of the Public Sector and Policy ▪ Avoid repeating historical failures of direct government interventions • At least 11 African countries have supported government-run or highly subsidized tractor hiring services in recent years ▪ Emphasize private-sector-led market development ▪ Broaden agricultural R&D to identify appropriate mechanization technology • Increase knowledge for diverse soil types – a crucial knowledge gap for promoting appropriate machinery • Adapt imported mechanization models to local conditions, develop new designs, and educate service providers • Support small local manufacturers in developing simple equipment complementary to large imported machinery ▪ Policies should prioritize market-led hiring services • Minimize market distortions when subsidies are necessary • Cherry-picked subsidies often create rent-seeking behavior and compete with the private sector rather than supporting it • Create better conditions for migratory mechanization services • Encourage coordination among farmers (e.g., via farmer-based organizations) ▪ Promote better mechanization practices • Some mechanization practices (e.g., harrowing or second-plow) can benefit farmers with higher yields and create more demand for tractors beyond primary plowing • Promote smaller tractors appropriate for local conditions through demonstrations and a small subsidy at the early stages
  10. 10. Asian Experiences
  11. 11. Mechanization in Asian countries has taken off despite small farm size 0 10 20 30 40 50 60 70 80 90 100 0.21 0.4 0.47 0.6 2.4 2.5 3.1 China Viet Nam Sri Lanka Bangladesh Nepal (Terai) Myanmar Thailand % of Mechanization Farm Size and Country Land preparation Harvesting Average 444 ha in the US About 3 ha in Ghana Mechanization in Land Preparation and Harvesting (Paddy production, by farm size and country) Land consolidation and the re-design of the rice land to form large contiguous fields are essential for the adoption of combine harvesters … – Pingali (2007) on Southeast Asian countries Average farm size (ha) NA
  12. 12. Machinery is widely used in different stages of crop production, but machinery ownership is low Winnowing Rental thresher Combine harvesting service Power tiller Photos taken in Myanmar Power tiller ownership: India: 0.21% Nepal: 1.67% Viet Nam: 2.40% Myanmar: 4.10% in Delta 1.90% in dry zone Bangladesh: 4.00% Sri Lanka: 7.14% China: 9.02% Thailand: 26.50%
  13. 13. The use of machinery has little to do with farm size thanks to the active ploughing and harvesting service market – Myanmar Only 1% of households owned 4WT or combine harvesters in Myanmar, suggesting most farmers rely on hiring services Share of Households Using Machinery for Land Preparation and Harvesting in Myanmar by Farm Size Group (2015/16)
  14. 14. A Rice Harvesting Route Taken in Sichuan, Point B Traveling 1,079 miles (about from NYC to Orlando) Cross-regional mechanization harvest services become popular – China ▪ Form cooperatives: 3–4 operators per team; travel in convoys with combines on trucks (average 10 trucks) ▪ Chase production seasons for up to 8 months (average half year) ▪ Charge service fee half of the labor hiring cost (about US$200 per hectare)
  15. 15. Rising wages are a key driver –– an example from Myanmar ▪ Growing migration • Very recent phenomenon — since 2010 • Migration to Thailand and other neighboring countries • Domestic migration (within Myanmar), urban areas ▪ Surge in real agricultural wages • 2011: MMK 2,600 ($1.8) • 2013: MMK 2,800 ($2.0) (↑ 8%) • 2016: MMK 3,700 ($2.6) (↑ 32%)
  16. 16. Infrastructure and policy: Myanmar experience ▪ Wherever there is road access, there are combine harvesters and tractors ▪ No tariff on agricultural machinery imports ▪ Farmers can use Land Form 7 as collateral to get bank loans with an interest rate between 12 and 14 percent
  17. 17. Conclusion and Implications ▪ Agricultural mechanization has taken off in Asia mainly through hiring service markets despite small farm size ▪ Rising wages are a key driver behind the rapid mechanization ▪ Rural road and other infrastructural conditions facilitate hiring market development and the spread of mechanization ▪ Ability to produce low-price agricultural machinery domestically or proximity to such neighboring countries may be an important factor for technology spillover in Asian countries
  18. 18. African Experiences
  19. 19. Growing mechanization adoption in certain pockets and among certain types of farms in some African countries Source: Tanzania Chapter Draft animal 4-wheel tractor 2-wheel tractor Tanzania Low adoption (& with root / tree crop system) Low adoption (& low rural wages) High adoption (& higher rural wages with cereal- based system) Low High Source: Ghana / Nigeria Chapters (Ghana) (Nigeria)
  20. 20. Significant effects of mechanization in early adopting areas => Suggests robust (albeit gradual) growth in demand Household income NGA Modern inputs (chemical fertilizer) NGA Animal saving NGA Yield (combine harvesters) ETH TZN Land cultivated NGA GHN TZN Labor displacement – insignificant NGA TZN
  21. 21. 0.2 0.7 6.2 12.9 2006 2013 Ghana % owning tractors % renting in agricultural machinery (most are tractors) Nigeria 0.1 4.0 2010-2012 % owning tractors % using tractors Custom hiring services are meeting growing demand Combine harvesters in Ethiopia (movement for migratory services) Source: Ethiopia Chapter Source: Ghana Living Standard Survey Source: Nigeria LSMS-ISA
  22. 22. Example: Ghana under AMSEC Phase I (2007- 2015) ▪ Low machine utilization rate, profitability, & loan repayment rate to government • Short peak season with limited coverage areas • Limited tractor use other than primary plowing • Required a large tractor fleet per center ▪ Insufficient supply in parts, repairs / maintenance, lack of after-sale support, and lack of skilled tractor operators ▪ Frequent change in imported tractor brands => Most service centers cannot reach break-even utilization rate (horizontal axis) Governments’ efforts in supporting service providers continue to face challenges
  23. 23. Efficiency gaps between government-selected and other service providers (an example from Nigeria) Gov’t selected service providers Other service providers Gross revenue 8 13* Own-farm use (market-value) 2 4 Hiring out 6 9 Cost 4 6 Operators 1 2 Fuels 2 3 Repairing 1 1 • Improving tractor markets is important • The efficiency of government-selected service providers must increase Profitability of tractor use (US$1,000 / 12 months) (Average per surveyed service provider) 3439 33 65 75 111 80 43 242427 34 63* 5559* 104* 119* 147* 126* 65 44* 57* 66* 72* 1 2 3 4 5 6 7 8 9 101112 Month Government-sourced Market-sourced 434037 44 61 85 73 52 42 3633 42 63* 58* 59* 78* 89*92 84 67 49 56* 67* 68* Operation time per tractor (hours / month) % time operated a month * = statistically significant difference Source: Nigeria chapter
  24. 24. ▪ Inclusiveness • AMSEC I : A center required to purchase at least 5 tractors • AMSEC II: Offers opened to any would-be buyers at the same price without requirement in minimum # of tractors ▪ Maintenance • Free tractor maintenance services (at 1,000 engine-hours or 1 year of use) • Mobile workshop vans • Spare parts supply for two years ▪ Mandatory training provided by the public institutions ▪ Multiple uses of a tractor: complementary equipment ▪ Diverse tractor brand options A room for improvement within existing programs ––An example of AMSEC Phase II (~ 2016 ) in Ghana
  25. 25. Concluding remarks ▪ Mechanization as part of Africa’s agricultural transformation driven by urbanization, increased food demand, and rising rural wages ▪ Evolving paradigm of agricultural mechanization • The paradigm shift in Africa led by farming-system evolution with induced technological and institutional innovations • The recent Asian experiences offering lessons to Africa Challenges and opportunities • How can private sector’s potential be maximized? • How can government address market failures while avoiding government failures? • What more research needed? These questions cannot be resolved overnight. Our book tries to contribute to a broader effort for searching better solutions toward mechanization in Africa.