Corporate farming is now a buzzword in Pakistan’s agricultural discourse. You may have heard large tag lines praising the potential for economic growth and increased food security through corporate agriculture, especially with the military’s recent entry into the sector. On the surface, corporate farming offers a promising solution for Pakistan, a country where food security and economic output are major concerns.

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The primary logic behind corporate farming is straightforward: large land holdings reduce per-unit production costs, increase yields, and boost profits — a simple cost-profit principle that is linked with economies of scale.

Corporate farms are characterised by high entry barriers, including advanced mechanisation, high-tech equipment, and access to cutting-edge scientific knowledge. Not to mention the high costs of acquiring land. The result? More efficient production and, in theory, better exports and food security for the country.

However, the focus on large-scale corporate agriculture could have significant costs, especially for the small and medium-scale farmers who comprise the bulk of Pakistan’s agricultural workforce.

Large-scale corporate farms could reduce the market share of small farmers as they struggle to keep up with their production

Agriculture has long been called the backbone of Pakistan’s economy, not because of its contribution to GDP (which is relatively modest) but because it supports a large portion of the population. Roughly 37.4 per cent of the country’s workforce is involved in agriculture, and about 70pc of the population relies on it either directly or indirectly.

Now, here’s the critical point: In Pakistan, over 90pc of farmers own less than 12.5 acres of land, and 60pc of farmers operate on even smaller plots of 5 acres or less as per the Agriculture Census 2010. These farmers have been involved in agriculture for generations, and for most of them, this constitutes the sole source of income.

A famous Punjabi saying that translates to “agriculture neither let the farmer die nor flourish” perfectly depicts the thin profit margins faced by these farmers. Small landholdings, lack of technical knowledge, high input costs, and exploitation by middlemen make agriculture unsustainable for many. In addition to this, limited access to export markets and local disputes further complicate the equation of farming profitability.

So, what changes when corporate farms enter the equation? Corporate entities — including private companies, military-backed ventures, and public-private partnerships — will bring large-scale operations, lower costs per unit, and economies of scale, resulting in increased output and better prospects for exports, but at the expense of the small farmers who simply cannot compete with corporate entities.

Corporate farming in countries like India and Brazil offers cautionary tales. In India, large corporate farming ventures have led to land grabs that displaced many small farmers. This has created socio-economic turmoil in rural areas.

A report by Oxfam India highlighted that small farmers are forced to sell their land to corporations at unfair prices. This makes it nearly impossible for them to re-enter the agriculture market. Similar is the case in Brazil, where corporate farms dominate vast portions of agricultural land, which leads to reduced employment opportunities and pushes small farmers out of business.

In both countries, these practices have contributed to rural poverty and increased inequality. Similarly, in the US, corporate farming has been seen to reduce the number of buyers available to small farmers, limiting their power to negotiate. This can occur in Pakistan, where farmers already struggle with middlemen taking a share of their earnings.

Small farmers in Pakistan already face significant challenges in accessing credit; the International Monetary Fund’s pressure on the government to remove support prices worsens the situation. Without support prices, small farmers will find it even more difficult to match the lower production costs of corporate farms. Meanwhile, corporate farms have diverse financing options, which include foreign investment and public-private partnerships.

The survival of small farmers depends on both government intervention and innovative farming practices. They must adopt strategies to lower costs — such as using in-house organic fertilisers or employing satellite imaging for precision spraying and applying fertilisers.

The role of the government is critical here. Instead of blanket subsidies, the government should implement targeted subsidies for small and medium-scale farmers. For instance, an Rs30 billion subsidy was provided to fertiliser plants for cheaper gas to lower fertiliser prices earlier in 2024 but then ended since it did not directly support farmers.

Fintech solutions could also increase access to credit and new opportunities, allowing small farmers to modernise and scale up. Other countries, such as India, have implemented successful subsidy schemes targeted at marginal farmers through PM-Kisan, which provides direct cash transfers. This was also witnessed in Pakistan in the form of a Kissan card, but the policy is never consistent.

Corporate farming offers clear benefits for Pakistan’s agricultural output and export potential, but it could also undermine the livelihoods of millions of small farmers. Sustainable solutions that balance the needs of both corporate and small-scale agriculture are critical. The rise of corporate farming must not come at the expense of the small farmers who are the backbone of Pakistan’s agriculture.

The writer is a recent graduate from Lahore University of Management Sciences.

Email: aliyan.nawaz22@gmail.com

Published in Dawn, The Business and Finance Weekly, October 7th, 2024