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Moderated e-mail conference on small farms and food security

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Mon, 24 Oct 2016 16:52:23 +0000
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My name is Pavlos Karanikolas. I am an Assistant Professor in the Agricultural University of Athens-Greece, Department of Agricultural Economics and Rural Development.

Regarding Questions 3.3.2 and 3.3.4:

I would like to present briefly some research findings from field surveys in Greece, including more than 300 farms. These farms are representative samples of local farming systems, including mainly olive groves, as well as orange trees, arable farming (e.g. wheat) and sheep rearing.    

Beyond a minimum threshold of farm size, i.e. except tiny farms, in all other scales (small, medium, large and very large farms) the average total cost of production does not vary significantly. This means that small farms are not less efficient compared to large farms. This finding indicates also the prevalence of increasing and constant returns to scale. The vast majority of small farms are economically sustainable in both the short and long run, because with their revenues they can cover their variable and total costs, respectively. 

Having such a cost structure for their products, small farms manage to be resilient for long time periods, using two additional mechanisms. First, alternative marketing channels for their products (including an own network of customers, producer groups, producer-consumer cooperatives, etc.). Second, flexible combinations of family and hired labor on-farm and of family labor both on- and off-farm. Thus, whenever their farm income is not sufficient to support the standard of living of the farm family (including access to food), they use off-farm sources of income.  

Macroeconomic stability and integration into local and regional markets are also prerequisites for the smooth functioning of this model; these conditions are at risk within the severe ongoing crisis. 

Since 2010, the GDP in Greece has decreased by 27 percent, while disposable income has fallen by 40 percent. Also, in the context of hard austerity policies applied to the Greek economy, bank lending to agriculture (for both working capital and investments) has decreased by two-thirds, whereas a series of measures have been established in 2015 concerning the agricultural sector: cessation of exemptions on diesel fuel; rise of value-added tax (VAT) to 23% on agricultural tools and inputs; removal of the tax-free income threshold of 12,000 euros; doubling of the taxation on revenue which will reach 26% in 2017; payment of this tax on an anticipatory basis; and an increase in social welfare contributions. Consequently, according to our recent estimations, a large part of small and medium sized farms are not going to survive. 

Also, small farms use a part of their produce for self-consumption. We have seen that, especially within this crisis, this part of farm production mitigates the problem of poverty, by reducing poverty rates by several percentage points. 

Pavlos Karanikolas
Assistant Professor
Dept. of Agricultural Economics and Rural Development
Agricultural University of Athens,
Greece
E-mail: Pkaranik (at) aua.gr

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