In most countries, organic agriculture has blossomed in response to market demand and despite some government indifference or policies that do not favour it. Small organic farmers face problems related to biased government policies and institutions, which tend to favour larger farmers, such as government research agencies that focus on crops grown by larger farmers, or subsidies to credit for heavy machinery or inputs used mainly by larger farmers.
For years organic agriculture has been generally overlooked, because it was perceived as being insufficiently modern and of little economic consequence. Often seen as the default option, it was lumped with traditional and rustic forms of agriculture that receive little if any policy support.
This despite indications that investing in marginal areas is justified by evidence that, the marginal returns to investment in such areas are typically higher than in more advantaged areas. However, this is quickly changing, as the fiscal and risk benefits are increasingly realised at the government level.
In some cases, state and provincial governments have moved much more quickly than some central governments to develop adequate policies in response to the opportunities of organic agriculture in their regions. Today, many agricultural ministries have organic policy and standards on their current agenda. This section covers the specific implications for the public sector of the 14 case studies, and the general lessons that can be inferred from these and the current literature on this topic.
Government Investment in Organic Agriculture-Oriented Services:
Both India and China have recently taken more supportive positions toward organic agriculture. In fact, a number of Asian governments are increasingly recognizing their nations’ potential for organic agriculture and supporting some modest investments in the field.
For governments, investment in organic agriculture implies a number of tangible benefits ranging from simple economic benefits to those, which are more difficult to quantify. For example, the yield stability and diversification demonstrated in organic systems is likely to improve both nutrition and food security, especially in rural areas, thereby reducing government expenditures in stock retention and policies to encourage increased production.
In a separate calculation, each farmer that fully adopts organic principles produces a crop without synthetic fertilizer, which in the case of some countries (e.g. India) means a direct cost savings that can amount to hundreds or thousands of dollars per farmer each year in subsidies, which government does not have to expend.
For example, the current Indian fertilizer subsidy of USD 98 per hectare could be also paid to organic farmers but in a different manner (i.e. certification, promotion, tax relief, direct credit, organic extension services, organic research fund, etc.). Since the subsidies are typically paid directly to fertilizer companies, they would be the only ones to be disappointed.
Similarly, government support for organic agriculture would reduce the use of usually imported synthetic agro-chemicals such as pesticides and herbicides, and thereby reduce the outflow of foreign exchange. In these ways, and others, the public sector’s support for organic agriculture can help to transform marginal rural denisens that are currently perceived as either vulnerable or as a burden into one of the country’s contributing assets.
In most cases, government investments in organic- oriented public services have been minimal – often from the local level – and primarily in the form of pilot projects and some research. Both India and China have strong governments with considerable influence on rural well-being.
For organic agriculture to thrive and to offer its benefits to both farmers and consumers, governments ought to take a supportive and pro-active approach. Much of the government support for agriculture is targeted to conventional agriculture and excludes organics. This can be seen in the form of state-sponsored research, subsidised certification [i.e. for International Standards Organisation (ISO) 9001 and Hazards Analysis at Critical Control Points (ACCP)], extension services, and subsidised power for irrigation and fertilizer production, both used primarily by conventional agriculture.
Subsidies for organic agriculture are warranted because they meet nearly all of the criteria for subsidies given to conventional agriculture and add an important consideration. The positive externalities of organics, whose costs are typically not fully internalized by market forces, especially during the conversion process, can justify the public investment.
This reasoning led a number of European countries to adopt subsidies and other incentives for their organic sectors. The experience of IFAD and other international agencies can help to design and channel incentives, and help ensure that subsidies are structured so as to be non-distortionary.
Organic agriculture need not necessarily be an expense; in fact it can easily fall on the other side of the balance sheet. For example, a new multi-donor fund is being considered for the remediation of non-point sources of pollution in China (Personal communication SEPA).
Development agencies such as IFAD have experience that will be vital as the fund intends to incorporate organic agricultural incentives in remote rural areas, since these have been recognized for their environmental contributions at the watershed level.
The training of extension services in organic methods has been slow and, in many cases, is non-existent. None of the 14 cases studied found that public extension services provided adequate training benefits.
Extension services are less prepared to serve organic farmers, and in some areas they are increasingly trained by, and affiliated with, agro- chemical distributors who are often replacing governments and research institutions as sources of information for farmers (Uttaranchal).
Since the cases have clearly conveyed that production technology is vital, there is a critical role for NGOs and development agencies to help bridge this missing link, particularly for small farmers.
In both countries, organic investments have been more prominent at the state and local government levels. In the case of Jianxi, the organic conversion was initiated and facilitated by the township government. They identified this opportunity and organised the farmers to vote on full community adoption of organic principles.
The government drew up a contract ensuring farmers that the township government will provide them with various supports including subsidised bio-pesticide, seeds and organic fertilizer as well as extension services and marketing. The contract clearly forbids farmers to use prohibited agro- chemicals and Genetically Modified Organism (GMO) crops and, in a bid to help restore natural biodiversity, also forbids hunting (including frogs and snakes) or forest clearing.
Although the project has met with its difficulties — particularly adapting to organic methods due to the limitations of local extension services — it has succeeded in meeting many of its goals, and farmer incomes and opportunities have increased such that only half of those that formerly migrated for work now do so.
India’s organic agriculture is progressing at the state level. Several states have made strong commitment to developing an organic farming base. Uttaranchal boldly declared itself “an organic state” proclaiming its intention to encourage it at every level of government and only funding new research and projects that incorporate at least some organic components.
It is also now considering legislation to favour organic investments with tax benefits and to exempt organic inputs and products from taxes. Karnataka is the first state to elaborate organic standards and is actively developing pilot projects in every district in partnership with local NGOs that have been selected as part of a statewide process.
Institutions that Influence Organic Agriculture:
China has recently shifted the administration of organic inspection and certification from the State Environmental Protection Administration to the Committee for National Certification and Accreditation (CNCA). The Ministry of Agriculture’s role is still evolving.
The China Organic Food Certification Centre, under the Ministry of Agriculture’s CNGFDC, now certifies about one-third of the products for the domestic market. Optimists hope that the Ministry of Agriculture can do more to promote organics, while pessimists feel that the Ministry is far more committed to its own standards of Green Food, which have enjoyed enormous acceptance and earned considerable incomes for the many state affiliated and government owned farms that produce certified Green Foods.
There are already clear indications that the Green AA designation will be subsumed into an organic certification. It is not yet clear how the Ministry of Agriculture will invest in organics, but at the local and regional level, several governments have already expressed their clear commitment to supporting organic agriculture.
The CNCA, an important part of the government apparatus, is keen to promote the upcoming organic standards, and its international-calibre staff is preparing to position Chinese organics as a valuable component of its agricultural trade portfolio by helping to ensure tighter regulation and enforcement of the standards.
State council said that administration of organic inspection and certification has been shifted from SEPA to CNCA, but it is not clear exactly what will be the role of the Ministry of Agriculture. Currently under consideration is a scheme to provide favourable taxation and credit options for organic farmers.
India is reportedly planning to help even the playing field by providing organic fertilizer manufacturers with the same fertilizer subsidy that it currently provides to conventional agriculture. Early plans indicate that this would do very little to help organic agriculture, because it would merely fund some of the same fertilizer giants to produce and distribute “organic fertilizer”.
Since organic principles encourage on-farm nutrient recycling, this could be a perverse subsidy that works against organic principles and against poor farmers, who are most likely to produce their own on-farm fertilizer.
An organising body is important to the development of an organic sector. Such a representative entity in a country can promote the organic movement, play a valuable role in raising public awareness, influence government policy, serve as a resource point for related interests, organise training and capacity building, and continuously collect data on the development of the sector.
Policies and Regulations for Organic Agriculture:
Organic policy need not be distinct and separate, in fact it should be integrated as a part of existing agricultural policy as one on the menu of options available for farmers to select. In many cases, local and even national policymakers are unfamiliar with organics and the body of experience in other countries. IFAD and other international agencies have the most experience to play a vital supporting role in this process.
India’s Uttaranchal state, for example, is reviewing the formulation of all state funding and regulations to ensure that they are pro-organic and must draw primarily on its own sources of knowledge and local resources. Existing agricultural policies often embody distinct biases favouring conventional agriculture.
These take the form of research support, tax breaks, fertilizer subsidy, power subsidy, and unrealistic national economic indicators that undervalue the depletion and degradation of natural resources such as water and biodiversity.
If it is understood that organic agriculture does no harm and tends to safeguard health and the environment, then the idea that farming systems, which cause pollution or use environmentally toxic pesticides should be the ones that are registered, inspected and certified, doesn’t seem so novel. Indeed it makes simple economic sense.
The aspects of facilitation and support are perhaps the most important roles that governments can play to foster healthy organic growth. Provincial, state, and local governments are similarly active in several parts of India and China.
The Indian State of Karnataka and the Yunnan Department of Agriculture are just two of the governments that have responded to the positive examples in their regions with concrete initiatives such as model organic projects in every district and support for organic extension training and bio-fertilizer development respectively.
Here, development organisations, including IFAD, are well placed to assess best practices and support such pilot initiatives. Some policies can inadvertently work against organics. For example, Rundgren (2002) notes that some governments do not support or protect farmers’ rights to develop and save seeds, something that is an integral part of organic and traditional agriculture.
Policies that provide loose or no controls over GMQs also risk destroying organic potential, since some international standards will reject organically labelled products that are contaminated with GMOs. Farmers require secure land tenure in order to invest in organic methods, since some of these methods yield benefits (e.g. improved soil tilth) that are more tangible in the long- term.
Investing in the Land – Fragmented Holdings and the Importance of Tenure:
The security of land tenure is vital for farmers to adopt organics. Organic methods may require more labour investment, particularly in the early stages of adoption, and this investment’s benefits are increasingly evident over the long-term. For example, organic methods can gradually build the fertility and tilth of soil and, over time, can significantly contribute to its stability thereby reducing erosion as well as improving both water percolation and moisture retention.
However this can take years to become evident. Similarly, organic methods and the accompanying environmental conservation, gradually over years build toward an ecological balance of pest/predator relationships thereby requiring fewer pest and disease control interventions.
Without secure land tenure, there is a greater risk of nutrient mining of the soils and reduction of the forest area for short-term benefit, not to mention that it is difficult to get credit as was noted in some cases (Kerala, Karnataka).
Farmers tending very small and geographically fragmented plots can face difficulties to maintain organic practices if the surrounding land is using conventional agricultural methods or is contaminated as in urban or periurban areas.
In cases of fragmented farm parcels, the transport of manure and compost may also be challenging for some farmers since organic fertilizer tends to be more bulky than conventional fertilizers. Farmers that practice shifting cultivation may benefit from organic practices that enable them to improve soil characteristics and thereby cultivate one area consistently.
Organic Agriculture Standards:
A number of Asian nations have developed national organic standards that apply to their exports. Other than Japan and S. Korea, Asian countries have not elevated standards and consumer labelling rules to the level of binding domestic regulations.
India is developing national standards in the wake of one state developing its own and another declaring itself to be “an organic state”. China is also ready to unveil its new official national standard before the end of the year.
With the exception of Japan, none of the Asian countries appear to have yet developed the capacity to effectively monitor organic labelling and standards compliance. Consumer confidence, as mentioned in the earlier section on certification is underdeveloped and, in some cases, consumers already doubt label claims.
Several case studies mention that the scaling up of organic agriculture will benefit from a supportive regulatory environment, especially on inspection and certification, monitored product traceability, and supervised internal quality control systems.
It should be noted that in developed markets there is no clear correlation between government intervention in certification and inspection and the development of the organic sector perhaps because their circumstances are different from those in many developing countries (i.e. bottom-up, farmerled development, well-functioning fraud and labelling laws, etc.).
A clear signal from government could be quite helpful to organic development. As Rundgren (2002) points out, there are other ways to support organics besides a formal regulatory framework.
Depending on their orientation, the case study projects aimed for either internationally recognised standards (exports) or local/national standards. The latter are often modelled on international standards but, as many cases showed, tend to have lower levels of compliance and only modest attempts at enforcement.
Although less stringent compliance and enforcement requirements help to keep costs low and may encourage more farmers to participate, they are likely to eventually have dangerous repercussions in the form of lost consumer confidence. For farmers, poor compliance means that they are unlikely to experience the full benefits of organic methods and may develop an unrealistic understanding and expectations of organic principles.
The Confusion of Certification Standards for Organic Agriculture:
It is difficult to develop a market for organic produce, when farmers are not clear on the standards and requirements, and more so when consumers are confused. The cases were almost unanimous in expressing that for consumers, for many farmers, and even for government and industry representatives, there is considerable bewilderment about organic standards.
This is perhaps most consequential at the consumer level, where confusion or lack of trust are well-known sales inhibitors. One Chinese case notes that this is primarily due to the absence of “government control of inspection and certification” (Inner Mongolia).
Building organic brands to convey trust as some have tried (Yunnan ancient tea, Inner Mongolia livestock) can be a very productive strategy, but is not easy to do, especially beyond the local area.
For example, conventional lamb producers in Inner Mongolia also claim that their product is certified as safe, and consumers do not recognise the differences between this claim and organic certification. The sector could benefit from credible labelling standards and education campaigns to inform of farmers and consumers.
In Asia, only Japan has made great strides with the codification of organic standards. Their clear labelling rules elevate consumer confidence and undoubtedly help consumers to more readily identify and develop a trust for certified organic products. Enforced labelling guidelines can also protect genuine organic farmers from competing with counterfeit products.
Enforcement is particularly important for organic products because they are often perceived — despite many products and producers — as a single unified category unto themselves. Consequently, the public exposure of fraud in one product is likely to have a ripple effect on other organic products.
Consumers tend to remember that organic certification was fraudulent rather than that one supplier of organic apples or of organic tea committed fraud. Conversely, certification and its numerous requirements can also serve to force legitimate organic farmers out of the organic market, as it already has in Japan.
At the international level, the processes and the bodies that are accredited for certification and inspection, still vary from country to country. So despite increasing bilateral recognition of equivalency, farmers must often undergo more than one certification process to sell to different countries.
The lack of unified standards concerning organic certification among different certifiers still causes confusion and inefficiencies in the trade making it a source of conflict that comes up in several of the case studies such as Yunnan beans as well as in some industry surveys of different countries.
Role and Impact of Public and Private Institutions for Organic Agriculture:
Conventional farmers today can count on a reasonable public/private support network, where they can access information about cultivation techniques, statistics, market information, etc. In contrast, the organic sector in many countries is highly fragmented and typically characterized by the domination of market-responsive companies and the slow plodding reactions of government agencies.
In order to build a sustainable platform for organic products a similar — though much leaner — public/private network must be woven together to enable sector participants to understand and respond to the dynamic requirements of both farmers at one end and market demands at the other.
The new information and communication technologies make this possible, but hardware is not enough. A recent Chinese initiative is aimed at building an international organic farming and green food information- sharing network, but after two years of effort it is not yet fully functional and offers little on organics.
International agencies can play a useful role by providing access to the most current know-how and best practice experience in order to improve the competitive position of organic farmers.
The first hurdle for most farmers is to understand the principles of organic agriculture. This can be true even when farmers are already producing without synthetic agro- chemicals. Many are surprised that there is much more to it than the prohibition of synthetic chemicals.
Developing an understanding of the principles and how they can be pragmatically applied to their specific situation takes time. If they are to avoid costly bouts of trial and error, producers will need adequate institutional support to help them analyze their particular situation and find the best solutions.
The best support is from other farmers that have faced similar situations. It is therefore critical that government and public organisations help to foster local self-help associations, since they not only benefit farmers but also benefit government, for whom it is increasingly costly and difficult to effectively reach farmers through extension services.
These same associations can significantly improve farmers’ competitiveness by facilitating the benefits of scale in inputs, production, storage, and marketing. The implementing of Internal Control Systems for farmers associations can significantly reduce their costs and likely improve their internal governance skills.
Similarly, such associations can potentially ease the difficulties that are inherent in transitional periods for farmers that have cultivated intensively with synthetic agro-chemicals.
These associations can be a valuable part of rural development and deserve to be both recognised by government and given necessary support as they establish themselves. The body of international experience in this realm is quite important and ought to be made available by IFAD and other international development organisations with this knowledge.
Research on Organic Agriculture:
Small farmers frequently face problems related to biased government policies and institutions, which tend to favour larger farmers, such as government research agencies that focus on crops grown by larger farmers. Most organic farmers face these prejudices and more since their approach to agriculture is fundamentally different than the dominant research paradigm in both countries.
However, some of the leading academic institutions (for agriculture) in China and India, not to mention Japan and Thailand have seen a considerable increase in interest for this topic over the last few years, and this is evidenced by a considerable escalation in relevant publications (personal communications and document exchanges during project round table meetings in Beijing and New Delhi).
Similarly, the organic sector in Europe initially had only modest investment from the public research systems, although there has been increasing interest in recent years.
Overall, in both China and India, the level of research oriented toward organic production has been modest in most cases. In the field, there are few examples of on-farm or farmer-conducted research and trials except for those carried out by the case study projects themselves.
The Kerala case for example, has a Land to Lab Centre that encourages farmer-oriented innovation and facilitates its testing in the lab to help determine efficacy and applicability elsewhere. The shortage of credible and rigorously conducted research is a shortcoming that has likely slowed the adoption and impeded the success of organics.
Stoll (2001) notes that “…as long as policy-makers have limited interest in the organic sector, organic research will remain insignificant.” To bridge this gap, IFAD and other development agencies are knowledgeable about how to support field level research and farmer to farmer dissemination.
In order to shift the current public course in research, new approaches would be necessary at four levels:
1. Re-orienting some of the research priorities in formal institutions to focus on holistic approaches to practical needs in the field. This includes research on the formulation and application of organic inputs such as bio pesticides.
2. Training and coordinating the different extension services so that they can provide organic cultivation advice and also offer consistent messages.
3. Recognition and integration of farmers’ own field research into the research agenda can effectively utilise the practical experience of successful innovators. Dissemination by farmer-to-farmer or farmer field school methods can be facilitated by organic projects.
4. Support alternative research and application institutes that already show interest in organic agriculture, including those that are NGO-based.
Financing for Organic Agriculture:
Small farmers frequently have problems accessing credit to cover investments, such as irrigation and mechanisation, and to purchase costly inputs like fertilizers and pesticides that are usually necessary to produce high-value crops. Thus, it is important to understand that smallholder organic production in India and China is typically not capital intensive.
The exception is the at times crucial transition period when sometimes lower yields are exacerbated by increased costs for certification and labour. Any organic project must be prepared for this financing need, if the farmers who are converting had previously used conventional methods and high levels of inputs. Whether financing is provided as a subsidy or as a credit, it should include technical assistance during conversion.
There is no evidence of the availability of traditional forms of credit for organic farming from financial institutions in either country. Although India has a fairly well-developed micro-credit and Self-Help Group network, such resources may only serve to convert a few farmers each year (Uttaranchal).
As with other forms of agriculture, adding value at harvest (picking methods, field packing materials, cold storage, etc.) and post-harvest stages does require capital investment. Organic marketing can also be more costly because of fewer buyers. China is discussing the option of providing preferential credit and perhaps trade promotion to food processors that handle organic products.
Nearly all of the case study projects help farmers overcome these financing problems by subsidizing organic inputs and paying for certification. Most also help cover many of the external costs incurred by farmers such as input production, technology acquisition, and by handling the marketing and attempting to provide extension support to improve yields. In at least one case the foreign buyer has provided a number of subsidies and pre-financed the harvesting operation (Madhya Pradesh cotton).
Such arrangements are increasingly common in other countries where small farmers family with Amaranthus in forest setting can provide a unique product, and where buyers seek to fulfill their own Corporate Social responsibility requirements.
Organic Agriculture and Fragmented Land Holdings:
Fragmented land holding, especially in marginal regions, is one of the biggest challenges to overcome in the introduction of any market-oriented agriculture programme. In Northern India, there are cases of organic farmers consolidating their tiny dispersed parcels — typically less than 0.5 hectare held in two or three different places— into a common group land title that has some legal validity.
The increased social dynamics resulting from their common organic practices enhances their ability to adopt improved cultivation methods and Internal Control Systems for certification. They thereby facilitate their capacity to undertake contract farming and to obtain the critical volumes and necessary quality levels required for marketing and processing, thus encouraging further investment for adding value.