Family farms and plantations in tropical development

Small family farms and plantations are the two contrasting systems of agricultural production in the tropics. While the family farm is an old institution, which has existed since time immemorial, the plantation is a new institution brought by Western colonialism for extracting tropical cash crops for export to home countries. Large-scale operation of the plantation was necessary for internalizing gains from investment in infrastructure needed for opening vast tracts of unused lands. However, where the communities of indigenous smallholders had already been established, family farms proved to be equally or more efficient producers of tropical export crops using the family labor of low supervision costs, relative to plantations based on hired labor. This advantage of family farms rose as population density increased and rural infrastructure improved, whereas not only economic but also social drawbacks of the plantation system loomed. Reorganization of the plantation is desired. However, the breakdown of plantations to the operation of smallholders by the government’s coercive measures will likely prove to be disruptive and inefficient. A better approach will be to support the initiative of the private sector to reorganize the plantation system into the contract farming system in which an agribusiness enterprise manages the processing/marketing process and contracts with small growers on the assured supply of farm-produced raw materials.