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Abstract
Research has shown that gainful participation in livestock markets is an important
means of reducing poverty in developing countries, particularly for rural and periurban
households. The rapid growth in demand for meat and milk, along with the corresponding
expansion of livestock markets to connect consumers and suppliers, presents real
opportunities for smallholders to generate income by raising livestock. Nevertheless, the structural
changes associated with increasing urbanization taking place in these markets, the greater
integration between domestic and global markets, and the emergence of a more stringent regulatory
environment also present significant threats to participation by poor households. Further,
as the market for livestock products rapidly grows, smallholders have to compete with
large-scale commercial producers for market share, particularly at the domestic level, and if
market forces and policy environments are biased toward larger-scale producers, smallholders
are often displaced. IFPRI has identified research on the future of smallholder farming as a
priority for improving our understanding of the relationship between livestock sector development
and poverty reduction, thereby enhancing opportunities for smallholders, and countering
threats. To this end, this study begins by examining the market forces, structural factors, and
policies that affect the scale of pig production, and then goes on to identify strategies for enhancing
smallholder participation and competitiveness in a rapidly growing livestock market.
The study offers a new way of conceptualizing the problems that lead to the exclusion of
smallholders from live hog and pork markets, explaining why some smallholders participate
successfully, while others do not. Determinants are identified using limited-dependent variable
models based on the hypothesis that transaction costs, such as access to credit and market
information, affect market participation. The report also presents a contemporary approach to
measuring profit efficiency in hog production for the case of Southern Luzon, Philippines.
Although the findings of this study are specific to the Philippine context, many of the
issues confronted are common to the challenges of participation, upscaling processes, and
policy interventions across the developing world. The research has generated solid empirical
perspectives of the changing situation of poor smallholder producers in a high-value market
situation. IFPRI thus continues to examine the effect of mechanisms like contract farming on
collective action as a means of increasing smallholder participation in high-value markets,
particularly in developing countries in Asia and Africa, where small farms continue to dominate
the landscape.