Agricultural Development
Senior 6 · Economics
Agricultural Development
Lesson 3 of 4
25 min
The Seasonal Agricultural Survey asks farmers what they did with each crop. In Season A 2026 (NISR, SAS, Table 16):
| Crop | Sold | Eaten by the household |
|---|---|---|
| Vegetables | 85.6% | 8.2% |
| Paddy rice | 81.6% | 17.6% |
| Maize | 42.0% | 43.7% |
| Climbing beans | 16.8% | 51.8% |
Think: rice and vegetables are grown mostly to sell; beans mostly to eat. What would it take for a bean farmer to become a commercial farmer, and would it be wise?
Definition
Transformation approach: developing agriculture by changing how farming is organised: moving from subsistence to commercial production, regrouping land, specialising, and organising farmers into cooperatives, out-grower schemes or large farms linked to markets and processors.
Definition
Specialisation: concentrating on one or a few crops in which the farm or region has a comparative advantage. Diversification: spreading production over several crops, livestock or non-farm activities to reduce risk and widen income sources.
Out-grower scheme (contract farming): a processor or exporter agrees in advance to buy farmers' crop at an agreed price and quality, often supplying inputs and advice.
| Subsistence farming | Commercial farming | |
|---|---|---|
| Aim | Feed the household | Sell for profit |
| Crops | Many crops mixed on small plots | One or a few crops in larger blocks |
| Inputs | Own seed, family labour, hand hoe | Bought seed, fertiliser, hired labour, machines |
| Decisions driven by | The family's food needs and risk | Prices, costs and markets |
| Main risk | Hunger after a bad season | Low prices after a good season |
Commercialisation needs roads to markets, storage and drying, credit, reliable buyers, and information on prices. PSTA 5 makes "connecting farmers to markets" its catalyst for change. It introduces AgriHubs, large market-driven production zones, and Food Basket Sites (FOBASI), which organise consolidated smallholder production, served by Farm Service Centres; models may be cooperative-driven, out-grower or land-leasing (PSTA 5, pp. 14 and 18). The area under Food Basket Sites is planned to reach 324,702 ha by 2028–29 (p. 21).
| Specialisation | Diversification |
|---|---|
| Gains from comparative advantage and economies of scale | Lower risk: one failure does not ruin the farm |
| Expertise, simpler marketing, easier mechanisation | A more varied diet and steadier income through the year |
| Supplies processors and exporters with volume | Uses family labour across all seasons |
| But: exposed to disease, weather and price falls | But: small volumes of each crop; harder to reach markets |
Rwanda saw both risks during PSTA 4: cooking banana yields fell by 16% because of Banana Xanthomonas Wilt disease, and bean yields fell by 18%, mainly because of droughts, disease and less use of quality seed (PSTA 5, p. 8). A region that grows only one of these crops suffers far more than one that grows several. Diversification is also about exports: PSTA 5 aims to raise agricultural export revenue from US$875 million to US$1,540 million by 2028–29 (p. 20) through higher-value products such as horticulture, rather than relying on coffee and tea alone.
Demand for staple foods is price-inelastic: people do not eat much more beans when beans are cheap. So when all farmers have a good harvest at once, supply jumps (S₁ to S₂) and the price must fall a long way to sell it all. Farmers' revenue, price times quantity, falls. Commercial farmers therefore need storage, processing, regional markets and strategic reserves to spread sales over the year; PSTA 5 emphasises strategic commodity reserves to "address market volatility" (p. 18).
Worked example
Worked example 1: a bumper harvest (illustrative figures)
The price elasticity of demand for beans is −0.4. The bean harvest is 20% larger than usual. Approximately how far must the price fall to sell it, and what happens to farmers' revenue?
Revenue falls by about 40%: the bigger harvest makes farmers poorer. (Point elasticities are only approximate for changes this large, but the conclusion holds whenever demand is inelastic.)
Definition
Cooperative: "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise" (International Cooperative Alliance, Statement on the Cooperative Identity).
The International Cooperative Alliance sets out seven principles: (1) voluntary and open membership; (2) democratic member control, one member one vote; (3) members' economic participation; (4) autonomy and independence; (5) education, training and information; (6) cooperation among cooperatives; (7) concern for community. In Rwanda, cooperatives are registered and supervised by the Rwanda Cooperative Agency (RCA); coffee washing stations, rice schemes in the marshlands and dairy collection centres are often run by cooperatives.
| Advantages for farmers | Common problems |
|---|---|
| Bulk buying of seed and fertiliser at lower prices | Weak management and poor record-keeping |
| Bargaining power when selling; access to bigger buyers | Embezzlement or capture by a few leaders |
| Shared storage, drying, processing and machines | Late payment to members, who then side-sell |
| Easier access to credit, training and extension | Little capital, as members are poor |
| Value addition: washing coffee, milling rice | Political interference and dependence on donors |
| A voice in policy; mutual support in bad years | Free riding: some members do not supply their share |
Worked example
Worked example 2: the value of selling together (illustrative figures)
Fifty farmers each harvest 400 kg of maize. Selling alone at the farm gate, they get Frw 300 a kg. Through their cooperative, which dries the grain and sells 20 tonnes to a miller, they get Frw 380 a kg, minus a cooperative fee of Frw 20 a kg. Find each farmer's gain and the cooperative's fee income.
The fee pays for drying, storage and transport. If a trader offers a member Frw 350 cash today, the member is tempted to side-sell, which is why cooperatives that pay late lose their members' crop.
Warning
Don't confuse the two approaches. Modernisation changes the techniques used on existing farms (seed, fertiliser, machines, advice). Transformation changes the organisation of farming (who farms, at what scale, for which market, in what groups). Land use consolidation has elements of both, so say which aspect you are discussing.
Tip
A three-part evaluation for any farming strategy: Does it raise productivity? Does it reach the market at a fair price? Does it spread risk? A strategy that fails any one of the three rarely lasts.
Important
Discuss. Climbing beans are mostly eaten by the families who grow them. Should a Rwandan district encourage its bean farmers to specialise and sell, or to diversify? Use the bumper-harvest diagram and the risks of specialisation in your answer.
ONE, "Rwanda Coffee Washing Station" (2008). Visitors describe a speciality coffee washing station in Rwanda. Listen for how processing the cherries locally raises the price farmers receive, then link it to the cooperative advantages in this lesson.
Practice
Sources and credits
Written by Ganzaa: the text, the bumper-harvest diagram, the tables, the worked examples and the practice items. The elasticities, prices and quantities in the worked examples and practice items are illustrative.
