The research underlying this report investigated factors affecting the scaling-up of selected livestock products in Brazil, India, the Philippines, and Thailand, with particular attention directed at understanding issues affecting small-scale producers.2 Scaling-up is defined here as growth in the average size of farm in terms of annual livestock sales. The urgency of the topic is driven by the fact that livestock are among the few commodities that smallholder farmers widely produce that are growing rapidly in demand, and thus the interest for poverty alleviation is strong. However, there are signs that smallholders may ultimately be displaced from this source of livelihood by competition from larger-scale farms. Furthermore, the rapid growth in production of pigs and poultry has also been associated with significant environmental problems in the zones of most rapid growth. The interactions between overall growth in production, size of farms, and sustainability are crucial to rural poverty alleviation in a sustainable manner.

Therefore, the objectives of the research were to assess whether the market share of large farms is growing relative to small farms and, if so, why. The analysis is directed primarily toward the issues of efficiency in production and its determinants, but also deals with the unit costs of inputs received and the unit prices for outputs obtained. The study specifically does not investigate the likely existence of economies of scale in output marketing, which are anecdotally thought to be large and will over time largely work to the disadvantage of independent (nonintegrated) farmers, especially small-scale ones. This important topic is deferred to a different study on contract farming in poultry and dairy using different data and approaches.

The research was pursued by setting up models and collecting farm-level data to test the following hypotheses: • Small-scale producers have profits per unit of output that are higher than or equal to those of large producers.

• Small-scale producers are more efficient users of farm resources to secure profits than are large producers, other things equal.

• Small farmers expend a greater amount of effort or investment in abatement of negative environmental externalities per unit of output than do large farmers.

• Uncompensated negative environmental externalities favor the nominal profit efficiency of large farms over small ones, ceteris paribus.

• Profits of small producers are more sensitive to “transaction costs” than are those of large-scale producers.

• Contract farmers are more profit-efficient than independent farmers at comparable scales of operation.