Cash Crop Production, Food Price Volatility, and Rural Market Integration in the Third World

TLDR

In the Third World, large farmers allocate a greater share of land to cash crops than small farmers. The study proposes that food self‑sufficiency best ensures food security for Third World farmers, even when food markets exist. The authors use a multivariate risk crop‑portfolio model that reproduces the observed land‑allocation pattern. Simulations indicate that food market integration reduces the need for self‑sufficiency, suggesting that domestic trade liberalization and agricultural technology can improve food security.

Abstract

Abstract Large farmers in the Third World often devote to cash crops a larger share of their land than do small farmers. This paper suggests a possible explanation: even in the presence of food markets, Third World farmers' food security is best assured by food self‐sufficiency. A model of crop portfolio choice under multivariate risk is used to show that reasonable assumptions regarding risk and preferences reproduce the observed pattern. Simulations further indicate that food market integration reduces the need for food self‐sufficiency. Policy implications are drawn regarding domestic trade liberalization and agricultural technology.