[Paper Review] Assessing the role of small farmers and households in agriculture and the rural economy and measures to support their sustainable development

Oleg Nivievskyi, Pavlo Iavorskyi+1 more|arXiv (Cornell University)|Apr 29, 2023

Agriculture Market Analysis UkraineAgricultural and Biological Sciences3 citations

TL;DR

This paper assesses the role of small farmers and rural households in Ukraine’s agriculture and rural economy, proposing policy measures to formalize small-scale farming and reduce the shadow agricultural market. Using data-driven analysis within the SAFPI project, it identifies institutional and economic barriers and recommends targeted support mechanisms to enhance sustainability and formalization.

ABSTRACT

The Ministry of Economy has an interest and demand in exploring how to increase the set of [legally registered] small family farmers in Ukraine and to examine more in details measures that could reduce the scale of the shadow agricultural market in Ukraine. Building upon the above political economy background and demand, we will be undertaking the analysis along the two separate but not totally independents streams of analysis, i.e. sustainable small scale (family) farming development and exploring the scale and measures for reducing the shadow agricultural market in Ukraine

Motivation & Objective

• To evaluate the contribution of small family farmers and rural households to Ukraine’s agricultural output and rural economic stability.
• To identify structural and institutional barriers hindering the formalization of small-scale farming in Ukraine.
• To assess the scale and drivers of the shadow agricultural market in Ukraine.
• To develop evidence-based policy recommendations for supporting sustainable development of smallholder farming.
• To support the European Union-funded SAFPI project in advancing agricultural and food policy reforms in Ukraine.

Proposed method

• Conducting a dual-stream analysis of sustainable smallholder farming development and shadow market dynamics.
• Utilizing data from the Ukrainian Ministry of Economy and other national statistics to assess formal and informal agricultural activities.
• Applying policy analysis frameworks to evaluate existing institutional mechanisms for small farmer support.
• Mapping institutional gaps in access to credit, land, and formal markets for small farmers.
• Designing targeted policy recommendations based on comparative analysis of formalization success in similar economies.
• Integrating findings into a policy-oriented report for the European Union’s SAFPI project.

Experimental results

Research questions

• RQ1 What is the current contribution of small farmers and rural households to Ukraine’s agricultural production and rural economic development?
• RQ2 What are the primary drivers and scale of the shadow agricultural market in Ukraine?
• RQ3 How do institutional and regulatory barriers limit the formalization and sustainability of smallholder farming?
• RQ4 What policy measures can effectively reduce the size of the shadow agricultural market while supporting small farmers?
• RQ5 How can existing EU-funded programs like SAFPI be leveraged to improve smallholder integration into formal agricultural systems?

Key findings

• Small family farmers constitute a significant share of Ukraine’s agricultural production, yet remain underrepresented in formal economic statistics.
• The shadow agricultural market in Ukraine remains substantial, driven by informal sales, tax evasion, and limited access to formal credit and markets.
• Institutional barriers—especially in land access, financial inclusion, and regulatory compliance—hinder the formalization of smallholder operations.
• Targeted support, including simplified registration, access to microcredit, and technical assistance, could significantly reduce informal market participation.
• Formalization of small farmers would enhance state revenue collection and improve rural economic resilience.
• The SAFPI project’s policy recommendations show strong potential to scale smallholder integration into formal agricultural value chains.