Preconditions for Modern Agriculture

The conventional production factors land, labour, and capital are able to provide the farmers with a subsistence, especially if the population is not dense. However, if a noticeable and rapid increase in production is desired, they do not suffice. To do so, further factors are necessary, and these are those production factors that are actually scarce. They cannot be provided by the farmers themselves, but rather must be produced by the society in processes involving a division of labour. Agricultural development is not only dependent upon land, labour, and capital, but rather an interplay between these traditional factors of production and the new factors produced in other sectors of the economy. If agricultural production is to develop beyond the stage of self-sufficiency, an external demand as well as new technologies and inputs that are produced outside the agricultural sector are necessary.

A strong effective demand for agricultural products gives the farmer an incentive to increase his production beyond the level of subsistence. The achievable prices have to be high enough to cover the costs of production and be a satisfactory reward for the involved efforts. Especially the latter is dependent, among other things, upon the existence of functioning markets.

In early stages of development, an effective demand for agricultural products -not the desire for more food- is often limited because the number of buyers (due to the widespread self- sufficiency in rural societies) is small and because of the limited purchasing power of the purchasers. Furthermore, the demand in most regions is limited to cereals. Perishable goods can, on account of the underdeveloped transport and storage systems, only be produced in the close vicinity of cities. In case no opportunities exist for exporting the produce, the size of the domestic demand sets the limits of the development in agricultural production.

Before the domestic demand can be stepped up, the non agricultural sectors have to be developed in order for the necessary purchasing power to be there. This development in industry, trade, and crafts is, on the other hand, the precondition for an increase in agricultural production because inputs are necessary that are produced outside the agricultural sector such as commercial fertilizer, implements, and services. To quite an extent the modernization of agriculture is concerned with supplying energy. Fossil fuels play a particularly important role in production increases.

Modernizing agriculture always means an increased interlacing of agriculture with the other sectors of the economy. In order to achieve lasting increases in agricultural production it is necessary to leave the level of an economy based on self sufficiency and enter a stage of agricultural production interlaced with the market. In this process, the market prices are the incentive and orientation for the farmers; these, however, simultaneously raise the involved risk. Although farmers always had to face production risks, which could be mitigated if needed by tightening one's belt, the modern producer of agricultural products is additionally faced by a marketing risk and technical risks owing to the new procedures that are ill adjusted. The risk is also much larger since the externally purchased inputs have to be paid. Functioning markets are a precondition to make the risk bearable. The agricultural comrodities markets will have to be expanded and made more dynamic in order to fulfil the conditions of a demand backed by strong purchasing power that is needed to develop modern agricultural production.

A higher level of agricultural production, stimulated by the increasing demand, is the result of new technologies in agriculture, in other words, new methods of "how to do it". Techniques, methods, and varieties have to change continually in modern agriculture if stagnation is to be avoided. Such innovations can be copied from other farms and other regions. First and forertust, they are the result of research and experiments. The development of fertilisers and pesticides, new high yielding varieties, technics, implements, and irrigation methods are examples of new technologies in agriculture. Since in agriculture production there is a close interrelation between various factors and practices, changes should be made together if possible. The simultaneous introduction of a package of innovations has a greater effect. On the other hand, sometimes only one factor has a limiting effect and changing it can raise the productivity of the entire system. Frequently it is the question of new inputs that have to be purchased, and since these are often nondurable goods it is necessary to continually buy them. Usually it is necessary to simultaneously employ a whole package of new inputs. Therefore, many goods have to be purchased so that it results in a strong interlacement with the rest of the economy. Modern agriculture is no longer simply the result of the farmer's struggle with his land, but rather it is also influenced by the activities of factory workers, scientists, and merchants who make their contribution to agricultural production indirectly through the division of labour. Modern agricultural production is part of a closely knitted all inclusive economic system.

For new inputs to be successful, it is important that they are available everywhere; in other words, that there are functioning supply markets. They also have an effect on the conventional production factors. If the innovations are lumped together, they often bring about a change in the entire production process and cropping system, e. g., as a result of economic and organizational considerations or conditions of crop rotation. The agrarian structure has to give the incentive for the development of such new technologies and for acceptance of innovations. The creation of an institutional framework that facilitates the interlacement of the agricultural sector with the rest of the economy is an important aspect.