Most inputs or factors of production for UPA in the South are outside the formal market economy. UPA is an economical use of land for a number of reasons: activities generate income from temporarily available land; techniques need comparatively little space; and some generate a number of jobs. Perhaps the greatest barrier to urban farmers is access to land.
The area of land which is required to make UPA activities commercially viable will depend on a number of factors including: the quality of the land; the use of natural and artificial micro-climates including greenhouses and polytunnels; the type of crops grown; the mix of plants and animals; the price of produce at markets, including produce from rural areas and overseas; levels of other inputs including labour and fertiliser; and the distance of the site to urban markets. One estimate of the land area needed to make an organic box scheme commercially viable in the UK ranges from 1-4 hectares depending upon whether crops are grown in intensive beds or on a field scale (Soil Association,
Very often land is leased on a temporary basis or obtained informally, known as ‘usufruct’. Land used for urban farming generally has a low opportunity cost, which makes it appear to have a low contribution in monetary terms. When the opportunity cost of the land rises sufficiently, the land becomes more desirable for alternative purposes to UPA. This fact can inhibit investment in the agricultural use of land or the use of it altogether, implying that appropriate policies are needed to improve both access to land and security of tenure.
Usufruct increases the total rent that is available from land, providing public and private institutions with an additional source of income. UPA activities may also reduce the maintenance costs for public and private facilities (Smit, 1996).
Critical to UPA and city food enterprises in the North is the scarcity of unskilled labour, shortage of skilled labour, or high wage costs. In some instances this has led to capital-intensive modes of production and mechanisation. In the South, UPA uses relatively little wage labour apart from during seasonal planting and harvesting times. Exceptions to this include Jakarta, Havana, and Shanghai where there is strong institutional support and well-developed commercial sectors (Nugent, 2000a).
Urban farming enterprises on a larger scale may have lower average costs of production compared with smaller enterprises. These economies of scale will give the enterprise a cost, and therefore a price/profit advantage within the market place. However, this does not always apply in the urban situation where larger enterprises may face diseconomies of scale such as unsellable, large surpluses at some points in the year. Smaller producers, as we note elsewhere, can respond better to changes in consumers’ taste, specialise in high value products, and have less need for wage labour, and expensive capital and infrastructure.
Farmer co-operatives can benefit from organisational economies of scale and conduct activities which the individual would find hard to achieve in isolation. Marketing, financing, and technical assistance can be provided through this co-operation. It can also ensure the farmer or enterprise has an almost guaranteed market for the produce within certain quality standards.
The internal economic costs of UPA enterprises include items such as wage labour, plants and seeds, and transport. New UPA enterprises in the North may incur very high initial start-up costs if they are to compete effectively with existing urban and rural enterprises. Cost savings of UPA accruing to other sectors are not generally ‘internalised’ and may also occur over a number of years, and hence, are likely to be heavily discounted.