The Risks Agriculture Faces in Developing Countries

The Risks Agriculture Faces in Developing Countries

Synthesis of an online debate*

ATwo things distinguish food production from all other productive activities: first, every single person needs food each day and has a right to it; and second, it is hugely dependent on nature. These two unique aspects, one political, the other natural, make food production highly vulnerable and different from any other business. At the same time, cultural values are often deeply entrenched in the way the food is produced. The debate on food security and rural development should therefore take these aspects into account, rather than looking at agriculture as just another industrial sector.

BFarmers everywhere face major risks, including extreme weather, long-term climate change, and price volatility in input and product markets. However, smallholder farmers in developing countries must in addition deal with adverse environments, both natural, in terms of soil quality, rainfall, etc., and human, in terms of infrastructure, financial systems, markets, knowledge and technology. Counter-intuitively, hunger is prevalent among many smallholder farmers in the developing world.

CParticipants in the online debate argued that our biggest challenge is to address the underlying causes of the agricultural system's inability to ensure sufficient food for all, and they identified as drivers of this problem our dependency on fossil fuels and unsupportive government policies.

DOn the question of mitigating the risks farmers face, most essayists called for greater state intervention. In particular, they considered that governments have a fundamental role to play in addressing the inability of farmers to organize themselves to correct market failure and secure higher prices, but they were divided on the role that could be played by private risk-management tools, such as private insurance, commodity futures markets, and contract farming. In addition, state intervention has its problems: while governments can reduce the risks faced by large-scale farmers, their interventions often contribute to the problems faced by smallholders. For example, regarding state subsidies for agriculture, Rokeya Kabir, of the Bangladesh-based NGO ActionAid, indicated that the state should not subsidise something when only the rich benefit from it.

EShenggen Fan, Director General of the International Food Policy Research Institute, held up social safety nets and public welfare programmes in Ethiopia, Brazil and Mexico as valuable ways of addressing poverty among vulnerable smallholders, and thus reducing their vulnerability to shocks. However, some commentators argued that public works programmes take poor people away from their own farms and have a negative effect on food production.

FKanayo F. Nwanze, President of the International Fund for Agricultural Development, argued that governments can significantly reduce risks for farmers by investing in basic infrastructure like roads, water and electricity. Sophia Murphy, senior advisor to the Institute for Agriculture and Trade Policy, suggested that governments can also mitigate risks by using procurement programmes to create price bands for essential foods. These would help reduce price volatility by buying stocks when prices are low and releasing them when prices are high. However, other participants argued that this was not feasible in developing countries.

GMany essayists mentioned climate change and its consequences for small-scale agriculture. Fan explained that in addition to extreme weather events, climate change will bring about shifts in rainfall and temperature patterns, with severe consequences for crop yields. He argued that to adapt to climate change, farmers need to adopt resilient agriculture practices, while Murphy added that this needs to be supported by national and international policies.

HSome participating authors and commentators argued in favour of community-based and autonomous risk management strategies through collective action. According to Murphy, 'collective action offers an important way for farmers to strengthen their political and economic bargaining power, and to reduce their business risks.' One commentator, Giel Ton, warned that collective action does not occur automatically, and that challenging financial, physical and social environments might actually hinder farmers from organising themselves.

ISome participants explained that market price volatility is often worsened by the presence of intermediary purchasers who take advantage of farmers' vulnerability, dictating prices. One solution, according to Sonali Bisht, founder and advisor to the Institute of Himalayan Environmental Research and Education (INHERE), is 'intermediary-free' co-operatives that sell directly to consumers. Another scheme is to encourage consumers to pay a subscription to a farm in return for a share of the harvest, which helps farmers to manage financial risk.

* The personal names in the text refer to the authors of written contributions to the online debate.