Each year, the FAO publishes a report on the State of Food and Agriculture, the aim of which is to provide a synthetic overview of the global agricultural situation and develop on the issues concerning rural and agricultural development and world food security. Published on 6th
December, this year's edition focuses on the importance of agricultural investment.
While it is essential to significantly increase agricultural production and productivity to overcome global food insecurity, the issue of agricultural investment and these vectors is indeed very crucial. We recommend reading this report1
, the press release of which we have published below, which summarizes its main points.
Firstly, the FAO points out that farmers are the principal investors in the agricultural sector, before States and fund donors. It also notes that these investments are largely profitable and have, in countries where they were implemented, made significant progress in reducing hunger. But the FAO also notes that farmers' investments are hindered by an unfavourable economic environment, characterized, for example, by poor governance, extreme poverty, uncertain property rights, high taxation in the agricultural sector or even poor access to markets and financial services. If these hindrances to agricultural investment are indeed deep-seated barriers to improving global food security, it is important to note that, more broadly, the weakness and volatility of agricultural prices also discourages agricultural investment. Indeed, how can farmers invest in their land if they do not have enough income to feed themselves or when agricultural prices vary considerably overnight? In this context, it is important to implement mechanisms to regulate agricultural markets, to ensure stable and sufficiently high prices for farmers to further invest in their farming.
momagri Editorial Board
Making more and better investments in agriculture is one of the most effective ways to reduce hunger and poverty while safeguarding the environment.
This is the key message of FAO´s flagship annual report, The State of Food and Agriculture 2012 (SOFA) presented today in Rome.
The world´s more than one billion farmers must be central to any agricultural investment strategy, as they are the biggest investors in this sector, the report notes. But farmers' investments are often limited by unfavourable investment climates.
"A new investment strategy is needed that puts agricultural producers at its centre," said FAO Director-General José Graziano da Silva. “The challenge is to focus the investments in areas where they can make a difference. This is important to guarantee that investments will result in high economic and social returns and environmental sustainability. ”
Investing in agriculture pays off
New data compiled for the report show that farmers in low- and middle-income countries invest more than $170 billion a year in their farms - about $150 per farmer. This is three times as much as all other sources of investment combined, four times more than contributions by the public sector, and more than 50 times more than official development assistance to these countries.
Investing in agriculture is clearly paying off, according to the FAO report. Over the last 20 years, for example, the countries with the highest rates of on-farm investment have made the most progress in halving hunger, to meet the first Millennium Development Goal.
The regions where hunger and extreme poverty are most widespread - South Asia and sub-Saharan Africa - have seen stagnant or declining rates of agricultural investment over three decades.
"Recent evidence shows signs of improvement, but eradicating hunger in these and other regions, and achieving this sustainably, will require substantial increases in the level of farm investment in agriculture and dramatic improvements in both the level and quality of government investment in the sector," the report said.
Overcoming investment barriers
The report emphasizes that in many low- and middle-income countries, farmers are often confronted with weak incentives to invest.
A number of factors can drastically reduce the incentive to invest, including poor governance; absence of rule of law; high levels of corruption; insecure property rights; arbitrary trade practices; high "taxation" of agriculture relative to other sectors; and inadequate levels and quality of rural infrastructure and public services.
Smallholders face specific, severe constraints, often including extreme poverty, weak property rights, and poor access to markets and financial services.
Overcoming these barriers will be essential to unlock the full investment potential of farmers in many rural areas. The report recommends focusing on a number of areas in order to foster smallholder investment, including the following:
- Governments and their development partners need to help smallholders mobilize their own savings and gain improved access to credit.
Make better use of limited public funds
- Stronger producer organizations, such as cooperatives, can help smallholders deal with risks and provide better market access.
- Social protection can contribute to the expansion of the asset base by the poorest smallholders.
National governments are the second largest source of investment in agriculture. The report urges governments and donors to channel their limited public funds into areas that have been proven to be strongly supportive of agricultural growth and poverty reduction, such as agricultural research and development, rural infrastructure and education.
Evidence from many countries shows that investing in these areas often "has much higher returns than spending on subsidies for agricultural inputs such as fertilizer." While such subsidies may be politically popular, they usually do not offer the highest returns.
Large-scale investments in agriculture
The report calls upon governments, international organizations, civil society and corporate investors to ensure that large-scale investments in agriculture, like the acquisition of land by private companies and funds, are transparent, accountable, socially beneficial and environmentally sustainable.
“The key word is good governance. We need to assure that the investments meet a certain set of conditions that assure that they contribute to food security and sustainable local development,” said Graziano da Silva.
Instruments like the new Voluntary Guidelines for the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security, endorsed by the Committee on World Food Security (CFS), offer governments and communities support in negotiating contracts that are beneficial while respecting the rights, livelihoods and resources of the most vulnerable.
The CFS is also beginning a process to develop and ensure broad ownership of principles for responsible agricultural investment. These are expected to promote investments in agriculture that contribute to food security and nutrition, and to support the progressive realization of the right to adequate food in the context of national food security.