If Farmers in Developing Countries are to Prosper, They Need a Route to Market
After recently attending a week of sustainable development goals (SDG) events in New York, one lesson has become abundantly clear: if agriculture is to have a better future in the emerging world, farmers need “access.” Namely, access to technology, access to finance, access to labor, and, crucially, access to markets. However, even with major progress in microfinance and a slew of small but vital innovations—such as solar-powered irrigation pumps and fertilizer deep placement—for many small farmers the markets remain closed.
Some 2.5 billion people in developing countries earn their living from agriculture, with 80 percent of the land managed by smallholders (less than 10 hectares)—a group that makes up a disproportionately high number of the 3 billion people living below US$2.50/day worldwide. Inevitably, this financial fragility feeds into high rates of malnutrition and food scarcity, with small farmers in sub-Saharan Africa especially susceptible as climate unpredictability increases. Evidence of this vulnerability is apparent in the Global Food Security Index (sponsored by DuPont and produced by the Economist Intelligence Unit), which in 2016 found that nine out of the 10 most food insecure countries in the world are in Africa.
If these smaller farmers are to have a chance, they need to be able to move beyond subsistence farming and embrace trade. However, such a shift is far easier said than done. In the immediate sense, the hurdles for getting the harvest to market are on occasion insurmountable, as a lack of roads and other infrastructure hinders passage, an inadequate electricity grid limits storage options, and a paucity of pricing information undermines commercial prospects.
Less is more?
Yet, in the wake of an almost decade-long global recession and the most recent collapse in global commodity prices (which has hit the budgets of African and Latin American states especially hard), governments are poorly placed to assist. Nonetheless, if governments are struggling to provide the finance, they can at least help by getting out of the way. For example, although counter-intuitive, the US$1 billion governments have spent on fertilizer subsidies in sub-Saharan Africa has largely been money wasted, with much of the fertilizer pocketed and resold commercially and a substantial portion of it unsuitable for the acidic soil in the region. Meanwhile, more egregiously, the over US$250 billion that the Operation for Economic Cooperation and Development (OECD) spends on subsidies for its own farmers is often at the expense of potential emerging market agricultural suppliers. Indeed, with subsidies often encouraging overproduction, the excess is on occasion dumped into poorer countries in the form of aid, undercutting local producers.
Private sector to the rescue?
Such market-distorting measures undermine progress, hindering the kind of investment flows that have been evident in manufacturing for decades and in turn have transformed living standards across regions like east Asia. It also contributes to localized overproduction and creates wilder swings in global food prices. These outcomes are now deterring the young from following their parents into agriculture, as the rewards fail to justify the long hours and hard work.
Encouragingly, however, as was made abundantly clear during the week’s SDG events, the private sector can and is helping to fill the gaps. Where finance is lacking, microfinance schemes for farmers have begun to flourish; where infrastructure is weak, public private partnerships (PPPs) have sprung up; and where pricing information is absent, new apps and SMS services are being cultivated, a technology supported by increased access to mobile phones. There is still a long way to go, but finally there are indications that emerging market farmers are being offered the chance to compete on a level playing field.
Guest commentary from Robert Powell, a senior consultant with the Economist Intelligence Unit