Greater attention needed to farming sector, experts tell commodities meeting

20 March 2013

High prices for basic farm goods and industrial raw materials, with the complex effects that these cause on the economies of numerous poor countries, are not expected to decline any time soon, the Global Commodities Forum has been told.

A series of experts urged broad, well-designed strategies to ensure that the higher prices, which have now lasted for a decade, are harnessed in order to achieve significant and durable reductions in poverty in the developing world. For that to happen, they said, greater attention must be paid to the needs of the globe's 450 million smallholder farmers, and to the millions of impoverished non-farming families, often in the same countries, who suffer when food costs climb.

Opening the debate, UNCTAD Deputy Secretary-General Petko Draganov said: "In essence, high commodities prices have so far had only a limited impact on poverty reduction." The challenge, he said, is "to examine the measures and policies needed in different sectors to strengthen the link between the commodities sector and poverty reduction."

Pascal Lamy, Director-General of the World Trade Organization, said that while prices have eased slightly from their 2007-2008 peaks, they remain relatively high, underpinned by continuing strong demand resulting - among other things - from the "nutritional transition that goes hand in hand with poverty reduction, rising costs for farming inputs, and often slow reactions of supply to price signals."

Nominal prices of agricultural commodities "are expected to trend upwards over the next ten years," Mr. Lamy said, "and are projected to average 10-30 per cent above those of the previous decade. These developments have shifted the focus from commodity trade… more towards importing developing countries, and the bills they have to pay for their food commodity imports. This is the 'food security' concern, which is an important one for the global community."

The WTO Director-General said that trade is not a "magic bullet that will concurrently guarantee development based on export of commodities and food security." But he said that it is a necessary part of a package of comprehensive responses needed to reap better poverty reduction from the commodities boom.

While such continuing obstacles as export subsidies, export restrictions, bound tariffs, and non-tariff issues such as health and safety standards continue to affect commodity trade, said Mr. Lamy, the progressive opening of trade in recent years "has created opportunities for agri-food firms to reorganize their production and distribution systems around value chains. A particular challenge is to ensure that smaller firms in poorer countries can join in these value chains."

Juri Seilenthal, Ambassador and Permanent Representative of Estonia, and outgoing President of UNCTAD's Trade and Development Board, told the meeting that attention needs to be paid to issues such as risk management and resilience among small farmers, transparency in commodities markets and value chains, and the relationship between the energy sector and economic growth and development. He urged reflection "on the best ways of achieving a fairer distribution of the benefits" arising from the continuing high commodity prices.

Michael Lipton, Research Professor of Economics at Sussex University in the United Kingdom, said the most effective and durable way to reduce poverty is to help smallholder farmers improve their agricultural inputs and to practice farming scientifically. "The most important policy lesson," he told the meeting, "is that… subsistence farming, especially of food staples, should be celebrated and helped."

Those who question this perspective should understand that the trumpeted progress in Asia since 1965, which has led to massive poverty reduction, is "based on a green revolution in food staples output, mainly on subsistence and near-subsistence smallholdings," Professor Lipton said.

He told the meeting that smallholder farming, if supported, especially for staple food production, keeps rural populations on the land, raises health more efficiently and cost-effectively, and leaves hundreds of millions of people less vulnerable to food price increases, as they are able to feed themselves on what they grow. One government policy that pays off rapidly in poverty reduction is to free up additional land, such as "superfluous public lands", for subsistence farming, for example for home gardens and kitchen gardens, Professor Lipton said.

Ruth Rawling, Vice-President for Corporate Affairs for Europe, the Middle East and Africa of Cargill, the agro-industrial conglomerate, said that the private sector, which includes 450 million smallholder farmers, "is the delivery mechanism to end hunger and poverty". She added, however, that "the private sector can only do this with help: help from the right policy framework and the right incentives."

Ms. Rawling went on to describe a scheme for sustainable palm oil production in South Sumatra, Indonesia, that has combined work by Cargill and by 8,800 smallholder farmers represented by 18 cooperatives, and government efforts to improve infrastructure, including roads and bridges. Also involved are government/company negotiations "to ensure smallholders are paid a price that is fair but is linked to the world price", and government help to provide farmers with sustainability certification. Since 2006, the average income per farmer under the programme has more than tripled, she said.

Similarly, she said, the corporation has worked in extensive public-private partnerships with cocoa farmers in several developing countries. These relationships, she said, are built on farmer training, community support, and farm development arrangements, and involve not only the private sector and governments but also humanitarian organizations.

A critical factor for developing the potential of smallholders is setting up effective price-risk management and safety nets, Ms. Rawling told the meeting. She added: "These are essential and hard to do."

Dhano Sookoo, President of the Agricultural Society of Trinidad and Tobago, told the meeting that farmers' organizations, wherever and whenever they have been well structured and well organized, have served as "the catalyst for growth and the centre of development for that country's agricultural sector." Too often, she remarked, governments and policymakers have failed to harness the resources and potential of such organizations. Such groups, she said, "have played, and will continue to play, a key role in the reduction of poverty throughout the world."

The Agricultural Society of Trinidad and Tobago is a strong advocate for farmers, and takes strategic approaches focusing on bringing farmers together "under one single voice, enabling at the same time the collection of data as to the amount of the farmers' acreage and the types of crops being cultivated," she said.

Associations working under the umbrella of the Society group together farmers producing similar crops, and monthly forums discuss problems and challenges that arise and seek joint solutions to them. A "tractor pool" has used Society dues and other sources of funding to buy tractors and make them available to farmers preparing their land for planting, and the collective nature of the Society has allowed it to negotiate financing and credit for farmers at reduced rates, Ms. Sookoo said. It has also found ways to provide credit to farmers who do not have formal title to their land and in the past have been unable to obtain loans. Those steps, combined with an irrigation programme and input into government decisions on upgrading roads and other infrastructure, have led to increased harvests.

"The increase in production means an increase in income," said Ms. Sookoo. "More money available means more opportunity for farmers to improve their lives."