Agriculture, rural livelihoods and poverty eradication: Policy lessons from the food price crises

Transcription

1 UN-DESA Expert Group Meeting on Poverty Eradication Geneva, June 2011 Agriculture, rural livelihoods and poverty eradication: Policy lessons from the food price crises Bettina Prato, Ph.D, Strategy and Knowledge Management Department, International Fund for Agricultural Development (IFAD) 1 1

2 By way of introduction: why this paper now? 2 Persisting scale and depth of rural poverty and hunger/malnutrition in the developing world (esp. SSA, SA) Part of the roots to be found in decades of underinvestment or mis investment in agriculture Recent global focus on agriculture for many reasons (poverty reduction, food security, environment, climate change) The food price crises point to a new environment for agriculture to contribute to reducing poverty and hunger The point for policy makers is how to harness this new environment effectively to achieve this goal BUT, a focus on agriculture is only part of the picture broader rural growth is needed (including RNFE)

3 1. Rural poverty, rural livelihoods and agriculture 3

4 Some facts and figures on rural poverty About 1 billion people living under 1.25 USD a day are rural Urban/rural balance of extreme poverty is different across regions: over three quarters of the very poor are rural in SSA, SA, SEA Very large shares of rural population live on less than 2USD a day (around 90 per cent in SSA) Income of course only part of the picture: multidimensional poverty also widespread and often more entrenched in rural areas Over 1.6 billion people without electricity, most in rural areas Access to drinking water and sanitation very poor in many rural areas Unequal access to social services (healthcare, education) urban bias, but not only Less access to opportunities for active citizenship (organization, political representation, voice, accountability institutions in some cases also ID cards, etc.) Gender and social marginalization as factors of rural poverty 4

5 Long-standing/well-known factors of rural poverty 5

6 Rural poor households and agriculture Rural livelihoods are increasingly diversified (RNFE, migration, mostly informal jobs, very diverse picture) Agriculture remains central to the livelihoods of most poor rural households (income source, fallback option, household consumption), but this varies a lot across countries/areas Gender roles in agriculture changing differently in context (women overall 40% of ag labor force, but with variation) Vast majority of agricultural holdings (over 85%) are small, many more based on family labor Smallholder agriculture supports billion people 6

7 Agriculture and poverty reduction Economic growth in agriculture traditionally has large impact on poverty b/c of large participation of poor people in the sector Growth in agriculture can be up to 3.4 times more effective at reducing extreme poverty than growth in other sectors Or, growth in agriculture (esp. SH agriculture, and notably where land is more equally held) can be twice as beneficial to the poorest than growth in other sectors Growth in agriculture also essential for food security However, not enough investment going in agriculture for decades, plus policy neglect of agriculture and of rural areas more 7 broadly

8 Some lessons from the past Lessons from China, India, Vietnam, Brazil show that agriculture can play a major role in reducing both poverty and food insecurity But need for political commitment, policy packages covering a broad set of issues, and public investment: Supporting R&D and advisory services for improved productivity Securing land and water entitlements of poor farmers Improving rural infrastructure and services (roads, irrigation, electricity) Providing adequate incentives to farmers (e.g. floor prices, secure markets) Limits of GR approaches environmental focus now a priority Also, different context: private sector to play a greater role. Public sector and policy environment are however critical enablers 8

9 2. The recent price crises and smallholder farmers 9

10 The crises as symptoms of a new world for agriculture and rural poverty Two main global food price spikes: , mid 2010 to today Global spikes part of an environment of more volatile prices, possibly similar to 1970s (large fluctuations, unpredictability) Global/domestic price interplay volatility and price spikes can be imported, but sources can also be local transmission issue Different causes, but globally include among other supplydemand imbalance, and supply shocks (possibly more frequent) Both of these causes point to the same: the environment for agriculture to help reduce poverty and hunger has changed Both opportunities and challenges policymakers need to focus on how to help farmers seize opportunities and reduce their vulnerability to the challenges including price volatility itself 10

11 The impact on poverty and food security price spike added 105 million to the very poor, helped bring the hungry over 1 billion Mid to end 2010, 44 million more poor people Evidence of malnutrition stagnating or even increasing at field level (UNHLTF, WFP ongoing assessments) Why all this? Poor families spend up to 75% of their income on food higher prices lead to eating less, and less nutritious food (women and children especially affected) Families also cut down on welfare expenses, schooling More awareness of long term poverty impact of malnutrition these are not just short term effects 11

12 Impact on smallholder farmers Most poor farmers are net food buyers evidence of similar poverty and nutrition effects as on urban poor Most poor farmers have not been able to take advantage of higher prices (but exceptions: e.g. 44 million more poor include 24 million net food sellers moving above poverty line) Responses are context specific depend on asset base, links to markets, bargaining power in markets, services (e.g. financial), infrastructure Some farmers produce more for self consumption, others the reverse. Crop diversification a response in many areas Poor farmers face greater risks: prices are not just higher but more volatile, inhibit planning and investment 12

13 Implications for agriculture and rural poverty Food price hikes and greater volatility can result into rural poverty and hunger both in the short and in the long term They undermine the food security and livelihoods of small farmers as well as their production and investment capacity They result to a large extent from supply demand imbalance and a more volatile natural and climate environment Small farmers can play a key role in addressing the root factors of the crises as well as in mitigating its impact BUT, small farmers are held back by long standing factors resulting into poverty Price volatility is adding to those factors, holding farmers back further, while also making them more poor 13

14 14 3. Policy lessons from the crises

15 How governments have responded to the crises Focus mostly on immediate impact of the crises (buffering consumers), less so on longer term issues (stabilizing supply, reducing vulnerability to supply shocks, thickening markets) Agriculture has been part of both sets of responses, to varying degrees this will need to continue (CFA) From a policy perspective, responses cover in particular: trade policies social protection/safety nets subsidies to agricultural production direct price stabilization incentives to large scale investments Impact highly context specific, not clear how short and long term targets are reconciled 15

16 Areas of focus for policymakers going forward Develop an appropriate institutional environment to incentivize private investment in agriculture For small farmers as investors, both improve market incentives and reduce risks and transaction costs (through good governance, support to organizations, adequate business and contract laws, improved infrastructure energy, transport, etc.) For larger investors, develop appropriate balance of incentives and safeguards for smallholders and poor rural communities (as above, plus develop win win business models, labor laws, secure natural resource entitlements, PPPs) Strengthen agricultural services and markets/value chain approach Invest in needed infrastructure and services upstream, to support/stabilize supply (reform of R&D, input, financial services) Strengthen market infrastructure and institutions downstream, so small farmers can capture greater value and benefits at reduced transaction costs Promote public private partnerships and provide incentives for the private sector to provide the needed services to rural areas and people 16

17 Areas where policy efforts must focus, cont. Promote sustainable agricultural intensification agenda for increased and more resilient supply (policies, public investments, PPPs) 17 Focus R&D, innovation, advisory services on sustainability, productivity, and climate change adaptation and mitigation as a comprehensive agenda Strengthen women and men farmers human and collective capabilities (reform of ag. education systems, laws on associations and cooperatives, multi stakeholder platforms) Establish or strengthen social protection/safety net systems with a food security and nutrition focus, covering rural and urban areas Safety nets need to be developed to cover the nutrition vulnerabilities of small farmers and poor rural people (women and men), not just urban consumers Safety nets that are food based need to be designed both to reduce small farmers vulnerabilities and to support their production capabilities and incentives Strengthen the risk management capacity of small farmers Foster innovative financial products, secure natural resource entitlements, develop resilient ag technologies, strengthen organizations gender a cross cutting concern Make the environment of rural areas and agriculture less risky (again, infrastructure, good governance, services)

18 18 4. Conclusions

19 To sum up: Price volatility and price spikes undermine rural livelihoods, with negative impact on both poverty and food security BUT, they are also signs of a new environment for agriculture and rural poverty new opportunities for agriculture to help drive exit from poverty for many, though not all, rural women and men For this to happen, the right policy environment needs to be in place for private investment in agriculture, and for small farmers to seize new opportunities linked to increasing demand for food in more sustainable and resilient ways (SAI) and with less vulnerability to risk (market engagement risks, environmental/climatic shocks, price volatility) 19

20 20 Thank you!