Transcript Recent trends and issues in agriculture and rural development or the state of IFAD’s business in the global context of post-Aquila Executive Board.

Recent trends and issues in agriculture and rural development
or the state of IFAD’s business in the global context
of post-Aquila
Executive Board – 97th Session
14-15 September 2009
Kevin Cleaver
Assistant President for Operations
1
Six contemporary agriculture issues affecting developing
country farmers, and the impact on IFAD
• Issue #1: Food, fuel, fertilizer price volatility and world
economic crisis
• Issue # 2: Agricultural growth is inadequate to meet demand
• Issue # 3: Climate change and environmental degradation:
government responses inadequate causing land degradation,
water shortages, production failure
• Issue # 4: Government responses often counter-productive
• Issue # 5: Agriculture is constrained in fragile states and
conflict-prone countries: hitting the poor most
• Issue #6: All of the above causing rural poverty to increase
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Issue #1: Commodity and oil index prices
increasing, and increasingly volatile
Food and fuel Price Volatility
300
250
CRUDE P ETROLEUM ,
A VERA GE
FOOD
200
RICE THA ILA ND
(B A NGKOK)
150
WHEA T U.S.GULF P ORTS
M A IZE US(GULF P ORTS)
100
50
3
0
Fe 8
b0
M 9
ay
-0
9
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
20
99
19
19
98
0
Source: IM F International Financial
Statistics, July 09
Index: 2005= 100
Effect of food prices: Developing world and
Africa worse off due to increased food prices
Countries in red suffer
biggest trade balance
losses, countries in blue
expected to show biggest
gains
Source: IMF Survey Magazine,
April 2008
4
Long term trends: The long term decline in real
agricultural prices has been reversed
Extended Annual FAO Food Price Index,
1998-2000= 100
5
Why are food prices rising; and why greater
volatility?
• Due to rapidly rising global and local demand for food, at
about 2% per annum and rising
- In turn caused by income growth, population growth,
dietary changes, bio-fuels
• Combined with a slowing of the rate of increase in
production
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Issue # 2: Agricultural growth response to higher
prices is weak due to:
• Lack of agriculture investment and consequent reduction in productivity
growth
• Cereal yields increasing at 1-2% p.a. now, compared to 3-6% p.a.
in the 1960s-1980s
• 18% of development assistance went to agriculture in 1979, falling
to less than 3% last year
• Low investments in agricultural research: 0.42% of agricultural output in
Asia, 0.65% in Africa, 1.1% in LAC (over 5% in developed countries)
• Transport, marketing and farm input price increases as oil prices increase
• Land degradation
• Substitution of bio-fuels for food (for maize)
• Government policy deficiencies, panic in food markets
• Climate change may be exacerbating the slow food production response
7
Agricultural productivity: Improvements far below
population growth
Least Developed Countries:
Agricultural productivity and population
900
800
700
Population, million
600
500
Agriculture value added per
worker (constant 2000 US$)
400
Cereal yield ( 10 kg per
hectare)
300
200
100
8
20
05
20
03
20
01
19
99
19
97
19
95
19
93
19
91
0
Source: WDI dat aset 2008
Agricultural productivity: Growth most in high-income
countries; stagnation in sub-Saharan Africa
Cereal Yield (kg per hectare)
6000
5000
4000
High income
3000
Low income
Sub-Saharan Africa
2000
1000
0
1980
1990
2005
High income
3338
4180
4985
Low income
1387
1730
2080
Sub-Saharan Africa
1051
1029
1090
Source: WDI dat aset 2008
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Investment in the agricultural sector: Government
spending and donor aid declining
Share of total government spending on agriculture
Year
Africa
Asia
Latin America
Total (Weighted Average)
1980
6.4%
14.8%
8%
11.3%
1990
5.2%
12.2%
2%
7.9%
2002
4.5%
8.6%
2.5%
6.7%
Source: DFID/ World Bank 2007
Donor Aid to developing countries: Share of agriculture
1980
20%
1990
15%
2006
Source: IFPRI, April 2009
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4%
To meet MDG-1, an additional $14 billion
annually is needed in developing countries;
and an additional $3.8 to 4.8 billion in SSA.
IFAD lending/grants at $500-600 million p.a.
too small to have significant impact.
Issue #3: Rural environmental issues and climate change
have larger impact on small farmers than previously thought
• Deforestation, groundwater depletion, salinization of
irrigation areas, destruction of rural biodiversity, soil loss
(see UNEP Atlas of Africa)
• Agriculture both a cause and victim of environment
problems
• Agriculture contributes 13% of green house gases
• Rural environment problems to worsen due to climate
change (IPCC)
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Issue #4: Government responses to the
above often counter-productive
• Supply response to higher prices strongest in industrial countries,
China and Brazil
• Harmful government policy responses to higher prices in many
countries
- Export bans
- Farm price controls imposed to allow consumer subsidies at low
public cost
- Bio-fuel subsidies and import barriers
- Lack of investment in agriculture; too much focus on food aid
• Subsidies maintained for high greenhouse gas emission
agricultural practices in both industrial and developing countries
• The poorest people often most neglected by governments
(women farmers, indigenous people, the poorest regions)
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Issue #5: Agriculture is particularly constrained in
fragile states and conflict-prone countries
• Fragile states had 30% of world’s poor, 50% more
malnutrition
• Inadequate local governance and weak institutions in
fragile states, reflected in poorly performing investment
programs
• Accompanying investment climate, infrastructure poorly
developed in fragile states
• Civil strife more common in fragile states (by definition)
• Poor governance and civil strife scares away donors,
private sector, exacerbating the problem
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Issue #6: Rural poverty and hunger is increasing
as a consequence of the above five issues
• 2 billion live on less than $2 per day
• Over 1 billion hungry people in the world (June 2009),
100 million more than last year
• 642 million in Asia and the Pacific
• One third of the population affected in sub- Saharan
Africa
• Food emergencies in 31 countries
14
Poverty: Very little progress in sub-Saharan Africa,
greatest numbers in South Asia
Source: World Bank 2009
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Malnutrition: The same trends followed
and deepened
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The L’Aquila statement, in brief:
“The combined effect of longstanding underinvestment in
agriculture and food security, price trends and the economic
crisis have led to increased hunger and poverty in developing
countries, plunging more than a further 100 million people into
extreme poverty and jeopardising the progress achieved so far
in meeting the Millennium Development Goals. … Food
security, nutrition and sustainable agriculture must remain a
priority issue on the political agenda, to be addressed through
a cross-cutting and inclusive approach, involving all relevant
stakeholders, at global, regional and national level. …”
17
The L’Aquila statement, in brief:
… Building on the experience of FAO, IFAD, and other
agencies, special focus must be devoted to smallholder and
women farmers and their access to land, financial services,
including microfinance and markets. Sustained efforts and
investments are necessary for enhancing agricultural
productivity and for livestock and fisheries development.
Priority actions should include improving access to better
seeds and fertilizers, promoting sustainable management of
water, forests and natural resources, strengthening capacities
to provide extension services and risk management
instruments, and enhancing the efficiency of food value
chains. …
- Endorsed by 27 countries
18
The L’Aquila declaration states that more resources will
be made available to fragile states and to Africa (up to
$20 billion in next 3 years)
• How should the resources be used, and what is the
potential role for IFAD?
19
IFAD’s 8th Replenishment period corresponds
to the L’Aquila statement (2010-2012)
IFAD will lend and grant $3 billion during this period. IFAD will focus on:
• Smallholder production and productivity improvement, particularly
amongst the poorest rural population and women
• Rural employment generation through farming, agro-industry, marketing,
input supply
• Development of farmers’ organizations, to help plan village-level
development and manage services in:
-
Rural finance
Marketing and input supply
Water and irrigation
Land and grazing
Forests
• The above to address the production and rural poverty issues at the
same time
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IFAD supports micro-credit project through
Women’s Groups in Uganda
•Microfinance plays a crucial role in
consumption smoothening.
•Microfinance is one of the few asset
classes with a positive return during
2008. While emerging market funds
have experienced a 20 percent selloff, assets of the top 10 MFI funds
grew by 32 % in 2008 (CGAP,
May 2009)
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Agriculture Services in Haiti
22
Women’s training in the Gaza strip
23
Reforestation in Bolivia
24
Irrigation and Land Rehabilitation Project in Bhutan
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IFAD projects will incorporate adaptation to climate
change and environmental concerns
• Adaptation
-
Drought resistant cultivars
Crop diversification
Alternative tillage and erosion control
Payment for environmental services
Weather insurance
Drought contingency and early warning systems
Water management, including flood response
• Mitigation of climate change through agriculture. IFAD will argue to:
- Reduce subsidies for high greenhouse gas-emitting agriculture practices
• Reduce expansion of new irrigation schemes, farm machinery, chemical
fertilizer, land and forest clearing, livestock development, fuel use
- Subsidize low greenhouse gas emission processes
• water management, conservation agriculture, reforestation
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IFAD agrees that the market and the private sector are increasingly driving
agriculture. Governments and donors need to adapt this evolving reality to the
benefit of small farmers, but work mostly through governments
VALUE CHAIN APPROACH:
Input
industry
Producers
Research
Extension
service
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Food
process
industry
Food
retail
industry
Consumers
IFAD will make its projects more effective and larger
scale to have larger impact
• Support projects and programs in partnership with other
sources of expertise and funds (IFIs, bilaterals, private
sector, governments) – to scale up
• Focus more on institution building in fragile states
• Introduce longer term approach, with 10-15 year
partnerships reflected in 2 to 3 consecutive projects
• In fragile states with poor governance, work through civil
society, NGOs, private sector
• Encourage more South-South cooperation with Middle
Income Countries
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What more can IFAD do in the context of L’Aquila?
• IFAD can provide project/program “vehicles” into which
other donors can put money
• IFAD will provide more agricultural policy advice
• Wider and more effective knowledge sharing, including
in the November World Food Summit
• Development of grassroots agricultural and farmer
organizations: institutional development at the grass
roots and globally
• Remittances
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Still more
• IFAD’s internal efficiency must improve dramatically
- IFAD will not take on more than its capacity permits
• IFAD’s Results Measurement Framework for 2010-2012 commits to
improve results qualitatively and in scale
• IFAD will work to help coordinate assistance to agriculture and rural
development
- UN Secretary-General’s High Level Task Force; FAO, WFP, CGIAR,
other UN agencies; regional institutions; IFIs; bilaterals; the Copenhagen
Climate Change Summit
• IFAD will explore new instruments and conditions to deliver more
effective products to its clients
- Private sector, new grant policy, gender policy, environment policy,
MICs policy, fragile states policy
• What can you, as Board members, do?
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Annex - Effect of agriculture price increases on
developing countries
• High international agricultural prices stimulated production
in industrial countries and a few large MICs
- 2009 production forecast is marginally lower than 2008
record cereal output of 2.28 million tonnes
• There has been a recent decrease in international prices
- But cereal prices still 66% higher in March than in 2005
- Domestic prices higher than a year earlier in about 78% of
developing countries
- Rice prices higher in all sub-Saharan countries (April 2009)
• Developing countries cereal import bill rose 56% in 2008
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Annex - The effect of increased food prices on food
insecurity in rural households
• The rural poor can benefit from higher agricultural prices if:
(i) they are a net producer; not a net consumer; (ii) if they can sell
at the higher prices; or if (iii) they can get higher paying rural jobs
• Studies show that food purchasing power of the poor decreased
by 20% in 2008, because the poor spend 60% or more on food
(more net consumers than net producers)
• Surveys have found greatly increased malnutrition (stunting and
wasting) in countries experiencing high food inflation (2007-08).
• Net Result: poverty and hunger increasing
• Hungry poor increased from 923 million in end-2007 to 963
million in end-2008 to 1020 million in June 2009
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Annex – Monthly volatility in food prices
Food prices increasing and increasingly volatile
350.0
300.0
250.0
Fo o d P rice Index
200.0
M eat P rice Index
Dairy P rice Index
Cereals P rice Index
150.0
Oils P rice Index
Sugar P rice Index
100.0
50.0
33
6/2009
5/2008
4/2007
3/2006
2/2005
1/2004
12/2002
11/2001
10/2000
9/1999
8/1998
7/1997
6/1996
5/1995
4/1994
3/1993
2/1992
1/1991
0.0
Monthly food prices from 1991 to
August 2009: FAO Food Price Index
September 2009 (2002-2004= 100)
Annex - What next? Projections suggest that prices will
fall, but stay higher than long-term trend levels
Source: OECD-FAO Agricultural Outlook 2009-2018
34
Annex - Climate change and agricultural productivity:
The long-term projection
Source: IMF 2008
35
Annex - The role and effects of value chains
• Supply side: Increasing # of market players; Centralized management of
purchases; Decreasing ability of governments to regulate;
• Demand side: Urbanisation + Income growth creates demand for new
products: consumer driven value chains springing up
• Size: Supermarkets have about 50% share of food retail in Central America,
Mexico, East Asia, S. Africa; 20% in China, India.
• Effect of value chain phenomena on rural poor: depends on:
- Structure of agro-economy: Increased power of consumers and
purchasers could exclude smallholders; but if smallholders are contracted
by purchasers, could have increased opportunities
- Employment potential: If large farms increase employment, could benefit
rural poor; but large farms could capture most of the benefit of contracting
with value chains.
- Role for IFAD: IFAD will help organise small farmers into cooperatives
and associations to negotiate with rest of value chain, and strengthen
technical/quality control of production.
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Annex - Agricultural growth: Productivity varying
across countries
Average annual growth
(1990- 2005) in agricultural GDP
India
2.5
China
3.7
Brazil
4.1
Ghana
3.8
Average annual growth
(1990- 2005)
Bangladesh
3.2
Ethiopia
2.4
Burundi
- 1.7
Source: WDR 2008
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Annex - Agricultural growth mirrors malnutrition
in most countries
Undernourishment in total population (%)
1990-02
1995-97
2003-05
India
24
21
21
China
15
12
9
Brazil
10
10
6
Ghana
34
16
9
1990-02
1995-97
2003-05
Bangladesh
36
40
27
Ethiopia
71
63
46
Burundi
44
57
63
Source: FAO Statistics, 2009
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