The current food crisis—increasing poverty linked to price volatility and high food prices—have put agricultural growth and food production issues back on the development agenda. Is productivity growth the only way to address the short-run challenge (the food crisis) and longer-term needs (meeting increased demand for food)?
Even though today agriculture is the main source of livelihood for 2.5 billion people, including 1.3 billion smallholders and landless workers, public investment in agriculture in developing countries, as well as the share of agricultural expenditure in total government spending, have been gradually declining since the 1980s. Bilateral and multilateral assistance to agriculture, after an increase in the 1970s, also fell starting in the mid-1980s. It is only in recent years that the World Bank and other aid agencies have increased their lending and boosted their investments. But will these investments be effective? This depends on whether they will have a sizeable impact on agricultural productivity.
As of today, the growth of agricultural productivity has stalled. The yields of major grains grow by about 1 percent per year, which is lower than the population growth rate. Given that expanding the cultivated area is not a possibility to meet future needs, in order to feed the growing (urbanized) population (who has higher food demand), the only solution is increasing agricultural productivity.
Whether it is possible to increase productivity —which would give a major boost to economic growth and substantially reduce poverty in low-income economies such as Sub-Saharan Africa— depend on a range of factors. A recent report by IEG and other evaluation offices identifies six action areas: research and extension; access to water; access to credit; access to land and formalization of land rights; transport and marketing; and policies, markets, and agribusiness. Weaknesses in any of these areas can hinder agriculture and agribusiness productivity. There are no “silver bullet” solutions. The most difficult challenges are institutional and are related to market failures, missing markets and property rights—which all imply the need to find solutions to complex social problems and therefore compound the probability of failure.
New approaches to increasing productivity in these countries have to be found. In most parts of the world, agricultural growth will need to come from intensive rather than extensive growth. Intensification is vital not only to meet increasing demand but also to reduce deforestation, environmental devastation, and global warming. The per capita production of cereals did not increase after the mid-1980s. Globally, the growth rates in yields of major grains declined from around 3 percent in 1980 to 1 percent recently—but this global figure masks large differences across countries and regions. In Africa, production of cereals and root crops rose mainly because more land was brought under cultivation; crop yields were largely stagnant. For its Green Revolution, Africa therefore needs high-yielding varieties that are adapted to local conditions. In addition, to guarantee adoption of such crop varieties and to integrate small farmers into modern value chains, existing barriers – such as low education, missing infrastructure, lack of credit and insurance markets – and insecure property rights have to be addressed. And new ways of information dissemination and learning methods, such as the use of communications technology in extension services, can foster adoption and profitable cultivation among farmers. Increasing productivity among smallholders in developing countries is also an instrument to guarantee food security in the long-run.
Agriculture can also be an engine of growth and employment opportunities for the rural non-farm economy because of its linkages with small cities and rural areas. Rural development and community-driven development can assist in this process. The government will need to play an important role. It should not, however, be the only purveyor. The private sector will be the main source of investment funds and a supplier of services. Donors, NGOs and civil society organizations (who benefit from local and external private expertise when implementing projects) will also play a key role. To identify the right mix of these actors and to establish an effective cooperation among them will also be a complex task.
As if new evidence was required, the 2008 food crisis has demonstrated once again the vulnerability of the poor to income shocks due to food price increases. As commodity prices rise once again in 2011, it seems important to adopt measures to limit volatility and put in place effective coping mechanisms. Macroeconomic approaches to stabilize prices in national markets are not promising. Policies which help the poor to cope with income shocks (such as social safety nets) have a higher potential to mitigate the adverse effects of price increases on the poor and prevent households from falling into chronic poverty. At the national level, beggar-thy-neighbor trade policies to stabilize prices and guarantee food security have been counterproductive: during the 2008 food price crisis, policies adopted by some developing countries have harmed poor populations and reversed some past gains. Once again the best instruments to protect small farmers from income shocks are increased productivity or other ex-ante measures that reduce the risk of shocks in the first place.
Food and agriculture challenges are examined in “Evaluative Lessons for Agriculture and Agribusiness,” by the Evaluation Cooperation Group and written by Xubei Luo (January 2011) and in “Agriculture and Development: A Brief Review of the Literature,” by Jean-Jacques Dethier and Alexandra Effenberger, World Bank Policy Research Working Paper 5553.