How can agrologistics support small farmers in Northern Central America?

“Talking about the life of a small producer is talking about a life of countless challenges, among which we can mention dependence on intermediaries, low investment and technology adoption, low productivity, increase in pests and diseases linked to climate change. These and other barriers marginalize us to subsistence farming.”

Jimmy Ramírez, a coffee producer in the El Paraíso department of Honduras, reflects on how smallholder farmers in his country have been affected by structural inefficiencies and new global challenges.

With food and fertilizer prices increasing, things are getting worse. Northern Central America (NCA), a region comprising Honduras, Guatemala, and El Salvador, is facing some of the worst impacts of the ongoing global food security crisis. Nearly 20 percent of the NCA population (7 million people) experience acute food insecurity (comparable to average prevalence rates in East Africa), and this situation is expected to further deteriorate. The region has consistently witnessed double-digit food price inflation during the last 6 months, and Honduras and Guatemala are among the 6 countries classified as highest-concern “hunger hotspots” by the World Food Program and the Food and Agriculture Organization of the United Nations.

Agrologistics is a key element of the food system that can deliver a “triple win” of increasing food security, alleviating pressure on climate and natural resources, and improving incomes for farmers, agrifood businesses, and the household economy. The agrologistics system collectively refers to the infrastructure, machinery, services, and information systems that enable the movement of agrifood products from farm to fork, within countries and internationally . As we outline in a recent World Bank report, an efficient agrologistics system can contribute to green, resilient, and inclusive development outcomes like healthy diets, lower carbon and water footprints, climate resilience, high-quality jobs, and market participation and profits for family farmers like Jimmy.

Contribution of enhanced agrologistics to green, resilient, and inclusive development

However, agrologistics systems in NCA have been historically performing poorly, compounding a situation of low agricultural productivity, stifled innovation, limited financial inclusion, and high climate vulnerability. Overall, the region has lagged the world regarding logistics efficiency, with poor roads, weak border infrastructure and management, and underperforming phytosanitary inspection systems imposing additional costs and hampering food-system productivity and competitiveness.

Logistics efficiency in Central America and the Caribbean lags other regions

For example, inadequate post-harvest and storage capacity have directly contributed to food loss and waste . In Guatemala, an estimated 38 percent of food production (up to 58 percent for tomatoes) is lost annually – higher than the average for Latin America (34 percent) and all regions globally (ranging from 26 percent in South and South-East Asia to 36 percent in Africa and West and Central Asia). Food loss occurs primarily post-harvest and has important implications for Guatemalans' livelihoods and food security.

Around half of all tomato losses in Guatemala are specifically attributable to inefficiencies in agrologistics, which in 2021 amounted to an estimated value of USD 36.5 million that could have gone into the pockets of tomato producers, processors, and distributors. Similarly, agrologistics-related losses make up a quarter of total losses of maize and beans, the most important food staples in the country. Post-harvest losses also have an important environmental footprint, accounting for 9.1 percent of Guatemala’s greenhouse gas emissions and 14.6 percent of its total land use.

Moving down the food chain, poor rural infrastructure, and cumbersome and costly custom processes put pressure on domestic food prices and hamper global competitiveness . About 60 percent of NCA’s road network is in bad condition so trucks can only travel at an average speed of 17 km per hour (on United States highways the average is 80 km per hour).

Transport costs represent 19 percent and 14 percent of final retail prices in domestic markets for basic grains like maize and beans. Improvements in inland logistics would have generated savings of US$18.1 million for El Salvador’s maize production in 2021. Moreover, customs clearance operations increase importing and exporting times, simultaneously reducing food imports available to the population and dampening NCA’s agri-food exports. Reducing agrologistics costs associated with exports would have allowed for an estimated saving of US$67 million for Honduran coffee producers .

What can Northern Central America countries do to promote agrologistics systems that deliver triple wins for producers and consumers?

On the policy side, it has been shown that gradually shifting agricultural support towards public goods and services holds potential to deliver triple wins for healthy economies, people, and the planet. For agrologistics, this will mean a combination of the following:

• Updated and systematic collection agriculture and food data. In all NCA countries, the latest agriculture censuses are at least 15 years old, and agriculture surveys do not include agrologistics information.
• Strengthened agricultural innovation systems. “Triple-win” objectives should be explicitly mentioned in public policies and programs for the generation and transfer of agricultural technology, and closer coordination should be established among the various agriculture innovation centers in the region.
• Expanded access to food quality laboratories and testing. Providing better articulation, timeliness, and quality of food quality testing and certification will render agri-food value chains more efficient and reliable, improving product safety and market access for family farmers.
• Effective intersectoral dialogue. Coordination with the transport sector for the operationalization of national Logistics Plans will promote connectivity and penetration.
• Streamlined cross-border processes. Streamlining controls and inspection of agriculture products will increase the efficiency of food trade and advance regional integration, ensuring that smallholders can benefit from high-value export opportunities.

Targeted value-chain investments can operationalize this agenda and complement enabling policies. In the short run, these investments should also include incentives for family farmers' adoption of sustainable and energy-efficient equipment and technologies  – so that producers like Jimmy can benefit from and contribute to triple wins in their communities.

Agrologistics investment opportunities for key value chains in Northern Central America