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Re: HLPE consultation on the V0 draft of the Report: Investing in smallholder agriculture for food and nutrition security

FSN Forum Team Afghanistan
18.01.2013
FSN Forum

Posted on behalf of the Australian Government

The Australian Government acknowledges the importance smallholder agriculture plays in global food security. Smallholders are not only important contributors to food security and agricultural productivity within many countries but also drivers of/ contributors to economic development and enterprise in rural areas. Throughout the developing world smallholder agriculture faces many access constraints. These include access to:

  • secure tenure of land;
  • knowledge and technology transfer;
  • markets and market information;
  • financial services; and
  • social safety nets to protect them during times of crisis.

Like other businesses, smallholders (whether formal or informal) benefit from reforms and improvements in the domestic enabling environment and liberalisation of trade.

In responding to these challenges Australian aid currently supports:

  • lifting agricultural productivity by increasing investment in agricultural research and development, through Australian and international organisations working on food policy and agricultural innovation;
  • improving rural livelihoods by strengthening markets in developing countries and improving market access to increase incomes and employment, and reduce risks for the poor – through enterprise development, better policies and access to financial services; and
  • building community resilience by supporting the establishment and improvement of social protection programs that reduce the vulnerability of the poor to shocks and stresses.

As well Australia is supporting adaptive capacity and resilience through climate change adaptation and disaster risk reduction programs.

Australia recognises the importance of trade liberalisation and trade facilitation in underpinning food security, and pursues these through multilateral, regional and bilateral channels. The Australian Government has been a strong advocate for a successful conclusion to the World Trade Organization Doha Round of trade negotiations. From Australia’s perspective a multilateral trade deal offers opportunities to improve global food security. Australia also works to reduce trade barriers through other forums such as the Group of Twenty (G20), Asia-Pacific Economic Cooperation (APEC) forum, and the Association of Southeast Asian Nations (ASEAN). Australia seeks to negotiate and implement comprehensive bilateral free trade agreements that can deliver real benefits for the relevant parties.

Australia recognises the important contribution that investment in agriculture, whether from domestic or overseas sources, can make towards achieving food security. Foreign investment in agriculture can bring benefits to the sector and create opportunities for farmers. It can help to generate higher employment and incomes, investment in infrastructure and improvements to food production capabilities.

Further liberalisation of global agriculture and food markets will improve the efficiency and effectiveness of these markets and ultimately access and availability of food. Liberalisation of markets and improving access to markets and information is also likely to lower the likelihood of information asymmetry, rent seeking, and other market distorting behaviour. This in turn will benefit poor farmers and the food security of the poor by reducing transactions costs, increasing return on investment and providing income and employment opportunities. Food security will be determined by not only how communities and individuals feed themselves, but by their own ability to purchase and consume food at the lowest cost.

1) Definition and significance of smallholder agriculture and related investments is the approach in the report adequate?

Yes. The definitions and significance of smallholder agriculture and related investments are adequate and well defined in the paper. However, there probably should be some caveats put around expectations the document may generate of smallholder systems acting as a panacea for global food insecurity. The reality is that many systems of smallholder farming, while having the potential to significantly increase their local production capacity, will not alleviate global or even local food insecurity because of physical, cultural, social or economic constraints and disincentives. It would be helpful for the report to put smallholder systems in context by outlining the other key approaches that are fundamental in addressing global food security. These could be outlined in the report’s executive summary section and should cover:

  • Emergency assistance and longer term protection for the most vulnerable
  • Increased investment in agricultural research, development and extension
  • Increased focus on agricultural production and distribution and
  • Appropriate economic and trade policies, leading to open and efficient markets to maximise food trade flows, locally and internationally.

2) Framework for Smallholder Agriculture and related investments: is the typology useful, adequate and accessible for the problem at hand?

The typology is useful, well thought out and accessible conceptually. The approach while acknowledging the heterogeneity of smallholder contexts provides an opportunity to clearly analyse what context best describes smallholders in a system, what the system itself looks like, and how changes can be generated to impact on the poor.

There is room for the analysis to be further enhanced by drilling down and further mapping the characteristics of smallholder agriculture with further sub classifications relating to specific areas (i.e. land tenure arrangements (assets) and farmer type (markets) see below).

This is simply an example and other sub-classifications could include prevalence of marketing boards (institutions), cost of doing business (markets, institutions), ease of access to finance and financial institutions (assets, markets, institutions) and other measures all of which could build a very useful typology for analysis and intervention if required.

A better and more nuanced understanding of smallholder agriculture and the constraints to investment and other opportunities they face, would certainly improve Australia and other international partners’ capacities to respond effectively to need.

One issue for consideration in drafting the next version of the document is to ensure that the clarity of thinking is as apparent in the Executive Summary as it is in the body. In reading the Executive Summary the logic and clear thinking within the body of the document is lost by summarising and compressing the thinking - resulting in what looks like a series of headline statements with little of the interconnecting logic of the main text.

3) Constraints to the smallholder investment: are all main constraints represented in the draft?

No. The enabling environment constraints to smallholders and smallholder investment seem to be somewhat overlooked in the paper. Rather than tackling the hard questions of vested interest and the need to reform markets from within, the paper tends to take a broader brush focusing on how farmers operate at the end point of the system.

While flagging institutions in the typology analysis the focus seems to be placed more on the demand than supply side. Thus institutional reform as defined in the document tends to focus on governance at the local level and the empowerment of farmers and farming communities in rural areas rather than on the perverse incentives that some existing and centralised institutions may be exerting on the market. While potentially politically sensitive, the document should use every opportunity it can to highlight where smallholder investment and the opportunities for smallholders can be improved through both centralised macro-reform (of say commodity marketing boards and departments of agriculture) alongside micro-reforms to the farming sector. The domestic reform and market access activities are a necessary precursor to securing the potential gains for smallholder farmers from trade liberalisation. Farmers often lack access to domestic markets as a first step to achieving export potential.

There is also a slight bias towards protectionism in some of the analysis and prescribed solutions. Even with respect to new economic entrants – such as modern retail markets – there is a focus on protection of the smallholder and their existence. Institutional and policy reforms which have often been slow are being overtaken in some regions by private market developments, such as investment in modern retail chains, which open both opportunities and challenges to smallholders as urbanisation continues to grow across many countries. Traditional institutions/policies are either hampering or confusing these autonomous developments and constraining rather than facilitating farmer participation. Both protectionism and domestic subsidies are cases in point in many countries. Over the longer term, such innovations and changes in the market place may lead to greater income and employment opportunities, improved access, availability and utilisation of food, and ultimately poverty alleviation. Protecting the cultural aspects of smallholder society seems a misplaced aspect of the paper given its focus on smallholder investment and opportunity.

While purporting to be market focused, the paper is in fact very public investment and public good oriented. This includes recommendations in support of public goods such as research, health services, extension and even asset transfers. Less focus is given to how sustainable markets can and will be developed over the longer term. Even financial services have a focus on cooperative rather than commercial services. While products like a ‘National Smallholder Vision and Strategic Framework’ are often seen as important outcomes from such analyses there should be an emphasis in this document around less planned approaches to smallholder investment and opportunity, and more on systemic reform that will result in long term change.

The report should give greater focus to the role of agriculture and trade reform and the importance of developing well-functioning markets at the local, regional and international levels.

On Food sovereignty (page 20 paragraph 7)

Australia notes the use of the term “food sovereignty” in the report and suggests that its use be avoided. Food security refers to the ability of a country to determine its own agriculture and food policies, however, some use food sovereignty to justify policies that perpetuate existing trade distortions or introduce new ones.

On Speculation (Page 65 paragraph 5.3.1.)

Australia suggests that the sentence “Speculation in agricultural commodity derivatives market exacerbates price volatility and prevents most vulnerable smallholders from investing.” be excluded. A June 2011 report to the G20 (by expert organisations led by the OECD, FAO, and others) concluded that speculation was not a major influence on prices or volatility and that demand and supply remain the fundamental drivers of price formation for agricultural and food commodities