Challenges and Opportunities for Smallholder Farmers in Global Value Chains
17 February, Washington DC – As highlighted in FAO’s State of Agricultural Commodity Markets 2020 report, approximately one-third of global agricultural and food exports are traded within global value chains (GVCs). Over one‐third of all agri-food exports form part of a value chain that involves at least three countries. Participation in global value chains can boost farmers’ productivity by diffusing improved technologies and knowledge. However some smallholder farmers who lack the required skills and assets could be excluded from these modern markets.
To discuss opportunities and challenges for smallholder farmers in global value chains, FAO North America organized a webinar on 17 February 2021 with speakers from academia, the private sector and civil society, moderated by Florian Doerr, Associate Professional Officer at FAO North America.
“Even before COVID, we were struggling to meet the SDG target of eradicating hunger by 2030, so we need markets to function well and that is exactly what FAO is trying to do,” explained Vimlendra Sharan, Director of FAO North America. “With nearly 700 million people suffering from chronic hunger, 2 billion lacking access to regular food and nearly 3 million not being able to afford healthy diets, we need an all hands on deck and all tools in the toolkit approach to tackle global hunger,” he added. “We need not fear global value chains. We need to understand them. We need to make them inclusive. We need to make them fair and equitable. We need to look at them as solutions for the welfare of small and medium farmers. Needless to say, this is easier said than done and there are numerous challenges in making it happen,” said Sharan.
George Rapsomanikis, Senior Economist in FAO’s Trade and Markets Division, presented The State of Agricultural Commodity Markets 2020 report, which explores how agricultural markets and trade can contribute to sustainable development. “In SOCO 2020, we look at global value chains and the mechanisms that can help markets make a positive contribution to economic, social and environmental outcomes,” he explained. “Contract farming can help farmers to access markets and increase their incomes significantly, by up to 50 percent,” Rapsomanikis added. As outlined in SOCO 2020, he explained how sustainability certification schemes can provide incentives to produce more sustainably, while digital technologies can help to reduce transaction costs.
Roger D. Norton, Research Professor of Agricultural Economics and Regional Director for Latin America and the Caribbean at the Borlaug Institute for International Agriculture at Texas A&M University, further outlined challenges and opportunities for smallholder farmers in GVCs. “For farmers, value chains offer market outlets beyond local markets, as well as access to technology and finance for higher productivity. Smallholders do have an advantage in growing high-value crops,” said Dr. Norton. He underlined that trust and cooperation among actors to solve problems is key, as well as stable governance, knowledge flows, and ensuring profitability for each actor in the value chain. Quality, quantity and food safety can be key challenges for smallholders. “Risk-reducing strategies are vital for all value chain participants, and value chain coordination mechanisms should be promoted,” he concluded.
Howard-Yana Shapiro, Distinguished Senior Fellow, Resilient Landscapes, World Agroforestry Center (CIFOR-ICRAF), and Senior Fellow, College of Agriculture and Environmental Sciences, University of California Davis, provided a private sector perspective. “In the last 20 years, we have seen so much upheaval, including climate change, which we can see everywhere in the world. In the late 1980s, Brazil was the second-largest exporter of cacao beans in the world, and in less than 18 months, they became a net importer, because of one small little pathogen called Witches' broom. The entire cocoa industry in Brazil collapsed,” said Yana-Shapiro.
“The private sector generates industrial knowledge which they try to share in many cases up and down the supply chain to make it more viable,” he added. Underscoring the malnutrition burden in many rural areas around the world, he emphasized that “we must end chronic hunger, malnutrition and stunting in the rural sector before we can have a viable supply chain.” He added that “it's almost impossible to imagine what aflatoxin causes in terms of food loss and waste. Toxins can cause 25 percent of the world's food crops to be destroyed annually.” Yana-Shapiro also called for social inclusion, gender equality and nutrition value considerations in value chains.
Moving to a civil society perspective, Friedel Huetz-Adams, Senior Researcher at Suedwind Institute, presented the Cocoa Barometer, a biennial review of sustainability in the cocoa sector. Citing the Universal Declaration of Human Rights, he emphasized that smallholder farmers have the right to a just and favorable remuneration. “The cocoa sector is affected by poverty and malnutrition, child labor and human trafficking, unsafe working conditions, and a lack of healthcare. Low farm gate prices and low yields, combined with high risks result in the lack of a living income. The problems of deforestation, loss of biodiversity, use of agrochemicals and climate change have increased,” he noted. Huetz-Adams also underlined the price volatility and long term price decline for cocoa, which also affects many other tropical crops. He concluded that in a highly competitive oversaturated market, productivity increases are not a “silver bullet” solution and that higher and more stable incomes for cocoa farmers are key to improve sustainability in the cocoa sector.
Koen Deconinck, Policy Analyst at the Organisation for Economic Co-operation and Development (OECD) in Paris, emphasized that “we also need to think about what we will do for the people who won't manage to join Global Value Chains. Ideally, investments in rural environments, transport infrastructure, human capital, etc. lead to richer and more diversified rural economies, which also provide opportunities for farmers unable to join GVCs.”
The panelists agreed that positive and negative effects of trade can be amplified through GVCs. It is important to minimize the negative effects while amplifying the positive effects and using GVCs as a tool to increase food security, nutrition and Sustainable Development.
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