Investment in agriculture has decreased despite it being one of the most effective ways of alleviating poverty. This was the key message in the FAO’s flagship annual report, The State of Food and Agriculture 2012, unveiled in Rome last Thursday.
The world´s one billion farmers must be central to any agricultural investment strategy, as they are the biggest investors in this sector, the report notes. But farmers’ investments are often limited by unfavourable investment climates. Director General of the FAO, José Graziano da Silva was in Rome for the launch of the report. Highlighting this key message in his speech, he said:
Current agriculture investment is not enough to break the cycle of poverty. A new investment strategy is needed that puts agricultural producers at its centre. The challenge is to focus the investments in areas where they can make a difference. This is important to guarantee that investments will result in high economic and social returns and environmental sustainability.
New data compiled for the report shows that farmers in low- and middle-income countries invest more than $170 billion a year in their farms – about $150 per farmer. This is three times as much as all other sources of investment combined, four times more than contributions by the public sector, and more than 50 times more than official development assistance to these countries.
Investing in agriculture is clearly paying off, according to the FAO report. Over the last 20 years, for example, the countries with the highest rates of on-farm investment have made the most progress in halving hunger, to meet the first Millennium Development Goal. The regions where hunger and extreme poverty are most widespread – South Asia and sub-Saharan Africa – have seen stagnant or declining rates of agricultural investment over three decades. The report states:
Recent evidence shows signs of improvement, but eradicating hunger in these and other regions, and achieving this sustainably, will require substantial increases in the level of farm investment in agriculture and dramatic improvements in both the level and quality of government investment in the sector.
Overcoming these barriers will be essential to unlock the full investment potential of farmers in many rural areas. The report recommends focusing on a number of areas in order to foster smallholder investment, including the following:
- Governments and their development partners need to help smallholders mobilize their own savings and gain improved access to credit.
- Stronger producer organizations, such as cooperatives, can help smallholders deal with risks and provide better market access.
- Social protection can contribute to the expansion of the asset base by the poorest smallholders.
As national governments are the second largest source of investment in agriculture, the report urges them to unlock their limited public funds into areas that have proven to be strongly supportive of agricultural growth and poverty reduction, such as agricultural research and development, rural infrastructure and education. This public sector investment is crucial to creating a better environment to support farmers:
Governments and donors have a special responsibility to help smallholders overcome barriers to savings and investment. They need to channel their limited public funds towards the provision of essential public goods with high economic and social returns.
Silva concluded this morning’s announcement by reiterating that investment in agriculture is the most efficient way to solve poverty.
View the full report here.