Global agrifood trade has more than doubled since 1995, amounting to $ 1.5 trillion in 2018, with developing and developing country exports growing and accounting for more than a third of the world’s total, according to a new report released today by Food and Agriculture Organization of the United Nations (FAO).
The report “Market Conditions for Agricultural Commodities” states that global trade and well-functioning markets are at the core of the development process as they can promote inclusive economic growth and sustainable development and strengthen resilience to shocks.
“We need to rely on markets as an integral part of the global food system. This is all the more important in the face of major disruptions, whether they come from COVID-19, locust outbreaks or climate change,” wrote the FAO director general. QU Dongyu in the introduction of his report.
The rise of the global agri-food value chain
The report estimates that about a third of global agricultural and food exports are traded in global and cross-border value chains at least twice.
The rise of global value chains is driven by income growth, lower trade barriers and technological advances, which have transformed markets and trade processes, connecting farmers with traders and consumers across regions and countries.
“Global value chains can make it easier for developing countries to integrate into global markets. Because they connect our food markets closely, they also provide a mechanism for disseminating best practices to promote sustainable development,” said the FAO director general.
In turn, by participating in global value chains, small farmers can increase their production and food income. On average and in the short term, a 10% increase in global agricultural value chain participation could result in an increase of about 1.2% in labor productivity, the report found.
Smallholders, however, often lose the benefits of global value chains. Furthermore, the emergence of a global value chain with stringent food quality and safety requirements can further marginalize smallholders.
“We need to redouble our efforts to include small farmers in the modern food value chain, thereby securing rural incomes and food security in rural and urban areas,” said Qu.
The report points out that there is a need for broad policies to create an enabling market environment and support smallholder participation in global value chains – for example, better rural infrastructure and services, education and productive technology.
Digital technology can help markets function better and can improve farmers’ access to markets. Innovations, such as food e-commerce, can benefit both farmers and consumers. However, to ensure that the digital innovation dividend is shared with the poorest, the current digital divide in agriculture needs to be reduced.
Adopting more inclusive business models, such as contract farming and blockchain, could also help farmers to better integrate into modern and more complex value chains, said FAO.
For example, participation in contract farming can increase agricultural income by more than half – based on the analysis of the main studies on contract farming. However, the report underscores the overall lack of information on the various impacts of contract farming, apart from the impact on farmer welfare.
Encouraging sustainable development
The report describes the role that the agrifood market can play in promoting sustainable development.
He argues that promotion and wider adoption of voluntary sustainability certification schemes and standards in agriculture, for example, can address the trade-offs between economic, environmental and social objectives.
Sustainability certification schemes can promote fair trade, inclusion, non-discrimination and environmentally friendly agricultural practices. They can also ensure work safety, prohibit child labor and encourage investment, the report said.
For example, according to data from smallholder coffee farmers in Uganda, sustainability-certified families spend 146% more on children’s education and keep children in school longer than non-certified families.
Another study of certification schemes promoting sustainable forests shows that coffee production grown in shady forests in Ethiopia can help reduce forest degradation.
The report also shows that although bananas are one of the most traded tropical commodities in the world, only about 5-8% are covered by sustainability standards.
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