The State of Food and Agriculture 2012: Investing in agriculture for a better future

The UN Food and Agriculture Organisation (FAO) this week released its annual report, the State of Food and Agriculture, for 2012. This year’s focus is on “the accumulation of capital by farmers in agriculture and the investments made by governments to facilitate this accumulation.” Farmers are part of the private sector and their investments in developing their businesses can have large impacts on the wider rural economy. This, as the report asserts, is why farmers are crucial stakeholders in national plans to improve agricultural investment.

And developing agriculture is important. Improvements in the sector can have wide reaching benefits for reducing hunger and poverty. Given that 80% of the world’s chronically hungry are farmers, greater investment in agriculture, which has been stalling or declining for several decades, can significantly contribute to meeting the first Millennium Development Goal of halving hunger and poverty by 2015. Indeed the report finds that over the last 20 years, countries with the highest rates of on-farm investment have made the most progress in halving hunger.

But farmers are only part of the story; governments have an important role to play. In low- and middle-income countries, farmers’ own investments to farming outstrip investments made by governments or the private sector. This report shows that farmer investments can have greater social and economic benefits when undertaken in an inductive investment climate, an area controlled by markets and government. As the report states, “Governments are responsible for creating the legal, policy and institutional environment that enables private investors to respond to market opportunities in socially responsible ways”. Developing this enabling environment is a crucial function of the public sector, particularly in terms of levelling the playing field between smallholders and larger investors. Improving incentives for farmers to invest and reducing the barriers will aid agricultural development significantly.