Africa: Climate Conversations – Will Information – or Infrastructure – Help With Food Price Shocks?

We have heard the story repeatedly – countries fall further behind the rest of the world when they lack the infrastructure needed to sustain growth. It may seem repetitive, but sometimes it’s important to reiterate what may appear obvious.

Last month the International Food Policy Institute (IFPRI) launched a new tool – the Food Security Media Analysis. The online tool is intended to help governments of developing countries better predict what commodity prices will do based on media reports. Although the media do not directly impact the prices of commodities, Maximo Torero, director of the markets, trade and institutions division at IFPRI, said that when the media cover events related to food prices, agriculture or climate shocks that may affect consumer expectations, and in turn have an effect on what the market does.

In theory tools to better predict what may happen in international food markets should help even out the playing field for countries that have always lacked them. Better tools would help governments make money by speculating on rising prices of commodities they import or protect them against loss by hedging against potentially falling prices of their exports.

There is potential to make and save a lot of money predicting the international market, but governments who have yet to, for example, integrate their own farmers into their country’s domestic agricultural market will find these tools offer little in the grand scheme of their concerns.

In many countries, farmers sell only to their neighbors or farm for their own subsistence, effectively barring them from domestic markets.

Marc Bellemare, a public policy assistant professor at Duke University, said tools like the Food Security Media Analysis are a “laudable effort … but what developing countries need is better infrastructure and governance.”

Countries that still lack access to even basics like decent roads will struggle to take advantage of new technology, in other words.

DISCONNECTED FARMERS

According to World Bank statistics, 70 percent of people living on less than $1 a day in rural areas depend on agriculture as their primary source of income.

Of those farmers, only about one fifth to two fifths are “significant participants” in agricultural markets, according to a 2011 report by the International Fund for Agricultural Development (IFAD).

And we aren’t talking about big international markets. According to the report, most small farmers only have access to one local market (the one closest to their home) if they have any access at all.

Lack of information due to poor, and often virtually non-existent, communication systems leave many farmers at the mercy of buyers, often selling their crops for below market price.

When a majority of rural people survive on agriculture and are unable to make a fair profit, they are left with little money to buy additional food and other goods they need.

Access to more and larger markets would allow farmers to buy and sell goods at fair prices, improving their incomes. And increased competition between farmers could keep prices fair and improve the quality of products.

THE ETHIOPIAN COMMODITY EXCHANGE

In 2008 the Ethiopian Commodity Exchange (ECX) was established – the first of its kind in Africa, and a good example of how access to information can benefit small-scale farmers.

ECX connects buyers and sellers, electronically posts the current market prices of the five commodities traded through the exchange, and implements quality control checks of all the food being sold.

The exchange helps member sellers get a fair price for their goods, and buyers are sure they are getting quality for their money.

The exchange also offers help with another concern for farmers – storage. Farmers with surplus crop can store their goods in large warehouses provided by the exchange.

Unfortunately, there are many obstacles, like transportation, that deter many farmers from participating in larger markets, despite their advantages.

Many rural communities are miles away from urban areas, and farmers have no way of transporting their crops without viable roads.

But a combination of changes – better infrastructure and governance, and better access to markets and market knowledge – could be the way forward for many struggling developing country farmers.

Katie Murray is an AlertNet Climate intern.

Read more at AlertNet Climate, the Thomson Reuters Foundation’s daily news website on the human impacts of climate change.

Posted by admin on Aug 12 2012. Filed under Environment. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry