"Getting Food to Market"
Ambassador William J. Garvelink is Assistant to the Administrator, USAID Bureau for Food Security and U.S. Government Feed the Future Deputy Coordinator for Development
Thank you for inviting me to speak to you today about a ground-breaking development initiative that is working with smallholder farmers and leveraging the private sector to strengthen markets.
Feed the Future, a presidential initiative designed to reverse global hunger trends, is a whole-of-government approach aligning U.S. resources with country-owned strategic plans to transform agricultural development and, ultimately, spur economic growth. It is part of a collaborative global movement to improve food security, agricultural production, and nutrition.
Feed the Future aims to significantly reduce poverty and improve nutrition by harnessing the power of agriculture to increase the incomes of poor rural people, expanding opportunities for smallholder farmers and rural businesses throughout the value chain, and increasing the productivity and quality of food that poor people eat.
As we all know, getting food to markets is an essential part of our task.
This initiative comes at a crucial time. We are experiencing a degree of support for development, and specifically agricultural development, in historical ways not only within the U.S. Government, but across the world.
In September, President Obama issued the first-ever development policy by a U.S. President, demonstrating that development is a core component of policy at the White House and across multiple agencies.
In addition, there has been a significant shift in funding for agricultural development. In the 1980s, 25 percent of U.S. foreign aid went to agriculture. That number dropped to 6 percent by 1990 and was a meager 1 percent by 2008. World Bank lending for agriculture fell from 30 percent in 1978 to 16 percent in 1988 to only 8 percent in 2006.
But, the focus has changed.
We watched as the spike in world food prices in 2007 and 2008 destabilized local and national economies across the world. The international community responded with the L’Aquila Food Security Initiative, launched at last year’s G-8 Summit, which reversed the decades-long decline in official development assistance for agricultural development.
President Obama pledged to spend at least $3.5 billion over three years on agriculture-led development through the initiative called Feed the Future. The United States is well on its way to achieving that financial commitment with an approved FY 2010 budget of $888 million.
Economic growth is the fundamental force that will eventually transform the developing world, and the only sustainable way to accelerate development and eradicate poverty. We see economic growth as the foundation of Feed the Future.
Strong economic growth is, clearly, not possible without strong markets.
And that is precisely why Feed the Future was designed with a heavy emphasis on providing smallholder farmers and their families with greater access to markets. Our development programs – spanning from Guatemala to Mali to Bangladesh – are working directly with smallholder farmers to advance research and biotechnology, expand land rights, teach best agricultural practices, and foster market linkages.
More effective and reliable access to markets for producers will lead to better access to quality food for consumers, which, together, is the key to the success and sustainability of our food security efforts. So, we are helping countries accelerate inclusive agriculture growth through improved agricultural productivity, expanded markets and trade, and increased economic resilience in vulnerable rural communities.
Efforts have failed in the past because the focus was primarily on agricultural productivity and neglected markets. Now, we not only have a renewed global commitment to agriculture-led growth, but we also are focusing our efforts in a much different way.
One new approach is a concerted effort to engage the private sector. We look to the private sector for innovative insights, not just for additional financial resources. We are ensuring that the private sector is at the table to provide advice and feedback on country-led investment plans on food security, particularly to listen to their expertise on supply chain development and on government policies that discourage investment.
Aid can be a catalyst, but it cannot bring about transformation on its own. Development assistance can increase farmers’ access to global markets, strengthen legal and regulatory frameworks, and lay the groundwork for a business-enabling environment – all outcomes that help the private sector overcome key challenges to investing in emerging markets. But, in the end, the key driver for market-led development and sustainable growth is private sector investment.
There are serious challenges. Markets in developing countries are hampered by poor infrastructure, weak policies, and unreliable market information, which drive up costs and market instability.
Many of you may be familiar with Roger Thurow, as a journalist, author, and currently a senior fellow with the Chicago Council on Global Affairs. The most recent issue of Foreign Affairs features one of his essays, “The Fertile Continent”, in which he writes, "Of the harvests that are reaped in Africa, one-third to one-half are routinely wasted, spoiled by pests, moisture, or disease. Climate-controlled, vermin-secure storage facilities are rare; many smallholder farmers store their harvests in flimsy wooden shelters or pile them up in their mud-brick homes."
In the context of global hunger, this level of waste is simply not acceptable nor affordable, and private sector expertise and innovation are necessary if we are to reverse this pattern.
Let’s look at what this means for just one of the challenges: adequate local food storage. The private sector, along with local government, can encourage competition in warehouses and technologies; provide warehouse management training so that less grain is lost in storage; standardize weights and measures to encourage farmers’ trust; establish tradable contracts; improve price information; and facilitate finance. We must take these steps to increase market predictability. We must also encourage governments to stop accusing traders of “hoarding”, as we have seen in South Asia, which causes shifting grain and increasing costs.
I should mention that one of the steps we are taking to stimulate market infrastructure is by supporting the World Food Program’s Purchase for Progress, or P4P. This program leverages the World Food Program’s purchasing power to create market infrastructure like storage facilities, quality standards, and helps to strengthen emerging institutions like Uganda’s warehouse receipts program and Zambia’s new commodity exchange—institutions which help to level the playing field for small holder farmers and dramatically increase their access to reliable markets.
As I talked about earlier, we are seeing large commitments in agricultural development from nations and donors on a scale not seen since the Green Revolution more than 50 years ago. This is precisely the right time for the private sector to leverage our work for its gain. There are many different models for how the private sector can engage in development to improve market stability and sustain food supply and demand.
We are particularly excited about models we are seeing emerge in Tanzania, where private companies like Unilever and Yara have joined with the government of Tanzania to create a rich investment environment in Tanzania’s Southern Trade Corridor. Instead of trying to do a little bit everywhere, we are concentrating our efforts in specific areas that show promise for gains in both productivity and market access in order to achieve greater impact.
Tanzania’s Southern Corridor will support opportunities to decrease transaction costs, creating more efficient markets and a more favorable investment climate. This approach focuses on meeting infrastructure needs, securing a supportive policy environment, and promoting geographical clusters to achieve economies of scale. The corridor will link smallholder farmers and agribusinesses from the Port of Dar es Salaam to Malawi, Zambia, and the Democratic Republic of Congo.
Models like Tanzania are encouraging because major global companies are sharing their expertise to make regions work as trade corridors. Strengthening value chains, especially across borders, requires the experience, advice, and resources that only international companies can bring.
USAID is the recognized leader for engaging the private sector in development. Since 2001, through the use of Global Development Alliances and other models, USAID has cultivated more than 1,000 alliances with over 3,000 individual partners.
But, how does this look on the ground?
We have a Global Development Alliance with Olam in Nigeria that is making a huge difference to rice farmers, who have doubled their productivity and increased their net incomes by 230 percent because of the partnership. Olam and USAID have worked at each point along the value chain – from supplies to processors to consumers – to provide training and tools to increase the yield and quality of rice, provide farmers access to commercial credit to expand production, and foster cooperatives to negotiate prices. Patricia Alegba (Ah-leg-bah), a rice farmer in Nigeria who has benefited from the program, can now own her own farm and use her additional income to pay school fees for her five children.
What works in Nigera, though, does not mean it will work in Nepal. It is important to keep in mind that markets look drastically different across the globe. Asia and Africa, in particular, are on a different trajectory when it comes to markets and commercial food supply. Parts of Asia are benefiting from supermarkets and large-scale food companies. This same supermarket revolution is not emerging in Africa and researchers don't foresee it happening anytime soon. Engaging the private sector, leveraging resources, and encouraging innovation is the only way we will see significant progress in market growth in Africa.
Efficient markets are the key to agriculture growth and lifting millions out of poverty. Engaging the private sector is central to our food security strategies and efforts, as we believe private investment and innovation are key drivers for sustainable agriculture growth. It is companies like yours that should leverage our focused investment because only together will be able to create and strengthen distribution networks that are efficient and profitable.