Risk management for family agriculture:

An ECART Development Programme

Gideon Onumah and Guy Poulter

Natural Resources Institute

WHY IS THIS ISSUE RELEVANT?

Need to raise global agricultural output is crucial and urgent because issues such as :

Global food crisis Potential for global hunger Adverse effects of climate change

Demand for raw material for bio-fuels.

Smallholder farmers in developing countries are strategically important

because:

They dominate farm sector in developing countries (over 2.5 billion people involved)

Improved sector performance has statistically significant poverty reduction impact

Smallholders :Heads they lose, Tails they

lose!!!

Smallholder farmers face production and post harvest risks

When unfavourable natural factors e.g. drought, flood, disease, pests, depletion of soil fertility etc lead to reduced output, smallholders lose (“tails”)

When favourable natural factors lead to good production but markets are inaccessible and/or prices are volatile, smallholder are unable to sell their product and also lose (“heads”)

Key to helping smallholder farmers is understanding

their ability to manage risk

Production problems constrain yield

• Public/donor investment in research has declined limiting availability of better performing crop varieties and livestock breed.

• Yield-enhancing farm inputs and improved crops and livestock not affordable to smallholders.

• Poor provision of extension and veterinary services.

• Single-farm irrigation technology unaffordable and public investment in irrigation declining.

Problems with marketing systems accentuate post-harvest risks

Marketing systems constrained by lack of- Basic transport and storage infrastructure

- Reliable market information systems

- Standard measures and grading systems

- Modern market institutions that facilitate impersonal trade

- Trade finance for effective inventory management

- Stable, trade-friendly policies and regulations

Limited options for managing risks• Risk sharing options are severely under-developed (e.g.

contract farming and forward contracts)• Markets for risk transfer are absent (e.g. crop and livestock

insurance and hedging instruments)• Formal coping systems also absent (e.g. welfare transfers)

Consequence • Households adopt risk minimising strategies • Low yield but more tolerant crops, mixed farming, crop • rotation • Leading to slow growth in agricultural output and

productivity.

Programme objectives

To improve welfare of smallholders by

increasing access to effective tools for

managing farm risks, through:- Identifying, improving, replicating and/or

promoting effective/feasible tools- Fostering dialogue to ensure supportive policy and

regulatory framework- Encouraging lesson learning.

Programme approach

• Holistic: - focus not only on mitigating individual but also inter-related risks

• Contextualise lessons: - understand context within which particular systems succeed

• Inductive:- derive over-aching insights from different cases

• Ensure effective stakeholder engagement (from beginning)

• Focus:- developing countries (especially Africa) but lessons from Europe, America and elsewhere

Phase I (Inception and Scoping)

• Key outputs include:- Stakeholder mapping- Inventory of farm risk management tools based on

desk-based papers (produced by ECART members and others)

- In-depth studies of selected tools leading to synthesis of feasible options

- Dissemination of feasible options- Adoption of framework for selecting countries for

Phase II.

Phase II (Innovation/Validation)

• The key activities include:- Selecting four participating countries from Africa,

Asia and South America- Agree plans for developing or strengthening

accessible risk management systems- Implement plans agreed with national stakeholders- Monitor, evaluate and share lessons from country

experiences

Progress to date

• Identification Fiche submitted to EC - Likely funding in 2009• Consultations ongoing with Agence Francaise de

Developpement and Ministere des Affaires Etrangeres et Europeenes on support for research and development of post-harvest risk management tools/systems

- Work likely to be undertaken in first half of 2009.- Further funding need!