In recent weeks food production has become one of the most hotly discussed global debates. In particular, a number of reports and comments have been released by leading organisations about agriculture’s ability to feed a growing world population subject to changing climatic conditions and land constraints.

One of these latest report’s was released yesterday by a UK government-commissioned study. The Foresight Report on Food and Farming Futures argues that the current system is unsustainable and immediate action must be taken or widespread hunger will not be resolved. The study took two years to compile and received input from a wide range of disciplines (involving 400 experts from 35 countries).

Hunger levels could increase in the future

The report emphasises radical change stating that increasing yields should not come at the expense of sustainability. Moreover, incentives should be given to the agricultural sector to address malnutrition. Similar to the Worldwatch Institute’s State of the World report (mentioned in the previous post), the authors believe that more has to be done to reduce food waste; where in developing countries, a majority is attributed to poor storage and inadequate transport facilities. However, in richer nations wastage is often caused, simply by consumers’ throwing away food.   Another contradiction between the developed north and developing south is the huge disparity in consumption levels (925 million people suffer from hunger while 1 billion people overeat). Professor Beddington, who commissioned the study, believes that those who overeat indicate yet another failure of the current food system because of its inability to deliver good health.

The authors are calling for agriculture to become a higher priority in the political agenda. This must be collaborated with efforts to address the effects of climate change, declining water supplies and the loss off farm land. Perhaps the most radical statement is: “Nothing less is required than a redesign of the whole food system to bring sustainability to the fore.”

Others are also taking a critical stance including Olivier de Schutter, the UN special rapporteur on the right to food.  His radical and outspoken views about country and donor practices are leading him to be seen as a champion for smallholder rights and food security. In London this week to present to a UK parliamentary group, he has challenged leading actors by discussing what he believes are mistakes being made in the current system. Speaking to the Guardian, here are some of the statements he made:

“Chronic underinvestment in agriculture over the last 20 years combined with trade liberalisation has trapped many developing countries in a vicious cycle of low agricultural productivity and dependence on cheap food imports. The one exacerbates the other as local farmers struggle, and fail, to get a decent price for their produce in competition with imports, which have often benefited from government subsidies.”

Mr de Schutter has launched some fierce views on the current food system

“Since the early 1990s, the food bills of developing countries have increased by five- or six-fold,” this addiction to cheap food leads to balance-of-payments problems and then political instability. It deprives countries of their abilities to feed themselves.”

“Donors are finally recognizing the need to invest in agriculture, but the danger is that they put money into monoculture cash crops for export, a strategy that that has no impact on improving food security for the poorest.’’

Overall, de Schutter is a fan of strengthening public goods (better infrastructure, improving local markets, and building storage capabilities). Moreover, he thinks smallholder need to increase their bargaining power by organizing themselves, which would give them a greater voice. To solve hunger issues and develop the rural economy, de Schutter argues for the development of grain reserves. Grain can be bought at a good price from farmers. Then when there is a price hike, it could be sold to the population at affordable levels.

In conclusion, more and more attention is being given to global agriculture because of rising fears of future food crises. Hopefully, with stronger and more critical views being expressed as mentioned above, food can be given a higher priority in politics, which may eventually lead to these key problems to be solved.

The Worldwatch Institute has recently published its annual State of the World report titled, “Innovations that Nourish the Planet”, which makes some very insightful proposals on tackling hunger and supporting rural liviehoods.

The report argues that previous attempts to feed the world’s population have failed because approximately 925 million people globally still go hungry everyday. Instead, it suggests that rather than increasing food production, which is the most common measure argued to solve hunger issues, a more concise strategy has to be adopted where food security and climate change are addressed in tandem. For example, measures that encourage self-sufficiency and waste reduction in both developing and developed countries: ‘’f we shift just some of our attention away from production to consumption issues and reducing food waste, we might actually get quite a big bang for our buck, because that ground has been neglected,” said Brian Halweil, co-director of the Worldwatch Institiute’s Nourishing the Planet Project.

The report also believes that smallholders are vital in maintaining food supplies and after many years of neglect have finally started to receive investments again. Moreover, the authors outline 15 environmentally friendly and sustainable strategies to address hunger. These include the expansion of organic farming, sourcing food locally and targeting food waste.

The Worldwatch Institute is an independent research organisation based in Washington in the USA. The report was published with the support from the Bill and Melinda Gates Foundation.

The New York Times (NYT) last month published an article discussing the displacement of small farmers in Africa as a result of land grabbing. Since the 2007/08 food crisis, the acquisition of land in developing countries by other nations has been on the rise and in this post I discuss these new developments.

There are two main motivations to buy land in another country. Firstly, private companies can exploit business opportunities and create supply chains catering to their consumers’ needs. Secondly, by buying land in another country, other nations are able to secure their own food security. I will concentrate on the latter as this is what has been hotly debated over the last two years.

The place that has seen the largest investment has been Sub-Saharan Africa (SSA). Leading the investments abroad have been the capital rich Gulf States, which face water and land constraints. China and India follow with the need to feed their burgeoning populations. The green revolutions in these countries were remarkable. However, their environments’ have taken a hit as a result. For example, China has reached physical water scarcity and industrial farming methods have turned 18.1 % of the country’s formerly productive lands into desert. Apart from factors relating to land and water constraints, investments are also driven by lower production costs and climatic conditions for preferred staple crops. Other than maintaining food security, countries are also keen to invest in land for bio-fuels.

The decline of state led spending in rural development makes a valid argument for large scale land acquisitions, as they can bring a number of benefits to resource scarce developing countries: ‘foreign aid for agriculture has dwindled from about 20 percent of all aid in 1980 to about 5 percent now, creating a need for other investment to bolster production.’ Advocates of such investments argue that some of the advantages include; creation of farm and off-farm jobs, improvement of rural infrastructure, development of schools and health services. By far some of the most significant are spill-over effects from access to new agricultural technologies, which can transform regions producing low yields to food hubs. Let us look at Mali for example. Approximately 3million acres along the Niger River and its inland delta are managed by a state-run trust named the Office du Niger. In around 80 years, only 200’000 acres of the area has been irrigated. Therefore, the government considers new investors as a miracle, with even the Abou Sow, the executive director of Office du Niger, stating, “Even if you gave the population there the land, they do not have the means to develop it, nor does the state.”

Benefits aside, large scale land acquisitions have been termed ‘land grabbing’ by populist media and the phenomena is often described as a form of neocolonialism. There are obvious drawbacks to these types of investments but some news articles have had a tendency to over-exaggerate their implications. There is now even an anti-land grabbing website continuously updating all articles on the issue. A closer look at facts on the ground can reflect another picture. Although news articles have helped shed light on land grabbing, the exact details of deals, amount of land purchased and price paid are not very clear and have not been widely documented.

Undoubtedly, problems have arisen with overseas land acquisitions. The impact on food security is one of the most widely talked about. Land acquisitions have taken place in many countries from Cuba, Mexico, Philippines and Pakistan but those in Africa have been the most severely criticized. As domestic production is weak and hunger widespread through SSA, it remains contradictory that countries are making food for other countries: ‘It is ironic that some farms in Ethiopia produce food for other countries when it needs more than $116 million in food aid itself’, says Jose Cendon from Bloomberg.

The other major issue is the displacement of people once the takeovers take place, which the NYT article looks into. According to IFPRI, this issue is exacerbated by problems related to inequalities in bargaining power. Smallholders may not have formal titles to land but often use it under customary tenure agreements. Since, governments formally own farm land, when foreign investors come; the rural poor often get displaced in favour of the investor. However, land acquisitions have not taken place so easily because of considerable bottom-up resistance. In 2009, a South Korean conglomerate was about take over half of Madagascar’s arable land. However, an opposition movement formed, which ended the deal when the president was overthrown. Furthermore, Mali saw angry protests in its capital last month, with people demanding the government to stop selling land to investors.

IFPRI makes a number of suggestions of how the land investments can be made fairer with greater effects for the communities involved. In my opinion, three of the most important are:

1. Transparency in negotiations- actors driving the deals must involve all those people that are likely to be affected in the negotiation process.
2. Sharing benefits- local communities should benefit from foreign investment and conditions need to be enforced in a pro-poor context should deals take place.
3. Commitment to national trade: if domestic food security is at risk, production for local markets must take priority.

Overall, we need to take a balanced approach to large scale land acquisitions and not been drawn into the populist rhetoric that mainstream media portrays. There are both advantages and disadvantages to be found in these investments. To negate the disadvantages, civil society, governments and the private sector need to work towards developing more transparent and fairer deals.

Over the past few decades, huge transformations have taken place in the global agrifood industry. In particular this era of globalization has seen the decline of state-led rural development, whilst witnessing the ascendance of private agribusinesses. Consequently, much of the academic literature has been keen to emphasise the shift from traditional wholesale markets to modern food systems. Employed by many researchers, value chain analysis has become an instrumental tool for analysis and is mainly used to describe the supermarket revolution. This type of structural change in markets is characterised by vertical co-ordination, where a high degree of buyer driveness allows driving agents to simultaneously control production, increase sales and reduce costs and risks.

Much of the evaluation is based on formal markets. Formal markets in agriculture can be described as those governed by high quality and food safety standards and where the activities of companies can easily be monitored. They include domestic supermarket, export chains and processing industries. On the other hand informal markets such as traditional supply chains (wholesale and local wet markets) are more difficult to study and have largely been neglected by research. When talking about helping smallholders increase incomes, it is often said that linking them into high value export chains offers one of the best solutions to decrease rural poverty.

It is the contention of this blog post to challenge this conception that formal markets are necessarily better than informal markets. The relative costs and benefits of traditional versus modern market channels are poorly understood and include many assumptions that lack sufficient empirical evidence to support them. There is an evident divorce between trends identified in the literature (e.g. market modernisation) and reality in the developing world where most small farmers continue to market their goods through traditional informal channels and wet markets. The World Development Report (WDR) 2008 is keen to emphasise this: “the market for food staples remains by far the most important in many agriculture-based economies and transforming countries, because staples take up a major share of household food expenditures and account for the bulk of agricultural gross domestic product (GDP).” Therefore, integrating smallholders into traditional markets or improving aspects of informal supply chains are likely to have strongly pro-poor outcomes because of this sector’s broad base.

But WHY and WHAT assumptions are driving the literature to portray formal markets as being necessarily superior to informal channels. The study of modern markets is relatively new and as a result, researchers have had a tendency to exaggerate the outcomes. For example, the sociologist John Humphrey from Sussex University in the UK argues, ‘’when a significant new trend is first isolated, it is quite common for the pioneering analyses to over generalise both its reach and impact.” Better prices, improved efficiency, higher standards and rejection of sub-standard produce are frequently cited as factors making modern markets better than informal chains. On the other hand, traditional systems are perceived to be inefficient and unorganised.

Quite remarkably, a new breed of literature (mainly from country case studies) is emerging, which counters the conventional arguments about modern food systems. For example, studies on Colombia’s informal markets have shown that smallholders prefer to participate in traditional supply chains because they gain on the spot payment and are not subject to extensive quality checks (where sub-standard produce is rejected), despite formal chains being more lucrative. Moreover, recent data from Nicaragua indicates that smallholder returns from modern markets, once costs are factored in, are lower than traditional wet markets. Furthermore, evidence from Ho Chi Minh city in Vietnam shows that 200 traditional markets continue to supply 8 million customers, despite the expansion of supermarkets since the 1990s. Supermarkets only account for 2% of fresh food sales. Moreover, as traditional food marketing systems are dominated by small family run businesses, they can be a good sector in which to increase labour demand. Whereas, the development of modern distribution outlets could be seen as a way to concentrate labour supply in the services sector.

There are also suggestions that traditional and modern markets complement each other. This applies mainly to emerging economies. Consumers in these countries often have a perception that ‘’fresh ’’ and “cheaper” food is found in local wet markets and prefer buying from them. On the other hand, they would opt to buy dry and packets goods from supermarkets.

Prevalent perceptions of the inefficiency, high transactions costs, unpredictability and poor quality of traditional and informal supply chains needs to change. With little empirical evidence, these chains have been ignored by the mainstream literature and we now have serious knowledge gaps about their structure and operations. Traditional systems are not as simple as they seem and often form intricate and sophisticated networks. Indeed, they offer great opportunities for research and action. Despite, predictions of their disappearance, smallholder have proved to be remarkably resilient over the past few decades. However, to solve widespread rural poverty across the developing world, it may be worthwhile to focus on improving informal and local channels of production before jumping ship to modern value chains.

“We just can’t be sure.” This five word excuse has been used by consumers and industry leaders alike to distance them from the production practices that so many of their products and parts embody. This week, a great article in the Guardian highlighted the need for greater research into value chains in order to really understand the impacts on the the individuals in developing countries who are involved in global value chains:

This is globalization in which supply chains crisscross continents, passing from company to company, and at every stage every player has an interest in obfuscation: either blatantly on the ground in Congo, where huge quantities of this million dollar trade are illegal; or closer to home with the polite refusal to engage, the citing of commercial confidentiality.

The obfuscation is hugely convenient…too many links in the chain have hidden behind the convenience of ignorance: “We just don’t know; we can’t be sure.”

The passion behind CIAT’s Linking Farmers’ to Markets program is understanding how we can better unravel global value chains to not just incorporate the global poor, but actually benefit them. Our English cohorts over at IIED are in the midst of a great webinar series on this very topic. Consideing the following questions in a series of “provocative seminars” and inviting global experts and stakeholders to share in the discussion. Key questions included:

• Why should we focus on fair trade if conventional markets can assure better prices?
• Why should we focus on commodities and export markets when rapid urbanization means that domestic ones are growing?
• How can we address market failures? Are fair trade standards still the ‘good’ standards?
• Aren’t we overlooking the role of the state with the new ‘trendy’ markets and value chains approach?
• How can we integrate individual expectations in collective actions?
• What about the non-organized small-scale producers which form the majority?
• Are we concentrating too much on the ‘external agenda’ and not enough on how small-scale producers are shaping this agenda and what mechanisms they are using?
• Are we seeing how real ‘agency’ works — for example, what makes small-scale producers sell their votes?
• Is removing people from farming the best way to development?
• Have we had to shift from markets for the poor to markets with the poor?
• How can we deal with farmers’ demands for opportunities, not charity, in national policies dealing with subsidies in other countries?
• Is the value chain approach and practice synonymous with small-scale producers’ emancipation? We need evidence.

Certainly there’s room for debate and improvement on how exactly to do this and any successes will certainly have a unique and regional focus. Hundreds of people and organizations around the world are fast at work trying to understand the current social and environmental impacts in various regions, and are attempting to imagine something different. Value chain development and small-holder integration is still in its infancy, and collaboration between the social and the natural science, in addition to businesses, NGOs and governments, is critical.

Links to audio or video of the first Making Markets Work for the Poor webinar series (which was excellent) may be found here.

Just to add to Katie’s last post, I have summarised some the important messages of IFAD’s findings. Titled ‘’New realities, new challenges: new opportunities for tomorrow’s generation’’, the report highlights a number of prospects and challenges facing the rural poor today.

IFAD, start the report referring to the food price hikes in 2008 and the one earlier in the middle of this year. However, the FAO and OECD have both predicted that food prices are likely to remain at 2010 levels or higher for at least the next decade. Therefore, the immediate concern is food security and the need to formulate policies to feed the estimated 9 billion people in 2050. Current food production will have to increase by 70% to meet the population’s requirements in 2050.

One of the key messages of the report is that rural poverty continues to be a major problem across the developing world. Despite, 350 million rural people being pulled out of extreme poverty in the last decade, 70% of the world’s 1.4 billion very poor people are still rural. The results are also context specific. For example, East Asia has reduced rural poverty substantially, with China being responsible for much of the decline. In Latin America, extreme rural poverty has decreased by more than 50% while in the Middle East and North Africa, rates have fallen by nearly half. However, incidence rates remain high in South Asia and Sub-Saharan Africa.

With Globalisation and the rise of countries such as Brazil, India and China as major world players, agricultural markets are continually evolving, where there are now clear incentives to invest in the countryside of developing nations. The importance of rural economic development is emphasised with data from studies: “a 1 percent growth in GDP originating in agriculture increases the expenditures of the poorest 30 per cent of the population at least 2.5 times as much as growth originating in the rest of the economy.” IFAD recognises the development and support of smallholder agriculture as one of the best solutions to rural poverty and maintaining sufficient food supply. Moreover, IFAD states that the stereotypical perceptions of smallholders need to change. Rather than being viewed as “charity cases’’, small scale farmers need to be seen ‘’as people whose innovation, dynamism and hard work” can bring prosperity to their communities.

Climate change, state fragility, ill health, insecure access to land and natural resource degradation are all cited as ‘risk’ factors that the rural poor face. Apart from agricultural markets, IFAD believes the rural non-farm economy and migration are methods, which communities use to diversify income and reduce risk. Nonetheless, what remains critical is for donors, NGOs and policymakers to design effective policies to build sustainable market relations for smallholders. The report ends on this note: ‘’If all these stakeholders want it enough, rural poverty can be substantially reduced. What is at stake is not only the present for one billion rural people and the prospects for food security for all, but also the rural world and the opportunities within it that tomorrow’s rural generation will inherit”.

photo via IBC.com

Last week an interesting article showed up at the NYT about microfinance and predatory lending.  While we tend to focus more on mechanisms that lend to the missing middle of agriculture finance it’s certainly a scary reminder what’s at stake and how easily things can go wrong.

Then again, with current financial crisis underpinned by predatory lending, did we really need another example?

When did investing become about making money exclusively in the credit-extension transaction and not about creating and driving value through meaningful enterprise development? How can we facilitate pro-poor growth by equipping in-country entrepreneurs to build great, necessary businesses?  Certainly, these businesses don’t need dictation, but business development and mentorship should be inextricably tied to funding.

We know that the developing world is offering unprecedented avenues for growth and innovation, but focusing that energy into enterprises with social meaning and sustainable growth is perhaps a greater challenge.  How are some leading firms and companies focusing on agri-enterprise packaging business development and a long-term finance perspective? Will these strategies eventually reduce poverty and leverage environmental managment?

The field is moving fast, suppliers, retail giants, and investment firms alike are looking to agriculture as a way to invest in a food and beverage market that is growing quick.  By 2030, an extra 3 billion people will move into the middle class, consuming the staggering amounts of food and fiber (especially meat) that most of the developed world is accustomed to.

Suppliers are reacting by developing and investing in their supply chains.  See a recent NYT article about Walmart’s move into Africa, and the pledge to spend over 1 billion on small farmer sourcing from emerging markets. (Check out a new World Bank report on African Agriculture and Value Chain Development).

On the investor side, getting many of these small scale agribusinesses moving has solid economic and development potential. Triple bottom line investors like the Acumen Fund, Grassroots Business Fund, Root Capital, and others are extending the capital needed by small scale enterprises to reach the quality and quantity demands of a growing retail sector.  Check out a recent Stanford review of Acumen and their long-term strategy approach. The big guys are moving in as well, though perhaps not as publicly.

While the supplier and retail driven development is more difficult to gauge economic and environmental impacts, it’s certainly becoming somewhat easier to peak into these value chains.  Food safety regulations and complicated certification schemes are creating great accountability, but also increasing transaction costs and reducing the competitive edge that many small farmers once obtained.

How well these entities support pro-poor growth and good environmental management strategies is less clear, but certainly excellent specific examples exist.  They’ll certainly never be a one-size-fits all approach to agribusiness development, but long-term approach to enterprise development will remain critical.  Investment packaged with business development means coming along side an investee, a process which takes time, energy and money. If we believe that a long term lending approach allows undervalued businesses grow in value over time, then we must avoid, at all costs, the pitfalls of lending and abandoning.

A few weeks ago I posted on invisible assets and the need to put a price tag on environmental resources.   Farmers, in particular, often feel the pinch or prod of these “hidden assets” which includes assets like quality soil, favorable weather conditions, functioning credit systems, or access to water (via adequate rainfall, groundwater wells and nearby lakes and rivers).  Putting a price tag, as I mentioned, is riddled with controversy.  Yet these assets make cultivation of healthy products less expensive, less risky, and more appropriate for crop diversification which translates to higher potential incomes, higher flexibility to changes in international markets and preferences, and overall productivity.

Matching Assets with Liabilities: Considering Guatemala

But resources are not distributed equally.  Neither are the incentives for using them sustainably and ethically.  What translates as a high-cost constraint for one farmer (for example, water, or labor) may come free or more easily to another.  In a country like Guatemala, for example, water access for farmers in the Central Highlands, where a majority of the export-agriculture of the country is done by poor, indigenous Mayan communities.  As an aside, check out this great article on sustainable water use which discusses green vs. blue water sources and the impending water crisis.

For communities like the indigenous Mayans in the Central Highlands, this is a major asset; and yet they remain incredibly constrained in terms of production capabilities.  Investments in irrigation, a popular trend in development projects, would likely do little to increase productivity.  Where then, are the hidden liabilities constraining full production potential?  Fertilizer?  Labor?  Land?  How can the accurate identification of these constraints inform better government policies and interventions?  At the moment, fertilizer is relatively cheap and available (although costs are rising), thus policy or program objectives to further subsidize costs of fertilizer may do little to significant change constraints (at least as of November 2010).  Ample labor in Guatemala had originally why Guatemala had an advantage for export-oriented production in the first place.  In fact, a large migratory workforce, occurring  both from internal conflict and displacement as well as movement for greater economic remittances, has been a pressing public health and social justice issue.   Indisputably, land rights and land availability, however, has remained a critical issue for indigenous communities for over a century.  One benefit of non-traditional export crop cultivation in Guatemala has been that farmers with very little land were able to achieve high incomes – but increasing needs for more land on account of a booming population as well as a desire for export-oriented crop producers to use  has had  both ecological and political consequences.

How can we best direct policy and programs to attack hidden, perhaps even invisible constraints?

Innovative modeling technology may give us an idea at where the constraints lie, but significant progress can be made by simply asking farmers themselves.  Here’s a few resources that struck me as interesting and innovative this week:

Aline.org.uk (Agriculture Learning & Impacts Network) offers some interesting areas of insight into how to collect farmer-driven feedback, assess how efficient/inefficient service provision is for citizens within a particular community (which can include resource distribution like fertilizer, water, seeds, etc), and more macro-community scorecards on regional access to critical necessities, in order to uncover where constraints may lie.   When we finally understand the reality of both assets and liabilities for small growers,  or at least know ways to uncover what they are, can we steer policy and programs towards maximum effectiveness.

At the recent Hague Conference on Agriculture, Food Security and Climate change, on 2 November 2010, evergreen agriculture received unrivalled attention. Evergreen agriculture, defined as, “the combination of trees in farming systems (agroforestry) with the principles of conservation farming” , is gaining popularity as a way to combat land degradation as well as increasing small-holder production.

More specifically, a distinctive type of acacia (spiny tree or shrub) known as the ‘’fertilizer tree’’ has led to the doubling or tripling of maize yields on small-holder farms in countries such as Zambia, Malawi, Niger and Burkina Faso.  Scientists from the World Agroforestry Centre (WAC) believe that fertilizer trees can be utilized throughout Africa to combat climate change and ensure food security. At the Hague conference, Dr. Dennis Garrity, Director General of the WAC said, ““Doubling food production by mid-century, particularly in Africa, will require nonconventional approaches, particularly since so many of the continent’s soils are depleted, and farmers are faced with a changing climate. We need to reinvent agriculture in a sustainable and affordable way, so that it can reduce its emissions of greenhouse gases and be adapted to climate change.”

A particular type of fertilizer tree known as the Faidherbia albida has produced some spectacular results. For example, farmers in Malawi have seen their maize yields increase by up to 280% when grown under a canopy of the tree. Furthermore, 4.8 million hectares of millet and sorghum are being grown in agro- forests with up to 160 trees per hectare. Fertilizer trees are a great source of natural nutrients for land. They extract nitrogen from the air and transfer it to the ground through their roots and leaf litter. This replenishes land that has been exhausted of its organic nutrients. Additionally, they are an important source of timber and fuel. Moreover, the leaves and pods from the trees are used as fodder for livestock. The trees are beneficial to the environment and farmers because they provide positive externalities for 70 to 100 years.  

Most importantly, this method of farming is being taken seriously by governments, international donors and research institutions. For example, the WAC is working with 18 countries in Africa to establish national frameworks for evergreen agricultural production. It offers a viable strategy for sustainable development with a focus on increasing incomes of small-holder farmers. To read more about evergreen agriculture, see the following document:

http://www.worldagroforestry.org/downloads/publications/PDFs/B09008.PDF

The Institute of Economic Affairs (IEA) has today released a report launching a wholesale attack on the Fair trade movement. The study, titled ‘’Fair trade Without the Froth” has been written by Sushil Mohan, a trade expert from Dundee University in the UK.

Described as a ‘’specialty market operation’’, the report suggests that fair trade’s stringent requirements represent the views of  western consumers, rather than the needs of poor producers in developing countries.

Moreover, the notion that fair trade offers a better and more equitable relationship for producers is questioned: ‘’Fair trade’s proponents try to convey the impression that almost all the price premium they are paying for Fair Trade products is passed on to the producer, while the reality is very different.’’ For example, in some cases premium prices for goods translate into higher mark-ups for wholesalers, importers and retailers. Furthermore, fair trade has become an industry in itself with high bureaucratic costs, which are absorbed by price premiums.

Although fair trade production has grown rapidly in the past few years, it still only represents a small fraction of global food sales. Considering the fact that multi-nationals such as Kraft and Procter & Gamble are responsible for a majority of food processing activities, it may be worthwhile to target the private sector to improve rural livelihoods. Large businesses simply have the buying systems to make changes to rural communities on a grander scale.

Besides, Corporate Social Responsibility (CSR) and ethical trading are becoming more serious concerns for food corporations. More so, an ever-increasing number of companies are willing to engage in their supply chains to make them socially and environmental responsible. For example, Unilever has made a commitment to source all of its renewable ingredients from sustainable production within the next ten years. The New Business Models (NBMs) that we in DAPA are working on, also offers an ideal strategy for these companies to improve their supply chains and reduce rural poverty.

Overall, there is no doubt that the Fair Trade Movement has a valid cause, where it is working hard to improve the lives and working conditions of poor producers. However, rural poverty is major phenomena in the developing world and other options are available to reduce it on a wider-scale. Critical enquiry should be paramount and we must be careful of anti-corporative rhetoric that demonizes multi-national corporations. Instead the benefits they have on rural communities should be recognized with a greater emphasis on improving value chains and making them more transparent.

To read more about IEA’s report and its findings check out the following articles:

http://www.guardian.co.uk/uk/2010/nov/04/multinations-development-fairtrade-report?intcmp=122

http://www.telegraph.co.uk/foodanddrink/foodanddrinknews/8107746/Fair-Trade-does-not-help-the-poorest-report-says.html