Our Perspectives


The right to food is about much more than boosting supply

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Improving small-scale farmers’ access to markets is vital for achieving food security and improved nutrition, but we must also improve farmers’ bargaining position in food chains. Photo: UNDP Georgia

It is increasingly common for big agribusiness firms to contract out the production of raw commodities to hundreds and thousands of smallholders, sometimes known as “outgrowers”. Through the contracts they negotiate with small-scale farmers, private investors are shaping agriculture in the developing world.

For example, the investment pledges gathered in the G8’s New Alliance for Food Security and Nutrition are primarily made up of plans by multinational and domestic agribusiness firms to source more widely from smallholders in a range of African countries. Yet what matters is precisely what is agreed between investors and small-scale farmers, and small-scale food producers have been largely neglected by agricultural policies to date. Understanding this situation is crucial to assessing the role of private investment in achieving the Sustainable Development Goals (SDGs).

In contract farming, farmers commit their output to processing or marketing firms at (generally) predetermined prices. Doing so can give them improved access to inputs and credit at one end, and easier access to markets at the other. Plugging small-scale farmers into new and lucrative market openings can help them to share the gains of globalisation.

Under certain conditions, contract farming can also help in the development of localized food chains, for instance by linking farmers’ co-operatives to the local food-processing industry or to fresh produce retailers serving urban consumers. At the same time, however, farmers can easily become disempowered by contract farming: it may result in passing risk down to them and exposing them to markets that are volatile, while allowing agribusiness firms to consolidate their commodity supply chains.

An extensive review of the experiences of contract farming to date reveals that safeguards must be built into the scheme to ensure that the benefits of contract farming outweigh the potential costs. Local governments need to play a role, scrutinizing contractual arrangements to check that they are transparent, viable and beneficial to both parties; that they are fair and that dispute procedures are in place; that they respect women’s rights; that quality standards are clear; and that they will not harm the environment.

It is equally important, however, to consider other development models that can provide farmers with the benefits of contract farming – such as access to credit and markets, price stability and risk spreading – without the potential drawbacks. Farmers should be encouraged to consider forming co-operatives and joint ventures – allowing them to join together to access markets without losing power over their land and livelihoods – or direct-to-consumer food marketing, which links small-scale farmers to markets while allowing them to increase their incomes and retain control of their production.

Improving small-scale farmers’ access to markets is vital for achieving food security and improved nutrition, but we must also improve farmers’ bargaining position in food chains. Today, the relationships between producers and buyers are deeply unequal and they will remain so unless farmers have a variety of channels through which to sell their produce, and the capacity to negotiate better deals.

In my view, this is what the right to food is all about: not simply a matter of boosting supply to meet growing needs, but of who produces, for whom, under what conditions. It is not just a question of reducing the gap between farm-gate prices and retail prices to ensure affordable food, but also of empowering the most marginal food producers, allowing them to capture a greater portion of the value of their produce. In short, it is about allowing the vast number of small-scale farmers in developing countries to reach, finally, their full potential.

 

This article is one in a series of opinion pieces written by prominent authors on issues covered in the OECD Development Co-operation Report 2016: The Sustainable Development Goals as Business Opportunities.

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