4. Establish financing across the agriculture supply chain

 

Agribusiness is essential for achieving global food security, and financing is a central component to the working of the entire value chain. From bringing land into sustainable production and improving productivity by transferring technologies and practices, to ensuring the best use of water and other natural resources, financing is a critical factor in supply chain development and overall food security. Financing—whether through new instruments or farmer and supply chain financing programs—can play a critical role in developing environmentally sustainable and socially inclusive food supply chains that bring safe, affordable food from producers to end consumers.

 

Establish price hedging facilities on commodity exchanges.

 

Farmers face serious risks due to their exposure to volatility of crop prices that can vary for a number of reasons, including weather conditions, global supply trends, demand patterns, and a range of other factors. In developed countries, farmers have access to hedging facilities on commodities exchanges which, offer a wide range of hedging instruments such as options, futures, forwards and swaps to enable farmers to lock in the prices for their crops and mitigate the risk that prices may be depressed from current levels when crops are brought to market.

 

There is an urgent need to develop commodity exchanges in emerging markets so that farmers in these countries who are even more vulnerable than their developed country counterparts can protect themselves from declines in future crop prices. In addition, there is a need to develop mechanisms to enable farmers to benefit from instruments that are traded on commodity exchanges in other countries, to the extent that such exchanges offer contracts in the same crops which they produce and such crops are globally traded and command a unified global price.

 

Financial education programs that can educate farmers about available alternatives are also critical as these instruments are relatively new to farmers in a large number of developing countries.
 

Photo credit: flickr@DFID