The Paradox of the Starving Farmer

By Eduardo Tugendhat, CEO

President Barack Obama recently announced to the world’s media a doubling of U.S. financial support for global food security―over $1 billion to give “people the tools they need to lift themselves out of poverty.”

He added, “This is not just charity. These are all future markets for all countries and future drivers of world economic growth.”

These words could herald a new approach to this perennial crisis, one that uses the market to overcome the pitfalls of traditional food aid and gives poor farmers a steadier financial foundation.

In 2008, skyrocketing commodity prices ignited deadly riots in capital cities of several developing countries. Little attention went to the more numerous rural poor, most of them farmers. At the crux of the developing world’s food production system, rural residents make up 75 percent of the estimated billion “dangerously undernourished.” For this dispersed and disenfranchised population, higher food prices offered a small window of opportunity to boost meager incomes.

This brings us to the paradox of the starving farmer: Why are so many farmers and rural dwellers desperately poor and hungry?

It comes down to market access. When farmers can’t get competitive prices, they don’t have the means or incentive to improve crop management and invest in yielding the large surpluses that would improve their incomes while feeding urban dwellers and replenishing national food stocks. So most farmers grow just what their families will eat―plus a little extra to pay for other goods.

Market barriers take many forms. Historic land tenure patterns cram too many people onto tiny plots and marginal land. Governments often control prices of basic commodities, while subsidized―or worse, free―imported food from rich countries also keeps prices artificially low. In most poor countries, shoddy post-harvest handling, warehousing and transportation add up to a crushing “tax” on farmers.

But these problems have solutions to benefit rural and urban poor alike, helping the developing world avoid future crises. Economic history has repeatedly shown that development for all requires a dramatic jump in farmer productivity and income. From the United States’ development of the West, Japan’s Meiji restoration, early 1900s Argentina, and recently, China, Israel, Taiwan, Korea, Chile and Brazil, countries that have raised agricultural incomes have followed two principles: 

• Treating agriculture as a business and farmers as businesspeople, regardless of how poor they are. China’s dramatic growth started in the 1970s with the Household Responsibility System, which allowed farmers to control their land and more freely sell their output, while also increasing grain prices. The resulting jump in productivity tripled rural incomes; the number of extremely poor dropped from 260 million to 25 million by 2001. The famines of Mao’s China became relics of history. The U.S. should encourage developing countries to adopt policies that would help farmers get more value from their products: more land ownership, easier business registration, fewer price controls. Governments can also support interest in export market opportunities―as did Chile, Brazil and Israel, sparking new agribusiness industries there. 

• Investing in efficient “farm-to-fork” services. Consumer food prices directly affect farmers’ incomes, but their share depends on the stages between field and market. Lifting the inefficiency “tax” on farmers to help them compete with imports requires investment: roads, irrigation, extension, research, packing, processing, storage and transport. The U.S. and other wealthy countries can best make this happen by partnering with the local and international private sector, including farmer associations, food and agribusiness companies, research and educational institutions, logistics and transport companies. Linking these “stakeholders” lets farmers tap profitable markets, technology and financing, while delivering the safe, high-quality products that consumers want.

President Obama’s commitment to addressing food insecurity is an opportunity to solve its underlying causes. With clear market access, efficient food production and delivery systems, farmers can respond to price signals, stabilizing their own precarious livelihoods and national economies.