Sustainably producing safe, nutritious affordable food and agriculture products for nearly 10 billion people in 2050 is a formidable task. Producers are the key to meeting this challenge. To be successful, however, they must contend with factors they cannot control, like extreme weather, market fluctuations and political instability.This creates uncertainty in a sector that thrives on long-term planning and predictability.
Thankfully, agricultural producers have remarkable capacity for innovation and adaptation. With the right support, producers will help make the world’s food and agriculture systems economically viable, environmentally sustainable and socially beneficial.
The private sector provides products and knowledge that help producers decide when and where to invest, and how to manage risk and protect their investments.
Agribusinesses and retailers work directly with producers to select inputs and create farm management plans that generate more output while conserving water resources and protecting soil health. They also provide affordable access to mechanization through financing and rental services.
The finance and insurance industries fund and protect the investments that farmers make in the productivity and sustainability of their operations.
Private sector efforts are supported by the public sector with policies such as land tenure reform and infrastructure investments for transportation and communication systems.
This chapter describes how industry and government help agricultural producers invest in success and manage risk to ensure a productive sustainable food and agriculture system.
Managing Risk Through Diversification
For producers who rely on a major commodity crop such as wheat, maize or rice, diversifying into other crops or livestock products is a way to manage the risk from crop failure or low commodity prices. While there are risks to growing unfamiliar products, support from government and the private sector can facilitate this transition.
In India, for example, women farmers are growing vegetables for local markets to earn money for school fees, healthcare and food. In addition to paying for household necessities, it provides another source of income, should the family not earn enough from their cash crop, usually cotton, wheat or rice.
Insuring the Present and Protecting the Future
Farmers use credit to purchase inputs, buy or rent mechanization, hire labor, install irrigation and acquire more land. They also rely on credit to see them through periods of low crop prices or for purchases between growing seasons.
In India, farmers use both formal and informal credit sources to increase their net farm income.
A national survey of India’s agricultural households found that 52 percent of farmers tap into formal or informal credit markets and 85 percent of agricultural credit is used to purchase inputs or to rent mechanization.
The survey reveals a positive correlation between credit and an increase in net farm income. Borrowers from formal institutions, such as banks or farmer cooperatives, realized 17 percent more net farm income than people who borrowed from moneylenders, friends or relatives.
The link between institutional credit and higher net farm income is largely due to the characteristics of formal borrowers. They are more likely to be experienced farmers, with more education and business experience, and have larger landholdings to use as collateral.
The total amount of agricultural financing from formal lenders in India has increased four-fold in the last decade, but institutional credit still disproportionally benefits medium and large-scale farmers.
Most small and marginal borrowers rely on informal sources, which typically charge higher interest rates, driving up the cost of their investment.
Financing for Tenant Farmers in Bangladesh
BRAC, the world’s largest development organization, is working with tenant farmers in Bangladesh to provide access to financial support and technology through the Borgachasi/Sharecropper Union Programme (BCU) Project. BRAC provides credit to farmers for purchasing inputs, tools and irrigation equipment. They also provide technical support to address farmers’ production and post-harvest challenges. With the support of Bangladesh’s largest banks, BRAC hopes to reach 300,000 sharecropper/tenant farmers with credit and proven agricultural technologies.
Coping Strategies with Generational Consequences
During periods of prolonged drought, small-scale farmers are faced with difficult choices.
Those with more assets raise cash by selling cattle and equipment or by leasing their land. The poorest farmers, with fewer assets, cope primarily by reducing their consumption, particularly of food.
Both coping strategies have generational consequences for the health and economic prospects of the family and the productive capacity of the land.
Crop and livestock insurance can stabilize farmer incomes and food security during times of crisis. It also ensures they have enough resources and assets to improve their productivity once the crisis subsides.
Connectivity for Productivity
In addition to roads, farmers of all scales need a reliable high-quality telecommunications infrastructure.
Mobile phone technology has already revolutionized how farmers around the world access agronomic advice, market information and banking systems.
Extending mobile cellular and high-speed reliable broadband services to agricultural areas will facilitate the adoption of the data and precision agriculture technologies that are the significant drivers of productivity growth in the twenty-first century
Precision systems give farmers the ability to maximize the productivity of their fields. Livestock producers use data to monitor animal health and manage grazing lands. Precision systems also help farmers reduce costs. USDA researchers estimate the cost savings from precision agriculture in corn production ranges from $13 to $25 per acre.
Most U.S. crop and grazing land in the U.S. is not covered by mobile cellular or high-speed, high-quality broadband services.
The 2018 Omnibus Budget allocated $600 million for a broadband pilot grant/loan program to encourage communications companies and cooperatives to extend the broadband infrastructure and provide internet service to rural homes, schools and hospitals. But the coverage for agricultural land also needs investment.
The Agricultural Broadband Coalition (ABC), a diverse group of farmer associations, equipment manufactures and technology companies, is supporting the Precision Agriculture Productivity Act of 2018, which passed the House in June 2018 and will next be considered by the Senate.
The legislation calls for the creation of a task force to study the specific connectivity requirements for precision technologies and recommend policies to deploy high-quality high-speed fixed broadband and mobile cellular service to 95 percent of U.S. agricultural crop and grazing lands by 2025.
This will enable more farmers to adopt precision agriculture technologies and data analytics that boost productivity growth and help ensure the U.S. can sustainably produce food, feed, fiber and biofuel for domestic consumers and millions around the world