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Food, ag product trade more than doubles in two decades

FAO says trade and markets can spur sustainable development and strengthen resilience to shocks.

Global agri-food trade has more than doubled since 1995, amounting to $1.5 trillion in 2018, with emerging and developing countries' exports on the rise and accounting for more than one-third of the world's total, according to a new report issued today by the U.N. Food & Agriculture Organization.

The “State of Agricultural Commodity Markets” report argues that global trade and well-functioning markets lie at the heart of the development process as they can spur inclusive economic growth and sustainable development and strengthen resilience to shocks.

"We need to rely on markets as an integral part of the global food system. This is all the more important in the face of major disruptions, whether they come from COVID-19, locust outbreaks or climate change," FAO Director-General Qu Dongyu wrote in his introduction to the report.

Rise of global agri-food value chains

The report estimates that about one-third of global agricultural and food exports are traded within a global value chain and cross borders at least twice.

The rise of global value chains is driven by income growth, lower trade barriers and technological advancements, which have transformed markets and trade processes, linking farmers to traders and consumers across regions and countries.

"Global value chains can make it easier for developing countries to integrate into global markets. As they link our food markets closely, they also provide a mechanism to diffuse best practices to promote sustainable development," the FAO director-general said.

In turn, by participating in global value chains, smallholder farmers can boost their food production and income. On average and in the short term, a 10% increase in agriculture's global value chain participation can result in an increase of around 1.2% in labor productivity, the report found.

Smallholder farmers, however, are often missing out on the benefits of global value chains. In addition, the emergence of global value chains with the stringent food quality and safety requirements could further marginalize smallholders.

"We need to redouble efforts to include smallholder farmers in modern food value chains, thus securing rural incomes and food security in both rural and urban areas," Qu said.

The report suggests that there is a need for broad policies to create an environment that enables markets to flourish and bolsters smallholders' participation in global value chains -- for example, better rural infrastructure and services, education and productive technology.

Digital technologies can help markets to function better and can improve farmers' access to them. Innovations such as food e-commerce can benefit both farmers and consumers. However, to guarantee that the dividends of digital innovation are shared with the poorest, the current digital divide in agriculture needs to be reduced.

The adoption of more inclusive business models, such as contract farming and blockchains, can also help farmers better integrate into modern and more complex value chains, FAO said. 

For example, participation in contract farming can increase farm income by more than half, based on an analysis of main studies on contract farming. The report underlines, however, the overall lack of information on the different impacts of contract farming, apart from its impact on farmers' welfare.

Fostering sustainable development

The report makes the case for the role agri-food markets can play in fostering sustainable development. It argues that the promotion and wider application of voluntary sustainability certification schemes and standards in agriculture, for example, can address trade-offs among economic, environmental and social objectives.

Sustainability certification schemes can promote fair trade, inclusion, non discrimination and environmentally friendly farm practices. They also can ensure occupational safety, ban child labor and encourage investments, the report said.

For instance, according to data from smallholder coffee farmers in Uganda, sustainability-certified families spend 146% more on child education and keep children at school longer than non-certified families.

Another study on certification schemes that promote sustainable forests found that the production of forest shade-grown coffee in Ethiopia can help alleviate forest degradation.

The report also points out that while bananas are one of the most traded tropical commodities in the world, only an estimated 5-8% are covered under sustainability standards.

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