Global trade in food and agricultural products has doubled, says FAO report

Global agri-food trade has more than doubled since 1995, amounting to US$1.5 trillion in 2018, a new report issued by the Food and Agriculture Organization (FAO) says.

The report says emerging and developing countries’ exports are on the rise and account for over one-third of the world’s total exports.

The report, The State of Agricultural Commodity Markets, 2020 (SOCO 2020) says 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,” says Qu Dongyu, the FAO’s director general, in his introduction to the report.  

Rise in value chains

The FAO report estimates that about one-third of global agricultural and food exports is traded within a global value chain and crosses 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,” Qu says.

The report says that 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 roughly 1.2% in labour productivity. 

Missing link

However, smallholder farmers are often missing out on the benefits of global value chains, the report says. Furthermore, the emergence of global value chains with stringent food quality and safety requirements could further marginalise 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,” says Qu.

To achieve this, the world will have to develop 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.

Digitalisation 

The FAO report proposes that digital technologies can help markets to function better and 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 digital divide in agriculture needs to be bridged.

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

For example, an analysis of the main studies on contract farming suggests that participation in contract farming can increase farm income by more than half.

However, the report underlines an overall dearth of information on the varying impact of contract farming, aside from its impact on farmer welfare.

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