F&A Corporates must act now and take the lead in collaborating with farmers; a lack of agricultural investment in the farmers that have fed us for the last 10 to 20 years has created a vulnerable food market finds Rabobank.

Rabobank spoke at the Economist Conference in Geneva, "Feeding the World - The 9 billion people question".

A lack of agricultural investment

• In 1970, global funding of agricultural research, public and private, was estimated to total around 40 billion USD per annum. Today it's still 40 billion USD, while the world population has doubled;
• In the past 20 years,  demand for food has increased 15 times faster than the available area of arable land;
• Our retail food prices are one third lower than when our grandparents were alive even though agri commodity prices have reached record levels. 

Farmers: Caught in the middle

Despite the need to feed a growing global population, farmers are not growing significantly more food to meet that need because of a growing double market failure.

This failure - price pressure on both ends of the value chain - leaves farmers trapped.  On the one side, farmers face competition from other farmers, often in other countries, based on lowest price.  On the other side, large global food companies are demanding lower prices for farm produce and major industrial firms are demanding higher prices for inputs and agricultural supplies.

The bank recognises that agri commodity traders, food processors and retailers must act now and take the lead in collaborating with farmers.

To keep up with growing demand, farmers need to increase their productivity. But increasing agricultural supply takes time and money. The rapid transition from a world of oversupply of food to a world dominated by scarcity and volatility calls for urgent investment in more sustainable agriculture.

Berry Marttin, member of the Executive Board Rabobank: "A big part of the solution to the food supply issue lies in our perspective at farm level, as farmers have the opportunity to close the productivity gap. At the end of the day, farmers feed the world. To close this gap, innovation and investment by farmers is crucial. They are changing into rural entrepreneurs, professional, skilled, self-conscious, informed and committed. Farming will become more high tech, more specialised and farm size will increase further. But, to create an enabling environment in which farmers can prosper, cooperation between private sector and public sector with farmers is needed."

Choosing a new supply chain strategy

Many players in the F&A chain are now faced with having to choose a new strategy and a new position. Currently multinationals and governments invest in their own food supply chain. Many multinationals forget to invest in the critical primary food producers that can create much-needed stability: the individual farmers.

Gilles Boumeester, Global Head Food & Agri Coverage of Rabobank: "The next decade will be dominated by a battle for raw materials. As larger players try to carve out their own piece of the raw material pie, the commodities market will break up into separate 'controlled supply chains'. This has placed private enterprises in the driving seat when it comes to solving the dilemma of how to create stability in the vulnerable food supply chain."

Tailored models for farmer support: a strategic necessity for food companies
Rabobank recognises a pressing need for companies to develop tailored models of support for farmers in order to create more stability in our food supply.

Rabobank's point of view is that  private industry is well-positioned to take the lead  in order to help solve food supply issues and feed the world by 2050.

Rabobank identifies four ways of collaboration between multinationals and farmers:

1. Support input: Trigger long-term investments such as structural access to inputs such as fertilisers, machinery, seeds and crop protection chemicals and promote knowledge about best agronomic practices.

2. Education: Provide tailored support in innovation or training to primary food producers

3. Access: Make crop/produce more accessible by improving logistics and finance,  urge governments to remove trade barriers  and stimulate free trade in order to produce food in the most efficient way and in the most efficient locations.

4. Demand: Stabilise demand by investing directly in sustainable farmers whose supply chains are transparent and whose products are traceable.

www.rabobank.com