Rethinking Agri-Business Investments Through the Pandemic

Photo: CASA

Across the world, lives have changed dramatically in the last few months. We have all been affected in some way by the tragic deaths from Covid-19, lost jobs and reduced incomes, and curtailed freedoms. But the impact of the crisis on small farmers and their families in the poorest parts of the world, already reeling from drought, pests and low commodity prices, needs particular attention. Understanding the different ways in which smallholder farmers are currently being affected by the Covid-19 pandemic will be critical to implementing the most effective responses.

In the first of CASA’s four-part event series, five experts explored the impacts on smallholder farmers through loss of inputs, changes in the market for their products, reduced ability to work, and constraints in access to finance.

Logistics breakdowns and border closures have meant that many farmers are unable to source inputs such as seeds and fertilisers. In addition, training support from extension services cannot be provided during the lockdown, potentially affecting future yields. And it is difficult for many farmers to reach markets to sell their products.

‘Green channels’ allowing free transit for trucks with agricultural inputs to travel to quarantined areas have helped to reduce disruption in the flow of agricultural goods. But communities are concerned that, without appropriate protective equipment, truck drivers may contribute to the spread of Covid-19.

People cannot go to work in agro-processing operations, because of the lockdown and social distancing, so output has fallen. These impacts on both supply and demand have in turn led to cash flow problems for small and medium-sized enterprises (SMEs), forcing many to lay off workers.

Activities where the harvesting or processing is labour-intensive, where the crops are more perishable or where the focus is on export are more exposed to the impacts of Covid-19. Agricultural operations which provide high-end food for hotels and restaurants have been particularly badly affected by the halt to tourism.

The impact on smallholder production and income has a knock-on effect on nutrition. Even if food is available, people may not be able to pay for it. As their incomes fall, they can only afford to eat less nutritious foods. Support for local production therefore has to be central to the response.

Access to working capital (or, at the most basic level, cash for agricultural inputs) is also of fundamental importance. Countries with a stronger record of public sector support for agricultural finance have been able to respond more quickly to the crisis. Impact investors stepping up to provide or extend patient capital are playing an important role. But general increases in liquidity through central banks are only rolling out slowly to farmers and agricultural SMEs and may not get there at all.

For governments, getting the right balance between containing the virus and allowing economic activities is obviously difficult and critical. In China, farmers are going back to work and agro-processing activities are being restored. This is expected to avert large-scale food shortages. Other countries are now facing that very difficult decision.

The current crisis has emphasised the vital importance of communication in the supply chain for relaying information to smallholders on changes in the market and to give buyers and policy-makers a clear picture of the challenges that farmers are encountering. In order to respond quickly to crises of this kind in the future and avoid the worst impacts on the most vulnerable, these channels of communication must be improved, most probably through digitisation.

CASA’s next event will look in more depth at what can be done to address all of these impacts for smallholder farmers, to help them through this crisis and to build greater resilience for the future.

This article was originally published by CASA.