Bringing the small farm future to life: tomorrow’s agri “multinational”
October 10, 2022
A new era in agriculture and food systems is emerging. One that brings together the best of what works in today's globalized value chain, and leaves behind what doesn't. In this briefing paper, we discuss how tomorrow’s model might look.
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The pandemic has taught us that we need to be nimble and adaptive in the face of shocks. It has also made it abundantly clear that our food system is not fit for purpose. Just ten companies control over 70% of the world's seed market, while four firms slaughter 80% of chickens. As for logistics, the top five firms account for nearly 60% of the global market.
This degree of consolidation means that our food supply is vulnerable to both pandemic and climate shocks. A handful of companies currently control the majority of the world's farmland. This consolidation has led to a homogenization of crops, with a few commodity crops like corn, wheat and soybean accounting for the majority of global production.
The pandemic has also put a spotlight on the plight of smallholder farmers, who make up the majority of the world's agricultural workforce. They have been hit hard by the drop in demand for food, as well as by the restrictions on movement and labor. For example, in Africa, smallholder farmers make up over 80% of the agricultural workforce, but they own just 2.5% of the continent's farmland.
The time has come to rethink our approach to agriculture and food production. Indeed, the pandemic has also created an opportunity for a new era in agriculture, one that is more decentralized, adaptive, and resilient. A new model of agriculture is emerging, one that is more decentralized, regionalized and diversified. One that takes inspiration from the way small farms used to operate before the age of industrial agriculture.
In this new model, farming is both local and global. A looser network of collaboration is structured, with small farms working together to build synergies and economies of scale. A global network of small farms can allow for sharing information and best practice where sensible. And transnational cooperation can help avert global crises, whether related to disease, famine or conflict.
This new model of agriculture offers a way to build a more resilient food system that can weather the storms of today and tomorrow. This model can be transposed across the agri value chain - including production, harvesting, processing, storage, transportation, distribution, handling and end markets. Here is our sketch of how tomorrow's farming model may work in practice.
Pillar 1: A flexible network of collaboration for production, processing and transportation
Farming can be both local and global. On the one hand, local farmers have the know-how and experience to produce food in their specific environment. They also have the advantage of being close to the market, which can reduce costs. On the other hand, global agri-businesses have the resources and scale to invest in new technologies and processes. By working together, both local and global players can benefit from each other's strengths.
Tomorrow's farming model can bring together the best of these two models. For one thing, tomorrow's farming multinational doesn't need to be headquartered in the United States or Europe, or even require farms to be linked in any legal or financial way. Tomorrow's model can be based on an "opt-in" services model, where the central office serves principally to support local operations. Collective purchasing, technical services and logistics can be made available on an opt-in basis at more favorable rates without requiring every project to participate in the same way. In addition, the central office can offer software, platforms and other technologies for sharing best practices, innovation and research and development.
This approach will allow local farms to maintain their independence and innovate without being squeezed out by bigger players, often for competition or pricing reasons. Providing a federated system of cooperation for key aspects - whether relating to inputs, machinery, irrigation solutions, packaging or transportation - will allow small farms to become price makers instead of price takers, benefitting from the same economies of scale that global agri-businesses do. For example, in Africa, smallholder farmers could form producer cooperatives to negotiate better deals with input suppliers. In this way, local farms can stay afloat in difficult times, such as during droughts or pandemics, when big agri-businesses may be struggling.
In addition, a loose network of collaboration can help us to avoid the pitfalls of the current system, which is often too centralized and top-down. Farmers on the ground know best what works for them. Having decisions always made at a far-away headquarters tends to disempower the people who generally have the best idea of how to solve a given local problem. There should be a trouble-shooting element made available by headquarters, without creating bottlenecks in local operations. A looser model of collaboration will allow for a more distributed form of knowledge sharing and decision making, and allow for better responses to changing conditions and needs.
A global network of small farms can allow for cooperation to build synergies and economies of scale. The most obvious synergy is with respect to oil and gas. A closer network of coordination on the agricultural side will allow for more precise and cost-efficient management of consumption of oil and gas, include projects to manage carbon emissions (including projects for replanting, reforestation, carbon sequestration and others). It makes no sense for each small farm to struggle in managing these aspects. By working together and leveraging natural synergies, we can pool our resources and knowledge to create a more efficient and effective system.
Pillar 2: Distribution hubs that support farmers and communities
Today's downstream agricultural value chain is characterized by an inefficient and costly system of middlemen. In many cases, these middlemen provide little value other than adding to the cost of the final product. They typically buy from farmers at low prices, often below the cost of production, and then sell to processors or retailers at much higher prices. This system squeezes farmers' margins, leaving them vulnerable to shocks and unable to invest in improving their productivity. It also increases the cost of food for consumers.
One way to overcome this problem is to develop distribution hubs located near farmers, providing them with access to essential inputs (such as seed, fertilizer and machinery) and services (such as training and extension) at more reasonable prices. The hubs could also buy farmers' produce at fair prices and sell to processors or retailers at a reasonable margin. In this way, farmers would be able to capture a larger share of the value of their produce, and consumers would benefit from lower prices by mutualizing costs.
The distribution hubs could also provide other essential services for the smooth functioning of the agricultural value chain, but which are currently lacking. For example, they could provide storage facilities for farmers' produce, or facilitate the transport of produce to markets. They could also provide financial services, such as mobile banking, loans and insurance, as well as information services, such as weather forecasts and market prices, or services relating to management of excess inventory (recycling and waste management, for example).
Streamlining the agricultural value chain would also weigh in favor of providing local farmers with better access to international commodity markets. Because the current system of international trade in agricultural products is characterized by distortionary subsidies and high tariffs, a few large producers tend to benefit at the expense of both consumers and small hold farmers in developing countries. One way to achieve this is to establish a global market for agricultural products, in which all countries would agree to remove subsidies and tariffs on agricultural products. This would create a level playing field, in which farmers in developing countries would be able to compete on an equal footing with farmers in developed countries. In addition, the global market would provide consumers with access to a wider variety of food, as well as to food that is produced more sustainably and without the use of harmful chemicals.
Pillar 3: Sharing information, knowledge and best practices across the network
A global network of small farms can allow for sharing information and best practice where sensible. Problems faced by farmers are no longer local but global in scale. For example, the spread of diseases such as avian flu or mad cow disease does not stop at national borders, and neither do climate change or water shortages. By sharing information and best practices, we can develop solutions to these problems more quickly and effectively.
One way to share information and resources is through face-to-face interactions. This can be done through "farmer-to-farmer" exchanges, in which farmers from different parts of the world visit each other's farms and share knowledge. It could also be done through "field schools", in which groups of farmers are given intensive training on specific topics, such as sustainable agriculture or new technology.
Another way to do this is by creating an online platform where farmers can share information and resources. The platform could be used to exchange information on best practices for sustainable agriculture, or to share information on new technology and innovations. The platform could also be used as a marketplace, where farmers can buy and sell products and services. Without a doubt, there is a huge "open data" component to solution. Resources that are affordable and easily shared must be done so freely. Intellectual property enforcement will have to be relaxed. There is no reason for farming processes to be patented, or for holders of farming technology to be limited in how that information is shared. What works must be shared openly and without fear of legal liability or financial penalty.
In addition, innovative hedging tools can be developed to help farmers manage risk, whether related to weather, production, transportation, price or currency. Currently, large agricultural producers have sophisticated agreements in place for hedging commodity risk through derivative instruments, including direct access to commodity exchanges that afford them better market access and spreads. For example, in the case of coffee, a farmer in Colombia could have a contract to sell his coffee at a set price in three months' time, regardless of whether the market price has gone up or down. This kind of risk management is not currently available to small-scale farmers, who are often forced to sell their crop as soon as it is harvested, when prices are at their lowest. Experts in securities and commodity trading and risk management have an important role to play in building capacity and opportunities for consolidated approaches to derivatives trading. By developing hedging tools that are accessible to small-scale farmers, we can help them to weather the ups and downs of the market and get a better price for their crop.
Pillar 4: A model that builds peace and transnational cooperation
Transnational cooperation can help avert global crises, whether related to disease, famine or conflict. By creating a global network of local farms, we can better prepare for and respond to global challenges in agriculture and food systems, and better avoid practices that are harmful to nature. In addition, by working together, farmers can pool resources and share risk. This makes it more likely that farmers will be able to weather the bad times, and less likely that they will be forced to sell their land or move to urban areas in search of work.
Tomorrow's farming model can also include a global food security system, in which countries would cooperate to ensure that no one goes hungry. This would include an early warning system for potential threats to food security. The system would use data from a variety of sources, including weather monitoring, satellite imagery and crop yield data, to identify areas at risk of drought, flooding or other hazards. The system would then provide alerts to farmers in the affected areas, so that they can take steps to protect their crops.
Another component could be a food security reserve. The reserve would be a stockpile of food that could be released in times of need, such as during a drought or a famine. The reserve would be managed by an international body, such as the United Nations, and would be funded by contributions from governments, businesses and individuals. In times of conflict, the reserve could also be used to provide food assistance to civilians in war-torn areas. This would help to prevent starvation and malnutrition, and would also reduce the need for people to flee their homes in search of food.
In addition, a global network of small farms can help build peace by promoting economic development and food security in conflict-affected regions. For example, the network can be used to connect farmers in conflict-affected regions with markets for their products, or to provide training and resources on sustainable agriculture. In this way, the network can help create opportunities for economic growth and employment, which can help to reduce the drivers of conflict. In addition, if a disease outbreak occurs in one region, the network can be used to quickly share information and resources, and to coordinate a response. Similarly, if there is a famine in one region, the network can be used to identify surplus food production in other regions, and to facilitate transport of food to those in need.
Making inroads towards a new model
The current model of industrial agriculture is not sustainable. It is damaging to the environment, it is wasteful of resources, and it is contributing to climate change. In addition, the current model is not capable of feeding the world's population in a nutritious and affordable way. A new model of agriculture is needed, one that is more sustainable and more resilient. This new model must be local and global, it must be structured as a loose network of collaboration, and it must allow for transnational cooperation. It must be built on the foundation of small-scale farmers. It must be based on principles of collaboration, openness and transnational cooperation. And it must make use of technology to connect farmers with markets, and to share information and resources. What are the steps to achieving this model?
First, this model requires collaboration across industries. The food system is complex, and it involves many different actors, from farmers to manufacturers to retailers. To create a new model, all of these actors must work together. This will require a new level of cooperation and coordination, including building hybrid partnerships between smaller and bigger players.
Second, it requires investment in small-scale farmers. Small-scale farmers are the backbone of the new model. They are the ones who are already doing things differently. They are the ones who are experimenting with new methods and new technologies. They are the ones who are leading the way. But they need our support. They need access to markets, to credit, to training and to resources. Innovative financing structures are critical, including mechanisms to turn national debt into funding for agriculture and natural ecosystems.
Third, it requires investment in infrastructure. The new model will require a different kind of infrastructure, one that is more decentralized and more flexible. It will require new technologies to connect small-scale farmers with markets. And it will require new storage and transport systems to allow for the quick and efficient movement of food around the world.
Fourth, it requires a change in our mindset. We must move away from the current model of industrial agriculture, which is based on the principle of maximizing production at all costs. Instead, we must embrace a new model, which is based on the principles of food security, sustainability and resilience. This means producing food in a way that is good for the environment, good for the economy, and good for society. It means producing food in a way that is nutritious and affordable. And it means producing food in a way that can withstand the challenges of climate change.
The time to build this new model is now. We cannot wait for the current system to collapse. We must act now, and act together. Small-scale farmers around the world are already leading the way. They are demonstrating that it is possible to produce food in a more sustainable and more humane way. It is time for the rest of us to follow their lead. The time for change is now. We have a responsibility to ourselves, and to future generations, to build a new model of agriculture. A model that is more sustainable, more humane, and more capable of feeding the world.
CPM
