Insuring Small Farmers against Price and Climate Volatility
Price and weather-indexed insurance schemes may be needed to protected small farmers who are vulnerable to rainfall and temperature volatility, due to climate change, and to international price volatility.
This idea was raised during a plenary session on Natural Resource Management, Bio-Fuels, Food Security and Sustainable Development, at the sixth African Economic Conference on Thursday in Addis Ababa.
Experts said that of the 800 million people considered malnourished worldwide, 190 million resided in sub-Saharan Africa. The hunger and malnourishment situation in Africa indicated a big lag in the accomplishment one item of the Millennium Development Goal, which includes eradicating extreme poverty and hunger, according to Olanrewaju Smith of the International Trypanotolerance Centre in The Gambia.
Small farmers in the continent are also becoming vulnerable to both climate change and international price volatility, which is impacting domestic markets, according to Patrick Guillaumont, Professor emeritus at Auvergne University
The G20 will discuss price volatility and food security as one of the top items on the agenda when they meet in November. However, Guillamont, notes that “the link between the two issues has led to a focus on price spikes rather than on the volatility itself.”
During the commodity price boom of the mid 70’s, the G77, aiming to stabilize prices, came up with a number of efforts including “Integrated programme for commodities” and advocated “price indexation” for all main commodities and the multiplication of international commodity agreements (ICAs) to avoid price shortfalls and to counter a possible deterioration of the terms of Trade.
Guillaumont notes that the decisions were not implemented, adding that thirty yeas afterwards the world is experiencing another commodity price boom, mostly in food products. This has led to “severe consequences on urban poverty in developing countries,” He said pointing out that it has also affected price levels in developed countries.
“This fight against price volatility has become mainly understood as avoiding price spikes,” Guillaumont said.
The world’s concern, according to Guillaumont, is that world price instability was being easily transmitted to domestic price instability, affecting even the prices of food products that are mainly not traded internationally.
“The last food crisis was more severe because it was connected with the global crisis,” he said.
With the unlikelihood of a decline in world price volatility resulting from climate change shocks, in particular, the next steps for the G20 would be, according to Guillamont, to prioritise investment in agriculture, with adaptation in mind, as well as a rationale of international or national price stabilisation schemes and the use of aid as an instrument of stabilisation.
Guillaumont called for stabilisation or insurance not to be limited to the macro level but to include small farmers as well to protect them from risks caused by climate change and those associated with the volatility and recurrent fall of international prices being transmitted to producers.
Mr. Smith of the Trypanotolerance Centre also suggested that the situation of food insecure Africans could be mitigated by intervening in short-term emergency activities and long-term responses to transform African agriculture from subsistence to a business venture.