Agribusiness for rural development: a peripheral view?

Abstract

This paper argues that new technology used in the production of biofuels and adopted rapidly during the recent oil and food price crisis has altered the longterm relationship between energy and food prices as these products have now become much closer substitutes in consumption. In future, food expenditure could account for a larger share of poor consumer income not only in times of economic recession but, paradoxically, also in times of global prosperity when energy prices rise. Alarming symptoms of this over the past year pressured the World Bank into funding a global food response programme and triggered renewed interest in agriculture and agribusiness as ways of combating poverty. The paper contends that a greater focus on agribusiness issues is required in development thinking if meaningful numbers of smallholders are to capture higher returns in this new economic environment. It argues that more innovative thinking and research is required on how these smallholders can be effectively linked to markets through vertical and horizontal coordination, and calls for a better understanding of informal supply chains and global commodity chains to find ways of improving their performance for smallholders. It is concluded that efforts to link smallholders with higher-value supply chains in the hope that they would improve their returns have seldom been replicable at scale because they were founded on naïve understanding of what smallholder participation in supply chains offers and requires, and on inappropriate producer organisations.