Interview with Derek Byerlee on World Development Report 2008

Both approaches are needed. For example, soil fertility is a major constraint on productivity in Africa. This urgently requires increasing fertilizer consumption which is less than 10% of other developing regions (in terms of nutrients per ha). However, this has to be combined with approaches such as legumes and agroforestry which increase both soil fertility and soil structure and which have been successfully adopted in Zambia. These different approaches and examples of their success are outlined in chapter 7 of the WDR.

OECD farm subsidies and protection cost developing countries about five times what they provide in aid to agriculture (chapter 4 of the WDR). The Doha round of trade negotiations must progress, and the top priority is to reduce trade distortions that hurt developing countries most—especially those in cotton and oilseeds. But this impact differs across products and countries. With full trade liberalization, international agricultural commodity prices are estimated to increase on average by 5.5 percent, while those of cotton are expected to increase by 21 percent and oilseeds by 15 percent.

However, the average distortion in world prices from trade policies is about 5 percent for food grains (lower than for traditional export crops), with imperfect transmission of world prices to domestic producers given infrastructure and transport costs. This long-term effect is small relative to recent price changes on food grain prices, as reflected by the increase in world maize prices by about 40 percent over the past three years. So the overall effect of trade distortions on food grain prices in the poorer developing countries is likely to be small.

In many countries, yield losses of cereals will be significant--as much as 20-40 percent with temperature rises of 3-4 C.

It is urgent that countries most affected by climate change invest in adaptation measures. Richer countries that have been the cause of climate change have to provide financial support to adaptation in poorer countries.

The most urgent investments are in crop varieties tolerant to drought and heat, and irrigation systems. Also countries need to strengthen responses to increase vulnerability through crop insurance schemes and safety nets.

The emphasis in each countries should be on improving household food security which depends on the supply of food and the means to access food. In many small island countries it may be more efficient to import food grains, and focus on programs aimed at reducing poverty and providing safety nets to the poor.

Most countries experience this problem of lagging regions due to several factors such as poor agroclimatic conditions, poor infrastructure and social and ethnic exclusion (see chapter 2 of the WDR). The solution to these problems is very specific to the region. In some cases, investments in infrastructure, irrigation and agricultural technology can tranform lagging regions, as in the Cerrados of Brazil. In other cases, these regions may produce important environmental services . Several countries of Latin America are now paying farmers to preserve biodiversity and watersheds. But there are also regions where the best investment may be in educations and skills so that people can successfully migrate to other regions and sectors.

Genetically modified organisms (GMOs) do offer promise to increase food production and quality for the poor—both smallholders and poor consumers—but greater international and national public support is needed to go beyond today’s commercially-driven technologies to develop pro-poor traits and to regulate their safe testing, release, and use. Vitamin A enhanced rice is an example of propoor technology under development which could save millions of lives. This will entail increasing support to public national and international research for crops grown and consumed largely by the poor, as well as strengthening capacity in biosafety evaluation and regulation.

The World Bank is not against subsidies per se. Instead, we argue these should be well targeted toward achieving the highest possible payoff. The World Development Report takes a pragmatic position, favoring "smart subsidies" in select circumstances. Smart input subsidies should be transparent, well targeted to the poor (for example through a voucher or coupon system), should help jumpstart agricultural input markets and should be part of a comprehensive strategy to improve agricultural productivity.

In the wake of extreme drought and low agricultural productivity in early 2005, the Government of Malawi reintroduced a broader agricultural input subsidy program during the 2005/06 cropping season. Approximately 130,000 t of fertilizer was distributed through a coupon based distribution program to more than 1.3 million farm households. The following year, approximately 1.5 million farmers received coupons for the purchase of 150,000 t of fertilizer and two million farmers received coupons for free maize seed. In 2007/08 more than 1.7 million farmers are expected to coupons for 170,000 t of fertilizer and almost 3 million farmers are expected to receive coupons redeemable for seed. Over 50% of the budget of the Ministry of Agriculture and Food Security is allocated to pay these costs. Donor funds are paying some administration costs and much of the costs of the seed subsidy.

In combination with favorable rains, this program has contributed to sharp increases in maize harvests in 2006 and 2007. During the most recent harvest, the country produced an estimated 3.4 million metric tons (a surplus of 1.2 million metric tons above national requirements).

The Bank’s position is that the program should be targeted to achieve as large a set of development gains as possible. In effect, these should be “smart subsidies”.

First, these should target farmers who cannot afford fertilizer purchases in order to avoid displacement of commercial fertilizer sales. Though since most Malawian farmers are extremely poor, this commitment would still encompass large numbers of households.

Second, the subsidy should be linked with the best possible research and extension advice in order to be sure farmers are getting the highest possible gain from this investment. The fertilizers being provided need to be targeted to variable soil and rainfall conditions around the country. These should be linked with advice on cropping practices that will improve both fertilizer and water use efficiency such as timely application, good weed control and conservation farming practices.

Third, the subsidy should be managed in ways that encourage the expansion of commercial investment in wholesale and retail trade in agricultural inputs. This is a gain partly made by shifting from free input handouts to the use of vouchers redeemable at retail shops. But retail trade still needs to be expanded in many outlying areas.

Over time, commercializing farmers should no longer need subsidies to encourage the continuing adoption of improved technologies and farm profitably. Though there may be a continuing justification for input subsidies to improve the welfare of the poorest of the poor who would otherwise continue to depend on food aid.

Smart subsidies are important but need to be weighted against other priorities in national budgets For example, Malawi only spends 3% of its agricultural budget on R&D--an important source of future productivity increases.

The payoffs to investments in the agricultural sector are very country specific. However, hundreds of studies have found high payoffs to agricultural R&D. Also many studies support good payoffs to investments in rural roads, irrigation, and education. See Chapter 1 and 7 of the report.

These are probably the easy wins, but even these need to ensure that resources are used effectively.

We agree that this is a major challenge that we discuss in chapter 5 and focus D. We put a lot of emphasis on stronger producer organizations as a way of including smallholders in new food markets, and increasing their bargaining power. Many of these organizations are now also operating internationally with direct sales to global food chains, often through public private partnerships. Smallholders also need special attention in access to assets and supporting services such as agricultural extension and market information.

We agree that this is a common problem. Microfinance is being provided in many situations without collateral, especially for livestock. New arrangements include lending to groups, without collateral. Community based savings and loans institutions can also help. More examples are given in chapter 6 of the report.

The World Development Report argues for more decentralized and participatory approaches, especially in the highly diverse systems of SubSaharan Africa. It also makes the case for conserving biodiversity both through genetic conservation and avoiding deforestation (chapter 11). The Report argues that carbon financing should be made available for avoided deforestation--and it seems that the recent Bali climate change conference has supported this approach. International support to the Global Crop Diversity Trust should be increased.

The World Bank now has many programs that aim to improve the asset base of the extreme poor in order that they do not depend on relief programs. Many of these programs are implemented through community-driven development approaches. An example is the Food Security program in Ethiopia where some 5 million people are dependent on food aid.

US farm policies have significant costs to developing country farmers increasing poverty and hunger. For example, subsidies to US cotton farmers decrease cotton prices by 20%. Removing cotton subsidies alone is estimate to increase the incomes of West African cotton producers by 8 to 20%. Since African cotton producers are poor, this would have direct impacts on reducing of poverty and hunger.