Launch of The State of Agricultural Commodity Markets (SOCO) 2020

Launch of The State of Agricultural Commodity Markets (SOCO) 2020:

“Agricultural markets and sustainable development: Global value chains, smallholder farmers and digital innovations”

Statement of Mr. QU Dongyu, FAO Director-General

23 September 2020

As prepared

 

 

Distinguished Delegates,

Dear colleagues,

Ladies and Gentlemen,

1. Thank you all for joining us today at the launch of the 2020 edition of The State of Agricultural Commodity Markets, or SOCO 2020, as we call it.

2. The rapid spread of COVID-19 across countries, all over the globe, has reminded us that we live in an interconnected world. What happens in one country can affect distant countries in multiple ways.

3. While COVID-19 is not the central theme of this flagship report, its impacts demonstrate the critical importance of food markets and trade for global food security.

4. Governments and the private sector have put equal efforts to ensure that food supply chains and food trade continue to flow smoothly amidst the pandemic.

5. Yet, the effects of COVID-19 can exacerbate the food security and nutrition challenges that many countries already face.

6. Trade can play a key role is this regard.

7. By moving food from surplus to deficit areas, trade can provide an important mechanism to address production shortfalls caused by adverse and unforeseeable events.

8. SOCO 2020 highlights how trade and markets can contribute to better food security and nutrition and overall sustainable development.

9. One key takeaway of this report is that properly functioning markets are vital for development and economic growth. They can be harnessed to foster positive and sustainable economic, social and environmental outcomes.

10. Global value chains can make it easier for developing countries to integrate into global markets. This happens because as production is divided across countries, there are more opportunities to integrate into the process.

11. As global value chains link our food markets closely, they also provide a mechanism to diffuse best practices across countries and to promote sustainable development.

12. SOCO 2020 shows us that trade in food and agriculture has more than doubled since 1995, and that emerging and developing countries have become active participants in global markets. They now account for one-third of global trade.

13. Technological advances have made it possible to transform production and trade processes, which has in turn enabled global value chains in food and agriculture to emerge.

14. In fact, SOCO 2020 estimates that over one-third of global agricultural and food exports are traded within global value chains.

15. While well-functioning markets are fundamental to achieving the Sustainable Development Goals, alone they are insufficient to transform our societies at the scale and with the urgency we need.

16. In many developing countries, markets function poorly, and transaction costs are high.

17. Smallholder farmers, in particular, face many market failures. Markets for insurance and credit, for instance, often fail to function or are entirely missing. This has critical implications for food security, livelihoods and development.

18. Likewise, not all smallholders can participate in global value chains, if they don’t have the means or skills to meet requirements in terms of food quality and safety standards.

19. How can we address these challenges?

20. Good policies, investments and innovation are key.

21. Broad policies are necessary to create an environment that enables markets to flourish – for example, improved rural infrastructure and services, communication, education and productive technology.

22. In addition we need inclusive business models, such as contract farming, that can help farmers integrate into modern and more complex value chains.

23. Digital technologies can drastically cut transaction costs and shorten the value chain.

24. The transformational impacts of digital innovations can support a range of market outcomes and accelerate progress towards achieving the SDGs.

25. For example, digital technologies promote financial inclusion as they allow financial institutions to enter rural markets without having to bear the cost of physical presence.

26. Blockchain technology can build trust, promote transparency, and increase traceability of food throughout the value chain.

27. E-commerce platforms promote market access and expand consumer choice, while encouraging youth and women to remain in, or return to, rural areas.

28. This can transform rural areas into more attractive places to live and work.

29. However, digital technologies also entail risks and challenges.

30. For instance, the illiterate and the elderly face obstacles to use digital technologies. Connectivity remains low and costly in many rural areas.

31. Issues related to farmers’ ownership and use of data collected through digital technologies have raised huge concerns.

32. Technology also affects the demand for labour and wages.

33. Digital technologies could also lead to deviations from competitive outcomes in markets, affecting prices or quantities and, therefore, welfare.

34. Recognizing these issues and addressing them are imperative and can further promote digital technology adoption.

Ladies and Gentlemen,

35. Let me conclude by stressing the high importance of ensuring market access.

36. Raising trade barriers is counterproductive.

37. Trade barriers undermine the role of global markets to respond to shocks and to serve as a leveller between demand and supply.

38. Export restrictions, especially when imposed suddenly, add to global market volatility and harm net food importers. They can also be self-defeating and hurt the domestic economy.

39. It is in our shared interest to ensure global markets remain a reliable source of food.

40. Balanced approaches that foster trade while taking into account national food security and development objectives should be encouraged.

41. Trade and markets are key components of the transformation of our food systems to become more sustainable and resilient.

42. We hope that this report will contribute to gaining a better understanding of the vital role of markets and to fostering fruitful dialogue and cooperation on agricultural trade.

Thank you.