Explore the pressure on farmers to cut costs and increase productivity | Sagentia Innovation

Sustainable agriculture: solving the economic conundrum

Farming is a numbers game. But in the face of climate impacts, resource scarcity, water pressures, biodiversity loss and ever diminishing soil quality, maintaining livelihoods, let along boosting income, remains a struggle for many of the world’s farmers.

According to the World Bank, more than 60% of the world’s poorest people make a living from agriculture. Farming is incredibly important; it accounts for 4% of global GDP. In the developing world, it can account for more than 25% of GDP.

Financial stress is particularly acute for the millions of smallholder farmers that operate on land less than two hectares in size. These farmers produce between 30-34% of the world’s food, yet they are even more exposed to the risks of climate change, extreme weather and economic instability. Even farmers in the US find themselves under financial pressure, with more than half of the two million US farm households reporting negative income from their operations.

Farming communities are increasingly aware of the need to adopt more sustainable agriculture practices, including reducing the use of water and pesticides, and encouraging greater biodiversity in their fields to fend off damaging pests and diseases. Yet achieving these things can prove expensive and inaccessible, especially when faced with the day-to-day pressures of delivering crops and feeding the family.

Some have turned to sustainability certification as a way of turning the tide on their unprofitable and unproductive farms. For example, farmers that have signed up to the Sustainable Rice Platform (SRP), a multi-stakeholder alliance organised by the United Nations Environment Programme, have successfully raised standards and incomes. A quarter of the world’s farmers are rice smallholders earning no more than US$7 a day. Thanks to the SRP, rice farmers in Cambodia are now selling their rice at 30% above the market average because it has been certified as ‘organic’.

Similarly, CottonConnect has been working with a range of brands, including Primark and John Lewis, to train the cotton farmers which supply the manufacturers from which they source. On average, farmers have increased their profits by 36% thanks to agronomic training and boosted their yields by 11%.

Scaling technology use is a tough ask

However, to scale these types of results demands the widespread adoption of technologies that will transform the agricultural sector into a smart, efficient and zero-waste industry – and put a positive dent in the carbon and water impacts of food production (which currently account for 26% of global greenhouse gas emissions and 70% of global freshwater withdrawals respectively). And that’s not going to be easy, says Sagentia Innovation’s Chief Technology Officer, Alun James. “There’s an ever-increasing pressure on farmers to bring costs down and increase productivity across the board,” he says. “Labour costs are rising across the globe and many farmers, particularly in developing economies, are struggling to stay afloat as profit margins are eroded.” The increased uncertainty in the weather, brought about by climate change, also means many farmers face the potential of natural disasters wiping out entire harvests without warning.

“If we require farmers to adopt more sustainable practices, we must also recognise that this will have a substantial impact on both CAPEX and OPEX, potentially driving more farmers out of business.”

Recognising the gravity of the situation, several companies have started to react in protecting what they see as vulnerable suppliers. Companies like Nespresso find themselves particularly vulnerable. Most of their high-quality coffee is produced by smallholders operating small pockets of land in remote corners of the globe. One of those places is Aguadas, Caldas, a small town in the Andes mountains of Colombia. As with many coffee-growing rural communities, young people in Colombia are less interested in taking over the farms from their parents. They would rather go to the city and look for work. This presents an issue for Nespresso which needs to safeguard the supply of its coffee for the long term. So, the company set up a pension scheme for its smallholders – the first of its kind in the industry – to help improve the financial stability of farmers, and encourage the next generation to stick around.

 A need for progressive legislation

Not all companies share the foresight of Nespresso and many will need convincing of the need to invest in supporting farmers at the end of their supply chain. What will help foster greater intervention will be a more progressive legislative agenda, argues James. “Many of the technological advances that are proposed as solutions – whether that’s indoor farming, precision agriculture or synthetic biology – have stumbling blocks due to the way the current system of farming subsidies incentivises mass crop production,” he says. Rather than favour the same efficiency incentives that have been chased for the last 50 years, the food system’s economics must be “reconfigured to benefit farmers who adopt sustainable practices,” he adds.

Food supply chains are often complex webs of different players all fighting for a slice of the pie. Yet, if they are all to be successful, each needs the other to be sustainable. “Food manufacturers need farmers. Brands need manufacturers. Retailers and consumers need the food companies,” concludes James. “Government intervention is key. But if we are to continue to get food on our plates – at a price we can all afford – everybody must work together and collaborate to find the best way forward.”

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