High-risk households dependent on, and critical for, food supply chains: Pathway 2

3.1 Small commercializing farmers are at the heart of food supply chains, but rely on fragile ecosystems for survival
3.2 Potential disruptions from COVID-19 across actors in three different types of value chains
3.3 Potential impact of COVID-19 on commercializing farmers as virus spreads to rural areas
3.4 How governments, donors and service providers can best support this pathway

3.1 Small commercializing farmers are at the heart of food supply chains, but rely on fragile ecosystems for survival Add to My Resources

Commercializing farmers operate on one to two hectares of land, and perceive their agricultural activities as a business and their main source of income. They are able to generate a surplus and increase production value through improved inputs, better farming practices, and regular sales to buyers and traders. They invest in farm intensification, resulting in an increase in volume and/or an increase in production value (e.g., through higher quality or price realization). These farmers are more likely than subsistence farmers to access financing, and depend on ecosystems of financial service providers, extension services, input providers, and markets. They produce for local, regional, and export markets, often through cooperatives or outgrower schemes.

Despite integration into more formal systems, these farmers remain vulnerable. With insurance and savings rates still low, they may be only one or two bad harvests away from moving back to Pathway 1 (subsistence farming). Additionally, farmers operate along a spectrum of commercialization that varies across countries—from more traditional commercializing farmers who sell into local markets with some access to finance to more intensified commercializing farmers who are more likely to have formal financing and offtake contracts.

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Commercializing farmers are highly dependent on their surrounding ecosystems to continue to operate farming as their primary livelihood source. These ecosystems have proven highly vulnerable to the effects of COVID-19, differing in severity depending on the value chain.

Commercializing farmers work on a variety of value chains, from local staple foods, such as cassava and maize, to high-value export crops, such as cocoa and coffee. The level of dependence and contracts within those value chains, and how they are financed, create a number of potential vulnerabilities and disruptions from COVID-19.

3.2 Potential disruptions from COVID-19 across actors in three different types of value chains Add to My Resources

The effect of COVID-19 on commercializing farmers is highly dependent on the season during which the virus and social distancing measures arrived. Countries that are in peak harvest seasons for staple crops, like Malawi, feel the impact of movement restrictions more acutely than countries whose harvests will come later, where farmers will struggle to get sufficient labor to support their harvest. In East Africa, for example, the initial impact of the crisis has arrived during the lean season, when there is limited farm activity for maize farmers and therefore less immediate impact on production.

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The likely disruptions across different types of value chains are an important basis for considering the impact of COVID-19 on Pathway 2 livelihoods.

The majority of Pathway 2 farmers rely on short value chains, serving local markets, as their primary source of income. These farmers’ activities don’t just affect their own families’ livelihoods, but also their country and region’s broader food security. If these commercializing farmers are not supported, they may be pushed out of commercially viable livelihoods into subsistence farming, no longer providing food to consumers in urban and peri-urban areas. Farmers who have begun to intensify, or have been connected into value chains through cooperatives and other service providers, are more likely to produce for medium or long value chains.

3.3 Potential impact of COVID-19 on commercializing farmers as virus spreads to rural areas Add to My Resources

Around the world, governments are trying to stop the spread of the virus and protect health systems, guarantee the provision of essential services, and ensure food and economic security. After the initial lockdown measures, governments are likely to adjust regulations to protect agricultural supply chains and businesses that are important to aggregating, transporting, processing, and selling agricultural goods. Even with these exemptions, commercializing farmers are likely to face numerous challenges to generating adequate income from their farms. These farmers are also likely to be impacted by any government decisions to support food security, such as changes to trade restrictions and/or release of strategic reserves of staple crops. These vulnerabilities must be considered across the types of value chains.

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3.4 How governments, donors and service providers can best support this pathway Add to My Resources

Commercializing farmers are at the heart of rural ecosystems and national food security, and their businesses and livelihoods must be protected throughout the COVID-19 pandemic. At the same time rural COVID-19 transmission needs to be avoided AND national food security needs to be protected. Achieving these three, interconnected objectives creates a real challenge for governments to manage, with the involvement of donors and private sector service providers.

Commercializing farmers are at the heart of rural ecosystems, and this interconnectedness makes them both very important to national food security, as well as very vulnerable to market disruptions. Governments and donors should not overlook these farmers in their COVID-19 response. Rather, they must both support the ecosystems around these farmers and provide them with direct aid when needed. These farmers and their contribution to food security will be crucial as economies rebuild.

While there are no one-size-fits-all blueprints, we believe governments, donors, and service providers should consider five major pitfalls in developing the right approach:

PITFALL #1: Not accounting for key value chain impact differences from COVID-19.

ACTION NEEDED: Creating differentiated agricultural support policies by types of value chains, with considerations for planting and harvest timings and farmer impact. An effective policy response MUST seek to manage any rural restrictions, market support and social safety net programs in a way that acknowledges the differences between value chains. This sort of planning will likely need to involve the Ministries of Health, Agriculture and Planning (at a minimum) to balance different policy objectives but the Ministry of Agriculture is in a unique position to articulate key value chain differences and requirements in the first instance. All other actions should flow from this point of consideration.

PITFALL #2: Restricting land-based transportation and cross-border movement at the expense of resilient food systems.

ACTION NEEDED: Prioritize the safe operation of agricultural transportation, with training of security officers and distribution of PPE/testing, particularly at the last mile. Innovate new ways to use transport efficiently, both with regulations and technology.

PITFALL #3: Distorting local food markets through unclear stocking and distribution strategy of food reserves, and short-sighted export restrictions.

ACTION NEEDED: Governments should plan the management of national food reserves and staple markets early, with a long term view and considering all the impacts of major policy decisions. Distribution of food will be one of the most critical success factors in mitigating the food security risk of COVID-19 by reducing food waste and getting it to the people that need it most.

PITFALL #4: Relying on service providers to continue lending to commercializing farmers who are perceived as less vulnerable than subsistence farmers.

ACTION NEEDED: Governments and donors should work with service providers to ensure that policies enable them to continue servicing commercializing farmers with both loans and other services. Donors and governments can provide risk management tools such as bridge loans and first-loss guarantees to ensure credit markets continue to support the ongoing operation of service providers. Donors should also support service providers with technical assistance and grants to help them make the necessary changes to their operations to comply with social distancing and mobility restrictions.

PITFALL #5: Overestimating the resilience of commercializing farmers and underestimating their importance in national food security.

ACTION NEEDED: Commercializing farmers should not be excluded from social security and aid systems (where needed) that are activated as part of the pandemic. While they may be more resilient due to their market connections, this also makes this income source more vulnerable. Some will need support—particularly in the form of direct cash transfers to allow them to balance their business and livelihood needs.