The world is experiencing a dramatic increase in food prices. During the first three months of 2008, international prices of all major food commodities reached their highest levels in several decades. To help alleviate the crisis, IFC is leading the World Bank Group's efforts to engage with the private sector and find ways of increasing production.
Rising food prices are causing severe hardship for millions of people who are already affected by chronic hunger, and for the poor who now find themselves unable to buy food that they need for a healthy life. This is provoking social unrest across the developing world and destabilizing the economies of many countries.
IFC's Response
With prices expected to stay far above 2004 levels through 2015, any long-term strategy to stabilize them should include more agricultural production. To help, IFC is providing investment and advisory services to the agribusiness sector, both directly to companies along the agribusiness supply chain and indirectly through intermediaries.
IFC's efforts complement the World Bank's public sector work on the proposed New Deal on Global Food Policy. Endorsed by 150 countries, the policy embraces safety nets such as school meal programs, food for work, and conditional cash transfers; an increase in agricultural production; a better understanding of the impact of biofuels; and actions on the trade front to reduce distorting subsidies and barriers.
The food crisis offers opportunities for many emerging markets to develop and grow their agricultural sectors. This can help reduce poverty in rural areas, link local farmers to global supply chains, and create new export sectors. IFC plans to help emerging economies capitalize on these opportunities.
Immediate Help |
IFC's short-term response focuses on:
- Investing in companies to boost production in middle-income countries with agribusiness potential, including Argentina, Brazil, Kazakhstan, Russia, Ukraine, and Uruguay.
- Working with an emerging class of agribusiness corporations from middle-income countries to transfer knowledge and technology to firms in less-developed economies.
- Working to maintain liquidity in supply chains by providing working capital facilities to agribusiness clients so that they can prefinance inventories, seeds, fertilizers, chemicals, and fuel.
- Financing and advising financial institutions, microlenders, growers, and traders to increase access to credit for small farmers and rural microenterprises.
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Future Actions |
IFC's longer-term response focuses on improving the productivity and quality of production throughout the agribusiness supply chain. Components of our action plan include:
- Bringing more land to sustainable production.
- Improving productivity by transferring technologies and practices and increasing economies of scale in farm production and processing.
- Investing in agribusiness logistics and distribution infrastructure with both the private and public sectors: this can facilitate trade, lower costs, and reduce post-harvest waste.
- Improving water efficiency and irrigation infrastructure.
- Establishing wholesale financing facilities with financial institutions, processors, and traders to increase rural access to credit.
- Developing and adopting modern financial instruments (warehouse receipts, crop insurance) for agriculture.
- Increasing food safety, traceability, and environmental sustainability by providing consumer-related investment and advisory services.
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Investing More
In the fiscal year ended June 30, 2008, IFC's investments across the agribusiness value chain—from farm to retail store—exceeded $1.3 billion. Over 40 percent of our agribusiness projects were in low-income countries. Our direct investments in agribusiness enterprises in Africa and indirect lending through financial intermediaries reached $116 million. We aim to grow our agribusiness commitments in the region to $400 million in the next two years.
For more information contact:
Irina Likhachova
Communications Officer
Tel.: +1 (202) 473-1813
E-mail: ilikhachova@ifc.org
