A severe El Niño event could result in losses of up to US$11tn across national economies over the next five to six years, according to a new report by the International Fund for Agricultural Development (IFAD) and Türkiye's Ministry of Agriculture and Forestry.
Source: Supplied | ©IFAD/Ueslei Marcelino
Released ahead of COP31, the report, Food Systems Under Stress: Building Resilience from the First Mile, examines how climate events, energy and fertiliser price increases and other economic shocks affect small-scale food producers and rural economies.
It highlights how interconnected crises can drive up production, processing, transport and distribution costs, placing additional pressure on small-scale agricultural producers, who provide a third of the world's food production.
At a time when multiple shocks have become increasingly common, the report examines ways to strengthen the long-term resilience of rural economies through pooled investments that improve producers' access to agricultural inputs and technologies, markets and financial services such as credit and climate insurance.
“This report highlights, based on the evidence from our investments, a key reality: resilience is not built by investing in isolated interventions but by combining investments in inputs, markets, and financing, so that progress in one area is not lost elsewhere,” said Alvaro Lario, President of IFAD. “The investments we have made collectively in these three pillars are producing transformative results: incomes have increased by more than 40%, almost all households have reported improvement, and technology adoption is up by 75%.”
Combined investment reduces farmers' losses
“Preparing means acting before crises occur. Farmers’ resilience depends on upstream measures: access to water, affordable inputs, financing, insurance, and reliable market access. When all these factors improve in parallel, food producers are much more resilient to shocks,” said Ibrahim Yumakli, Minister of Agriculture and Forestry of the Republic of Turkey.
Based on factual data from across IFAD's investment portfolio, the report shows that rural communities are much more resilient when investments enable farmers to preserve their production in the event of a shock, access markets to preserve the value of their products, and access finance to invest, manage risks, and recover.
The modelling presented in the report, carried out by IFAD, demonstrates the effectiveness of this approach when drought and sudden price fluctuations occur simultaneously. If farmers receive a finance-focused intervention, enabling them, for example, to purchase insurance, agricultural income losses are reduced by 9.8%. However, with a combination of interventions addressing inputs, market access, and financing, income losses are reduced by 18.7%, nearly double.
Examples from Kenya, Bangladesh and Turkey
The report presents several examples of IFAD's bundled interventions in various contexts.
In Kenya, training in micro-dosing fertilisers and agroforestry was combined with access to seeds, fertilisers, and drought insurance, as well as connections with bulk grain buyers, doubling farmers' resilience to droughts.
In Bangladesh, solar-powered irrigation systems coupled with vermicomposting training, access to credit, and food security certification reduced production costs and enabled access to high-end markets; household incomes increased by 50 percent.
In Turkey, donations to farmers have been combined with the provision of solar-powered irrigation systems, the creation of greenhouses and orchards to reduce water and energy costs, and the construction or modernisation of marketing, storage and processing facilities, resulting in a 40% increase in farmers' incomes.
How IFAD calculated the potential economic cost
IFAD's estimate that a severe El Niño event could result in a loss of US$11tn in national economies over the next five to six years takes into account the direct impacts on affected agricultural economies, the impacts on infrastructure and economies as a whole, the global repercussions of these cumulative effects on food and commodity prices, and the cumulative impacts on demand and trade.
The modelling carried out by IFAD to estimate the loss of income traces the chain of events by which shocks in fertiliser and energy prices, combined with a climate shock, affect the profits of smallholder farmers. It also shows the extent to which the damage is compensated for under different configurations of resilience-oriented interventions, carried out alone or grouped together.
View the report here.
