New marketplace to empower poor farming families

Uncertainty about the market prices of crops such as corn and beans is keeping destitute farmers from growing their businesses. The United Nations World Food Programme is about to change all that, creating a 'unique', large-scale marketplace to strengthen the position of 1.5 million impoverished farms across 25 developing countries. Rabobank is one of the partners.

Rabobank supports the World Food Programme

Destitute farmers in Africa, South America and Asia find themselves in a dire position. They have too few technical and financial resources available to properly tend to their crops such as beans and corn during the growing season, which would both increase their revenues and improve crop quality. And once these farmers have harvested their crops, their market position is weak. Buyers tend to wait until the end of the season to purchase produce in the free market at the lowest possible prices, leaving farming families unable to compete.

Global challenge

The new market platform, launched by the World Food Programme in early 2016, is set to change all that. Rabobank has joined this new initiative, along with various global companies and public organisations. 'Food security is a global challenge, one we can only address effectively on a large scale and in partnership with international players', says Wiebe Draijer, CEO Rabobank.

Price guarantees ahead of the growing season

The platform ensures that buyers provide guarantees to farming families ahead of the sowing and growing season for the minimum price at which they will purchase the produce after the harvest. This security should serve as an incentive for farming families to raise their crops with due care, as this will both improve their quality and increase their output. 'This approach is unique and represents a breakthrough for agriculture in developing countries. This will lead to greater stability in the food supply chain, which in turn will boost the food supply. That is the kind of stability Rabobank aims to establish through its Banking for Food programme', says Ben Valk, Head of Food & Agri Partnerships at Rabobank. He is involved in the project on behalf of Rabobank.

'This approach is unique and represents a breakthrough for agriculture in developing countries. This will lead to greater stability in the food supply chain, which in turn will boost the food supply.'

Ben Valk, Head of Food & Agri Partnerships at Rabobank

Half of world’s hungry live on farms

The new marketplace seeks to serve the most poverty-stricken farmers. 'Half of the 795 million hungry people in the world today are family farmers', says Ertharin Cousin, Executive Director of the World Food Programme. 'The platform will enable some of the most marginalized farmers to access reliable markets for the first time. This will have a profound impact on food security and bring us closer to our global goal of zero hunger.' The new market platform is already off to a tentative start in Rwanda, Tanzania and Zambia, with initial results that have been encouraging. Around 84,000 farming families are expected to earn 400 dollars more in revenue on an annual basis.

Direct contribution to food security

The initiative is not intended for export products such as coffee and cocoa, but for products people eat locally, such as beans, corn, chickpeas, lentils and sunflower seeds. Valk: 'These products contribute more directly to local food security than export products such as coffee and cocoa.' Regional and local traders will be working together with the new platform. The World Food Programme itself, which purchases one billion dollars' worth of food annually for emergency aid and other food programmes, will play a vital role by making 10 percent of its purchases through the new market platform.

Financing solutions

Rabobank will be supporting the initiative by sharing its knowledge of agricultural financing, food supply chains and the workings of cooperatives. Wiebe Draijer: 'We have agreed that Rabobank and other financial institutions will create solutions for harvest financing, as farmers must bridge the time between the moment they purchase sowing seeds and fertilisers and the moment they can harvest and start selling their crops.' The farming organisations involved can also draw on the knowledge and network of Rabobank Foundation, Rabo Development and its partner banks.

Risk management

Rabobank also plays a key role in managing the financial risks associated with the new market platform. Ben Valk: 'These risks are no longer restricted to farmers and the bank, but will be shared by all partners throughout the food supply chain. The new market mechanism must also be strong enough to handle the effects of crop failure and drought.'

Breaking the vicious cycle

'Our shared mission is to break the vicious cycle that currently paralyses the poorest farmers', says Rabobank Executive Board member Berry Marttin, who was involved in establishing the market platform. 'If they succeed in managing risks in a supply chain more effectively, it will become easier to raise funds and ensure that farmers can make investments. This involves price risks and the risk that crops are ruined before, during and after harvesting. Rabobank has extensive knowledge of agriculture and markets, and through our Banking for Food strategy we invest a lot of energy in improving that knowledge. We then use it to the advantage of our customers, for credit ratings and for initiatives such as this new platform.'

Involved in African agriculture

Africa is a fast-growing market, not only for local farms and businesses, but also for the largest international companies. Rabobank is involved in a variety of ways in the development of agriculture and the food supply in Africa. Rabobank supports multinationals and Dutch companies operating on the African continent, focussing on businesses engaged in agriculture and horticulture or food production. Rabobank also provides services directly to the people of Africa, operating in a large number of countries on the continent through Rabobank Foundation and the partner banks of Rabo Development. Both farming families and individuals gain access to financial services, as well as receiving assistance in setting up cooperatives, for example to sell their products. Cooperatives also play a role in improving output and encouraging young people to become farmers.

Cooperation is key. Tanzania’s National Microfinance Bank (NMB), a partner bank of Rabo Development, signed an agreement in early 2016 with the Netherlands Ministry of Foreign Affairs and Rabo International Advisory Services to improve access to financial services and the food supply in Tanzania. For the past several years, Rabobank has been working closely with the FAO, the Food and Agriculture Organization of the United Nations, to help farming families in Ethiopia, Tanzania and Kenya invest in superior seeds and improve their sales.