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Repurposing Agricultural Support and
Food System Finance
Rob Vos
IFPRI Policy Seminar - Financing food systems
transformation, 13 July 2021
Finance and Incentives
1. More finance or better incentives?
• Why mobilize more resources if not supported by right incentives for
investment, production and consumption decisions?
2. Governments provide US$700 billion per year in agricultural
support measures
• How to repurpose to meet global targets for food security, poverty
reduction, and environmental sustainability?
What support?
▪ 2017-2019: $640 billion per year
(2020: US$720bn = 27% of ag. value
added)
▪ Increasing in developing
countries
▪ China about $200 bn p/y
▪ Most are ‘market distorting’
▪ Coupled subsidies (25%)
▪ Border protection (33%)
▪ General support
▪ 5% for green subsidies
▪ 17% R&D and infrastructure
▪ Consumer subsidies ($ 100bn-11%)
0 100 200 300 400 500 600
ALL
Developed
Developing
MPS Coupled subsidies
Uncoupled subsidies GSSE
Agricultural producer support by types, 2017-2019
(Billions of US$ per year)
IFPRI- WB Modeling
insights (Laborde et al. 2021a/b)
Scenario 1: Removal
of all ‘distorting’ support
▪ Do not expect miracles!
▪ Small real income gains
▪ Farm incomes and
employment suffer (esp.
in major economies)
▪ No change in poverty
▪ Healthy diets less
affordable
▪ Global GHG emissions
barely down
▪ Slightly less loss of forest
and biodiversity
-3 -2 -1 0 1 2 3
World
Developed
Developing
ECONOMIC
(Real National Income, % change 2040)
-12 -7 -2 3
World
Developed
Developing
FARM SECTOR
(Real Farm Income per worker, % change
2040)
-2.0 -1.0 0.0 1.0 2.0
World
Developed
Developing
SOCIAL
(Poverty at $1.90, % change 2040)
-20.0 -15.0 -10.0 -5.0 0.0 5.0
World
Developed
Developing
DIETS
(Healthy Food Prices, % change 2040)
-0.5 -0.3 -0.1 0.1 0.3 0.5
World
Developed
Developing
NATURE
(Forest Habitat, % change 2040)
-60 -50 -40 -30 -20 -10 0 10
World
Developed
Developing
CLIMATE
(Emissions from agriculture and land use
change, %)
Scenario 2: Repurposing for
R&D and conditional payments
for productivity-enhancing
and emission-reducing
technologies
Smart repurposing can pay off:
▪ Focus on “efficiency” critical
▪ Yields are significantly up
▪ Farm incomes and employment
suffer (esp. developed)
▪ Poverty falls (but small)
▪ Healthy diets more affordable
▪ Global GHG emissions down
▪ Protect forest habitat and
biodiversity
-60 -50 -40 -30 -20 -10 0 10
World
Developed
Developing
CLIMATE
(Emissions from agriculture and land use
change, %)
Conclusions
▪ Smart repurposing of subsidies will help achieve important societal gains
(more welfare, less poverty, less emissions, better diets)
▪ Could help crowd in more food system finance if “repurposed support”
oExplicitly promotes efficiency gains, including through more support for
R&D, better infrastructure, education, and food value chain integration
o Complemented with demand-side measures influencing consumer
behavior
▪ Important political economy obstacles:
oEnsure farm sector does not lose out too much
oGains are global, but policies are national: need to make “repurposing”
part of globally concerted agenda
oGains are societal and long-term – incentives should be structured such
that today’s farm and business strategies will be aligned with those long-
term objectives (people, planet and profits)

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Repurposing Agricultural Support and Food System Finance

  • 1. Repurposing Agricultural Support and Food System Finance Rob Vos IFPRI Policy Seminar - Financing food systems transformation, 13 July 2021
  • 2. Finance and Incentives 1. More finance or better incentives? • Why mobilize more resources if not supported by right incentives for investment, production and consumption decisions? 2. Governments provide US$700 billion per year in agricultural support measures • How to repurpose to meet global targets for food security, poverty reduction, and environmental sustainability?
  • 3. What support? ▪ 2017-2019: $640 billion per year (2020: US$720bn = 27% of ag. value added) ▪ Increasing in developing countries ▪ China about $200 bn p/y ▪ Most are ‘market distorting’ ▪ Coupled subsidies (25%) ▪ Border protection (33%) ▪ General support ▪ 5% for green subsidies ▪ 17% R&D and infrastructure ▪ Consumer subsidies ($ 100bn-11%) 0 100 200 300 400 500 600 ALL Developed Developing MPS Coupled subsidies Uncoupled subsidies GSSE Agricultural producer support by types, 2017-2019 (Billions of US$ per year)
  • 4. IFPRI- WB Modeling insights (Laborde et al. 2021a/b) Scenario 1: Removal of all ‘distorting’ support ▪ Do not expect miracles! ▪ Small real income gains ▪ Farm incomes and employment suffer (esp. in major economies) ▪ No change in poverty ▪ Healthy diets less affordable ▪ Global GHG emissions barely down ▪ Slightly less loss of forest and biodiversity -3 -2 -1 0 1 2 3 World Developed Developing ECONOMIC (Real National Income, % change 2040) -12 -7 -2 3 World Developed Developing FARM SECTOR (Real Farm Income per worker, % change 2040) -2.0 -1.0 0.0 1.0 2.0 World Developed Developing SOCIAL (Poverty at $1.90, % change 2040) -20.0 -15.0 -10.0 -5.0 0.0 5.0 World Developed Developing DIETS (Healthy Food Prices, % change 2040) -0.5 -0.3 -0.1 0.1 0.3 0.5 World Developed Developing NATURE (Forest Habitat, % change 2040) -60 -50 -40 -30 -20 -10 0 10 World Developed Developing CLIMATE (Emissions from agriculture and land use change, %)
  • 5. Scenario 2: Repurposing for R&D and conditional payments for productivity-enhancing and emission-reducing technologies Smart repurposing can pay off: ▪ Focus on “efficiency” critical ▪ Yields are significantly up ▪ Farm incomes and employment suffer (esp. developed) ▪ Poverty falls (but small) ▪ Healthy diets more affordable ▪ Global GHG emissions down ▪ Protect forest habitat and biodiversity -60 -50 -40 -30 -20 -10 0 10 World Developed Developing CLIMATE (Emissions from agriculture and land use change, %)
  • 6. Conclusions ▪ Smart repurposing of subsidies will help achieve important societal gains (more welfare, less poverty, less emissions, better diets) ▪ Could help crowd in more food system finance if “repurposed support” oExplicitly promotes efficiency gains, including through more support for R&D, better infrastructure, education, and food value chain integration o Complemented with demand-side measures influencing consumer behavior ▪ Important political economy obstacles: oEnsure farm sector does not lose out too much oGains are global, but policies are national: need to make “repurposing” part of globally concerted agenda oGains are societal and long-term – incentives should be structured such that today’s farm and business strategies will be aligned with those long- term objectives (people, planet and profits)