World Bank unveils hedging tool to protect poor farmers
The World Bank has introduced a new risk management tool to shield poor consumers and farmers from volatile food prices. An estimated 44 million were pushed into poverty last year by soaring food prices.
- Droughts, floods and a numbers of different factors are causing food prices to rise across Asia/ Photo credit: BBC
Agriculture ministers from the G20 nations are meeting in Paris, in an attempt to tackle volatile food prices.
The meeting comes a day after the World Bank unveiled a new measure to provide protection from volatile food prices in developing countries.
The new measure will allow food producers and consumers to hedge against volatile prices.
Rising food prices have become a threat to the global economic recovery.
Robert Zoellick, the president of the World Bank called volatile food prices "the single gravest threat" the developing nations were facing.
"People are hungry for food and for action on a global level," he added.
'Sensible financial engineering'
The World Bank said that since June last year, rising and volatile food prices have led to an estimated 44 million more people living in poverty, under $1.25 (£0.77) a day.
It estimated that there are close to one billion hungry people worldwide.
Looking at the threat posed by volatile food prices, the World Bank has introduced a new risk management tool for the developing nations called the Agriculture Price Risk Management (APRM).
The organisation said, its new tool will allow better access to hedging and thus shield consumers and producers of agricultural commodities from price volatility.
It will protect buyers from price rises in food-related commodities such as wheat, sugar, cocoa, milk, live cattle, corn, soybean, and rice, the bank said.
"With this new tool, we can help farmers, food producers, and consumers protect themselves against price swings, strengthen their credit position, and increase their access to finance," said Mr Zoellick.
"This tool shows what sensible financial engineering can do: make lives better for the poor," he added.
Small-scale farming
While hedging may help safeguard against unprecedented surge in food prices, experts say that improving productivity, especially that of small-scale farmers is key to feeding the poor and impoverished.
"Millions of poor, smallholder farmers struggle to raise output on tiny plots of degraded land, far from the nearest market," said Shenggen Fan, Director General of the International Food Policy Research Institute (IFPRI).
"Lacking access to decent tools, quality seeds, credit, and agricultural extension, and being highly susceptible to the vagaries of weather, they work hard but reap little," he added.
Fan said that increasing the productivity of small-scale farmers will help improve the food supply situation in regions where it was needed the most, Sub-Saharan Africa and South Asia.
He said the two regions were not only home to the majority of small-scale farmers, but also to people living under poverty.
"Improving smallholder agriculture could take pressure off global food and agricultural markets and cushion the negative impact on poor people who are most vulnerable to volatile markets," Fan said.
