"We need to rely on markets as an integral part of the global food system.
This is all the more important in the face of major disruptions, whether they
come from COVID-19, locust outbreaks or climate change," wrote FAO
Director-General QU Dongyu in his introduction to the report.
The rise of global agri-food value chains
The report estimates that about one-third of global agricultural and food
exports are traded within a global value chain and cross borders at
The rise of global value chains is driven by income growth, lower trade
barriers and technological advancements, which have transformed markets and
trade processes, linking farmers to traders and consumers across regions and
"Global value chains can make it easier for developing countries to
integrate into global markets. As they link our food markets closely, they also
provide a mechanism to diffuse best practices to promote sustainable
development," said the FAO Director-General.
In turn, by participating in global value chains, smallholder farmers can boost
their food production and income. On average and in the short term, a 10
percent increase in agriculture's global value chain participation can result
in an increase of around 1.2 percent in labour productivity, finds the report.
Smallholder farmers, however, are often missing out on the benefits of global
value chains. Furthermore, the emergence of global value chains with the
stringent food quality and safety requirements could further marginalize
"We need to redouble efforts to include smallholder farmers in modern food
value chains, thus securing rural incomes and food security in both rural and
urban areas," said Qu.
To achieve this, there is a need for broad policies to create an environment
that enables markets to flourish and bolsters smallholders' participation in
global value chains - for example, better rural infrastructure and services,
education and productive technology.
Digital technologies can help markets to function better and can improve
farmers' access to them. Innovations, such as food e-commerce, can benefit both
farmers and consumers. However, to guarantee that the dividends of digital
innovation are shared with the poorest, the current digital divide in
agriculture needs to be reduced.
The adoption of more inclusive business models, such as contract farming and
blockchains, can also help farmers to better integrate into modern and more
complex value chains.
For example, participation in contract farming can increase farm income by more
than half - based on an analysis of main studies on contract farming. The
report underlines, however, the overall lack of information on the different
impacts of contract farming, apart from its impact on farmers' welfare.
How can agricultural and food markets foster sustainable
The report makes the case for the role agri-food markets can play in fostering
Sustainability certification schemes can promote fair trade, inclusion, non-discrimination,
and environmentally-friendly farm practices. They also can ensure occupational
safety, ban child labour, and encourage investments.
For instance, according to data from smallholder coffee farmers in Uganda,
sustainability-certified families spend 146 percent more on child
education and keep children at school longer than non-certified families.
Another study on certification schemes that promote sustainable forests show
that the production of forest shade-grown coffee in Ethiopia can help alleviate
The report also points out that whilst bananas are one of the most traded
tropical commodities in the world, only an estimated 5-8 percent are
covered under sustainability standards.
The evolution of trade and markets - trends and drivers