The State of Food and Agriculture 2012

1 Cover-I+ 1 28/11/2012 21:09. ISSN 0081-4539. 2012. 2012. THE State . OF FOOD. AND. Agriculture . THE State . 2012. Investing in Agriculture is essential for reducing hunger and promoting sustainable agricultural production. Those parts of the world where agricultural capital per worker and public investments in Agriculture have stagnated are the OF FOOD. AND. epicentres of poverty and hunger today. Demand growth over the coming decades will place increasing pressure on the natural resource base. Eradicating hunger Agriculture . sustainably will require a significant increase in agricultural investments, but also an improvement in their effectiveness. THE State OF FOOD AND Agriculture . Farmers are the largest investors in developing country Agriculture and must be central to any strategy for C.

2 Increasing investment in the sector, but if they are to invest M. more in Agriculture they need a favourable climate for agricultural investment based on economic incentives and Y. CM. an enabling environment. Governments also have a special MY. responsibility to help smallholders overcome the constraints CY they face in expanding their productive assets and to CMY ensure that large-scale investments in Agriculture are K socially beneficial and environmentally sustainable. Gover nment investment in Agriculture is a crucial component of providing an enabling environment for private investments in the sector. Governments need to channel scarce public funds towards the provision of essential public goods with high economic and social returns.

3 INVESTING IN Agriculture . for a better future ISBN 978-92-5-107317-9 ISSN 0081-4539. FAO. 9 7 8 9 2 5 1 0 7 3 1 7 9. I3028E/1 1 28/11/2012 21:11. C. M. Y. CM. MY. CY. CMY. K. Photos on front cover and page 3: All photos are from the FAO Mediabase. Copies of FAO publications can be requested from: SALES AND MARKETING GROUP E-mail: Publishing Policy and Support Branch Fax: (+39) 06 57053360. Office of Knowledge Exchange, Research and Extension Web site: FAO, Viale delle Terme di Caracalla 00153 Rome, Italy 1 28/10/2012 22:41. ISSN 0081-4539. 2012. THE State . OF FOOD. AND. Agriculture . C. M. Y. CM. MY. CY. CMY. K. FOOD AND Agriculture ORGANIZATION OF THE UNITED NATIONS. Rome, 2012. The designations employed and the presentation of material in this information product do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations (FAO) concerning the legal or development status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

4 The mention of specific companies or products of manufacturers, whether or not these have been patented, does not imply that these have been endorsed or recommended by FAO in preference to others of a similar nature that are not mentioned. The designations employed and the presentation of material in the maps do not imply the expression of any opinion whatsoever on the part of FAO concerning the legal or constitutional status of any country, territory or sea area, or concerning the delimitation of frontiers. ISBN 978-92-5-107317-9. All rights reserved. FAO encourages the reproduction and dissemination of material in this information product. Non-commercial uses will be authorized free of charge, upon request.

5 Reproduction for resale or other commercial purposes, including educational purposes, may incur fees. Applications for permission to reproduce or disseminate FAO copyright materials, and all queries concerning rights and licences, should be addressed by e-mail to or to the Chief, Publishing Policy and Support Branch, Office of Knowledge Exchange, Research and Extension, FAO, Viale delle Terme di Caracalla, 00153 Rome, Italy. FAO 2012. iii Contents Foreword vii Acknowledgements viii Abbreviations and acronyms x Executive summary xi Part I 1. Investing in Agriculture for a better future 1. Introduction 3. Who invests in Agriculture ? 3. Why invest in Agriculture ? 4. How to invest in Agriculture for a better future?

6 6. Structure of the report 8. 2. Agricultural investment: patterns and trends 9. Basic concepts: investment versus expenditures and public versus private goods 9. From concepts to measurement: making sense of the data 10. Agricultural capital stock 11. Foreign direct investment in Agriculture 21. Government expenditures on Agriculture 22. Public expenditures on agricultural research and development 29. Official development assistance to Agriculture 31. Increasing investment in Agriculture 34. Key messages 38. 3. Fostering farmers' investment in Agriculture 39. Creating a favourable climate for investment in Agriculture 39. Government policies and incentives to invest in Agriculture 43. Including environmental costs and benefits in incentives to invest 51.

7 Key messages 54. 4. Promoting equitable and efficient private investment in Agriculture 56. Addressing the constraints to smallholder investors 56. Making large-scale agricultural investment smallholder-sensitive 65. Key messages 73. 5. Channelling public investment towards higher returns 74. Returns on public investment in and for Agriculture 74. Returns to expenditures on input subsidies 82. Political economy of public investment in Agriculture 84. Planning public investment in Agriculture 87. Key messages 88. 6. A policy framework for better investment in Agriculture 91. Creating a conducive investment climate for private investment in Agriculture : context matters 91. Supporting the conducive investment climate through public investment 92.

8 Improving the policy and planning process for agricultural investment 93. Key messages of the report 94. iv Part II. World food and Agriculture in review: a focus on productivity 97. High real food prices 99. Trends in agricultural production, consumption and trade 100. Future prospects and challenges 103. Conclusion 106. PART III. Statistical annex 107. Notes on the annex tables 109. TABLE A1 Economically active population in Agriculture and agricultural share of total economically active population, 1980, 1990, 2000 and 2010 114. TABLE A2 Agricultural capital stock: total and per worker, 1980, 1990, 2000 and 2007 120. TABLE A3 Average annual foreign direct investment inflows to Agriculture , food, beverages and tobacco, and all sectors, 2005 06 and 2007 08 126.

9 Table A4 Government expenditures: total spent on Agriculture and agricultural share of total expenditures, 1980, 1990, 2000 and 2007 132. TABLE A5 Government expenditures on Agriculture : per agricultural worker and Agricultural Orientation Index, 1980, 1990, 2000 and 2007 136. TABLE A6 Public expenditures on agricultural research and development: total and as a share of agricultural GDP, 1981, 1990, 2000 and latest year 140. TABLE A7 Official development assistance to Agriculture and agricultural share of ODA to all sectors, 1980, 1990, 2000 and 2010 144. References 153. Special chapters of The State of Food and Agriculture 164. v TABLES. 1. Level and change in agricultural capital stock per worker, by region 17.

10 2. Average annual foreign direct investment in Agriculture , by income group 22. 3. Public spending on Agriculture per worker in low- and middle-income countries, by region 24. 4. Agricultural Orientation Index for public spending in low- and middle-income countries, by region 28. 5. Composition of government expenditures, by sector and region in low- and middle-income countries 28. 6. Public expenditures on agricultural research and development in 2000, by region 29. 7. Public expenditures on agricultural research and development as a share of agricultural GDP, by region 31. 8. Incremental annual public investment needed to eradicate hunger by 2025 36. 9. business environment rankings and on farm investment in low- and middle-income countries 41.