Agriculture and food systems are expected to provide food security and nutrition, livelihoods for millions of people working in the sector, and environmental sustainability. Because of these critical roles, the sector is too important to rely on a “reactive” approach to deal with shocks after they occur. Instead, it is essential to use a proactive approach and to build resilience; that is, being prepared with the ability to absorb, recover, and successfully adapt and transform in response to adverse events. Good policies strengthen the resilience capabilities of farmers and other actors in food systems, and invest in prevention and early warning, rather than rely on ex post support after a shock has occurred.
Resilience in agriculture and food systems
Agriculture and food systems are highly vulnerable to shocks, including weather shocks and natural disasters. Given the sector’s role in providing food security, nutrition, and livelihoods, agricultural policies need to build resilience through a proactive approach.
Key messages
OECD has identified three layers of risk which require different responses. “Normal” shocks occur frequently and have a limited impact; farmers and others in the supply chain are best placed to deal with such shocks. At the other extreme are “catastrophic risks”, which are rare but too big for individual producers to deal with; these may require government action. In between are “marketable risks”, such as hail damage; market instruments such as insurance or future contracts can be used here.
Description text: The different layers of risk identified by the OECD contain important lessons for policy makers. Governments should avoid providing support for “normal” risks and policies that crowd out the development of private mechanisms such as insurance. Rather, government intervention should focus on catastrophic risks that are rare, but which cause significant damage to many farmers at once. The procedures, responsibilities, and limits of the policy response – including the triggering criteria and types and levels of assistance – should where possible be defined in advance.
Governments should stimulate investments that strengthen the resilience of farmers and other supply chain actors by building their capacities to absorb, adapt and transform their operations in response to shocks. This includes effective regulation of insurance and water markets; investment in information, training, and advice for farmers; and the development of on-farm and market-based risk management tools. There is also an important role for no-regret policies and for investment in public goods. These include market, weather, and climate information resources, research and development, and knowledge dissemination to build resilience for a wide range of future shocks.
Without trade, food production and consumption in a country would be highly vulnerable to local shocks, such as poor weather conditions. At the global level, conditions in production regions are not perfectly correlated: one region may have favourable conditions while another suffers a setback. For this reason, global food production is typically less volatile than production in an individual country, so that trade can act as a “risk pooling” mechanism. Improvements in infrastructure (transportation and storage), as well as transparency regarding supply, demand, stocks, and prices, can contribute to the effectiveness of trade as a mechanism for coping with shocks.
To further strengthen the role of trade in resilient food systems, governments and supply chain actors could discuss ways to build more resilient supply chains. An effective approach would look at all possible risks along the chain, and not only its trade impacts. As with farm-level risks, governments should handle only those risks which are too big for private actors to resolve alone.
Context
Agriculture and food systems are highly vulnerable to shocks
Agriculture and food systems are subject to a wide range of shocks. These include droughts, floods, and other weather conditions, but also pests and diseases. Many of these shocks are increasing in frequency or becoming more severe due to climate change. In addition, the sector can be affected by policy shocks, conflicts, and economic crises that disrupt farm production and other parts of the supply chain.
