The Private Sector Has the Solutions to Reduce Post-Harvest Losses

Business is ready, willing, and able to address global challenges 

For many farmers, particularly for those in emerging markets, post-harvest losses that can reach up to 40 percent of crop yield are widely accepted as part of the production cycle. This should not be, and it doesn’t need to be. The sheer magnitude of these losses encapsulates revenues that might otherwise be reinvested in the farming business, spent on diversifying family nutrition sources, sending children to school, or enabling access to medical care.

There are other consequences as well. Fresh water is wasted. Studies show that approximately 25 percent of the water used for agriculture goes to produce food that will never be consumed. At a time when the number of water-stressed countries is on the rise, this is a serious concern. Similarly, the growing demand for food production generally implies increased deforestation, causing habitat destruction, soil erosion, and increased greenhouse emissions with dire consequences for biodiversity and ecological integrity. In our interconnected global system, the results of poor resource management practices manifest in clear economic, social, and environmental costs that directly impact human welfare.

However, the private sector has solutions to address these issues. These are not magic solutions, but fundable ones that have been implemented for years with proven results. They include silos for grain storage, cold storage for perishables, and processing and packaging equipment to preserve food with a short shelf life. They capture elements of the 17 Sustainable Development Goals developed by the United Nations that seek to end poverty, protect the planet, and ensure prosperity for all. Regarding post-harvest losses, these solutions specifically support Goal 2 (Zero Hunger) and Goal 12 (Responsible Consumption and Production).

The questions we need to be asking are, why are these solutions not spreading more broadly and what must be done to deliver them to where they are most needed?

The questions we need to be asking are, why are these solutions not spreading more broadly and what must be done to deliver them to where they are most needed?

Local Expectations v. Commercial Reality
Consider the case of grain storage. In many countries, the primary clients of storage solutions are governments — federal, regional, and local. Yet the public sector is often plagued by inefficiencies. Corruption can deplete the funding intended for the acquisition of such equipment. Bureaucracy and red tape can deter private sector companies from bidding on tenders or from pursuing such business opportunities. As a result, the projected time, energy, and money devoted to such projects far outweighs the gains to be made. Many governments are also well intentioned but have limited capacity, not only financial but in terms of professional expertise and project management.

For the local private clients, which includes collectives of farmers and smallholder farmers, the lack of financing to purchase equipment is one of the biggest limiting factors. Banks are reluctant to lend to the agricultural sector, simply because the non-repayment risk is high. This is because equipment is often sold in or indexed on foreign currencies, mostly in U.S. dollars. Essentially, revenues are generated in a local currency that keeps losing its value; on the other hand, authorities can further impose foreign exchange controls to prevent the flight of these precious currencies.

Some countries have been pushing for indigenization of the production of agricultural equipment. It is a laudable attempt to create manufacturing jobs and reduce costly imports but it does not take into consideration that localization of manufacturing activities requires sales volumes that would justify the investment. Manufacturing requires good infrastructure, guaranteed and reliable access to electricity and water, coupled with roads, rail, and ports to access markets. Large sale volumes are needed to recover the cost of investing in manufacturing products with low margin to meet the local demand.

Some will say that imported equipment costs are too high. However, you get what you pay for. What many miss is that Western companies also bring technical training, warranties, maintenance, and spare part services that, in the long run, will prove more valuable and cost effective than the upfront purchase of lesser quality equipment.

Coordination from all actors
Where there is a will there is a way. While that is true, in this case an effective solution requires the coordination of all the actors in the following ways:

  • Continuity over time, meaning that all the actors remain engaged irrespective of the changes of government or attrition of staff.
  • Financing, either from international finance institutions or from public or private sector banks that are incentivized to lend.
  • Governments that are willing and committed to addressing post-harvest losses.
  • Private sector companies that can deliver the needed equipment.
  • Implementers, either government employees, non-profit organizations, or collectives of farmers that can ensure new equipment is deployed appropriately.
  • Availability of funding, not only to purchase equipment but also to save for anticipated maintenance and spare parts over time.

Financing
In real estate, location is said to matter most. In agriculture, to address post-harvest losses, we could say that financing is what matters most. International finance or aid institutions have set up guarantee programs encouraging local banks to lend by providing guarantees in the event of default. De-risking the level of risk for banks that lend to the agricultural sector should be further developed. In that spirit, land title and cadaster issues should also be addressed to empower farmers to use their land, no matter the size, as collateral when seeking a loan.

Strategic grain reserves
Countries should work with their neighbors when building strategic grain reserves. In some instances, countries have such reserves not far from their neighbors but without a mechanism to make those reserves available to each other in case of an emergency. Strategic reserves address the issue of food security, which is a global issue that does not stop at borders.

Empowering smallholder farmers, notably women
In many countries, women constitute the backbone of agriculture. Smallholder farmers should receive support to organize into collectives, but should also receive training to become successful and economically independent. Additionally, access to technology, particularly mobile applications, should target those who would benefit from them. Lastly, micro lending should be made available, even more so as poor farmers have repeatedly proven to be highly reliable borrowers with a minimal default rate.

The private sector is not the enemy
Some consider private sector companies as predatory and uninterested in the underserved. Yet, private sector companies are all composed of human beings with heart and passion. These are people who can use the leverage they have to help solve issues such as post-harvest losses. Unlike countries, companies do not have the luxury to run a deficit year after year without being held accountable. With this in mind, there is nothing wrong with doing well by doing good. One cannot be oblivious to the fact that the progress made in production, productivity, and reduction of waste is the result of the work, products, and research & development carried out by the private sector.

All images courtesy of AGCO Corporation.



The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of AGCO Corporation.

 

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