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Food Security

The EBRD has both special insights into the problems of food security and a unique role to play in addressing them.

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Food Security

Food Security guarantees us all, men, women and children, the diet and food choices we need to lead a fulfilling life.

A more technical definition, as proposed by the United Nations’ Food and Agriculture Organization, describes food security as ‘a situation that exists when all people, at all times, have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life’.

This definition is based on the pillars of:

1. Access - having enough resources to obtain a proper diet

2. Utilization - proper use based on knowledge of basic nutrition and health care, plus adequate water and sanitation

3. Availability - sufficient quantity of food, consistently available

4. Stability - risk-free access to adequate food at all times

While the above may not appear to be a problem for those living in more prosperous societies, the world as a whole is living through an era of acute and growing food security challenges. No one is likely to be immune from the consequences, direct or indirect, of our success or failure to provide more people with more of the food they need, want or expect.

Population growth, the move to the cities and higher incomes will all contribute to a likely increase in food demand by some 70 percent by 2050, requiring 1 billion extra tons of cereal and 200 million extra tons of meat.

As a likely foretaste of what is to come, the food markets have in recent years experienced not one but two periods of steep price rises and volatility.

Global food stocks are also currently at worryingly low levels. At the same time, competition for water supplies is only likely to increase and the prospect of climate change implies still more uncertainty in the decades to come.

Food Security and the EBRD region

The EBRD, thanks to the geographic spread and variety of its countries of operation, has both special insights into the problems of food security and a unique role to play in addressing them.

The EBRD’s transition region includes countries with huge potential for boosting their agricultural output and meeting much more of the world’s food needs. In some other countries the poor suffer from monotonous diet and, in some cases, malnutrition. And as the EBRD expands into the southern and eastern Mediterranean, it is encountering the challenges of dealing with countries which are major importers of food.

While the transition region is already a major player on the international wheat market, accounting for almost a quarter of global wheat exports, it could contribute considerably more to world trade in the commodity.

While the EBRD’s transition region contains 17% of global arable land, it produces only 11 percent of global crops and 6 percent of global meat. Wheat yields in its main producing countries are still substantially lower than yields elsewhere where similar climates prevail. With investment, average yields across the region could be increased by 75 percent and 13 million ha of extra land could be brought into production.

Much of the likely future shortfall in global grain production could be supplied by three EBRD countries alone: Russia, Ukraine and Kazakhstan. If they were to exploit their potential to the full, they could meet almost half the world’s traded grain needs. Such a qualitative boost in output would, however, require substantial investment. In Ukraine, for example, achieving the targeted increase in food supply would cost $80 billion.

With the EBRD moving into countries in the southern and eastern Mediterranean, it is determined to help solve some of the problems they face in satisfying their food requirements. Egypt, for example, is the world’s largest importer of wheat. Egypt’s is also the largest net importer of grain from Russia but the former’s outdated and inefficient port-handling equipment causes substantial losses along the transport chain.

Helping major grain exporters satisfy the needs of major importers within the EBRD is likely to be a major part of the bank’s future activity in the field of food security.

How the EBRD boosts food security

The EBRD can play a major role in promoting food security because food production is chiefly the work of the private sector and tapping the potential of private business is one of the Bank’s notable strengths.

Given the financial constraints the public sector is likely to suffer for years to come, the private sector’s role in financing the improvements the food sector needs will be more important than ever.

With a portfolio of €3 billion invested in agribusiness, the EBRD is already the region’s largest provider of finance to the sector.

And the EBRD has also historically focussed on supply-, rather than demand-, side solutions to the problem of high global food prices.

Such an approach is reflected in the EBRD’s Private Sector for Food Security Initiative, which was launched in 2011 and is now the focus for all the Bank’s operational and policy work in the field.

Through debt and equity investments, the EBRD invests in the whole food value-chain: from farming and processing to logistics and retail. Infrastructure and trade are especially vital for removing the bottlenecks that can cause price instability.

Access to seasonal finance via warehouse receipts allows farmers to use stored grain as collateral when seeking credit from banks. Farmers are thereby spared the need to sell grain immediately after harvest and market prices stabilise.

Warehouse receipts are also an example of the EBRD’s work on policy dialogue. Policy-makers have been helped to approve the system whereby future, rather than stored, crop receipts help farmers meet their investment needs before the harvest is in.

In general, if the private sector is to raise the financing required to deliver food security, it needs governments to ensure a predictable policy framework. This should include market-based pricing, as blanket subsidies, price controls and quotas all deter investment.

Governments should also promote market and price transparency through commodity exchanges and better risk management tools.

The world also needs greater public and private policy-coordination to pool and share data on food availability, stocks, demand and price and help manage emergency reserves.

The EBRD’s Private Sector for Food Security Initiative

The EBRD’s Private Sector for Food Security Initiative is the focus for all the Bank’s operational and policy work in the field of food security.

Launched in 2011, the initiative champions the role of the private sector in boosting food production through technical assistance, policy dialogue and new financing. It will also help set incentives and create the right environment for encouraging private sector support.

The EBRD already invests up to €850 million annually in agribusiness.

Specifically, the EBRD’s Private Sector for Food Security Initiative concentrates on:

Direct financing and technical cooperation for risk management, insurance, hedging, analytics and policy dialogue

The programme will help introduce pre- and post-harvest financing mechanisms (such as crop and warehouse receipts systems) as well as improved trade logistics. Technical cooperation programmes will mainly focus on improving efficiency, the transfer of know-how, quality control, financial reporting and corporate governance standards.

Promoting, together with IFIs, private-public sector platforms with a focus on improving the private sector’s supply response

This entails strengthened public-private dialogue in countries such as Ukraine and other current and new countries of operations, with particular emphasis on food security in the grain and dairy sectors.

Matching export and import countries more effectively

This matches the huge potential for food exports from the existing EBRD countries of operations with the extensive import needs of the southern and eastern Mediterranean (SEMED) region, the world’s biggest importer of cereals. It will also enable an exchange of lessons learned between current EBRD countries of operations and the SEMED region on building an effective private-sector financed system for storage and transportation.

Supporting better water efficiency in food production through water audits

Institutionalising improved IFI coordination through the Multilateral Development Banks Working Group on Food and Water Security

This will mobilise the collective strengths of the MDB WG in joint projects for strengthening social safety nets, addressing food market volatility, promoting agriculture and food security investment and improving access to water.

Scaling up the successful EBRD-United Nations Food and Agriculture Organization (FAO) collaboration on food security

This includes expanding the EastAgri network of IFIs and private banks investing in agriculture and agribusiness in the SEMED region.

EastAgri and the EBRD

The EBRD was one of the founding members of EastAgri, a network of public and private agriculture/agribusiness institutions working in central and eastern Europe, Central Asia and the Caucasus.

EastAgri provides key players in the sector with an informal platform for building relationships and sharing information, best practices and lessons learned about financing and rural development in the sector.

EastAgri’s activity aims to foster innovative new approaches towards investments in agriculture and agribusiness among international financial institutions (IFIs) and private banks operating in the region.

EastAgri promotes such networking through its website, annual meetings and thematic workshops and study tours.

Other founding members of EastAgri, which was launched in 2002, include the Food and Agriculture Organization of the United Nations (FAO), the World Bank and the Central European Initiative.

Current members number among their ranks IFIs, private banks, international organisations, bilateral donor and bilateral investment institutions, citizen networks and a university.