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Opportunities and Challenges for Smallholder Farmers in Developing Countries Daniel G. De La Torre Ugarte International Consultation on Pro-Poor Jatropha Development Casa San Bernardo, Rome April 10-11, 2008 Characteristics of Biofuels Easily integrated with combustion engine infrastructure Feedstock growth & conversion in / around rural areas Generates a new energy sector in the economy / increases energy services in rural areas Provides a sustained demand for ag. resources Reduced GHG emissions by 20% (no land displacement effect) Biofuels are not The Solution to (but could contribute to): Climate Change Energy crisis Economic development / Poverty Reduction Source: USDA Corn Wheat Rice 20 06 / 20 04 / 20 02 / 20 00 / 19 98 / 19 96 / 19 94 / 19 92 / 19 90 / 19 88 / 19 86 / 19 84 / 19 82 / 19 80 / 19 78 / 07 05 03 01 99 97 95 93 91 89 87 85 83 81 79 Percent of total use Biofuels Expansion took-off when world inventories were declining 0.36 0.30 0.24 0.18 0.12 0.06 0.00 Grains for Feed and Fuel Use 700,000 600,000 Feed long term driver of ag. demand 000 tons 500,000 400,000 300,000 Developing countries are reproducing diet of the west based on high content of animal protein 200,000 Biofuels demand, the straw that broke the camel’s back 100,000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 World Feed Demand Feed Demand minus USA Source: OECD-FAO Agricultural Outlook 2007-2016 - OECD © 2007 - ISBN 9789264025097 Fuel Demnd Long term trend in agricultural commodity prices 350 300 Price Index 250 200 30+ years of declining and or flat prices 150 100 50 0 1957 1962 1967 1972 1977 1982 1987 Nominal Real 1992 1997 2002 Source: International Financial Statistics Online, IMF February 10,2008. Except for real price in 2007, which is estimated by author. 2007 Global Anthropogenic GHG Emissions Source: Fourth Assessment Report, IPCC (2007) (a) Global annual emissions of anthropogenic GHGs from 1970 to 2004. (b) Share of different anthropogenic GHGs in total emissions in 2004 in terms of CO2-eq. (c) Share of different sectors in total anthropogenic GHG emissions in 2004 in terms of C0 2-eq (Forestry includes deforestation.) GHG for ag and forestry is to address the 31% of annual emissions coming. If we take care of this we take care of 0.26% Searchinger, et al. The story thus far: Increase in agricultural commodity prices is structural (consumption pattern) and weather driven Biofuels are “the straw that broke the camel’s back Current industrial agricultural system is not sustainable; biofuels sustainability largely depend on the way feedstock are produced Today’s agricultural economic, environmental, and social problems are not caused but in any case exacerbated by biofuels. The Question is Under which conditions biofuels can be an opportunity for: Poverty reduction Climate change / environmental benefit Energy crisis / energy independence One could benefit from biofuels without producing them Take advantage of higher commodity prices: Investment in distribution infrastructure to capture a higher share of the market. Local traditional foodstuffs become more competitive than global commodities Vegetal protein becomes more competitive than animal protein Higher commodity prices may also induce investment in land restoration and the use of more sustainable agricultural practices What type of Biofuels expansion enhances rural development ? Contributes to household and regional food security Increases energy services in the community Generates the larger valued added possible Enhances the sustainability of smallholder farmers Includes farm workers and landless farmers Enhances environmental resources Prioritizes local use v.s. urban or export use Strategy for Poverty Reduction Mandates favored larger producers, as emphasis is placed in volume Local ownership and utilization enhances rural development and smaller producers Democratize access to land, water and other productive resources Too much biodiesel regulation too early, favors larger producers. Utilization of institutional markets favors local, small scale production. Implement programs to ensure access to food for vulnerable population Strategy for Climate Change Promote drastic change diet composition towards more efficient sources of protein and food from local origin Invest in Research & Extension oriented to: Reduce use of fossil based inputs in agriculture Improve management practices which increase the environmental performance of production agriculture Ensure the best use of soils and landscape Recuperate the complementarity of crop and livestock activities in the farm Integrate GHG emissions and other environmental impacts into farmers balance sheet Institutional Investment Strengthen land property rights and enforcing mechanisms to protect small holders Re-develop domestic institutionality to support transformation of agriculture International food reserve system Global coordination of biofuel development Concluding Remarks If nothing is done, missed opportunity for poverty reduction, agriculture, and climate change Biofuels could result in a massive increase of energy services in rural areas. Biofules provides the profitability to invest in rural areas. Biofuels could provide the profitability to transform agriculture and radically change what, how, and where we produce Countries could benefit from biofuels without producing them Thanks ! Bio-based Energy Analysis Group http://beag.ag.utk.edu/ Agricultural Policy Analysis Center http://agpolicy.org/ Department of Agricultural Economics, Institute of Agriculture University of Tennessee http://www.agriculture.utk.edu/