Agriculture has always been a precarious enterprise, vulnerable to weather, pests, disease and fickle markets. But for the farmers and ranchers in developing nations, such inherent uncertainty becomes a matter not just of success or failure but also of life or death.
Aiming to diminish that risk and alleviate global poverty and hunger, the US Agency for International Development (USAID) has established a $25 million grant program, directed by a UC Davis agricultural economist. The program will develop and test financial systems that can boost agricultural productivity and food security in developing countries.
The five-year project will finance research projects that design and test financial technologies, such as linked credit and insurance contracts, that reduce the vulnerability of poor households to adverse events, making it easier for them to invest in new agricultural technologies and break the cycle of poverty.
“Many developing country farmers are mired in low levels of agricultural productivity, and new seeds and markets by themselves can go only so far in solving the problem,” said Michael Carter, a professor of agricultural and resource economics and director of the newly funded BASIS Assets and Market Access Collaborative Research Support Program at UC Davis.
“Closing that productivity gap now requires that we address financial, risk-management and asset constraints that are hindering poor, rural households,” Carter said. “In a world in which more than one billion people suffer from chronic hunger, this is one research effort in which failure is not an option.”
An authority on development economics and poverty dynamics, Carter has focused his recent research on agricultural risk management and the economics of sustainable food security. While on faculty at the University of Wisconsin, Madison, he managed two five-year USAID-funded research programs.
The newly funded UC Davis-based program is designed to work with other research partners worldwide and will soon put out a first call for research proposals to implement its ambitious agendas.
Index-based insurance protects against risks shared by an entire community. In this case, the index, or statistical measure of risk, is the availability of forage based on satellite imagery. When the forage index predicts livestock mortality in excess of 15 percent, an insurance payment is triggered to all clients within the defined geographic area.