How agribusiness can tackle the food crisis - an expert explains

The World Food Programme has dubbed 2022 a 'year of unprecedented hunger.'

Hunger levels, always high, have worsened since 2019 as climate shocks, COVID-19, and geopolitical conflicts have driven up the costs of food, fuel and fertilizer.

In fact, at least 345 million people in 82 countries face acute food insecurity and 800 million - around a tenth of the population - go to bed hungry every night.

Agribusiness - the many enterprises that produce and cultivate food for consumers - will play a special role in tackling this crisis.

Wiebe Draijer, the Chairman of Dutch banking firm Rabobank, sat down with Agenda to explain agribusiness and the "crucial" role it will play.

With The Netherlands the world’s second-largest food exporter, Draijer offers his perspective on how Dutch banks like Rabobank can help develop agribusinesses and strengthen food security.

This interview has been edited for length and clarity.

Agenda: What is key to understand about the food crisis?

Wiebe Draijer: The global population may well be 10 billion by 2050. Food itself must be produced in a sustainable manner and maintain the nutrients necessary for people to find benefit from it. Simultaneously, those producing the food – the farmers – must find sufficient benefits in continuing this production. They need a fair reward for their contribution. When we speak of the food crisis, we really mean that projected food supply can’t feed 10 billion people in a nutritious form. So too, our current production capabilities, in the way in which we’re currently cultivating, isn’t feasible within land available on our planet.

Agenda: Hundreds of millions faced hunger before the pandemic. What has changed since?

The short-term food crisis we’re facing, right now, is connected to the volatility within the interconnectedness and current makeup of global food supply networks. Reordering these networks, for both short term and long term challenges, is critically important.

Agenda: How is climate change impacting farmers - what are some of the changes they are seeing?

Wiebe Draijer: Europe is experiencing significant droughts, and this is having a drastic impact on output. Italy, for example, is seeing a significant impact on the productivity of a whole generation of farmers. Climate change is leading to a gradual migration of crops from south to northern Europe. In Brazil, where I was recently, I saw how farmers are building water reservoirs for the first time to prepare for droughts. Farmers need our help in this changed reality.

Agenda: What role do you see finance and agribusiness banks, particularly, play in creating a more sustainable food supply network?

Wiebe Draijer: We have to consider both the long-term and short-term implications. Firstly, as Rabobank, we are actively involved in making sure that all the funds in our $100 billion+ loan book is well spent – these are directed at strengthening the global food supply chain and, through our various products, programs and incentives, we try to help our partners create sustainable value. With farmers, for example, we make our loans conditional to them applying sustainability. To qualify for financing and fair interest rates, they must adopt practices and prove that they are applying the best sustainability-driven practices. We also work closely with various nongovernmental institutions, including the United Nations Environment Programme, to help farmers shift from old, unsustainable practices, to new, more dynamic ones.

Within this transition, though, we know that there can be a lot of uncertainty and volatility for the farmer. It can take roughly 3 years to stabilize a business in such a transition. To assist them, we reward them for taking on this transition and have instruments that support them in this. On the longer term, then, it is necessary to implement these tougher transitionary practices now, so that the global food supply can reap the long-term benefits. Here, for example, we are working with Yara to help in the immediate shortage of fertilizer in some parts of Africa, with a long-term view of transitioning to more sustainable practices.

Here in The Netherlands, for example, farmers are being confronted with the issue of nitrogen deposits in the ground and are demonstrating against measures to curb this. We, in turn, try to help farmers from both a financing and knowledge point of view, to incentivize them to be more sustainable. We try to help farmers to change tactics and evolve their income through, for example, our carbon bank which offers farmers the incentive to store carbon in the ground. This limits the loss of biodiversity and increases the absorption capacity of land for water.

Agenda: What role do you see agri-tech play – and specifically finance for agri-innovations – in the needed response?

Wiebe Draijer: Over my last 8 years with Rabobank, it has been very exciting to see the advent of a whole new subsector of food technology. There are start-ups doing really exciting things to create more sustainable food supply systems. With the support of bodies like the World Economic Forum, we’ve seen these grow and receive funding and ultimately form part of a very exciting ecosystem. These start-ups are changing the way the food world works. In, for example, the food waste space, there is a startup out of California which imports microscopic chemicals into fruit sprays to make these last longer. When we first saw this firm, it was in its infancy. Today, it is flourishing and having a real impact on reducing food waste around the world.

Agenda: What technology could speed progress for the food crisis?

Wiebe Draijer: Something that really isn’t there yet is cheap, reliable carbon certification. Currently, it could cost upward of $25 per ton of C02 for certification. If C02 is priced at $50 - $100, it really is too costly. We need to get this price down with technology and make sure that carbon that claims to be nailed back in the earth, really remains there. Farmers who are properly incentivized to store carbon will definitely do so – it can be lucrative. In the USA, for example, its been shown to increase farmer income by up to 30%. In Africa, for example, we should be helping stallholder farmers to capture carbon and, with satellite technology and ground data, ensure it remains in storage. This can have a very real impact on their lives. C02 measures in the ground really aren’t accurate enough – so too, the systems are siloed and not connected. A central database, connected, for example, through farmer smartphones, can ensure more accurate understanding of progress on C02 capturing. We need these technologies.

Agenda: Is enough being done on the financial side to ensure we stay on track for our SDG goals?

Wiebe Draijer: I don’t think enough is being done. Start-ups – looking to become scale-ups – are facing the same financing issues as they always have with traditional banks. A lot of this has to do with the many prevailing misunderstandings of the food system. Food is an ultra complex industry with a gazillion subsectors. Each has its own risks and intricacies – it is tough for the finance community to have the competencies to understand all these delicacies and tradeoffs. I do believe not enough venture capital is flowing into food-tech scale-ups. As Rabobank, we want to invest in companies that we know are sustainable on the long-run. Similarly, we want to connect them to large food companies so that we know there is genuine adoption of trusted new technologies. Unfortunately, the knowledge gap remains, with many not grasping how to connect and sustainably scale-up agritech firms in the right places.

Agenda: Where would you want to see the agribusiness industry 10 years from now?

Wiebe Draijer: I want there to be a real appreciation of farmers and everyone across the agribusiness value chain for their contribution to the planet. There’s a world of agri-tech yet to be unlocked and we need to make sure our investments realize these. So too, I believe we need to figure out how to properly calculate C02 stored on farms. And finally, a more sustainable food supply system really needs a switch to more natural, healthy food. We will have to adapt and adopt new eating habits – realizing we can only eat within our planetary boundaries. Something we’re not appreciating enough is the knock-on effect on our health system of eating unhealthy foods. This is something that must really be explored.

Agenda: What is your message to those who under appreciate the role of agribusiness in our daily lives?

Wiebe Draijer: If we don’t look after our global food supply system, we’ll be hitting one crisis after the next. The longer we wait, the more difficult these become to solve. Everyone has a responsibility to raise awareness and create incentives to drive forward a more sustainable food system. None of us, as consumers, want to see premiums added to our food due to risks higher up on the value chain.

The question I think that people should themselves is: What is this problem really telling me? Here in The Netherlands we’re part and parcel of the farming community. The problems farmers face belong to all of us. We need to take a step back and properly reflect on their problems with as little bias as possible. In doing so, we may find the innovative solutions we need for the food system.