In service of food security

• The share of services (added value) embedded in agriculture, hunting, forestry and fishing is about 18.5%, with imported services representing 5.2%.
• Trade costs are still significant in the distribution sector, equivalent on average to a tariff of 10% on standard services and 37% on specialized services.
• About 70% of agricultural growth since 2005 can be explained by productivity improvements, with expansion of factors accounting for the remaining portion. Research and development (R&D) has driven productivity gains mainly in Brazil India, New Zealand China, Vietnam and Argentina.
• Precision farming illustrates how ICT services can deliver benefits to farmers and other actors in the food value chain.

Role of services is imperative at all stages of the primary and processed food value chain, be it from the credit farmers need to invest in inputs, through to the processing and distribution of finished goods. The role of policy makers and government in facilitating the services varies from one country to another. By establishing germane regulatory frameworks, governments can ensure that services for the food and agriculture sector support the achievement of most critical public policy goals, such as escalating agriculture trade, food security and rural development.

Value Addition

It is important that policy makers take a holistic approach to the relationship between the services sector, on the one hand, and the food and agriculture sector, on the other. Policies affecting a given part of a food value chain need to take into account potential upstream or downstream implications in order to maximize positive outcomes. According to a WTO analysis, 70.8% of the added value in agro-industrial exports in 2011 came from upstream industries, and the share of services in the overall added value was 37.7%, a figure which is higher than the 29.2% of value added by the agro-food sector itself. This clearly reflects the importance of services in transforming the agriculture sector.

Source: FAO STAT

Credit as a financial service in an integral part for agriculture to flourish and thus it becomes crucial for economies to facilitate it in an efficient manner.

How do key services sectors affect food and agriculture?

New developments in ICT, distribution, transport and logistics and financial services are structurally transforming economies in different regions of the world. Upcoming technology and business approaches are reshaping the retail sector. Machine learning and other technological developments are also being adopted. E-commerce in particular has significantly disrupted the distribution sub-sector around the globe. Sophisticated technologies are being used in countries that are investing in retail, with stores adopting self-service checkouts and price-check scanning machines, grocery price comparison websites appearing online, and digital walls in subway stations allowing consumers to shop and pay with smartphones.

For example, in European Union, an estimated two-thirds of business-to-business (or wholesaling) firms saw their online sales growing faster than offline. Online customers also have higher value orders. In high-income OECD members, food and grocery is the fastest growing and largest segment in e-commerce, while it is part of the top ten sales segments of developing countries such as India, Thailand and Philippines. The study done by OECD finds that several countries require a commercial presence before firms can supply cross-border distribution services. However, trade costs are still significant in the distribution sector, equivalent on average to a tariff of 10% on standard services and 37% on specialized services.

Over the past two decades, the transport and logistics sector has been revolutionized by digitisation and technological innovations, increases in the frequency and scale of international trade, and environmental concerns and related regulations. These have lowered costs, reduced delivery times and have improved the performance of sub-sectors. Technologies developed in this period have enabled produce to be brought to markets thousands of miles away while retaining freshness. For example, controlled atmosphere (CA) technologies have significantly extended produce shelf life, as well as product quality and variety. Ongoing technological progress is expected to continue facilitating trade in perishable goods.

ICT services can improve the competitiveness of value chains by improving efficiency, reducing costs, and increasing productivity. They also support in improving food safety and address environmental challenges. Precision farming illustrates how ICT services can deliver benefits to farmers and other actors in the food value chain. This technology uses remote sensing to map soil properties, pest and disease attacks, and control equipment on a continual basis. It also advises farmers when they can cultivate fertilize and spray pesticides; helps them decide on livestock nutrient intake; and assists with harvest monitoring. Farmers can receive services that use satellite sensors to provide information pertinent to a farm or specific geographic area, which is sent directly to farmers’ mobile phones.

Some applications use big data to help farmers adjust to weather variability. Farmers enter the village name, or detailed latitude and longitude of the farm and crops planted and receive in response tailored information such as crop-specific advice, localized weather forecasts, or local market prices.

Services are adding value to food and farming

According to the data, contribution of India’s food and hospitality services in the final output of primary agriculture surged in last fifteen years by a CAGR of 8.55%, which is cogent to explain the backward integration of services in agriculture.

Agriculture remains a large employer in Asia and the Pacific, employing nearly 46% of the workforce. Although employment shares differ widely across countries, the share in the two largest economies remains as high as 50% in India, and about 30% in China. In addition to the adoption of high-yielding seed varieties during the “Green Revolution”, the expansion of financial services and services related to agriculture and infrastructure have also played an important role in the rapid productivity growth of agriculture. The share of services added value embedded in agriculture, hunting, forestry and fishing is about 18.5%, with imported services representing 5.2%

About 70% of agricultural growth since 2005 can be explained by productivity improvements, with expansion of factors accounting for the remaining portion. Research and development (R&D) has driven productivity gains mainly in Brazil, India, New Zealand China, Vietnam and Argentina. Policymakers can ensure that market trends contribute to the achievement of public policy goals in areas such as agriculture trade and capacity building. Supporting a dynamic and competitive services sector can contribute to doing so, including by enabling economic actors in the food and agriculture sector to benefit from technological breakthroughs.