© Dr. Michaela Kuhl
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The largest areas currently suitable for Arabica production are the Brazilian state of Minas Gerais and regions in Central America. Areas suitable for Robusta production include the Brazilian Espiritu Santo region, lower regions of Central America and Asian regions, such as in Indonesia and Vietnam. However, the world's most important production regions in Brazil and Vietnam will experience a significant reduction in land area suitable for production. True, some regions in East Africa and Asia may become more suitable. However, in Asia, production could migrate within certain countries, such as the Philippines and Vietnam, to areas of higher altitude, which are mostly forested today. This may entail a new set of problems, as the environmental effects of such migration might be negative. In all cases, the new sites cannot fully compensate for the loss of land in the traditional coffee areas: studies find that climate change will reduce the area suitable for coffee cultivation by about 50% on a global scale. At least at first sight, the impact of climate change will be more pronounced on Arabica coffee than on Robusta, as the latter is typically more heat tolerant. Consequently, there might well be a shift in cultivation towards Robusta. However, this coffee bean is perceived to be of lower quality than Arabica. Furthermore, Robusta requires a relatively low level of intra-seasonal climate variability. And if climate change entails greater variability (which appears to be the case), the negative impact on Robusta production might be even greater. It is impossible to know today how successful investment in breeding for heat tolerance will be. Given the long life-span of plantations, established plantations will need to adapt as well as possible to climate change, e.g. by growing appropriate plants to shade the coffee trees. In the pessimistic scenario of limited breeding success and low rates of adaptation, some minor regions should stand to benefit, but most will see lower production and a drop in employment. Coffee would subsequently become scarcer and prices would then likely rise considerably. Such a price hike would at least dampen the growth in coffee consumption experienced over recent years, in the Emerging Markets in general, and especially in the producing countries themselves.
How can agriculture investment be considered as one of the most effective and important strategies for economic growth?
There is broad evidence to suggest that agriculture plays an important role in growth strategies in developing countries, where – according to the World Bank – three of every four of the world's poor live in rural areas and depend on agriculture for food and income generation. The World Bank cites studies showing that GDP growth stemming from agriculture is at least twice as effective in poverty reduction as GDP growth from non-agricultural sectors. And in many countries, such as China and India, strong agricultural growth was fundamental to the rise of industry. Agricultural growth also fosters rural non-agricultural sectors, such as services and trade. It has been increasingly recognized that the implicit taxation of the rural sector – which lasted for decades – was detrimental to the development of a strong agricultural sector and there has been some progress made in amending such policies. The number of rural poor has declined considerably in East Asia and the Pacific. However, in South Asia and the Sub-Sahara, development is far less positive and sometimes even negative. Much has yet to be done in matters of public policy: Property rights have to be strengthened and contract enforcement improved to enable farmers to invest in new technology and to establish efficient land markets. Access to financial services must also be developed with the same aim and this is closely intertwined with asset ownership. Production systems need to be enhanced that do not lead to environmental degradation and which help farmers to adapt to climate change as efficiently as possible. Access to water and water storage is important to improve productivity and the stability of yields.
Over recent years there has been considerable concern about the role of foreign investment in developing countries' agriculture. Lessons learned from the past show that there is no clear-cut answer to the question of foreign investment. However, according to FAO studies, projects are most likely to show successful economic, social and environmental impacts, if capital, technology and the investor's management expertise is combined with an active role for local farmers, e.g. in contract farming where local labour and knowledge is used. The FAO is far more critical when it comes to large-scale land acquisitions. In any case, human rights, core labour rights and efforts to protect heath and the environment are seen as key and are the subject of international efforts to promote good investment practice.