FAO in cooperation with the European Bank for Reconstruction and Development (EBRD) has just published a new working paper titled Innovative agricultural finance and risk management. The publication looks into the issue of risk management in agricultural finance in transition countries. These countries – like Kazakhstan, Ukraine and Russia – have the potential to become major world grain exporters if their agricultural yields, with investment from the private sector, increase to reach the standards achieved in similar countries around the world. This would help address the problem of rising global food demand - which FAO estimates could grow 60-70 percent by 2050 as a result of population and income growth. But to attract private investment in agriculture, new financial and risk management instruments need to be developed.
The paper identifies effective ways for international finance institutions like the EBRD to adjust their investment portfolio in order to support the creation and development of agricultural finance and risk management products, mechanisms and institutions. These include pre- and post-harvest financing instruments, price risk management and the development of trading platforms. According to the report, these advances could help reinforce the entire agriculture supply chain so that it is more profitable and secure for all parties involved, and consequently food production could be substantially improved.