The Challenge

Sharing risk equitably and efficiently across food supply chains

Demand for food already outpaces supply and will only increase alongside population growth, rising incomes, and thirst for biofuels. Climate change places additional pressures on the ability to produce enough food, feed, and fibre for a growing population. 

Extreme weather events such as droughts and floods and erratic rainfall patterns result in lower crop yields, higher and more volatile food prices, exacerbating poverty and malnutrition. Along the supply chain, smallholder farmers to global food retailers and manufacturers are all affected by disruptions to food production, availability, and prices, but smallholders endure the most risks. 

Climate change and extreme weather events place additional pressures on the ability to produce enough food for a growing population

Across Africa and South Asia, wheat, maize, sorghum, and millet yields are expected to fall by 8% by 2020.  In some African countries, yields from rain-fed agriculture could fall as much as by 50% and prices of key food crops could increase by 50% to 120% across Sub-Saharan Africa (SSA) by as early as 2030. The result? The number of people at risk of hunger is projected to increase by 10-20% by 2040, with 65% of these people living in SSA and the number of malnourished children could increase by as much as 20%, again with the majority in Africa. 

Smallholder farmers need to be supported to build resilience to climate change in part by better integration into supply chains and improved strategies for managing farming risks. One way to build resilience for smallholders is to offer weather index-based insurance, but the traditional offering has faced several limitations. Typically, large-scale uptake of weather index-based insurance by producers and insurance suppliers has been slow due to challenges of risk aversion, scalability, large basis risk, and poor regulatory frameworks.

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The WINnERS project is overcoming these challenges by exploring contract design models where the cooperative, bank or buyer is the policy holder instead of the individual smallholder to dampen farmers’ risk adversity and expand reach. The contracts are tailored to specific sourcing sites to improve the accuracy of predicted losses and minimize basis risk. With these innovations, WINnERS services and products seek to share risk more efficiently and equitably across all supply chain actors resulting in more sustainable food production and improved market access, as well as higher incomes for smallholders and reduced exposure to climate and weather driven risks for buyers and retailers.