Agriculture is a critical sector within the global economy, particularly in LMICs. According to World Bank data, agriculture accounted for 15.5% of GDP in LMICs, employing over half the labor force in these countries.
The agriculture sector faces interconnected challenges, from skyrocketing costs of fertilizer due to the war in Ukraine, to unsustainable practices such as the overuse of fertilizers and pesticides, monoculture farming, and soil erosion. Moreover, these challenges are compounded by climate change, particularly in LICs and LMICs, which are disproportionately impacted by climate-related damages. Altogether, these risks to the agriculture sector contribute to global food insecurity and acute poverty.
In 2021, agriculture ODA funding totaled US$9.9 billion, and agriculture ODA has comprised between 5% and 6% of total ODA from 2017-2021. With mounting risks on the agriculture sector and its sensitivity to the climate crisis, increased and debt-conscious donor funding is essential for achieving the SDGs, protecting livelihoods, improving food security, and building resilience to climate change.
After peaking at US$10.8 billion in 2020, agriculture ODA fell to US$9.9 billion in 2021. Similarly, donor’s prioritization of agriculture as a share of total ODA decreased from 6% in 2020 to 5% in 2021. However, this decrease could be related to reprioritized donor spending during the COVID-19 pandemic.
In 2021, Germany, France, and the US were the largest donors to agriculture, accounting for 47% of total agriculture ODA altogether. Germany was the largest donor in absolute terms, spending US$2.1 billion on agriculture, followed by France at US$1.3 billion. The US was the third-largest donor, spending US$1.2 billion on agriculture. In terms of agriculture spending as a percentage of total ODA, Iceland, Luxemburg, and Hungary were the top three donor countries, though their absolute contributions were modest.
To advance progress in agriculture, advocates should prioritize several key issues in the coming years:
- Increasing funding for agricultural adaptation to build smallholder farmers’ capacity to adapt to climate change
- According to the World Bank’s report 2016 Shock Waves: Managing the Impacts of Climate Change on Poverty, climate change could push an additional 100 million people into extreme poverty by 2030 if no action is taken. Climate change could cause the incomes of smallholder farmers in Africa, South Asia, and Latin America to decline by up to 20%. Accordingly, donors need to scale up funding for adaptation programs such as providing access to climate-smart agricultural technologies, improving water management systems, and promoting diversification of livelihoods to increase the climate resilience of smallholder farmers.
- Supporting food security and protect those impacted by malnutrition
- In the wake of the COVID-19 pandemic and the ongoing conflict in Ukraine, food insecurity is projected to double relative to pre-pandemic levels. More funding is needed for agricultural development, food assistance programs, nutrition, as well trade support programs. Moving forward, donors should prioritize sustainable, long-term interventions that are evidence-based, context-specific, and designed to meet the needs of vulnerable populations, to maximize the impact of each dollar spent.
- Targeting agricultural sustainability as a lever for climate change adaptation
- Despite the massive potential to mitigate climate change by making agriculture more sustainable, there is a lack of funding for agriculture sustainability initiatives, particularly in LICs and MICs. For example, while the agriculture and land use sectors are major contributors to greenhouse gas emissions, they received only 3% of climate finance in 2018. As such, increased funding for the adoption of sustainable agricultural practices, such as conservation agriculture, agroforestry, and integrated crop-livestock systems is critical to developing sustainable agriculture systems while reducing greenhouse gas emissions and increasing carbon sequestration.
- Advancing agricultural data as an important lever for reaching zero hunger
- Sound agricultural data is crucial for effective policy making in LMICs and the achievement and evaluation of SDG 2, Zero Hunger. As such, advocates should promote the collection and analysis of agricultural data to inform policy and improve productivity, net outputs, and farmer income levels.
Agriculture adaption-related ODA decreased between 2020 and 2021, from US$5.5 billion in 2020 and US$4.1 billion in 2021. This is a continuation of a downward trend after a peak of US$6.2 billion in 2017. In 2021, 2.2% of agriculture ODA had an adaption focus. More specifically, in 2021, 75% of donors had a significant agriculture adaptation objective, while 25% had a principal agriculture adaptation objective. More generally, in the past 5 years, agriculture adaptation ODA as a percentage of total ODA has hovered around 2-4%.
In 2021, the largest donors of agriculture adaption ODA were Germany, France, and the EUI. Collectively, disbursements from these three donors accounted for nearly 40% of total agriculture adaption ODA, or US$2.1 billion. Germany remains the largest donor in absolute terms with US$978 million for agriculture adaption-related ODA in 2021.
Food security-related ODA has seen a significant increase with a peak in 2021 of US$8 billion, compared to US$6.8 billion in 2020. This change could be due to donors' response to the ongoing food crisis, which has been fueled by climate disasters, dips in sector productivity, and the COVID-19 pandemic. Additionally, in 2021, 3.4% of agriculture ODA had a food security focus. ODA for food security has generally increased in recent years, from US$7.3 billion in 2017 and with US$8 billion in 2021. In relative terms, food security ODA as a percentage of total ODA has hovered around 3-3.5% since 2017.
The top three donors of ODA related to food security were the US, Germany, and the EUI. Together, these three donors made up 79% percent of total ODA for food security in 2021. By far the largest donor to food security was the US, which provided 52% of total food security contributions. The second- and third-largest donors were Germany and the EUI and Japan at approximately 18% and 8% of total food security contributions, respectively.
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The Donor Tracker team, along with many DAC donor countries, no longer uses the term "foreign aid". In the modern world, "foreign aid" is monodirectional and insufficient to describe the complex nature of global development work, which, when done right, involves the establishment of profound economic and cultural ties between partners.
We strongly prefer the term Official Development Assistance (ODA) and utilize specific terms such as grant funding, loans, private sector investment, etc., which provide a clearer picture of what is concretely occurring. “Foreign aid” will be referenced for accuracy when referring to specific policies that use the term. Read more in this Donor Tracker Insight.
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