World Bank's IFC eyes higher farm sector lending

WASHINGTON (Reuters) - The International Finance Corporation, the private-sector lending arm of the World Bank, is ramping up lending to agribusiness in response to soaring grain and fuel prices, its CEO said on Saturday.

"Eighteen months ago, we started to beef up our agriculture department and put resources in there," Lars Thunell told reporters.

"We are looking at what we can do short term to help the situation," he said of rising food and energy prices that have triggered food riots and hunger in poor countries.

Thunell said the IFC was talking to banks and agricultural businesses in every region of the developing world, where farmers often lack working capital to buy seeds and fertilizer to take advantage of the higher prices their crops will fetch.

Capital shortfalls and distribution bottlenecks often mean that "in spite of the high food prices, they can't get the cycle going," he said.

IFC financing committed to agribusiness rose to $628 million in the July 2007-June 2000 fiscal year, up from $456 million in the previous year, IFC data showed.

"We're trying to invest in various companies, everything from processing companies, logistics, refrigerated trucks to packaging firms for either domestic consumption or export," said Thunell.

The IFC does not target individual farmers but is working with banks in Africa on ways to share risks of lending to support the growers and advising on how to turn bottlenecks into business opportunities, he said.

He gave the examples of apples from a small Chinese farm that normally might rot on the ground being used to make juice by an IFC-backed processing business and cotton growers in Tajikistan avoiding usurious informal lenders by tapping IFC funds made available through a local partner bank.

Small African vegetable farmers who sell their crops on the roadside often end up throwing away unsold produce, but could boost their earnings if they could refrigerate produce and ship it to cities before it spoils.

With food prices rising sharply, "the value of that waste was X a year ago; the value today is two times X," said Thunell.

(Reporting by Paul Eckert, Editing by Chizu Nomiyama)