Agri value chain needs an overhaul to rescue farmers
While each participants in value chain ends up raking huge profits from the business enterprise, it is invariably the primary producer who is left pauperised
Banana is the cheapest fruit available. It also happens to be the most eaten fruit in Europe and North America. Largely being traded, most banana imports come into Europe from Ecuador, Colombia, Costa Rica and Dominican Republic. Looking at the efficiency of the value chains that operate, all that the growers earn is anything between 5 to 9 per cent of the end consumer price.
Coffee is the world's largest traded commodity providing livelihood to at least 60 million people in more than a dozen countries. But every time you drink a cup of coffee, don't forget the coffee bean grower gets only a few pence of the price you paid. In India, for the Rs 250 you pay for a cup of coffee in any of the trendy kiosks, farmer gets only Rs 1.
Strange, isn't it? For agricultural commodities that are traded globally, and result in massive profits for every player in the food value chain, it is invariably the primary producer – a farmer – who gets to bear the brunt. With a meagre share in the end consumer price, they are left with little or no money to sustain their families. Eventually, most farmers end up either committing suicide or abandon farming to move to the cities looking for a menial job.
This is happening at a time when food value chains are expected to increase competitive performance, and in turn make it profitable for all the collaborators down the line. Makes sense, isn't it? But then how come while each of the participants in the value chain that includes transporter, processor, retailers to name a few ends up raking huge profits from the business enterprise, it is invariably the primary producer who is left pauperised?
To begin with, let's first try to know what a food value chain means. According to the website of the Ministry of Agriculture, Food and Rural Affairs of the province of Ontario in Canada, 'a value chain can be defined as a strategic partnership among inter-dependent businesses that collaborate to progressively create value for the final consumer resulting in a collective competitive advantage'. By linking production, processing and marketing activities, the value chains end up ensuring that each of the participant gains economically.
I am no expert in value chains, more specifically the food value chains. My interest in the role value chains play to link the primary producer with market demands actually arose from curiosity.
Sometimes back I read an interesting analysis by a Canadian author and critic Darrin Qualman. Interestingly, he explains that while the price of wheat in Canada (adjusted for inflation) has come down drastically over a period of 150 years, from $30 per bushel in 1867 to $5 per bushel in 2017, the retail price of 60 loaves that are produced from a bushel of grain actually increased by $50 in past four decades, between 1975 and 2015. The question he asks is something to really ponder over. Why is efficiency measured only in terms of reducing the price of wheat for the farmers?
Take another example of the banana value chain. A study by BASIC and the Make Fruit Fair campaign of Banana Link tells us that hypermarkets and supermarkets are the two dominant players in the value chain, walking away with 35 per cent and 33 per cent of the food sale in Europe. But if we look at the various stages of production and distribution, the most strenuous role is played by the banana growers who toil hard for about nine months in a year. And yet, in the end, the growers get a price that is not even enough to cover the cost of production. If that is the way we measure efficiency of a value chain, isn't it time for disruption?
I can go on and on with examples that illustrate how farmers have been ruthlessly exploited over the period by the so-called efficient food value chains. With concentration of power in the hands of big agribusiness companies, the little margins that farmers were earlier getting is being further squeezed by the big players. Regretting the trend, the US National Farmers Union states that four largest meatpackers control 55 per cent of poultry, 66 per cent of pork, and 85 per cent of beef processing. "These corporations dominate what is grown and how it's produced, all while paying farmers as little as possible."
The US Department of Agriculture's food dollar series makes it explicitly clear. In 2016, the Economic Research Service of USDA showed that farmer's share in the end consumer price, measured in terms of a dollar worth of food purchase, averages 14 cents. This was the lowest since 1993 when the series began. With such low incomes, it is quite obvious that farming becomes economically unviable, forcing farmers to quit in large numbers. That is exactly what happened in America, and that's the trend that is being followed globally. Nevertheless, what becomes abundantly clear is that at the very foundation of the agrarian crisis that prevails in America, and also for that matter what has brought tens of thousands of farmers protesting at the borders of New Delhi for over ten months now, is the devastation wrought by the exploitative food value chains.
There is nothing sacrosanct about the way food value chains are designed. Business and management schools, nationally and internationally, must acknowledge that food vale chains need an overhaul. It calls for disruptions on a big scale. Let us not shirk away from that responsibility. The value chains need to be made more responsible towards the primary producer, the very foundation on which the chains operate. That is why the demand for a guaranteed farm price is so crucial to sustain farm livelihoods. The food value chains should be left to adjust accordingly.