Agriculture thrives while farmers languish
Wealth creators live a life of penury across the globe
Looking at the production figures, it is quite evident that farmers provide the foundation for economic growth, and are in reality wealth creators. But when we look at farm incomes, the misery and pain with which farmers somehow survive remains rather unexplained. And yet, instead of helping them directly with measures and programmes that can enhance their income, and that includes providing a guaranteed price, the focus of policy makers has been to strengthen the supply chain, which implies supporting the players at the two extremes
When Glenn Davis Stone, a distinguished research professor of Environmental Studies, and author of 'Agricultural Dilemma: How not to feed the world', tweeted the other day, saying: "I'd separate agribusiness from farmers. Most federal aid has been to the former at expense of the latter," I realised how truly he had summed up the dilemma that policy makers, policy analysts and the media encounter, and how wrongly we are made to believe that any aid or support to agribusiness construes support to farmers.
In my response, I tweeted: "In India too, most analyst equate support to agribusiness as support to farmers. That is why agriculture continues to grow while farmers are left behind."
At least, this is what I have observed over the years. While the profits of agribusiness companies, which provide inputs like chemical fertiliser, pesticides, tractors and other farm implements to farmers, continues to swell with their stocks rising, farmers are faced with a severe agrarian crisis. At the same time, reports of irate farmers throwing their tomato, garlic, onion, potato and brinjal harvests, to name a few, into canals or being put to fire, appear regularly in the media. With the market price not even sufficient to cover the cost of production, farmers are left with little choice but to dump the produce.
While the farmers suffer the consequences, I have never seen traders (and that includes organised buyers) incurring losses as a result. In Punjab, for instance, more than 16,600 suicides by farmers and farm workers were reported in the 15-year period, between 2000 and 2015. But we hardly hear of suicides by traders (unless for personal reasons) and by input suppliers. In other words, the agricultural supply chain is so cleverly designed that both the players at the two ends rake in profits, while only the farmers take the hit. That is why despite producing a record harvest year after year, farmers continue to languish at the bottom of the ladder.
I have often wondered why is it that while the FAO estimates that India's gross value of crop production in 2018 (report released in March 2021) is at $ 289, 802, 032 million, and that of gross food production at $400,722,025 million, farmers continue to live in misery. After all, India stands next only to China, with a gross value of $418, 541,343 million, and yet farming continues to be faced with a terrible distress. This is depicted by a Situation Assessment Survey of Agricultural Households for the year 2018-19, estimating the average farm household income at Rs 10,218 ($124.7) per month. While this includes income from non-farm activities, but when seen alone, income from farming operations, comes to a paltry Rs 27 ($0.33) per day.
Looking at the production figures, it is quite evident that farmers provide the foundation for economic growth, and are in reality wealth creators. But when we look at farm incomes, the misery and pain with which farmers somehow survive remains rather unexplained. And yet, instead of helping them directly with measures and programmes that can enhance their income, and that includes providing a guaranteed price, the focus of policy makers has been to strengthen the supply chain, which implies supporting the players at the two extremes.
A simple and easily understandable answer is provided by Venky Ramachandran, a techie who runs a resourceful website called Agribusiness Matters. Imagine an iconic emotive smiley, and take out the U-shape from the drawing which depicts a smile (see the attached figure).
On the two extremes at the top are agricultural input manufacturers on the one hand, and an agricultural output buyer at the other end. At the bottom of the curve is the producer. While the two ends of the supply chain are reeling in profits, it is the farmer who lies at the bottom of the heap. The 'smiling curve' therefore provides a simple answer to a sad question that most people tend to ignore, and then he asks: "Why are farmers not making money when everyone else around them in the world of agribusiness is?" As I have often explained, despite new technology improving efficiency and thereby increasing productivity, farm incomes have been on a decline. As Canadian author and critic Darrin Qualman has shown in an analysis, while the wheat price (adjusted for inflation) has come down over a period of 150 years, from $30 per bushel in 1867 to $5 per bushel in 2017, bread prices have been on a rise. In the past four decades, bread prices have jumped several times.
Similarly, take the case of bananas exported from Latin America to Europe. The farmer's share of the end consumer price is so low that it doesn't even cover the cost of production. Farmers toil for over nine months every year and yet live on pittance. But agribusiness companies at both the ends of the supply chain have no complaint, whatsoever.
I remember a US farmer tweeting sometimes back that the price of corn he received in 2020 was less than what his father had received in the early 1970s. The point I am trying to make is that farm distress is global, and the smiley diagram aptly captures the tragedy.
The lesson here is obvious. When a budgetary boost is provided across agricultural value chains, with emphasis on building up a digital public infrastructure and for setting up a dedicated fund for agriculture start-ups, the question that needs to be asked is how will it translate into a higher income for farmers? Even in the case of Farmer Producer Organisations (FPOs), while a lot of excitement hinges on the ability to aggregate and therefore negotiate a higher price for farmers, in a majority of cases the price being provided to farmers is much lower than the Minimum Support Price (MSP).
The proposed Agriculture Accelerator Fund as announced in Budget 2023 too aims to support agriculture start-ups to find innovative solutions to challenges faced by farmers, and it remains to be seen whether it ends up nurturing the technology-provider or in reality ends up building the entrepreneurial ability of the farmer. I am not against technology but as the 'smiling curve' shows it hasn't helped farmers to be equally profitable and thereby become economically viable.
Perhaps a better way would be to guarantee a minimum share of the end consumer price that the agricultural supply chain must ensure to farmers.
(The author is a noted food policy analyst and an expert on issues related to the agriculture sector. He writes on food, agriculture and hunger)