Fair price for farmers: How consumers can spur the change
We have to make the consumers realise that the true cost of cheap food is borne largely by farmers
I have often quoted an OECD-ICRIER study that puts an economic value to the losses suffered by the Indian farmers in the 16-year period, between 2000 and 2016. It puts the loss at a staggering Rs45 lakh crores, which means on an average, every year farmers suffered a loss of roughly Rs2.64 lakh crore. While some may contest the study findings, questioning the methodology, and others may find the loss to be an underestimate, the fact that perhaps for the first time an effort was made to measure the extent of loss that farmers suffered over an extended period, was solely missed.
Nevertheless, there was no public outcry over this. Except for a few of us writing and speaking about this study, and what it means to the survival of Indian farmers, the media as well as the academia was largely silent. Nor did Parliament take notice of this study, which actually pointed to the fundamental reason behind the acute farm distress that continues to prevail. Considering that more than 3.5-lakh farmers have committed suicide in the past 25 years or so, I thought the nation will feel outraged at what the study brought out. But nothing like this happened. It was business as usual.
But the significant point that is often missed is that the real beneficiary of the low prices to farmers was actually the consumer. While farmers invariably got 15 per cent less than what they should have ideally received, the consumers gained a price advantage by 25 per cent. The consumers silence therefore was understandable. That's what we normally would believe. This may however not be fair because I have always believed that a responsible consumer would always stand with the producer, in this case the farmers, provided he knows that the low price he is paying is primarily the reason behind farmer suicides and the grave agrarian distress that prevails.
My feeling is that consumers are not properly educated and no effort has been made to make them aware that because the farmers often has to sell his produce at a distress price, the indebtedness he carries multiplies leading to distress. Most farm suicides happen when the indebtedness burden crosses a threshold level that may vary from a family to family. If only the consumer was willing to pay relatively higher prices for the agricultural commodities they buy, farm livelihoods could easily become viable.
In this age of 'competitive' prices, where businesses try to reduce market prices, we should realise that it is actually the big business and trade that is the real culprit. Why I say so is because when economists try to promote 'competitive' global value chains, they actually turn a blind eye to the misery the supply chains inflict on the farmers, the primary producer of the agricultural commodities. Every agricultural supply chain and I don't know of any exception, ends up inflicting a severe damage to farm livelihoods. We can blame the consumers for not willing to pay a higher price, but it is the business that wants to extract its pound of flesh by way of higher margins.
Let' take the case of milk prices. I have come across reports of milk producers putting up banners seeking apologies from the people that they can't produce milk anymore at the prices they are being offered. That was from a recent protest in Ireland. In UK, dairy farmers rue the withdrawal of the milk boards in the name of economic liberalisation, which has exposed them to ruthless exploitation by the markets. Milk prices have been reduced over the years by super markets in a bid to stay competitive. In US, 93 per cent of the small dairy farms have pulled down the shutter since 1970s because of a steady reduction in milk prices. It is not supply demand as the companies would make us believe, but it is simply the greed for bigger share of profits that leads to a race towards rock bottom prices. This becomes clearly evident when one realises that despite the mass closure of small dairy farms, milk production in the US has actually increased with the entry of big players and mega dairy farms.
But the entire business of 'competitive' prices can be set aside when consumers realise that the prices they pay for the milk they buy from stores actually is not enough for farmers to survive. This realisation has brought about a new revolution in consumer behaviour in France. This experiment should serve as an example for others to follow the path-breaking trend. It only tells us that consumers are willing to change provided we make a serious and honest effort to educate them.
Untiring efforts by Nicholas Chabanne has made farmers realise that they need to pay a higher retail price. He set up a French cooperative brand C'est qui le patron (Who's the boss?). It has developed a new marketing culture wherein consumers are willing to pay an extra price to sustain the dairy business, to see that dairy farmers don't go bust. What began as a small initiative in 2016, this milk brand now tops the sale of milk in France, selling more than 301 million litres of fair priced milk by now. More than 11.5 million consumers have reposed faith in this excellent endeavour, which ensures that 45 per cent of the end consumer price goes to the farmer. This should be a lesson to imbibe, especially in Europe and America, where dairy farmers are somehow struggling to survive.
In India, Amul milk cooperative already claims that it pays 80 per cent of the end consumer price to farmers.
Reverting back to the French cooperative, each farmer has to pay an enrolment fee of Euro 1 to become a member. The coop has launched 32 new products like butter, pasta, applesauce, wine, sour cream, flour, sardines, pizza, etc. and the market for these products is also growing. The loud message is that we have to make the consumers realise that the true cost of cheap food is borne largely by farmers. Consumers would then be certainly willing to pay a higher price for reasons that are genuine and ethical and also when companies are transparent in their business practices.
Imagine, if the Indian farmers were to get a fair price for their produce, the rural economy will certainly rock. More money in the hands of farmers would mean more rural prosperity. It may not be easy to make the consumers realise that they hold the key, but it is certainly doable given the determination and dedication amply demonstrated by Nicholas Chabanne. Let's hope, this inspires hundreds of flowers in India to bloom, to launch a new market revolution where consumers decide.
(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)