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Inaugurating the National Convention of the National Growers Federation – group of associations of coffee growers in Karnataka – at Bangalore, I asked how much would be a farmers share from a hot cup of coffee that consumers normally drink in a trendy coffee outlet. It took them sometime to work out the cost, so much so that they even looked at some international analysis, and what they presented a day later would simply sound unbelievable.
For every cup of hot coffee that costs consumers Rs 250 on an average in any upwardly mobile coffee bar/lounge, the farmers share is only Re 1.
It didn’t however startle me. More so at a time when the international prices of coffee is a third of what it was about 13 years ago. The commodity futures market for coffee has remained depressed making the lives of producers more tenuous, forcing growers in many countries, especially the younger generation, to abandon plantations. In India, coffee prices have been on the decline for almost three decades thereby further aggravating the crisis in the picturesque coffee belt. To overcome growing debts, estimated at over Rs 8,000-crores, many growers have turned their homes into ‘home stays, some have abandoned plantations and many have moved out.
Earlier, a British Economic Survey report had computed a farmer’s share in a cup of coffee costing an average of 2.50 pound sterling, at only 10 pence. In other words, the coffee value chain, whether in India or in Britain, offers little or no succour to the coffee growers. Strangely, while all other stakeholders in a value chain end up making profits, it is the primary producer who is left to bear the brunt. “Unlike producers of commodities such as oil and natural gas, coffee farmers have long suffered from being at the wrong end of the value chain - receiving only a small fraction of the retail price of their crop,” says a Reutersnews agency report. Knowing that commodity future trading has played havoc with coffee growers’ livelihoods, the Financial Times had even sought a mechanism to stable coffee prices, which only shows that trading in futures market is no answer to the declining farm incomes across the globe.
Coffee is not the only agricultural commodity to be on the wrong side of the value chain, most other agricultural products fare equally badly. Several studies have shown that in case of bananas grown in Central and Latin American countries and traded in America/European Union, farmers share from every dollar worth of sale of bananas is a paltry 2 pence. Even for the best of the value chains, workers earn around 5 to 7 per cent of the total value of bananas while the retail pockets 36 to 43 per cent of the value. This is true for all agricultural commodities. It is the retail trade that walks away with a disproportionate share of the profits. In the case of milk, some dairy farmers in UK say that they receive at best 19 cents from every litre of milk consumers buy, which is not even enough to cover the cost of production.
To illustrate how farm prices have been declining over the years, the US National Farmers Union worked out a farmer’s share from what the consumers normally spend on a Thanksgiving dinner. Accordingly, a farmer gets just 12 cents from every dollar consumers spend. The US Department of Agriculture (USDA) has meanwhile also worked out that in 2018 for every dollar a consumer spent on food, farmers share of the profit pool was only 14.8 cents, which has seen a five per cent decline over the previous year. Interestingly, USDA analysis shows that while more than 85 per cent of every food dollar spent in the country goes for marketing, processing, wholesaling, distributing and retailing, farmer’s share is too low.
NFU says for one pound (0.45 kg) of tomatoes costing $ 3.19 in the retail, farmer gets only $0.54; for five pounds of potatoes retailing at $2.30, a farmer’s share is only $0.70; and for two pounds of bread costing $2.10 to the consumer, farmer share is only $0.10. Similar illustrations by the Indian Council of Agricultural Research (ICAR) are required showing what percentage of the retail price of vegetables, fruits and food products actually are passed on to farmers thereby helping consumers to understand the reasons behind growing indebtedness in agriculture leading to farm suicides and deepening of agrarian distress. Take the case of poultry eggs, a newspaper report quoted the Indian Poultry Equipment Manufacturers’ Association saying how in the past one year, the producer ends up making a loss of Re 1 on every egg consumers buy.
If becoming part of a value chain is an effective way for ensuring what is called ‘price discovery’ then there is no reason why farmer’s share in a food product available in the market should be declining. Further, linking these value chains with commodity futures trading is no assurance of price stability or a higher price as the coffee experience has shown. This is because to gain competitive advantage and high profit levels, companies are squeezing farmer’s price.
Since the farmer too needs a stable and appropriate income to survive, to maintain his family, to pay the health and education bills like all of us, the challenge is to find a workable mechanism that ensures the continuous viability of a farming enterprise. My first suggestion is to draw from the experience of Amul milk cooperative, which claims to pay dairy farmers nearly 80 per cent of the end consumer price, and to expand the cooperative farming network to include vegetables and fruits to begin with. The other approach should be to announce a minimum support price or intervention prices for every farm commodity, linked to inflation, and then credit the difference between the market price and the support price into farmer’s account as deficiency payments.
Farmer of no value in chain. The Tribune. Jan 17, 2020
https://m.tribuneindia.com/
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