Writing in the Conservative American, Austin Frerick, a director at the Open Markets Institute, had said: “In the 1980s, 37 cents out of every dollar went back to farmer. Today, farmers take home less than 15 cents on every dollar.” Pointing to the increasing concentration of economic power in the hands of a few multinational corporations over the decades to be primarily responsible for the declining farm incomes, he called for fixing the broken food system.
Last week, another article in Financial Times asked: “Is our food system broken?” In fact, a Google search for broken food systems comes up with hundreds of articles, reports and studies, clearly pointing to the desperate need to redesign global agriculture, with the primary focus on adopting sustainable farm practices and the desperate need to make agriculture economically viable. Another search for farm distress and among the top articles to pop-up is from the Time magazine: “’They’re trying to wipe us off the map’. Small American farmers are nearing extinction,” screams the headline. The more you read on farm distress the more you realise how in the name of free markets and the freedom to sell anywhere, to anyone is pushing small farmers off the land.
That makes me wonder. If after five decades or more of liberalisation of agricultural markets, with no stock limits for big retailers, and commodity futures markets giving an indication of the price at the time of planting, Al Davis, a former Nebraska senator and cattle farmer is left to say: “Farm and ranch families are facing a great extinction. If we lose the rural lifestyle, we have really lost a big part of what made this country great,” isn’t the exuberance being exhibited over the planned liberalising of agriculture markets in India overtly misplaced? After all, if leaving farm prices to markets is the winning formula, isn’t it first time to explain why American and European agriculture is in a severe state of distress.
Ever since the days of Uruguay Round negotiations, and subsequently after the WTO was formed in 1995, monumental agricultural subsidies being paid by the developed countries have remained a contentious issue. Former Commerce Minister Kamal Nath, who represented India at a number of WTO Ministerial conferences, had often said “you cannot expect Indian farmers to compete with the US treasury,” referring to the massive subsidies being doled out in America. Later, Arun Jaitley as Commerce Minister too had echoed the same sentiments at the time of the Cancun Ministerial. Even now, developing countries are asking for re-opening the hotly debated issue of farm subsidies.
This brings me to the essential question. If agriculture markets are so efficient, how come it failed to prop up US/EU agriculture? The US Department of Agriculture has itself acknowledged that the real farm incomes have been on the decline since the 1960s. And that too, despite such heavy subsidy support provided year after year. This is primarily because 80 per cent of these subsidies go to agribusiness companies, and the remaining 20 per cent are cornered by big farmers, as many studies have shown. An UNCTAD-India study in 2007 had shown that if the green box subsidies (protecting domestic support in agriculture) in the developed countries were to be withdrawn, agricultural exports from US, EU and Canada would drop by about 40 per cent.
Even 25 years after the WTO came into existence; OECD countries are still providing a huge producer support for agriculture, touching $ 246 billion in 2018. Of which, in EU-28 countries, the producer support totals $ 110 billion a year, roughly 50 per cent of it being in the form of direct income support. These subsidies are expected to further increase in the post-Covid period.
Repairing the broken food system therefore would urgently require restructuring the agricultural markets. Whether in America, Europe or India, where despite the scale, agrarian distress has been worsening over the years, the proposed agricultural reforms have to be tailored to the need to first make farming an economically viable, and profitable venture thereby restoring the pride in farming. Leaving farmers at the mercy of the markets hasn’t worked in developed countries. Nor has commodity futures trading been of much help. To illustrate, let’s look at the $ 103 billion chocolate industry, where the prices for cocoa beans is largely determined by commodity futures. While Africa alone produces about 75 per cent of the cocoa in the world, what percolates down to farmers is relatively insignificant. With hardly 2 per cent revenues coming to cocoa farmers, millions are living in acute poverty.
For several years, dairy farmers in UK had been protesting at supermarkets demanding to be paid a fair price that protects them against the volatility in prices. The bigger the retailer the more is the tendency to dictate prices. In the quest for higher profits, and at the same time ensuring competitive prices to consumers, big retail has often been known to squeeze on farmer’s margins. If big retailers like Sainsbury and Tesco, with the ability to maintain huge stocks, were providing a higher price to farmers, there is no reason why half of all the UK farms would end up being in business only by supplementing income from non-farm activities.
Providing a fair and assured price to farmers therefore is turning out to be the biggest challenge. All that has been tried, and tested in the developed countries has failed to show any promise. In fact, it has only pushed developed as well as developing country farmers into a severe crisis. Enabling farmers to sell anywhere, to anyone to get a better price is no reason for excitement, unless farmers can be assured of a better price. Instead of pushing what the agri-business industry needs as marketing reforms, let us develop a system that actually helps farmers become economically viable and in true sense atmanirbhar. Developing a food system based on local production, local procurement and local distribution is what India needs.
This is only possible by strengthening the existing networks of regulated APMC markets, and building a robust system of trading where the Minimum Support Price (MSP) becomes the model price. #
The broken food system. The Tribune. May 29, 2020
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