Farmers are also wealth creators

Pic courtesy: frontline.thehindu.com

We all know it by now. Agriculture was the saviour during the gloomy days of the pandemic. Not only that an individual household got its regular supply of food during the lockdown, and those who could not afford were supplied with free rations, but agriculture also kept the wheels of economy moving. At a time when the economy had slipped by 23.9 per cent in the first quarter of the 2020 financial year, agriculture was the only bright spot registering a gross-value added (GVA) growth of 3.4 per cent. 

All through the year, agriculture provided a solid foundation. Despite the Covid-19 disruptions, and at a time when all other sectors of the economy were struggling, desperately counting the emerging green shoots, the country achieved a record foodgrain production of 308.65 million tonnes. The bumper harvest reaped in 2020-21 was higher by 11.15 million tonnes over what was achieved in the previous year. In addition, the country also produced 329.9 million tonnes of fruits, vegetables, and aromatic and plantation crops, including spices; around 204 million tonnes of milk, and 36.10 million tonnes of oilseeds. 

Simply put, farmers produced economic wealth for the country. Not only during the pandemic, but what needs to be appreciated is that year after year, farmers have toiled hard to bring food to our table. From a stage when India was living in a ‘ship-to-mouth’ existence, and that was not too far distant in the mid-1960s, the role Indian farmers have played in turning the country food self-sufficient is widely recognised. Agriculture has taken a quantum jump, increasing food production six times in seven decades, between 1950-51 and 2020-21. 

A vibrant agriculture is what sustains a growing economy. But to believe economic growth alone can address issues of hunger and malnutrition is nothing short of delusion. As the UN Food and Agriculture Organisation (FAO) itself acknowledges that ‘economic growth is necessary but not sufficient to accelerate reduction in hunger and malnutrition’, a study published in the scientific journal The Lancet shows a reduction in malnutrition by a maximum of 6 per cent even if the economic growth soars by 10 per cent. On the contrary, a well-fed nation builds up an efficient and productive manpower which is required to attain a higher economic growth. 

Since 1950-51, if measured in terms of population growth, four more India’s have been added. From 359 million in 1950-51, India’s population has multiplied roughly four times to 1.4 billion. Agriculture not only kept pace, defying the predictions of the Malthusian catastrophe, but has also produced an unmanageable surplus. Not only producing enough to feed the nation, the rise in the per capita availability of foodgrains, fruits, vegetables and milk also helped in meeting the challenges of malnutrition and hidden hunger. That hunger still persists in some parts of the country is not because of any shortfall in food production but is the outcome of the twin problems of access and distribution. 

If growth and prosperity is the central theme of Adam Smith’s seminal work An inquiry into the nature and cause of the Wealth of Nations, it has to be accepted that the remarkable transition in Indian agriculture is what has essentially not only added but led to the wealth of the nation. As the second largest producer in the world of essential foods like wheat, rice, fruits, vegetables, and crops like cotton and groundnut and being the largest producer of milk, jute and pulses, the long strides taken by farmers to shatter all records however has not translated into higher incomes. Growth, in this case, has not led to prosperity on the farm. 

The invisible hand that Adam Smith talked about has actually failed to provide living incomes for farmers, not only in India but across the globe. One doesn’t need to apply sophisticated economic models to find out how farm incomes have actually been squeezed over the years, and how free markets have sucked income from farmers. Instead, as the citation for this year’s Nobel Prize in Economics admits: “.. Conclusions about cause and effect can be drawn from natural experiments.” Agreeing, I feel there is no need for economists to hold econometrics studies when conclusions can be drawn easily from the available evidences. 

FAO has estimated India’s gross value of crop production in 2018 (report released in Mar 2021) at $ 289, 802, 032 million, and that of gross food production at $ 400, 722, 025 million. When it comes to the gross value of agricultural production at current prices, India stands second in the world, next to China, with a gross value of $ 418, 541,343 million. Now before you get lost in the maze of production statistics, what is important to ascertain here is the enormous economic wealth that farmers produce and eventually what agriculture sector generates. 

In other words, farmers too are wealth creators.   

It therefore requires a change in economic thinking, which has traditionally banked on the assumption that only businesses – small and big – are wealth creators. The obscene wealth inequality that prevails is the result of this outdated economic thinking. Otherwise I see no reason why at a time when gross value of agricultural production since 1999 has grown at an average annual rate of 8.25 per cent, farmers should be at the bottom of the ladder. In America, the share of a farmer in every food dollar in 2018 has plummeted to just eight per cent. In India, the latest Situation Assessment Survey for agricultural households computes income from crop cultivation at only Rs 27 per day.  

There is enough evidence to show how free markets have devastated farming across the globe. This has to change. It can only happen when we begin to treat farmers’ not simply as primary producer but also as wealth creators, and ensure their contribution in wealth generation is adequately compensated. To sustain billions of farm livelihoods across the globe, and to celebrate the role farmers play in wealth creation, a beginning has to be made by guaranteeing an assured and profitable price for farmers. #

Source: Farmers need assured price for sustenance. The Tribune. Oct 21, 2021. https://www.tribuneindia.com/news/comment/farmers-need-assured-price-for-sustenance-327252?fbclid=IwAR0mBapW307jBEgSuqnoX-a5YjrYkbylg0AUOFpB22PrkIZfej1iMXhY2mw

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Agri value chains exploit primary producers

A typical agri value chain

Courtesy: gramworkx.medium.com 

* 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 so-called 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 agri or food value chain, it is invariably the primary producer – a farmer – who gets to bear the brunt. With a meager 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, and 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 pauperized? 

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. Every time farm gate prices came down, take the example of wheat price, it is hailed as a sign of efficiency. But every time the price of value added product from wheat goes up, bread is an example, no one would like to call it a sign of inefficiency. It is taken as a natural progression, an outcome of an economic design that thrives essentially on increasing demand, and thereby consumption, to achieve economic growth. 

The wheat example I gave above needs a bit of explanation. 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 of150 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 9 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 agri 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. #

Source: Agri vale chains need an overhaul to rescue farmers. Bizz Buzz. Oct 1, 2021. https://www.bizzbuzz.news/opinion/agri-value-chain-needs-an-overhaul-to-rescue-farmers-1031915

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Agriculture: There are lessons from China.

Pic courtesy: depositphotos.com 

Speaking at an international conference in 1998 at the University College Cork, in Ireland, to commemorate 150 years of the Great Irish Famine that killed nearly one million people, I was asked a question: who will feed India? This question cropped up at a time when the world was already deliberating a hypothesis floated by the well-known environmental researcher and thinker, Lester Brown. 

Founder of the US-based environmental think tank, the Worldwatch Institute, and later president of the Earth Policy Institute, Lester Brown in 1995 had built on his analysis to come out with a book Who Will Feed China? This had triggered a hot debate, prompting numerous seminars and conferences across the globe. I remember having participated in a few of these conferences, witnessing heated debates that followed. There were terrific academicians who would support Lester Brown’s hypothesis, and there were experts who openly challenged it. Nevertheless, 25 years later, faced with record high domestic grain prices, China has emerged as the world’s biggest food importer – a reminder of what Lester Brown had warned decades back. 

While the severity of China’s food crisis is being denied, questions continue to be raised especially after President Xi Jinping launched an  ‘Operation Clean Plate’ campaign in August last year, asking people to ensure that no food is wasted. With an estimated 6 per cent food wasted every year, good enough to feed 200 million people, the campaign even involved restaurants to ensure people are not provided with lavish spreads. If the consumers order for five meals, the quantity of food served by some restaurants would equal to the requirement for four people. 

This reminds me of the times when in 1965, the then Prime Minister Lal Bahadur Shashtri had asked Indians to observe a fast on Monday, every week. This was primarily to ensure that people learn to ‘share and care’ at a time when food was in great shortage. In fact, in 1965, a year prior to the launch of Green Revolution, India had imported 10 million tonnes of foodgrains to tide over the severe food crisis. Shows how precarious the situation was. But after the launch of Green Revolution, India attained food ‘self-sufficiency’ but with the easy availability of food over the years, a kind of complacency has set in. 

Similarly, China too had taken long strides in food production. It was in 1996 that China had brought in a policy focus to ensure that it meets 95 per cent of its food needs from domestic production. But by 2011, as per the World Trade Organisation (WTO), China had become world’s largest food importer. With rising incomes, the food preferences of the burgeoning middle-class had undergone a change that shifted the food habits from staples to an exploding demand for meat and nutritious products, including dairy. 

The changing food habits prompted the government to shift the policy focus from food self-sufficiency to allowing ‘moderate imports’. Denials notwithstanding, mass urbanisation and the efforts to move bulk of the farming population away from agriculture to join the industrial workforce in the cities did leave a gap in production. At the same time, intensive farming practices resulted in heavy soil contamination, groundwater decline as well as pollution, and the resulting environmental degradation reduced the extent of arable lands, prompting China to announce that it will protect 120 million hectares of farmlands to meet its food security needs. 

As the average farm size in China declined to 1.6 acres, the growing appetite for chemical fertilisers, including nitrogen, coupled with direct income support for farmers had resulted in grain surplus accumulating to 600 million tonnes in 2017. Although the silos were bursting, the growing demand for nutritious foods, including beef, also soared meanwhile. To give you an idea, the sale of beef to China in a decade had grown by 19,000 per cent. A change in diet therefore forced China to scout for food all over the world, including India and Pakistan. 

According to Fitch Ratings, China’s imports of corn, wheat, sorghum and barley in 2020 soared by 136 per cent, 140 per cent, 437 per cent and 36.3 per cent, respectively. It expects the trend to continue in 2021 as well. Already it has exhausted soybean supplies from Brazil, the world’s biggest soya producer, and is now turning to USA. So much so, as Forbes points out that despite being the world’s second biggest wheat producer, China holds over half of world’s wheat stocks. Similarly, it has 65 per cent of world’s corn inventories.  

Unable to meet its growing food needs domestically, China has been on an aggressive spree buying farmlands in Africa and Latin America, and is now turning its attention to purchase farm lands in America, European Union and Australia. The website farmlandgrab.org estimates that since 2010, China has already made an investment of $ 94 billion in farm activities abroad, purchasing 3.2 million hectares. 

While China is clearly at the edge of a severe food crisis, there are important lessons here for India. In a country where mainline economists ravel in cut paste prescriptions in the name of agricultural reforms, the Chinese example illustrates how the transformation from a state-regulated farming to a market-oriented agriculture has brought it to face an unmanageable food crisis, perhaps pointing to a bigger crisis ahead. With the experiment to transform China into a manufacturing hub going awry, especially after Africa was able to provide cheap workforce, restoring farm viability now is becoming a still bigger challenge. 

China provides $206 billion of farm subsidies ever year (add to it tens of billions spent on importing food year after year) shows if the same amount had gone into converting small farm lands into an economic powerhouse, the world’s biggest grain producer could have easily avoided turning into world’s biggest grain importer. There was an alternate economic pathway, more sustainable in the long run, that China failed to undertake. 

India cannot afford to go on the same beaten track. Or else, the question as to who will feed India will continue to haunt future generations. #

Lessons for India from China's food import. The Tribune. April 21, 2021. https://www.tribuneindia.com/news/comment/lessons-for-india-from-chinas-food-import-241793?fbclid=IwAR0lcM3vV8wRpZE2b3g4AwbM2KjUNQPnNs0JTW7JgP3b2Ip8VML2Y47zJjM

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