Reforms should make farming sustainable

In India, there is a concerted campaign to discredit the arhtiya, building the case for bringing in agri-business companies. There is certainly a need to regulate the middlemen, but the American experience shows how the consolidation of the meat industry, leading to market concentration in the hands of a few companies, is making it difficult for livestock farmers to survive.

LOSSMAKING: Declining farm incomes has been the main reason behind the farm crisis worldwide. PTI

Devinder Sharma

Food & Agriculture Specialist

WHILE Indian policy makers and economists haven’t drawn any lessons from the failure of market reforms in American agriculture, and even after the three contentious farm laws were repealed, they still reiterate that supply-demand equilibrium leads to price discovery. Market dynamics has once again failed American farmers from making a decent living.

This time, it is the turn of the livestock farmers.

Even the US President Joe Biden acknowledges the fiasco. In a statement, he said: “Fifty years ago, ranchers got 60 cents of every dollar families spent on beef. Today, they get about 39 cents. Fifty years ago, hog farmers got 48 to 50 cents for each dollar the consumer spent. Today, it is about 19 cents. And the big companies are making massive profits.” This is happening at a time when the US Department of Agriculture (USDA) estimates the beef prices to have shot up by 21 per cent, prices of pork increasing by 17 per cent and chicken prices by 8 per cent over the year.

President Biden further added: “As their profits go up, the prices in the grocery stores go up immensely; the prices farmers receive for the product they bring to markets go down.” To explain, the US Agriculture Secretary Tom Vilsack responded in a tweet, saying: “This summer, I met a farmer in Iowa who told me he lost $150 per head selling cattle to a processor who would end up making $1,800 per head.” Imagine the kind of profits meat processing companies are making while squeezing farmers’ income.

In India, we can certainly blame the profiteering arhtiyas (commission agents) and traders for exploiting farmers; the four meat processing giants controlling 85 per cent of the US meat industry are in reality the bigger middlemen, no less than big sharks. In India, there is a concerted campaign to discredit the arhtiya, building the case in turn for bringing in agri-business companies. There is certainly a need to regulate the middlemen, but the American experience shows how the consolidation of the meat industry, leading to market concentration over the years in the hands of a

few big companies, is making it

difficult for livestock farmers to

survive. With prices crashing over the years, generations of families that reared cattle, hogs and chicken are broke, and faced with an exodus. As rural communities got wiped out, the ‘farm to fork’ experiment only ended up further expanding factory farming.

The collapse of the American farming is a living testimony to the destruction wrought by free markets in agriculture, and still worse the denial of the failure of supply-demand equilibrium in ensuring fair prices to farmers. This happened earlier with agriculture commodities, with dairy industry and now with livestock farming. Consolidation is happening across the supply chain, from farm inputs to the retail market. In fact, concentration leads to monopolisation and power, and the cartels these conglomerates form end up ruthlessly exploiting the producer as well as the consumer. Faced with the multinational corporations extracting their pound of flesh, the US National Farmers Union is running a nationwide campaign, ‘Fairness for farmers’, to break up corporate monopolies and to ensure stronger enforcement of anti-trust laws.

The US government has responded. President Biden has called for a crackdown on what some major players are doing in the economy that is keeping the prices high. To begin with, the government has allocated $1 billion for investments in small meat processing units to enable ranchers to compete with the giants in the industry. Not a perfect solution, but at least an acknowledgement of the devastation corporate monopolies inflict on both end of the supply chain — the producers as well as the consumers. The better way, however, would have been to guarantee prices to producers of agricultural commodities and livestock. Seeking income parity, this is what the massive tractor protest that took place in Washington DC in 1979 had also demanded.

Indian farmers too are demanding a guaranteed price by way of a legal sanctity to the Minimum Support Price (MSP), ensuring that no trading be allowed below the benchmark prices. Same in Europe, where farmers have been protesting time and again seeking a guaranteed fair price to bail them out of the continuing crisis.

Declining farm incomes over the past several decades has been the primary reason that led to the global farm crisis. To illustrate, in 2005, Canada’s National Farmers Union had in a detailed submission on The Farm Crisis: Its Causes and Solutions explained the reasons behind the unprecedented farm income crisis the world was witnessing for the past 20 years. Between 1985 and 2005, farm incomes had remained in the negative zone. This is exactly what the UNCTAD had also brought out in one of its studies acknowledging that farm gate prices, when adjusted for inflation, had remained static the world over in the 20-year period.

Recognising that “the farm crisis has landed with a vengeance in the highly-regulated farm economies of Europe and with equal ferocity in relatively unregulated Australia and Argentina,” the Canadian NFU lamented that the prices farmers were getting in 2005 were far less than the years of Great Depression in the 1930s. And that too at a time when the world was witnessing an impressive economic growth, a booming stocks market, growing trade and a record grain production. Among the 16-plan package it suggested as a solution to the growing crisis, guaranteeing farm incomes topped the list.

Canada’s NFU had then asked the government to implement a farm income support programme that will guarantee at least 95 per cent of farmers recover their cost of production, including reasonable returns on labour, management and investment. But like in America, the Canadian government too ignored the farmer’s legitimate call for a guaranteed price. This is essentially because the dominant economic thinking all over the world has failed to recognise the crying need to ensure farmers with a living income. As a result, farmers across the globe carry the burden of producing food at a loss.