18 December 2011

Farm Glut and the FDI Gorilla .

The recent Potato Glut in Punjab has again got the FDI supporters telling us  sagely - if Walmart was here this would not have happened. This when Punjab is the most advanced State in terms of Agrobusiness. Bharti -Walmart and Pepsi have been  firmly ensconced for some time there now . Of course they must have lifted all the potatoes their godowns could hold but there  is more and the carrying cost is more . 
A simplistic view would be to have more of Big Retail,more cold storages,more of food processors,Vodka brewers and Chips sellers in the State .Because we see this as a problem of distribution -a problem of logistics.
Not as a problem created by a  dangerous reliance on free market forces to guide agricultural production patterns and as a failure of crop intelligence .
To make this more clear it would be interesting to see how the US farmer ,with access to all the Walmarts and all the processors -is "protected" from  the glut.
This is an excerpt from Michael Pollan's -Omnivore's Dilemma  which discusses why the American  farmers despite earning a pittance keep on growing corn when it costs more and more each year to grow it and to sell it to feed the Corporate demand for Corn.And the grave consequence for the Food and Agriculture System as a whole. 

  • "Farmers, believe it or not, actually lose money on every bushel of corn they make.  In order to actually feed their families when the price of corn drops, they have to squeeze out more corn in marginal land using more heavily fossil-fuel laden nitrogen fertilizer to try to make ends meet.  Of course, this further drives corn prices lower, which compels farmers to make even more corn.  This means  $5 billion a year in corn subsidies by the Federal Government to keep the farmers afloat ."
  • Naylor's curve : "A farm family needs a certain amount of cash flow every year to support itself, and if the price of corn falls, the only way to stay even is to sell more corn. Naylor says that farmers desperate to boost yield end up degrading their land, plowing and planting marginal land, applying more nitrogen – anything to squeeze a few more bushels from the soil. Yet the more bushels each farmer produces, the lower prices go, giving another turn to the perverse spiral of overproduction. Even so, corn farmers persist in measuring success in bushels per acre, a measurement that improves even as they go broke."
  • So the farmer remains trapped in low prices which means more profit for the Big Retail and Agro -Industrial combine. The consumer gets a cornified food chain .And everybody feels happy for the time being that they knew what to do with the glut !
Coming back to Punjab ,what led to a glut of Potatoes?
  • An insistence by the Agrobusiness guys to grow Potatoes ! The bigger farmers who choose a cash crop (potato is a cash crop in Punjab with it's swarm of agrobusiness) initially get  handsome returns - leading all the small and marginal farmers to emulate them at the cost of diverse ,multicropping patterns which may not give roof high returns  , but which are by nature a safeguard against price volatility.
The debate in FDI  IS NOT about  rapacious traders ,deprived consumers and poor farmers robbed of  higher Returns.
It is about leaving a lamb of a farm sector which is already vulnerable to losses  due to over-dependence on market economics of industrial agriculture to be played around by a 800-pound gorilla in the retail woods -which is what Walmart -the World's largest Grocery Chain is. The solution does not lie in more of  mono-cultures ,hybrid seeds ,fertilizers and pesticides ; more water guzzling cash crops, more groundwater use and mechanized factory farms causing a near stagnation in the unskilled,semi-skilled,rural employment market . We need Sustainable Agriculture .

The health of the farm sector is vital because we eat what they grow.And the kind of Agriculture we patronize,or the Corporates loved by us do, decides how we eat . The US has made the world Corny -do we want to get Potatoed ?

Leaving rhetoric aside what are the alternatives to deal with the glut ? Devinder Sharma noted Agriculture Policy Analyst  while reiterating that more Markets are not the answer recommends a  crop Intelligence System.His three suggestions are :
  • Regional Crop Mapping -to provide information backed guidance on how much a farmer should sow of a particular crop.
  • Embracing Multi-cropping and eschewing monocultures.
  • Assured Income Package for farmers.
Sustainability with Food Security is the way forward for Punjab Farmer -where Industrial Agriculture is close to the end of its dream run . Would we choose even more input heavy Agriculture leaving lesser incomes for the farmer or would we turn towards a Strategy for healing the ravaged,poisoned ,salinated and water-logged earth ?


  1. Zephyr18.12.11

    this was actually the reaction of people who are trying to push the FDI thing through. Loved this one for demolishing the theory.

  2. ooh ! I don't want to jump in this fray - but keep getting drawn in :D

  3. Currently INDIA is not ready for FDI not our laws, not our farmers

  4. FDI = Farming destruction Initiative :))

  5. I don't completely understand the whole dynamics of FDI so don't want to comment on that part.  But I agree with you that sustainable agriculture is the way to move forward.

  6. magiceye20.12.11

    Because our Government has failed in providing storage facilities the Gorillas are coming over sensing a complete takeover!

  7. I am still going through this blog, so this comment might be premature, but I have a slightly tangential perspective that I feel is relevant. The entire FDI in retail versus sustainable agricultural systems has another angle that many miss, that of poorly thought out developmental plans. If the agricultural sector receives the proper kind of attention, the kind that the industrial heavyweights do, from our policy makers, a lot of the input quality will improve, as will the supply chain dynamics, resulting in overall value creation. It is the over-emphasis of urbanization and urban lifestyles, not just through policy making, but also through popular media, that has caused this situation where FDI in retail seems to be a solution to the farmer's problems.

    As a big fan of Pollan's work, I like the approach to health and living that this blog seems to be endorsing, and I wish you all the best in your efforts.

  8. Subhoroop ! glad to know you .
    use and exploit -don't think of tomorrow = high economic returns ,growth today *Vs* re-charge -heal and leave something for the future generation = little less returns today but higher quality,better health of ecosystem.Plans and Corporates are both short term -thats their basic problem.

  9. Beyond a point - more storage means more carrying cost.The Answer is going for a diverse cropping pattern so single commodity gluts do not happen.

  10. Sangeeta khanna21.12.11

    Absolutely....sustainable agriculture might be a slow process but crop intelligence needs to be practiced at all levels of production and market economics. The greed of instant profits is leading to destruction beyond repair for the ecosystem.

    Great post.

  11. Devinder Sharma's three suggestions sound good. The first two are easily do-able. But to assure farmers an income? If there is a drought and no crop from farmer A, the wholesaler will simply go to farmer B. I don't think they'll pay farmer A. Of course, there is one safety net - insurance. But the cost of insurance will definitely be built into the price of their produce.



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