Economic Opportunity Mailing List Archive

["Vinay Chand" <<address removed>>]

I like and agree with William's distinction between effective and efficient 
access to markets. Most farmers engaged in any scale  of commerce can sell 
through collectors and here again I agree that collectors play an invaluable 
role. They can be cut out but not their function. Someone has to do the 
collecting but the balance of power is definitely with the collector. The 
latter is the buyer only when he has also advanced credit to the small farmer, 
otherwise he is purely and simply an aggregator. My argument is based on a 
gross simplification of the distribution system as it does exist.

In the chain from farmer to the retailer, the retailers often command the 
highest gross margins, followed by losses, wholesalers, collectors and then 
farmers. I am going to stick to my guns about market information systems in so 
far that they don't directly assist the farmer. However, systems can greatly 
assist retail buyers, wholesalers, transporters and collectors and anything 
that makes the system more efficient has to be welcomed since gains may well 
percolate down to the farmer. The reason for drawing the distinction is that 
nearly everywhere I go today, there are ever more sophisticated and expensive 
market price information systems being mooted in the name of the farmer. The 
public cost is thus seen as justifiable while there would be a greater emphasis 
on sustainability if it were recognised that the systems are for traders.

In any case, I thought there was some degree of consensus earlier in the debate 
that the farmer especially the small farmer has very little choice as to who he 
will sell to due to credit and when he will sell due to poverty. Without good 
post harvest facilities or effective farmer organisations, there really is no 
choice here for the small farmer, he has to harvest and sell as soon as he can 
to relieve the cashflow pressures.

What we have is a situation where in poor countries there are inefficient 
chains of distribution that result in over large ratios between farm gate and 
retail. The worst part of my experience has been that in most of the countries 
I have worked in recently they don't even know what the farmer is getting at 
farm gate. Therefore, they cannot really compare relative returns from 
different crops in gross or net terms. Hundreds of millions of dollars are 
being invested and there are calls for more money when few take the trouble to 
know what the farmer gets paid. Instead we want to supply the farmer with price 
information on what consumers are paying retailers or what wholesalers are 
paying other wholesalers at prices that bear no resemblance to what he is being 
offered or can demand.

I also agree with Andrew Shepherd that caution is required in interpreting 
farmgate based data in that we must not jump to conclusions about exploitation. 
On a recent TA in India I was extremely impressed by the massive service sector 
that services agriculture and gathers produce from all corners of the country, 
bringing it to the market at low prices to urban consumers who too have hardly 
been rich in the past. The system is massive and awesome and most participants 
cannot be described as greedy. Yet purely on grounds of inefficiency and 
underinvestment it leads to ratios between farmgate and retail of over 1:10 up 
to 1:20 in some instances and that is very inefficient. There are too many 
participants making tight margins and incurring high real losses.

The conclusion I draw is not the exploitation issue but rather that in such 
terrible inefficiency and deterioration of produce quality, there is a great 
deal of leeway of investing to make the system more efficient allowing higher 
farmer prices at the same time as leaving alone or hopefully lowering consumer 
prices. Central to trying to do this is to work on the entire chain in an 
integrated manner. The target should be to offer the farmer more choice by 
liberating him from the debt trap and working with the farmer to better meet 
market needs.

To me that requires developing new parallel channels of distribution as well as 
some contract farming. The farmer should ideally own the aggregation and 
collection which brings us back to the need for very small farmers to work 
together.

Best wishes,

Vinay Chand,
230, Finchley Road,
London NW3 6DJ, UK
Tel: 44-20-7794 5977
Fax: 44-20-7431 5715
<address removed><mailto:<address removed>>