India's exploitative horticultural supply chain

India Together carries this article analyzing the reasons behind sudden rise and fall in prices of vegetables taking onion as an example. A typical 'price spike' episode is shown in the graphic below.

The article argues the following: 

• The per capita production of the basic vegetables of mass consumption - potato, tomato and onion - is showing a healthy increase over the decade. So it is not the case that production is not keeping pace with demand in the longer term.
• Analysis of a price spike episode shows that while weather did affect production for a part of the year in some area, the overall production that year was adequate to meet local and foreign demand.
• It appears that weather related events are not the cause but merely the excuse for pushing up prices.
• Farmers, mostly with small holdings, have little ability to store their crops to get higher prices
• The ability to hoard vegetables and sell at higher prices is entirely with the middlemen - wholesale traders and commission agents - of the mandis. While middlemen make a killing when prices spike, the farmers are at the receiving end when prices subsequently fall, as they must.
• The laws governing agricultural marketing and the middlemen-state nexus in the management of the mandis ensure that middlemen can dictate prices to both the farmer and the consumer.
• The hold of the middlemen goes beyond the confines of the mandis and extends to credit linkages with farmers, sub-wholesalers and retailers.
• The entry of corporate retail - Reliance, Mittals, etc - has not changed this state of affairs. Corporate retailers have not been able to break the hold of middlemen on farmers and meet most of their requirements of vegetables from wholesale traders rather than from farmers.

Links:

CCI commissioned study of Onion Markets

Inter-Ministerial Group paper on inflation

National Horticulture Board for price and production statistics

Food price inflation - Why is the Government helpless?

Food prices have become a major talking point for the media and the opposition parties have also just woken up to defend the aam aadmi. The Government has unveiled some short term measures to curb prices and it remains to be seen if these will be effective. The problem however is not short term in nature. A timeline of food prices of common food items shows that the rapid food price inflation dates back 2 years and even more in the case of certain items.

Several questions arise. Why have prices risen? Are farmers benefiting from the rise? And why is the government so helpless in curbing the rise?

This article in India Together attempts to find answers to these questions.

Comming a month later this article in the Hindu Business Line by C P Chandrasekhar  and Jayati Ghosh of JNU carries a similar analysis.

Sugar: The cycles of plenty and scarcity

"Kashinath Chinkera (30) of Mangalgi village ended life by consuming pesticide on Saturday. He is survived by three children. He had reportedly availed himself of a loan of nearly Rs. 2.5 lakh.

Most of the 43 farmers who ended lives in the district this year had grown sugarcane. Their complaint was that their crop was not bought by sugar factories in the district. They had huge loans to repay and they had spent a lot of money on cultivation. Refusal or delay by factories meant their crop would dry up day by day."   

---------- The Hindu reporting on farmers suicides in Bidar on May 28th 2007

The graphic below shows the retail price of sugar in Delhi - figures supplied by the Ministry of Civil Supplies. Your kirana store likely charges more.

The government describes the shortfall in sugar production as a "cyclical phenomenon" coupled with the effects of a bad monsoon. An analysis of the reasons behind the runaway inflation in sugar prices makes for different conclusions.

Sugar cane must stay in the field for 11 to 15 months to mature. The year refered to is the 'sugar season' and starts from October, the earliest month when crushing of the years sugar cane begins. Crushing lasts for a maximum of 6 months and the factories close their crushing operations by the end of May. Thus 2008-09 cane production refers to cane brought for crushing in the sugar season 2008 October to 2009 September. Cane acreage came down sharply in 2008-09 on the back of a smaller drop the previous year. Cane production came down by 20% while acreage had come down only by 12%. How much sugar was produced from the cane?
This question is answered by the next graphic. Sugar production fell by a sharp 43% in 2008-09 from the previous years level much higher than the 20% fall in cane production.

The reason, it turns out, is that more sugar cane - used for making gur and khandsari besides sugar -was converted to gur in the 2008-09 season than usual. Why did farmers prefer to see to small scale units manfacturing gur and khandsari rather than to the sugar mills?

The above graphic also shows imports (exports) of sugar. The consumption in India seems to be about 20-22 million tonnes. The years 2006-07 and 2007-08 were years of overproduction. The government promoted exports to get rid of the excess stocks even providing a subsidy to exporters as international prices in 2007 were lower than Indian prices.

India started importing sugar from early 2009. The international market has now gone into a tizzy knowing that India has to make huge imports to meet requirements for 2009-10. See the full analysis in this India Together article

This piece has been referenced in a paper on a 'Sustainable Sugarcane Initiative' here

Inflation in India - is WPI a faithful measure?

The media has been interpreting the Wholesale Price Index (WPI) numbers as heralding that inflation has been halted. But other indicators show a picture of inflation entirely different from that shown by the WPI. Far from reaching zero or negative levels, inflation as measured by the consumer price indices has been averaging around 10 per cent for industrial and agricultural workers over the last 6 months. Read article here

Edible oil policy

The edible oil policy that reportedly favoured Indian consumers at the cost of farmers has come back to bite the consumers with a vengeance. And with the US and Europe embracing biofuels, things could get much worse.

Edible oil on the boil