Guest post by Dr. Richa Govil, Ashoka India
In India, rice and wheat comprise 70 percent of agricultural produce by area, but less than 25 percent by value. In other words, wheat and rice are low value crops to grow compared to other options. Yet, the land area dedicated to wheat and rice has not seen a significant decrease in the last decade.
Government data shows that the consumption of wheat and rice has been declining around 1-2 percent in both urban and rural India, while the demand for fruits and vegetables has been rising by 2-3 percent annually. This again begs the question: Why aren’t farmers shifting to growing more fruits and vegetables?
Furthermore, detailed studies across the country have also shown that while farmers just about break even (gross return compared to gross costs) on cultivating wheat and rice, growing fruits and vegetables is a profitable undertaking (gross returns are on average double the costs). Besides fruits and vegetables, there are also other crops that generate a higher income than wheat and rice. Having gone through these reports and data, I have been wondering why, despite all this, do farmers choose to grow mostly wheat and rice?
In other words, if Indian consumers are demanding more fruits and vegetables, and these crops are more lucrative anyway, why do Indian farmers keep growing more and more wheat and rice?
Are farmers completely unaware of the difference in returns? Or, is it that despite knowing the disadvantages they choose to grow wheat and rice?
The first possibility seems rather difficult to believe. While I am sure farmers have not created a detailed profit and loss statement for growing wheat versus okra, it is unlikely that farmers are completely ignorant. They probably do have a rough idea of probable market prices, input costs and likely profits.
So what is it about fruit and vegetables that keeps farmers from growing them?
Out of intellectual as well as professional curiosity, I have being digging deeper into this question, with the help of field visits and people working in the agricultural sector. Here are the results from my own observations and discussions with agri-sector professionals and experts.
- Minimum support price: Wheat and rice come with a government minimum support price, and fruits and vegetables don’t. Farmers find it reassuring to know that MSP exists and may influence open market prices and/or demand for their produce.
- Risk of crop failure: Pulses, fruits and vegetables are more vulnerable to adverse weather, leading to higher risk of failure. Rather than pay for crop insurance (where it is available), farmers prefer to simply avoid these crops.
- Care and effort required in cultivation: Wheat and rice require less care and effort to grow than vegetables. Higher care for crops means reduced availability of farmers for alternate income-generating activities, whether crafts or wage labour.
- Need to sell quickly due to lack of storage facilities: India has about 5400 cold storage units, the majority of which are appropriate for potatoes. So farmers don’t really have much of an option to store fruits and vegetables for later. The need to sell immediately means that they are at the mercy of current market prices, unlike grains that can be held on to for a longer time.
- Price volatility: Fruits and vegetables experience a much higher degree of price volatility than grains. Part of the reason for this is the high level of mismatch between demand and supply of fruits and vegetables. Another reason is the inefficiency of markets in matching supply and demand in different parts of the country. And of course, their inherent perishability and lack of cold-chain is an additional worry.
- Price realization due to spoilage: Lack of proper storage and transport facilities has yet another impact – spoilage of produce resulting in lower price realization due to poorer quality of produce by the time it reaches markets. For example, I saw cracked coconuts at a sorting-grading facility – damage that could easily have been avoided with proper packing (and better roads).
- Stored crops as financials assets: As one agri-expert put it, farmers treat grains like fixed deposits, for lack of other ways of saving/keeping money. Repeatedly, farmers told me that they store grains and sell them off as and when the need for cash arises. You simply can’t do that with fruits and vegetables! Even cold storage would extend the life of fresh produce by only so much (unless processed, of course).
- Dignity of transaction: Recent discussions with farmers revealed another reason for medium to large land-holding farmers not growing vegetables. Typically, vegetables are harvested and sold in smaller quantities at a time. When selling wheat, a large landholder farmer can arrive in the mandi with a truck-load full of wheat and be treated with respect. But if he arrives with a small vehicle of veggies, he will be treated just like small and marginal farmers without much respect and dignity. It is interesting to note how class dynamics plays into decisions about what to grow.
Almost all of the reasons listed above relate to risk – either production risk, logistics risk or market risk. Only two non-risk reasons can be seen in the list besides dignity of transaction: the opportunity cost of choosing crops which require greater care, and use of stored crops as financial assets. In principle, the latter can be addressed with better financial access for small holder farmers.
Typical solutions to risk management are insurance products, but typical crop insurance products cover only a limited subset of these risks. And in any case, insurance subscriptions in India have been much lower than hoped for by policy makers and non-profits alike.
So, what are the mechanisms and institutions needed to address the plethora of risks, to enable farmers to produce the crops people want to eat more of, which also happen to be the crops that give higher margins to farmers? Or, if we expand our thinking to non-food crops, we can ask: what mechanisms and institutions will help farmers shift to more lucrative crops with growing market demand?
Challenges of switching crops
Switching to a crop that has not been typically grown in the area brings in additional sets of challenges. First, it goes without saying that the soil and climate have to be conducive to cultivation of the new crop.
Second, the farmer has to learn how to grow the new crop (or new variety of the same crop). For example, I visited farmers who were growing baby corn for the first time and had let the cobs grow too much simply because they did not know when to harvest it. While the produce was still usable, a significant portion of its potential value was lost.
Third, buyers for the new crop need to either already exist at the local mandi (wholesale market), or brought to the local market, or the produce shipped to wherever the buyers are. In Bihar, I was speaking to farmers who traditionally grow cauliflower. Driving around the area in the cauliflower season, you see miles and miles of cauliflower. I asked a savvy farmer group why they grow the same crop that everyone else does and they replied that since the region is known for cauliflower, it is the cauliflower buyers who come to their local mandi. If they started growing something else, they cannot be confident of finding a buyer. Interventions in crop switching (such as organic farming) work well when a new market-facing intermediary is created to procure the produce directly, or act as a sourcing agent for other buyers.
And lastly, the financial risks of making the transition need to be absorbed or softened. For example, a few organizations working on transitioning farmers to organic farming are experimenting with providing a financial safety net during the first three years of transition and low yields before the produce can be certified as organic. These kinds of arrangements could be considered in this context as well and would help encourage farmers to switch to new kinds of crops.
Note: Published here is an updated version of the article that was earlier published in Fellowconnect magazine.