Financial Daily from THE HINDU group of publications
Monday, Jan 06, 2003
Agri-Biz & Commodities - WTO
The fallacy of raising crop yields
Not only crop failures, even bumper harvests have begun to push farmers into a vicious cycle of mounting debt and distress.
EVER since the Agreement on Agriculture of the World Trade Organisation (WTO) began to be debated in the country, increasing agricultural productivity and improving food quality are being tossed as the only solutions for farmers' survival. Invariably, at every conference and seminar on WTO, the common refrain is that farmers are left with no choice but to increase productivity and thereby reduce the cost of production to remain competitive in a globalised world.
The productivity bug has bitten not only the agricultural scientists but also the policy-makers, planners and, of course, the politicians. So much so that even the President, Mr A. P. J. Abdul Kalam, has urged agricultural scientists to work for doubling crop productivity in the next decade.
He was recently addressing a gathering of agricultural scientists at the 30th anniversary celebrations of International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), near Hyderabad in Andhra Pradesh.
Within a fortnight of President Kalam's exhortation to agricultural scientists, farmers in Kurnool district in Andhra Pradesh, dumped cartloads of tomato on the streets. Excess production had resulted in a crash in tomato prices, with prices slumping to 50 paise a kilo (less than half a cent for a kg), farmers were left with no choice.
In Maharashtra, Uttar Pradesh and Punjab, irate potato growers have demonstrated their anger by throwing potatoes onto the highways. There are no takers for the bountiful potato harvest.
Not only crop failures, even bumper harvests have begun to push farmers into a vicious cycle of mounting debt and distress. Whether it is Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra or Punjab, farmers are increasingly becoming a victim of the new emerging phenomenon of "produce and perish".
Farmers have been misled to believe that diversification from staple grains to cash crops is the only way out to escape an uncertain future. At the same time, farmers are being asked to increase crop productivity to remain competitive in an era of `free' trade.
Since the global trade parameters are being relaxed and phased out, increasing productivity is being touted as the new survival mantra. The high productivity refrain comes in handy for the biotechnology industry to bring in expensive and risky technologies, further compounding farmers' woes. In the bargain, it is the farmer who faces the brunt, often opting for the fatal route to escape the humiliation and distress that such half-baked advice brings in.
At every national and international conference, it is not unusual to see slide projections that point at the low productivity in India and, for that matter, in other developing countries. The projections for area and productivity under cereals, including wheat and rice, and crops such as sugarcane, cotton and vegetables, points to the prevailing dichotomy.
India ranks among the top five countries (often among the first two) having the largest area under crops such as wheat, rice, cotton, sugarcane, and vegetables. Its ranking in productivity brings it to the bottom of the chart, with per hectare yield or productivity hovering among the lowest five or ten countries. Increasing productivity will bring more income to farmers and, thereby, increase their presence and competitiveness in the international market.
Take the case of rice, the most important staple food crop of India. In the year 2000, India's rice paddy yield was hovering at 3,008 kg per hectare. In Thailand, the major rice exporter, paddy productivity stands at 2,329 kg.
In the US, the average yield per hectare was more than double at 7,037 kg. If productivity alone was the criteria, the US should have captured the entire world market in rice. And, at the same time, Thailand should not have been able to export rice considering that its average productivity is lower than even India. Moreover, even with such low rice paddy productivity, India had a record procurement of 20.9 million tones of rice in the 2001-02 marketing season.
The grain stock build-up over the last few years has seen India's rice and wheat surplus increase to an unmanageable level of 51.4 million tonnes in October 2002 (against a record 65 million tonnes in June 2001).
In fact, chief ministers of surplus rice-producing states of Punjab, Haryana, and Andhra Pradesh have been repeatedly asking their farmers not to produce more of rice as they have no place to stock it. The Centre too has been toying with the idea of getting out of food procurement leaving farmers to the vagaries of the market.
In the US, however, despite the high paddy productivity, farmers find its cultivation uneconomical. The US government, therefore, continues to subsidise its farmers.
Estimates point that the American farmers receive an average subsidy of $30,000 per farm per year. As if this is not enough, the new Farm Bill brings an additional federal support of $180 billion for the next ten years.
If high productivity is the criteria for global competitiveness, there is no plausible reason why the American farmers would depend on government doles for survival.
To ask the Indian farmers, therefore, to increase paddy productivity, is to merely push them into a death trap. Already, rice farmers in Punjab and Andhra Pradesh continue to suffer for producing more. For the past two years, with the Food Corporation of India (FCI) refusing to buy paddy under one pretext or the other, distress sale has become a common phenomenon. At many a places, a number of rice farmers preferred to commit suicide waiting endlessly for buyers in the markets. The scenario for wheat producers is no different. They too are faced with the `produce and perish' syndrome.
In cotton, India has the dubious distinction of having the largest area under the crop and one of the lowest average yields. This unexplained paradox was exploited by the multinational seed company, Monsanto, to hastily push in its genetically modified `Bt cotton' variety.
The Department of Biotechnology and the Indian Council of Agricultural Research (ICAR) too used the productivity yardstick to justify the approval granted to Bt cotton. By reducing pesticides use, Bt cotton was expected to reduce crop losses thereby increasing per hectare productivity.
The rise in productivity will help farmers get more for the produce, and also enable them to export.
While the impact both negative and positive of Bt cotton was too small to make any dent on the national production figures, the fact remains that cotton has lately emerged as the crop that has increasingly pushed growers into a death trap.
In 2002, more than 100 suicides were reported alone from 12 districts that constitute the Vidharva region of the eastern Maharashtra. Faced with mounting debt, a failed crop for the second year and government indifference, cotton farmers are resorting to suicides as a way out of misery. The Government's denial notwithstanding, more than 10,000 cotton growers have committed suicides throughout the country since 1987.
In contrast, the US remains the world's largest exporter of cotton. Armed with roughly $3.4 billion in subsidy, US farmers last year harvested a record crop of 9.74 billion pounds of cotton, aggravating a US glut and pushing prices far below the break-even price of most growers around the world, including India, China and west Africa.
In 2002-03, US cotton farmers are expecting to pocket even more, thanks to the Farm Bill signed by the US President, Mr George Bush, in May 2002. The Government programme ensures farmers reap about 70 cents a pound of cotton by making up for any shortfall in the market with state support.
Although relatively small share of the farm population just 25,000 of US' 9,00,000 farming families actually raise cotton their affluence and influence is legendary.
The average net worth of a full-time American cotton-farming household, including land and non-farm assets, is about $800,000, according to the US Department of Agriculture.
And more than half of it comes from the government subsidies. The slump in world prices, therefore, has no impact on their lifestyles. But, in turn, brings misery to farmers in the majority world.
No wonder, US cotton continues to dominate the world market. Even if Indian farmers were to double the cotton productivity, how can they ever compete with the American cotton-producers who receive a lavish federal support?
the cotton productivity in countries such as India, more would be the resulting crisis for the farmers and the country's food security and economy.
Further more, with the phasing out of quantitative restrictions on agricultural commodities, the import of cotton (from the US) has increased from 21,200 tonnes in 1999 to 48,805 tonnes in 2000.
It is strange that the government, which asks domestic farmers to improve productivity so as to attain global competitiveness, should allow highly subsidised imports so as to help the American cotton growers?
Let us move to another part of the world. Monica Shandu was adjudged the best small-scale sugarcane grower for 2001 in the Entumeni Hills of South Africa. She farms four acres with sugarcane, and the harvest brings her an equivalent of $200.
Despite being a progressive farmer with high productivity levels, Monica lives in penury, barely managing to survive against all odds.
Far away in France, Dominique Fievez cultivates his farm of 400 acres with sugar beet. His is an average farm, which remains untouched by the price fluctuations in international market since 1984.
The reason: Fievez receives a huge subsidy support under the European Union's Common Agricultural Policy at the rate of $23,000 for each of the 33 acres that he grows with beet. Such heavy subsidies depresses the international sugar prices, making it difficult for developing countries to export.
Monica Shandu gets a low price for her cane harvest because of the subsidies that farmers like Fievez in France continue to pocket.
To ask Monica Shandu in South Africa to work more for further raising the sugarcane productivity, therefore, is a sure recipe for disaster.
Similarly, asking the sugarcane growers in Uttar Pradesh and Maharashtra to raise productivity so as to be globally competitive is to further push them towards an uncertain future. And if you think that crop diversification may perhaps bail-out farmers, think again.
Even in the frontline agricultural State of Punjab, where diversification has been the goal since the early 1980s, it has been estimated that increasing the fruit and vegetable production by just one per cent will cause an unmanageable glut.
It is primarily for this reason that Punjab farmers have refused to diversify from the wheat-rice crop rotation despite the faulty recommendations of the agricultural scientists, year after year, and that too for the past 20 years!
There is something terribly wrong with the way developing country policy-makers continue to follow the economic prescriptions being doled out essentially to protect the massive subsidies being given to a few million farmers on either side of the Atlantic.
Equally more tragic is that it is the mainline economists and scientists in India and, for that matter, in other developing countries, who eagerly join the chorus.
Like the four blind men with an elephant, they continue to grope in the dark not knowing what actually ails agriculture. All they try to do is to fit the round holes in square pegs.
(The author is a New Delhi-based food and trade policy analyst. He can be contacted at www.dsharma.org)
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