InvestorQ : Why do farmers still not get a good price for their produce?
Anjana Aiyar made post

Why do farmers still not get a good price for their produce?

3 years ago

The supply chain for agri produce has too many persons involved and since each party needs to be compensated for the effort, the marketing cost adds up to quite a bit. Since most farms in India are too small, the process starts with local aggregators, then there are warehousing agents, wholesales, brokers, commission agents, last mile agents etc. This not only complicates the process of also makes the structure unwieldy and inefficient. Also the markets are fragmented at a state level and the absence of a national is a major hindrance to marketing agricultural produce.

The net outcome of all this is that a chunk of the profits in the agricultural value chain is taken away by the secondary and tertiary participants in the value chain. The farmer, in most cases does not get the final price due to clogs in the marketing infrastructure. In the last 1 year we saw farmers taking a big hit as pulses and vegetables have suffered from negative inflation. That probably explains why in a year of bumper Kharif production, Indian farmers are till distressed.

The crux of the matter is that the farmer is not able to extract value out of the agricultural value chain as most of the profits in the value chain accrue to the middlemen. This is almost becoming a disincentive for farmers to invest their time and resources into farming. One of the solutions to this problem could be to integrate the farmers with the commodity futures market. This way, farmers will get the benefit of greater transparency and a more lucid price discovery mechanism. That will be good in the long run!