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.
32 Responses
Excellent article. My experiences have been similar. Its a bit of chicken-and-egg sometimes. Since, the fruits/vegetables aren’t grown in scale, the buyers and or infra doesn’t come up to support it. Plus expecting the farmer to take a risk on his livelihood isn’t reasonable.
One avenue worth exploring, is to route some funds to demonstration plots at the block level. The govt system (notwithstanding its various drawbacks) can attract private players (traders, processors, banks) and farmers to demonstrate that lucrative crops can be produced of reasonable quality. Since even demo farms can sell their produce, it needn’t be an expensive effort, apart from securing some land – not in issue in many places. I’m sure banks could push in some seed funding for these initiatives on a commercial basis.
The marketing tie-up is very crucial. However, it will work just like the milk collection systems – a minimum quantity in an area gets the chiller! There are, I’m sure, many challenges to this process. But making the high risk switch is asking a lot. Plus the status thing is difficult to tackle. In practise both these are no different from the affluent communities and their perceptions of risk, return and status. For example, The Economist reported last year a shortage of nearly 0.5 million chemical engineers in the US – well paying jobs! Obviously the status of an infotech pro or financial markets job sways choices for the youngsters!
I found this to be a really helpful and thorough piece. Thanks very much for investigating this and describing the complexities.
Thanks for this excellent piece Dr. Govil. To my mind, this is an excellent illustration of income smoothing by households in the absence of better ways to manage risk. See Morduch, Jonathan, 1995, Income Smoothing and Consumption Smoothing, Journal of Economic Perspectives, 9, 103-114 for a detailed discussion on this. Our work at IFMR Trust is aimed at providing households better access to liquidity and risk management services so that they may make growth-maximising choices without having to avoid risks altogether.
This is an excellent point Bindu. This approach also allows households to make choices that are best fits for them rather than go along with everybody else’s choices. I worry about too aggressive an intervention directly in product markets — they end up distorting both markets as pushing households in directions that may not be best suited for them.
Could you elaborate on what you mean by too aggressive an intervention? In general, I would think that supply-side adjustments to deal with risk are suboptimal and it’s better to create ways/markets to share the risk. It’s not clear why there aren’t such markets, but what are the problems you envisage in assisting in the creation of such markets (assuming that’s what you mean by intervention).
Other than through financial services I feel that there needs to be a deeper debate on what interventions (if any) are required to make things easier for farmers (without distorting the underlying market itself). It is my understanding that setting up formal markets for perishables (like Safal in Bangalore) did not quite deliver the value they were supposed to. Training is certainly a low-risk intervention but it is not clear how ex-ante one should identify who to train for which crop and where. And, typically farmers learn best from their neighbours. How about more aggressive sharing of information about these issues using mediums like the Television and radio? Is that not already happening through the myriad agricultural focussed channels?
Dear Nachiket,
It is interesting that you bring up Safal in Bangalore. Whether we claim it a success or failure depends on what our objective is. Safal management believes they have not been very successful in developing a modern transparent auction model, but what their own work has shown is that a model that delivers against pre-orders from a variety of customers (the major part of their revenue now) works very well indeed. I also spoke with many buyers at the presumably “failed” but still continuing Safal auction, including several women buyers, and many were willing to pay same or Rs. 1 more at Safal Market (despite all their vocal complaints) than procure from a mandi because of the dignity of the transaction! We know that in general interventions that target marginalized women have a disporportionate positive impact on household development indicators. So perhaps we have to revise our thinking about the definition of success for Safal Market and focus on exploring and developing the aspects that are working very well.
In terms of information and learning, most social sector organizations find that identifying progressive farmers and forming farmer groups around them is the most effective strategy. It still takes multiple crop cycles before everyone in the group converts (and presumably those outside of farmer groups do as well).
One of the most market distorting interventions already happening is the huge subsidy on macro-fertilizers and PDS procurement at set prices for rice and wheat. So any deliberate market distortions in favor of vegetables should be seen as adding yet another layer to the existing mix rather than distorting a “pure” market mechanism.
Richa
Thank you Dr. Govil. I am very happy to hear that Safal continues to add value although in a different way than was originally envisaged.
Excellent and enriching post, Richa. Thanks for taking up this seemingly simple query and exploring it such.
Dr Govil has pointed out the various drawbacks which force farmers to go for low value crops like cereals when compared to high value perishable crops like veg/fruits. Mr Pras has thrown light on how to drive the farmer community to shift their preference from low earning farming activity to a higher one, though atleast to make a beginning like demonstration plots/milk collection systems etc. I would like to add some more points to enrich this discussion.
The discussion predominantly centres on the high value of the produce from the vegetables/fruits when compared to cereals. However, this is a relative concept, because, price of the agricultural output depends upon various factors. It is not necessary that always fruits/vegetable commands higher price. It all depends on the demand/supply and the level of value addition of the agricultural products, which dictates the end product price. However, from experience, we often found prices of vegetable/fruits very high and the main reason is the high demand with low supply base. Of course, you may notice, whenever there is an abundant supply of any vegetable, take example onion/ladies finger etc, there often occurs a price crash in the wholesale as well as retail market. My point is, price dynamics is more related to economics and we may sustain a better price for the farming community by way of various methods, i.e better warehousing/cold storage facility, price discovery with the commodity exchanges, policy for regulation of the middleman/brokers in the mandis, avenues for exports after satisfying the domestic needs etc.
Green revolution: green revolution in the late 60s to late 70’s had given thrust mainly to the development of cereals crops like rice/wheat. Considering the success of green revolution, farmer psychology was more attuned towards the cereal crops and unfortunately, even today, farmers are reluctant to go for any high risk crop especially veggies/fruits.
Due to the indiscriminate use of chemical pesticides/fertilizers in the green revolution, there was widespread contamination/erosion of soil quality/environmental pollution which has forced the government to revisit the techniques used (intensive farming) in the green revolution. Having regard to this, lot of hue and cry erupted from all the quarters for a safer farming, to be precise, organic farming (use of chemical agents to the bare minimum and encouraging natural agents like neem products, bio pesticide/fertilizer etc) to reduce the ill effects of country’s first green revolution.
This infact has prepared the launch pad for the second green revolution, which aims not only development of the agriculture per se but also the overall development of the farming community. Again, second green revolution is not meant for only producing veggies/fruits, but to augment our national agricultural production to the optimal level by leveraging the production of appropriate crop suitable to the place i.e. cultivation of all the crops on pan India basis whether it is the cereals, pulses, veggies/fruits with provision for mixed farming, inter crop etc.
Though, the principles of second green revolution sounds interesting, practicality of implementing the same calls for much efforts from various stake holders like the Government, NGOs, Banks/Financiers and of course the frame of mind of farmers. One of the ways to bring a sea side change is utilising the agriculture colleges/research institutes to carry out transfer of technology to farming community in this respect so that agricultural operations are carried out as per the package of practices relevant to the particular place/climate/season etc.
Side by side, Government should bring out necessary policy modifications in the existing procurement/floor prices etc and agencies/bodies should bring out infrastructure development to accommodate such policy modifications. More private as well as private-public partnership may be encouraged to enter the rural agricultural development along with the farmer community who will be main stakeholder and such a set up may result in use of latest farming technology with stress on organic farming/hi tech agriculture, higher productivity along with a better price to the farmer, overall development of the rural areas thereby reducing the pressure on metros/major cities etc. The overall results of such an arrangement may be a kind of corporatization of agriculture by involving farmers as the main stakeholders along with the best practices adopted by the non farming corporate entity. An excellent example in this regard is the initiatives made by the Jain Irrigation in the state of Maharashtra in promoting the scientific farming of crops especially banana & sugar cane by way of establishing model demonstration plots in the villages, which attracts other farmers also in adopting hi tech agriculture.
Our country has got abundant land bank and with proper rural development/agriculture policy transmission, we may obtain our daily needs of cereals, pulses, fruits & vegetable at right prices instead of the present day skewed prices.
Harish, great points. Price stabilization, which could otherwise be a major glitch for the abundant small farmers, will involve storage/value addition. The overusage of fertilizers and such methods is something I have feedback from fertilizer company executives – besides of course research on soil quality in TN, Punjab states like that.
One route for the latter I explored at work, was using a composite of compost with fertilizer. Compost is soil remediating, and idea that a few I spoke to liked. However, fertilizer subsidy is so high it pushed compost prices to unviable levels (since the comparison for adopting a new method is on nutrient content of the two)!
A major glitch with the extensive govt network of support officers is the lack of exposure, backed with support to innovation. Its easier to play safe. Yours suggestions around this are timely. Its possible to convert agriculture into a good, sustainable business that supports the farming community.
Pras,
agriculture in India needs rejuvenation, with active participation from the
Government, NGOs, there is always a possibility to utilise the farmer potential
to the highest level. After all, our hunger cannot be satiated with
Iphones/Mercs, but with fresh farm produce!!We will hope for the best and
prepare and work for the BEST (not the worst).
Pras: how can platforms like ICAAP (http://www.ikptrust.org.in/ikp-centre-for-advancement-in-agricultural-practice.html) help? There is a partnership between IFMR Trust and ICAAP in Thanjavur for improving rice yields in the entire district but perhaps more could be done.
Thanks, for the link too, Nachiket. I’m going to volunteer my two bits on this. Its pretty likely that with a high quality team like that, you’d have tread these paths. So here goes:
i) I’d focus on the commerce aspects first. Given the high quality of agri-scientists available plus farmers’ own knowledge, this part is more easily handled.
ii) An assessment of how much land is available for the initial switch. It won’t be fair, for reasons outlined earlier, to risk an existing chain on this.
iii) Review what’s being sold in markets that can be reached, especially on the higher value crops. Mandi prices, seasonality etc. This is easily done through a few conversations with traders or at site visits at mandis/ consumers.
iv) Look at whether the scale of land / market possibility will justify a producer group aligning its interests (this is step 2 after demos succeed) commercially.
v) Assess inputs available from govt already – schemes, funds and more importantly the human resources at block level. This de facto also becomes, seed capital – or one time grant that subsidizes the risks.
vi) Prepare a base plan – year 1-3 (on the above), to obtain the consensus of the farmer – not just to the produce, but the marketing
mechanism.
vii) It should be possible to talk to atleast two chains to look at buying linkages. Luckily, south India has a better density of these chains plus the distances enhance viabilty compared to many other parts of India.
viii) on rice itself – is it possible to commence some value-added rice products. There are successful rice clusters in India doing this. Nothing too complicated or huge investments.
There’s a lot of stuff relating to grading/sorting etc that needs to be done to create the price-quality difference. The reason say brokens get lesser price in rice.
I realize some that some of the above are general statements, but these can be validated through pretty low cost, street-smart research. Formal data will often be limiting.
Would love to sit with the teams and cook this all up for implementation.
Thank you for this thought provoking article and the contributors to this discussion on the socio economic factors behind crop selection by Indian Farmers. I am finding it very valuable to gain a holistic perspective that broadens out the constituents required for sustainable changes to be implemented. My area is irrigation and I appreciate that the up and down stream factors in crop selection are incredibly diverse and complex. I value these insights and encourage further contribution.
my limited interaction with some of “big retail” personnel, suggested their reluctance to enter into farm-gate procurement systems. Your comment on “Safal” echoes some of this. Its an expensive, and more importantly, long term business building exercise. Farm gate procurement that enables sorting will distinguish quality and the price accompanying it. Right now, the arthiyas and others who procure, and they do fulfill an important service, base prices on the worst quality of the lot – resulting in poorer prices!
Second major glitch is that farmers linkage right now is through the existing trade that also functions, as you at IFMR will be aware, as a de facto banker to these families. Organized sector systems that don’t replace this with procurement + finance are going to find it hard to crack this leg of the market.
One way is to co-opt the procureres into a formal system. They still acquire at farm gate, lend through banking linkage at slightly better rates, they can be entrusted with credit evaluation (this is what they do anyway) – but through means that upgrade the system. One add-on gain is that status that they will gain – my experience on garbage collection systems in cities suggest that this is an incentive for many businessmen. Of course, these are greedy thoughts that will require some work to do. However, in places like TN, with strong community groups of women, it should be more doable.
My interactions with big retail as well as food companies also lead to similar conclusions. In fact, I am working with several (social) entrepreneurs who act as modern, efficient intermediaries. I am also working on other models for addressing this gap. It is in early stages and I’d be glad to have your inputs. You can reach me through the Ashoka office or Linkedin.
Most certainly will do so. Should be a good challenge coming up with several options that can fit different circumstances.
What to do with demand and supply when a farmer is repeatedly growing rice in his land as it is convenient to marketing(as he perceive) and very used to the process followed during the cultivation. Nobody comes to guide/educate him the demand of fruit, vegetables(some) in the market. From previous generations his family accustomed to the same monotonous process of cultivation. And belief me..its a strong idea that deep rooted in his mind which can and only can changed through guiding him and providing him customized service regarding what suits the soil and how they/govt helps him if he faced any trouble in any stage of the value chain. We can’t generalized a conclusion looking at the status farmer(s)of Punjab and apply it across the geography. Last but not the least, the soil quality has been degraded by increasing use of pesticides year after year. so will it suits the fruit cultivation or need to prepare the soil for it? I don’t have the answer. This is one the problem that the farmer(s) facing in some part.
As you point out, this is indeed a big problem. I know of a few efforts which have been successful in changing crops to some extent. But we still have a very long way to go.
Is not the behaviour of retailers important, too? Where do Reliance supermarkets source their vegetables, for example. If India is opening up to big retail chains, as I hear it is, then Indian farmers will need some help to deal with the stores’ dominance of the market. From the article it appears that the farmers are to some extent thinking collectively about their position. Co-operatives have done well here in France, so could that be done more in India as well. India is churning out people with qualifications in business: direct them into agronomics!
How does the cooperatives work in France for vegetables and fruits cultivation?
Horticulture crops especially vegetables are also grown closer to towns and cities due to their perishability and lack of adequate cool chains. Typically vegetables are grown in small holder plots or in one small segment of the farmer’s land in addition to food crops.
An interesting article indeed.Most of the reasons cited here seem plausible to me. We did a set of case studies of progressive small and marginal farmers from different parts of India (Gujarat, Madhya Pradesh, Maharashtra, Odisha, Punjab, North-eastern States) in collaboration with some grassroots organizations and donor agencies to understand when do small and marginal farmers actually take up high-value agriculture successfully? Our initial findings and conjectures are summarized here:
http://www.iwmi.cgiar.org/iwmi-tata/PDFs/2012_Highlight-48.pdf
We also found that production and price risk is a big issue and there is very little institutional support for sharing the risk. Farmers resort to crop diversification, growing crops with multiple harvests, and keeping a large buffer to deal with the risk. We also found that adoption of cash crops becomes easier when a cluster develops with a number of farmers growing crops for the market. The question is: how do we seed such clusters of high-value agriculture? And how do we expand the existing clusters?
Hello
This is mahesh
I have been interacting with people ….. Agriculturists….. Farmers.
Most of them say crop cultivation is safer coz of scarcity of labour.
Where is labour available. One farmer said he has stopped agriculture totally becoz of labour scarcity.
Govt is giving all free. Rations and 100 days pay and pension and ………….
If govt is giving all free of at higjy subsidised rates then who will work.
I may be wrong on some points or the otherway round.
But tat is what i heard rrom most of medium and big farmers.let govt revoke all popilist schemes and then see the difference. Every one will work.
No work no food. No money. Let yhe govt give populinifits. but only to needy. Like senior citizens handicaps. But why for people of good age in which they can work. Let govt make farming accountable. Ensure minimum wage is given to labour.
Very nice discussion and a too important one.BUT did not find a workable solution. We need to discuss more till we find one.
I had interacted with many farmers when I was posted in a district in Tamil Nadu. The farmers despite knowing pretty well about the revenue potential, do not take up vegetables or flowers mainly because of labour issues. These cultivation requires a large number of labour and u don’t get the same. Further, if the harvest is very good, the price falls down dramatically… leading the vegetable growers to sell at very low prices… I have seen drumsticks, tomatos selling at Rs.2 per kg… a few years ago…. The farmer does not want to take that big risk…
Such a good discussion here…..but friend’s there is some error in government policies also…and farmer’s also not very enthusiast to grow differ crop which that he get more income…….govt giving more interest on Industries but not too much focus on Agri sector..
Insightful article raising a very simple question..Consumer wants F&V but Producers are not ready. Few more questions needs answer: What is farmers awareness about demand (what to grow)? He sees F&V as gamble some times onion rates touches sky and some times falls like hell. Following question is who will provide him with this information so as he makes a decision? If we see lot of vegetable areas/belts are surrounding cities only because of better connectivity. Need for a strong startups to shift F&V markets to interiors building strong market linkages with institutional buyers like retails chains/food chains/hotel chains and exporters. Last but not least aggregation of producers to produce to attract the market at their doors which offers lot of scope for Processing Industry..Food for thought.
Indian population widely dependent on agriculture for their livelihood. Measuring out the contribution towards the national GDP is only 14-15%. This clearly implies that there is an unsustainable development from the agriculture side.
Good Article . Thank you
Nice Information . Thank you