Farm marketing and poverty reduction
By Hammad Badar
At present the economy of Pakistan, besides many other problems, is grappling with the rising poverty problem, which is increasing persistently. As per the economic survey of Pakistan on the basis of caloric-based definition (headcount ratio), the poverty has increased from 22 per cent in 1992-93 to 28.2 per cent in 1998-99.
The estimated figure by some other sources is even higher than this which states that around 50 million people are living below the poverty line. This is largely a rural phenomenon as 32 per cent rural population was living below poverty line as against 19 per cent urban population in 1998-99 implying that in rural areas one among three households was poor.
Poverty is multidimensional concept covering not only the lack of income or accessibility to food and basic amenities of life but also exclusion from the social, economic and political opportunities which enhances peoples' capabilities. In rural Asia and Africa the poor are defined as those who have to sell their produce at low prices to the rich and later buy it back at high prices because they need immediate cash and lack storage facilities; or those who work long hours for low wages because they have no bargaining power.
In the rural sector, it is high among wage labourers, landless labourers, tenants and women. Agricultural wage earners are seen as the most exploited, often trapped in inter-generational debt. The rural poor, therefore, are very poorly endowed with the most important rural asset, i.e. land. They also suffer seriously from a lack of access to human capital i.e. health and education.
As for as the causes of rural poverty are concerned these are many. These include the poor performance of economy, slow agricultural growth, colonial legacy of the agrarian structure, unequal distribution of resources, ill-defined and poorly-enforced property rights, discrimination in public policies leading to the exclusion of the rural poor from the development process, market imperfections owing to the high concentration of land ownership, and external shocks like drought and unstable and non-representative political system in the country.
In Pakistan, an imminent threat to complex poverty situation is the World Trade Organization (WTO), which is likely to badly hit the poor small farmers of the developing countries in particular, including Pakistan. This will add to the miseries of this section of the society by increasing the rural poverty level.
Under this system the governments are required to dismantle the support system to farmers in the absence of which farmers would be dependent on the private sector for their returns. In countries like Pakistan, where private sector is not well established for agriculture, this is likely to create severe problems for the rural poor.
In Pakistan, almost 93 per cent farmers are below 25 acres of land. In most of the cases, their sole source of livelihood is agriculture. In the years when they get proper price for their produce, which is very rare, their economic miseries are lessened otherwise object poverty is their fate.
It is understandable that the trade liberalization in agriculture sector will have disastrous effect on small farmers, who are working with the conventional methods of farming. They do not have financial capacity as well as government support to use new technology for the cultivation of their crops.
On the other hand developed countries are advanced in their methods of cultivation and crop yields. So, they are in a position to harm our domestic production and enhance food insecurity. In addition, our farmers will have to face severe competition from the private producers and the multinational companies (MNCs) in the form of corporate farming. The government will no more be there to rescue the farmers by acting as second buyer. It will do nothing but enhance food insecurity, poverty and deprivation.
Although, the comparative efficiency of private sector can not be denied but it is a fact that in Pakistan private sector, in case of agriculture is so strong particularly in marketing of the agricultural commodities. But in our case owing to the involvement of many layers of middlemen between the growers and the consumers, every year the government has to intervene in the agriculture commodity markets to rescue the farmers from the clutches of the middleman by acting as a second buyer.
The farm producers, particularly the small farmers because of their weak bargaining power and ignorance of marketing tactics, are not able to exploit the market for their benefit. The grower hardly gets 50-60 per cent of consumer's price for his many months' hard labour and investment. But the middleman, in a very short time, receives 40-50 per cent without contributing anything concrete. This is mostly due to the inadequate storage facilities and the consequent risk of losses resulting from rain and other factors.
Presently direct marketing is being considered as an alternative and to ensure proper returns to the farmers by eliminating the middlemen from the marketing chain. But this is at least not possible in the short run. Middlemen are very vital institution in relation to producer and consumer and they provide very useful services in this regard. Therefore, mere holding the institution of middlemen responsible is not proper rather the crux of the problem is their presence in excessive number.
In reality, the exploitation of farmers at the hand of the middlemen is due to their ignorance of marketing and its functions. Our farmers majority of them are illiterate and unaware in post harvest management of their produce like cleaning, sorting, grading, storage and proper packing. Post harvest losses which range from 25-40 per cent or even greater in fruits and vegetables are the outcome of this fact. Consumer prices rise in addition due to the hidden quality losses. These losses bring low return to growers, processors and traders and also country suffers in terms of foreign exchange earnings. This results in weak staying power of the farmers in the market and low economic return.
Although, some changes in the existing agriculture marketing system are required but there is pressing need to provide training in agricultural marketing operations to all actors involved in the marketing chain like the farmers, the traders, the trade supporters and even to those who are involved in planning.
Agricultural marketing training to farmers is perhaps the most important instrument in alleviating the rural poverty because it enables the farmers to get the economic return for their produce and saves them from exploitation at the hands of the middleman as they will be fully aware of the various ways by which intermediaries try to underweigh and pay less to farmers. Secondly, the trained farmers knowing the economic significance of every bit of their product will endeavour their best to lower down the post harvest losses.
The government in this connection should, in consultation with experts in agriculture marketing and from the private sector, identify the subject areas in which there is a need to impart training to farmers and other stake holders involved in marketing process. Broadly, these may be like how to prepare the produce for marketing, performing the functions like sorting, grading, storing, proper transportations and methods of bargain in the market etc.
At present, as such no well-established department is present for this purpose. In this connection, we can benefit form the experience of other countries. Agricultural extension department and even the non-government organizations (NGOs) may be involved in this task that are working in the rural area. Agricultural marketing training will definite play its role in the alleviation of rural poverty by enhancing the income of poor farmers.
Marketing is an important component of the agriculture sector and efficient marketing can ensure proper economic returns to growers. The importance of agricultural marketing has increased manifold since we have come out of production problem for many commodities and now we are in surplus trap where we are finding it very difficult as how to handle the surplus commodities like wheat.
This has profound implications for the rural economy and rural poor of the Pakistan especially in the World Trade Organization (WTO) regime. Therefore, there is a need to strengthen the marketing component of agricultural, if we intend to face fierce global competition and to reduce poverty in rural areas.