Farming in an unstable international trade climate

Caroline

International trade has direct and indirect effects on the agriculture sector.

Brexit and US-China trade relations are two prominent examples of the uncertainty and confusion surrounding current international trade.

What are, in your opinion, are other international trade events or developments that could have direct or indirect implications on farmers? What are these effects?

NickOttens

On a more positive note, the EU is determined to pick up the leadership mantle in trade and slightly more willing than it used to be to open its vast market to agricultural imports.

But I agree the global trend is worrying. Also consider the recent US-Canada trade spat, which involved dairy.

@Mehta, what's the view from India on this topic?

Lorenzo

Just a comment from an EU perspective, from a seminar I've been following last year. In general, a non-protected farming sector (in a developed country) will die, as farmers will face lower-costst competition from abroad and eventually leave for better (more revenue) jobs and activities. The EU farming measures have halted that dynamic across many EU countries by giving subsidies, but that didn't work for countries, like the UK, where mass "migration" of workers from farming to industry happened too early for EU to be a factor (in UK this happened between late XIX and early XX centuries). Which means, for example, that in general either developed countries protect their farmers with custom duties for foreign products, or they need to subsidize them to maintain domestic production. That is an issue for post-Brexit UK farmers, for example: they are no longer eligile to receive EU subsidies and incentives, but if they remain on a free market with the EU they will face competition. If UK instead puts duties to protect them, it will increase prices of imports.

timsilman

@Lorenzo thanks for these insights. it seems we have some good insights about EU, UK, US, China. As @NickOttens mentioned it would be great to get some thoughts from a developing world context, as well as India. The movements of the "big" economies get a lot of attention but I suspect there is a lot going on at a more micro/regional level in S. / SE Asia and Africa

NickOttens

@efemubi, you might be interested in this discussion as well.

NickOttens

@Faraz, @padhu and @ganesanv, what is your take on this issue, seen from India and Southeast Asia?

Faraz

From the Indian perspective, there have been many developments recently, which could affect agricultural trade, although the scale of impact is too uncertain to predict. The recent imposition of duties on Indian exports by Trump govt. has attracted reciprocal measures by Indian authorities and agricultural products, whose imports are already quite restricted, can be affected adversely.

The farming community is a big vote bank in India and none of the political parties can afford to disregard their sensitivities. Water sharing has gradually been emerging as a bone of contention between India and its neighbours, namely Pakistan, China and Bangladesh. Even within the Indian states, its a thorny issue.

Another issue could be the potential snowballing of tussle between the multinational giants and Indian farmers in various areas. For example, Pepsico recently sued Indian farmers for growing their patented variety of potatoes used in chips, which has drawn widespread condemnation from various parties. Likewise, action by multinationals against farmers could spillover to international arena, as domestic sentiments are very strong on these issues.

FDI in retail has been another area of interest. There has been widespread opposition to the likes of walmart setting shops in India, but they have managed to make inroads in some states. Any legislation altering status quo, will have drastic effect on Indian agricultural sector.

The developed countries have long been demanding the opening up of Indian markets for export of agricultural products, which has long been resisted in India. Any developments in this area could be very interesting and could potentially alter the entire Indian agricultural landscape.

NickOttens

Thank you for sharing, @Faraz! I wonder, why is India so reluctant to open up its market? Is it for fear that its own farmers will be hurt? Or are there other concerns?

Here in Europe, for example, another concern is food safety and there is a lot of skepticism about genetically modified foods.

NickOttens

@ksoubly, you might be interested in this discussion as well.

Faraz

@NickOttens Although there are proponents who argue that opening up the agricultural sector would be beneficial in terms of bringing in the best practices and scientific knowhow. However, there is a great concern that an average Indian farmer will not be able to compete with multinational giants, due to very small land holdings, extensive usage of manual labour, lack of access to capital , lack of knowledge about new technologies, machinery and best practices. Most of the Indian farmers are small time, leading a hand to mouth existence. It is feared that opening up the sector will lead to loss of livelihoods.

There are other concerns as well, for example, multinationals lobbying the govt. (which is already taking place) to grow GM crops etc. There could also be a greater focus on growing cash crops, plantations etc. which may put pressure on soil, water resources etc.

arshimehboob

Interesting conversation and inputs.

Herein is a relatively worth reads:
https://www.indiatoday.in/fyi/story/pepsico-lays-potato-gujarat-farmers-fc5-1515198-2019-05-02

https://www.indiatoday.in/business/story/pepsi-withdraws-lawsuit-india-potato-farmers-1515501-2019-05-02

NickOttens

I understand the desire to protect small-holder farmers, but I also know from the experience in my country (the Netherlands) that small farms struggle to compete when demand for (affordable!) agricultural products keeps rising.

Big farms get a bad rep, but they do have the means to comply with environmental and food-safety regulations, which is one of the things that can drive small farmers out of business.

In Europe, anyway. I'd be curious to learn if that's happened in other countries, like India, as well? @arshimehboob @Faraz

Faraz

@NickOttens, I think thats an excellent point and I agree with it. In fact in agro and food processing industries, global giants have come in and make inroads in the Indian market.

However when over 50% of the total land area is under cultivation and 50% of the total workforce is engaged in agriculture, it would be a political suicide for any government to disregard the concerns of small farmers (85% of the farms are less 2 hectares).

Again, this will eventually happen, as small farms become unsustainable and people move to secondary and tertiary sectors (already happening), but for the foreseeable future, I dont expect the situation to change drastically.

arshimehboob

@NickOttens
In India, where 80% of farmers are smallholders, who farm on less than two hectares of land, crop specific agri-entrepreneurship models may empower rural youth to be a part of the agri-value chain and create local employment opportunities.
For example, the processing units for horticulture farmers, transportation for cash crops etc.
Indian smallholder farmers play a key role in ensuring food security, therefore, supporting smallholders to earn incomes from their farm and not just use it as a means to survive is also very essential to the country’s economic growth.
Also, establishing and strengthening smallholder farmer organizations/ groups (resource-oriented and market-oriented) are the key to double crop yields and triple farm incomes. This, in turn, will make farming an attractive profession for future generations and bring more investment to the industry.

arshimehboob

In recent years, small farmers have suffered much due to lack of remunerative prices for their produces. Either they have been dumping their perishable produces or their food grain harvests have not fetched them a price to cover the cost of cultivation as they couldn't afford the transportation cost for selling produce or getting access to the market at the right time.
The small and marginal farmers account for 85% of the total landholdings and hold close to 40% share in the total “marketable surpluses”. India has a meagre 8,900 markets regulated through various government agencies for selling of farmers’ produces.
Therefore, lack of access to an adequate number of market hubs means farmers do not get to bargain for their produces. The marginal farmers, with uneconomical sized marketable lots, find it difficult to aggregate their produce and move to Agricultural Produce Market Committee (APMC) to participate in the auction system for suitable price discovery.
They, therefore, use local agents and traders, who relieve small farmers of their produce at locally determined prices, to function as aggregators and transport to transact at the APMCs. This intermediation has naturally been depriving the farmer-producers from aiming for optimal or market-linked price realisation. The current market architecture does not provide farmers with a choice of markets but imposes constraints to their selling options.

India needs more of the technology-driven innovations like as follows:
https://www.oikocredit.coop/k/n171/news/view/299340/462/strengthening-market-access-for-small-scale-farmers-in-india.html