Like every year, paddy growers are forced to sell their produce at very low prices in the absence of a policy to support them. The beneficiaries of lower prices are the food processing companies, rice millers and the middle men.

Farmers in Sindh say they have sold non-Basmati varieties of paddy for just Rs725-750 per 40kg during this season to the agents of food processing companies and rice millers. And growers of Basmati varieties both in Sindh and Punjab are getting Rs1000-1050 per 40kg.

Farmers complain that selling paddy at these prices doesn’t even cover the farm input costs and if the government does not announce and implement higher support prices they would launch countrywide protest. Pakistan People’s Party says it would join such protests if farmers’ demand is ignored.

Growers lobby groups want paddy support prices to be fixed at Rs1200 per 40kg for non-Basmati varieties and Rs2000 per 40kg for Basmati varieties.

“The issue is that after the 18th constitutional amendment, agriculture is a provincial matter and same-level support price fixing cannot be expected across all provinces,” explains an official of the Ministry of National Food Security and Research.

‘If political leadership in every province starts demanding fixation of unreasonably higher support prices of certain crops at the federal level — instead of fixing a support price ahead of harvesting — it will only complicate things’

“If political leadership in every province starts demanding fixation of unreasonably higher support prices of certain crops at the federal level — instead of fixing a support price ahead of harvesting — it will only complicate things,” he said.

Unlike wheat and sugarcane, the economics of rice is a bit more complicated. The country produces surplus rice and has been its traditional exporter. Rice exporters and food processing-cum-exporting companies have very close ties with paddy growers.

“When they manage to buy paddy at mutually agreed prices from small growers, big growers come forward, use farmers lobbies and start pressing for higher support prices. They forget that under the law, the provinces are free to fix whatever support price they feel right in their own jurisdiction, Passco’s procurement prices shouldn’t be mistaken as support prices,” says another senior official of the ministry.

Obviously, the whole issue has political and social connotations as well. That’ why we saw a sort of rural-urban divide in work when the National Assembly’s standing committee on agriculture met recently and took up the issue of fixing support prices.

The meeting remained inconclusive; two MNAs who have strong roots in the growers’ class walked out and two MNAs whose parties have large support in urban areas vehemently opposed fixation of support prices at ‘unreasonably high levels’ which they said ‘would have lots of ramifications for the urban population.’

This, however, doesn’t mean that a majority of farmers are getting right prices for their produce. By and large, they are not. But the solution of this problem doesn’t only lie in fixing higher support prices, says a former director general of Sindh Agriculture Extension Department.

For paddy farmers, in particular, and for growers of all crops in general, there are four main areas of concern.

First is the slow growth in per-acre yield and rapid increase in input cost; second is pre- and post-harvesting losses; third is involvement of the middlemen in value-chain, and fourth is growers’ lack of knowledge about the changing agricultural market dynamics.

The issue of increase in input cost can be tackled not only by government interventions. The space for it is squeezing as the government continues to minimise or withdraw subsidies from fertiliser and power sectors while the seed supply business has largely shifted from the public sector to the market players.

Boosting per-acre yield is a must to keep the per-acre cost of a crop in check. “I have seen in Japan a mechanical harvester driven by a single man reaping paddy from a large field in less than an hour.”

Here, we do it with dozens of workers in multiple hours,” says a large paddy grower based in Thatta implying that lack of farm mechanisation has a direct link with the cost of final crop output, its actual cost and, thus, its’ minimum desirable price for the grower.

The involvement of the middlemen in agricultural value-chain is an issue that the federal government and the State Bank have recently tried to address. The SBP’s latest value-chain financing scheme, when implemented in full, would help growers get a better price for their produce.

But the scheme has just taken off (only one bank has placed newspaper ads inviting applications for participation in this scheme) and others are still busy making internal communications and arrangements about it.

Finally, the growers’ lack of knowledge about agricultural marketing mechanism needs to be tackled.

With rice futures being quoted on PMEX trading board, with Index Mundi rates just a click away from your laptops and with the roles of traditional rice millers-cum-exporters and of big food processing and exporting companies overlapping, growers will have to choose the sales timing, sales volumes and selling modes keeping in view the market trends,” says a senior official of Engro Foods Ltd.

Published in Dawn, Economic & Business, November 17th, 2014