The Economist on Contract Farming in India

Another good article about recent developments on India's agricultural sector. THIS piece argues that contract farming -where farmers commit to grow a commodity for a particular buyer- is growing rapidly in response to the severe problems faced in the sector. A combination of poor agronomic techniques, such as flooding irrigation and animal traction, combined with government policies that create incentives for over-fertilization (see WSJ article) and  use public money to get votes (see other Economist Article), have encouraged farmers to look elsewhere for a better future. That elsewhere is McDonald who, after five years of trying, now buys its potatos directly from Indian farmers.

These are good news for farmers in developing countries. They have traditionally been marginalized by better-off urban consumers who tend to preferred imports over local produce. A similar example is what Wall-Mart is doing in some Central American countries: through NGOs and other partners, Wall-mart equips farmers with the technical information (extension services), credit, and tools and inputs necessary to produce shelf-worthy products that meet the standards of the demanding urban consumer.

These types of relationships can be mutually-beneficial as they: a) make good local politics for the foreign-own corporation; b) can reduce the price of raw materials, especially now that transport cost is skyrocketing; and c) provide farmers with the markets they need to leave subsistence agriculture. However, it may be to early to name contract farming as the panacea for poor farmers. What it's clear, though, is that the McDonald and Wall-Mart examples show that the private sector can play a very positive role in helping farmers break their cycle of poverty. This, unfortunately, is often absent in the donor-driven agenda of agricultural development.

Farm Bill: Contrasting view: "Finally, an Editorial for Farmers"

In my effort to show the two sides of the Farm Bill debate, here an oped by Congressman Collin Peterson (D) represents Minnesota’s seventh Congressional district and is the chairman of the House Agriculture Committee. Although the underlying factors behind the subsides -the huge economic and political clout of the agribusiness sector in the US- and its impact on world prices are not addressed, the Congressman puts forward the usual arguments to defend the program: tradition and culture, food security, urban bias, and " safe, stable food supply".
In my opinion the fact that the small farmers argument is central in their justification to defend a policy that barely affects them, shows how little maneuver the Farm lobby has to insist in a policy that every year makes less sense.

Here is the article by the Congressman


Finally, an Editorial for Farmers (Original Post HERE)

In my position on the House Agriculture Committee, I have traveled around the country and met with many different kinds of farmers, and I have come to the conclusion that editorial board writers don’t spend a lot of time on farms.


If they spent some time in rural America, witnessing the hard work and risk that farmers and ranchers endure every day, I think we would see fewer editorial pages pontificating about farmers getting rich on taxpayer subsidies.

Every year, farmers and ranchers invest thousands of dollars into their crop, buying equipment, fuel, seed, fertilizer, water, labor and other inputs. They invest this money with no assurance that the seeds they put in the ground will produce a crop that will cover their investments, much less bring in enough money to support their families.

Is this the kind of investment you would be willing to make? Few Americans would put their credit, property and livelihood on the line every year, but that is what farmers and ranchers do, and they should be appreciated for that effort. Instead, they are demeaned for receiving federal support. This is a disgrace that reveals our collective ignorance of where our food comes from and why we pay some of the lowest food prices in the world.

Most people don’t understand that without the assurance of government payments, farmers may not be able to get the loans they need to plant a crop each year. If farmers can’t get financing from the bank, the other option they have is entering into contracts with big agribusinesses. If that happens, they’ll control the prices, and we’ll end up with vertically integrated agriculture, which means the end of independent family farming in this country. Americans need to ask themselves – would they rather support independent farmers in America or let big agribusiness control our food, fiber and fuel supplies.

The House-passed 2007 Farm Bill includes some meaningful reforms, including lower limits on adjusted gross income that prevent millionaires and wealthy non-farmers from receiving farm subsidies and changes that will tie farmers directly to the government payments they receive.

We have also made the largest federal investment in fruit and vegetable production in history. We have increased spending on nutrition programs that support needy families in the United States and abroad. We included new investments that will expand renewable energy production and use in our nation. This was accomplished because we had an open process that invited everyone to participate.

But for some, this isn’t enough. Nothing but a complete overhaul of our farm policy would please some critics. They have forgotten the last time we went out on an ideological limb on farm policy in 1996 with the ill-fated Freedom to Farm legislation.

The political environment then was similar to now. Commodity prices were high, and people thought they would stay high. Congress decided to phase out farm payments, and the consequences were disastrous. The government spent tens of billions of dollars over budget to prevent farmers nationwide from going out of business.

In 2002, we passed a Farm Bill that provided a safety net for farmers, making payments when prices are low and saving money when prices were high. This strategy worked for farmers and it also worked for the government. Since we passed the 2002 Farm Bill, it has cost much less than anyone expected. How many government programs can say they are spending LESS than expected?

Despite this success, some people again want to get rid of farm programs, destroying the safety net for farmers and ranchers. They don’t understand that drastic change has caused trouble in the past, and it will happen again.

This is an exciting time for American agriculture with a growing market for ethanol and other energy products helping farmers get fair prices on the market. It is possible that if these opportunities continue, there will be less need for subsidies in the future.

However, we can’t get ahead of ourselves like we did in 1996. We have a system that makes most payments when prices are low, so as long as prices stay high, reformers will get what they want – lower government payments for farmers. But, if prices drop, the system will support our farmers, so the public continues to get what they want – a safe, stable food supply. I think that’s a Farm Bill with something everyone can like.

About the Author: Congressman Collin Peterson (D) represents Minnesota’s seventh Congressional district and is the chairman of the House Agriculture Committee.