Corporate agriculture: transplanting failure

Maharashtra will soon join ranks with Andhra Pradesh, Gujarat, Karnataka, Punjab and Tamilnadu in promoting contract farming, ostensibly to bail out the farming community from the unprecedented spate of suicides in the state in the recent months. Chief Minister Vilasrao Deshmukh’s government has proposed an amendment to the Maharashtra Agriculture Produce Marketing Act that would allow corporations, retailers and food processing companies to enter into agreements directly with farmers; the government believes this will help farmers find ready and reliable markets for their produce.

Expectedly, the corporate sector has been quick to rejoice, much before the farmers themselves - for whom the new Act has been believed to have been enacted! With multinational giants like Metro, Cash and Carry, Cargill Foods, Hypercity, Shoprite and WalMart having signalled their intentions to enter into agreements with the state’s farmers, it is evident that they have high stakes in the emerging market. Even the Minister for Marketing, Mr Harshvardhan Patil could not help hide the truth: “The decision will be a boost for the food industry and retail chain majors.”

An estimated investment of Rs.964 lakhs to pilot contract farming on 200 acres of land in Kuppam has become a graveyard of technological options at the cost of farmers’ interests.

• Burden on the exchequer

• New terms of harvest

Failed experiments

But will farmers benefit? If experiences in Punjab and Andhra Pradesh are any indication, contract farming only helps corporations get a handle on farm operations and make profit. In Punjab, the Amarinder Singh government’s obsession with crop diversification has exposed farmers to the vagaries of corporate interests; farmers now resent a system that has put them under the total control of corporations. The growing incidents of pre-determined prices being reduced on the pretext of inferior quality of the grain or crop, have added to the resentment among farmers. The experience from Andhra Pradesh is no different; an estimated investment of Rs.964 lakhs to pilot contract farming on 200 acres of land in 1997 in the then Chief Minister Chandrababu Naidu’s constituency Kuppam has become a graveyard of technological options at the cost of farmers’ interests.

Likewise, the evidence from elsewhere in the country is uniform. Skewed investment outlays, misdirected explicit subsidies and faulty procurement policies have been the grand outcomes of the fallacious assumptions that corporatisation of agriculture can pull the sector out from the current slump. Overseas too, there have been alarming outcomes; corporatisation of farming in the US has seen consumer expenditure on food rise without concurrent gains in farm receipts.

Cooperatives strong in developed nations

Interestingly, while corporate farming may have gained political patronage in developing countries, the agriculture cooperatives hold dominant market shares in the European Union and also a significant share in the US. Studies clearly demonstrate that between 60-75 per cent of the market share in grain trade is held by the agricultural cooperatives in Denmark, France, Ireland, Austria and Sweden. Even at the peak of the corporate engagement in agriculture in the US, the agricultural cooperatives have been able to slice a 38 per cent share of the market in trading grains alone. In the dairy trade - which corporate India is eyeing with interest, especially in Gujarat - the cooperative tradition is even stronger in developed nations; farm cooperatives play a dominant role in dairy trade all across Europe. While in Ireland the entire dairy trade is run by the cooperatives, countries like Denmark, Finland, Sweden, UK and the US have over 80 per cent market stakes vested in dairy cooperatives.

Market share (%) of agricultural cooperatives in the EU & USA
	Dairy	Meat	Grain
Denmark France Ireland Netherlands Austria Portugal Finland Sweden U.K. U.S*	93 49 100 82 90 83-90 94 99 98 83	66-93 27-88 30-70 35 50 - 68 79-81 20 13	87 75 69 - 60 - - 75 20 38
--- Source: Agricultural Co-operatives in the European Union, O. van Bekkum and G. Van Dijk (eds.), Van Gorcum & Comp. B.V., The Netherlands, 1997

Increased liberalisation of market policies, privatisation initiatives and globalisation phenomena during the 1990’s may have warranted food system researchers to bypass the agriculture cooperatives model. The continuing strong tradition of agriculture cooperatives in the developed world even in this changed scenario reveals cooperatives hold an edge over corporate farming in channelling profits to the producers. It clearly signifies the value of ‘farmer-owned firms’ as opposed to an ‘investor-owned system’. In India, however, the evidence of cooperative success elsewhere is being ignored, as growing corporate interests and influences in the country’s farm sector are beginning to underplay the significance of cooperatives.

Although farm economists have studied the concept of cooperative inter-dependence of farm production and marketing since the early 1930s, it is only recently that they have begun to re-position ‘cooperative coordination’ ahead of ‘market coordination’, as the former gives farmers the voice and choice to be part of a ‘service at cost’ principle.

With millions of households in India possessing very little land, and millions more landless, cooperative farming is essential to pull subsistence farming out of the current abyss. Blind to this, states are pressing ahead with corporatisation of agriculture; Haryana is on the verge of amending its Agriculture Market Produce Act in favour of contract farming, and Chhattisgarh has enacted Land Lease Act 2005 to facilitate the transfer of land to corporations. No lessons seem to have been learnt from past experiences as well as the developments in the European Union.

Unless there is a policy shift in favour of farm cooperatives with the complementary support of inputs from public institutions and a reliable system of assured credit at reasonable rates of interest, the farmers in the impoverished regions of the country will continue to choose ‘suicide’ as the path of salvation. Tragically, governments have only learnt to hold the carrot that serves the private interests!