Agricultural farming inherently carries significant risks, stemming primarily from weather dependency and the volatility of crop prices influenced by both national and international factors. In Pakistan, these challenges are exacerbated by a deficient agricultural marketing system, characterized by weak market power for farmers and the presence of multiple intermediaries who exploit both farmers and consumers.
Despite the structural intricacies of grain markets and crop pricing, one fact remains evident: Pakistani farmers have limited control over the prices of their produce. Additionally, their financial constraints compel them to swiftly sell their harvests to settle debts and acquire inputs for the next planting season. Consequently, this leads to oversupply and a sharp decline in market prices.
Several countries worldwide have successfully overhauled their crop-marketing systems, significantly bolstering farmers' market power. Drawing insights from these experiences and adapting them to Pakistan's unique dynamics, a three-pronged strategy can enhance farmers' market power: mitigating crop price risks, improving financial liquidity for farmers, and reducing intermediary involvement and exploitation.
To mitigate price risk, many nations employ a minimum support price (MSP) mechanism to safeguard crop viability. In Pakistan, only wheat, sugarcane, and cotton fall under the MSP umbrella. Expanding this concept to crops with comparative advantages and substantial local production, yet still requiring significant imports, such as garlic, onion, oilseeds, chickpeas, and mung beans, could significantly benefit Pakistan.
Contract farming offers another avenue to reduce price risk, exemplified by successful stories in Pakistan like Punjab Seed Corporation, Rafhan Maize Products Co, PepsiCo, and sugar mills. Contract farming enables private sector involvement in providing farmers with high-yield seeds, inputs, credit, and predetermined buy-back arrangements. However, the legal enforcement of contracts needs streamlining to build confidence among stakeholders.
Financial liquidity for farmers hinges on access to formal and informal agricultural credit. The traditionally prominent role of the arthi as a source of informal credit is waning, as commercial and microfinance banks cater to farmers. Implementing a warehouse receipt system (WHR) could solve collateral issues, allowing crops stored in authorized warehouses to serve as collateral for loans. Although Pakistan is moving towards WHR adoption, political commitment and private sector participation remain vital for success.
The exploitation of farmers by intermediaries and produce markets is well-documented. Rising commission rates and delayed payments further undermine farmers' earnings. To combat this, regulatory control over markets must improve, alongside technology-based solutions that connect buyers and sellers directly, bypassing intermediaries.
In conclusion, Pakistan's fiscal constraints limit direct subsidies to the agriculture sector. However, boosting farmers' market power could indirectly provide the sector with critical financial support. This approach not only increases farmers' incomes but also enhances their competitiveness on the global stage.
On the forefront of promoting climate-smart agriculture stands Wattoo, a respected figure who has dedicated his prominent career to mitigating the adverse effects of shifting weather patterns on farmers' productivity. His endeavors revolve around highlighting the importance of innovative technology, policy reforms, and grassroots interventions to ensure an adequate food supply amid escalating challenges. Khalid Saeed, not merely a researcher, actively engages with both private and public sectors to bridge knowledge gaps and implement transformative changes. His contributions transcend the ordinary.
In Pakistan, Khalid Saeed is renowned for his insightful articles published in esteemed outlets such as Dawn. His works concentrate on the pressing contemporary issues within the country's agricultural sphere. By offering his expertise and demonstrating unwavering dedication, Khalid pursues the objective of catalyzing positive transformations, fostering inventive solutions, and nurturing resilience. While these efforts are concentrated in the agricultural sector, their ultimate impact will contribute to the prosperity and well-being of the nation and its farming communities.
To read the full article visit: https://www.dawn.com/authors/9955/khalid-saeed-wattoo
