Growing involvement of investors in production and marketing of fruits and vegetables has emerged as an important factor in the pricing of these items.
Whereas investors reap huge benefits by manipulating the market, small growers end up getting low returns on their hard labour. Big landlords with lots of money and political clout often join hands with investors or turn out to be key beneficiary of price distortions.
“When bananas came in the market during July-August (2012) their prices were prohibitively high. But now there is a glut of bananas in the market because of low demand and big supply. And trust me, we, the growers have hardly met our plantation cost let alone making any profit,” laments a Thatta-based farmer.
Investors had a presence all over in agricultural sector for a long time. But in last few years we have seen their numbers multiplying and investment diversifying too fast. “People sitting on large piles of cash now invest in almost all food crops and in fruits and vegetables. If you’ve planted bananas they would come to you and buy the entire plantation in advance for a song. Under the agreement made for this purpose, farmer is first paid a part of the agreed amount of money and he gets the remaining amount when the fruits are ready to be transported to the market.”
Since the investors buy the finest banana, mango and kinnow orchards in the areas where fruits come early, they sell them at very high prices because of high quality, low supply and big demand at the start of the season. “By the time their stocks end up and late picking of fruits starts, growers have to sell them individually to traders or exporters. And since the demand begins to falter by that time and growers are in a hurry to clear their stocks to get cash, prices normally crash,” an official of Sindh Agriculture Department explained to Dawn citing the 2011 tomato price crash in Sindh as an example.
“From wheat, rice, sugarcane and corn to mangoes, bananas, citrus fruits and dates and from potatoes and onions to green peas and lentils there’s literally nothing that escapes investors’ money nowadays”, he remarked.
Due to lack of adequate bank loans, growers from all over the country meet the bulk of financing requirements either through borrowing from informal sources at very high rates or by selling their crops and plantation in advance to landlords-cum-investors. Investors from nearby cities are also cashing on commodity trading.
Growers also lament that the benefit of seasonal price-hikes mostly go to investors or wealthy landlords whose cost of inputs remains lower than small-scale farmers because of economy of scale and due to their easier access to subsidised inputs—thanks to their political connections. But financial loss due to price-crashes (like the one currently in sight in case of bananas and in the recent past in case of tomatoes and apples) is largely borne by small growers for a variety of reasons. Key reasons include their inability to store commodities for a longer period; lack of access to far-flung markets due to increasing cost of transportation; absence of closer-to-farms clusters of buying centres (as is being developed in dairy farm sector) and above all, their higher cost of production due to non-availability of low-cost institutional financing.
Elaborating the last point, a tomato grower based in Malir Town of Karachi Syed Aneesuddin narrated to Dawn in detail how he had to sell his fine-quality tomatoes in 2011 at throwaway prices because he had to pay his informal creditor Rs100,000 he had borrowed for cultivating the vegetable at a high interest rate of three per cent per month.
“Believe me tomato prices had crashed simply because some large-scale food companies and individual investors had bought in advance hundreds of tonnes of the vegetable from across Sindh. They had got the produce at very low prices at that time because they had made part payments in advance. But once their requirement was met and small growers started selling their produce on their own, these same investors (who still had unused stocks) caused the market to crash by spreading stories of over-supply.”
Realistic and timely estimates of crops, reliable data-base on domestic consumption and a fair assessment of the possibility or (the absence of it) of export market demand play key roles in steering local price movements. “Unfortunately, we’re lacking on all counts,” says Chairman of Pakistan Agri Forum Mr Ibrahim Mughal.
Representatives of farmers’ lobby groups say output estimates of major crops like wheat, rice and sugarcane are made in advance and the constant global spotlight on these crops is always helpful in this process.
But estimates of minor crops almost always remain wanting in scientific approach except for in cases where help comes from SUPARCO or some international food watchdogs like USDA and FAO.
“Prices go erratic in case of major crops as interest of different stakeholders clash right from the beginning of the crop output estimate and some of them outweigh others (in political and financial clout),” says an official of Engro Foods.