Farmers: How far away are they?

Being a farmer is one of the least attractive job there is. Not necessarily because of the job itself but because of the fame that surrounds farmers and their way of life. This is ironic because even though it is often vilified it actually is an essential profession, that is made harder by the world around them, rather than their lifestyle.

Being a farmer is a hard, long, and badly paid job. Since the industrial revolutions, farmers have been regarded as the poorer sector in the supply-side, since they didn’t become professionals with studies they have also been considered dimmer than the rest of the population, more closed, less friendly, uglier and all the derogatory comment you can imagine.

This derogatory image was partly the excuse to modernise the sector and to create large multinational (clean) agribusiness companies, but still some people have remained in the small-scale agricultural sector either by choice or not. However, farming is the most important job if not the most essential human activity in the world.

In a recent post, I wrote about the way in which the Spanish housing sector has not been a perfect market where prices have always been the highest possible to benefit the few, where the price limit was the capacity of Spaniards to get into debt. And I would like to extend this situation to the small-scale agricultural sector, where prices at farm level have been set at the lowest possible, given that farmers need to get rid of their produce in a given time, where the price limit was the farmers decision not to produce any more  or his/her opportunity cost. This of course lowers even more, when there is no other income earner for the farmer than producing food.

In Latin America, Africa and Asia, this price is decided by the intermediaries. These people take the production from the farmer to the larger market. In a perfect situation, the different intermediaries would be fighting and betting on the price (as it happens on the fish lounges or wholesale markets in some countries), but if you happen to see a local market where farmers and intermediaries meet on a weekly basis, you will hear only mere talking and silence. Why is this? Because the price is set. Before reaching this market the intermediaries (or at least the main ones) meet for a coffee or a beer (figuratively) to see if this week they can lower the offering price.

In the US, Europe and other rich countries, large stores buy directly from the farmers, since the intermediary has been cut off. But these large stores act in the same way as intermediaries they set the lowest price possible. In this case, there is one purchaser per farmer with a contract full of clauses, which leaves rich country farmers hands tied.

So how much does the price increase from the farm to the plate?

Well this is a huge world large market involving thousands of goods, so to get an average estimate is close to impossible, furthermore the information is not readably available. You have specific cases that can be noted like milk in the table below.

Difference between producer and retail prices in milk
Country % difference*
Argentina 383,33
France 405,56
Germany 226,48
UK 230,06
US 331,08
Average 315,30
*all 2012 figures except France 2010

On average the price more than triples between the price at which milk producers sell their milk and stores sell the milk, and in cases like France it quadruples. All these countries belong to the 20 largest milk producing nations, so you can assume that in stores they get the better prices, since you are closer to the supply.

So what is the solution to this unfairness? Well basically paying farmers a higher price for their production without charging this raise on the consumer. And how can this be done? Well there are two options that can be perfectly combined:

a) Direct relationship between farmers and consumers: This is the most obvious one but it requires both farmers and consumers getting organised. The first being in close contact to insure common processing and distribution channels. For the consumers it means either going to farmer markets, setting-up a consumers cooperative where the products are delivered, and it also means that consumers can only consume what is produced locally.

b) You have fair trade projects. In this case the intermediary remains but it acts in a responsible way, charging only what it really costs to transfer and process the goods. This works in situations where the first cannot happen, due to large distances and import/export procedures.

Farmers deserve all our appreciation for the food they grow for us, and we can give it by helping them get a good price for their produce.

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Posted in Economy, Environment
One comment on “Farmers: How far away are they?
  1. […] products has meant that prices have systematically gone down to its minimum levels. Just like in agriculture, prices, for other raw materials, prices have gone systematically down, shutting uncompetitive […]

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