A lose-lose situation

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: Agriculture is often characterised by poverty in plenty. The reason is that people have largely fixed levels of intake of staples such as rice and wheat; thus, abundance is often counterproductive for suppliers, leading to such a steep market clearing fall in prices that farm revenues often decline. Interestingly, climate change and the grim predictions of associated scarcity should analogously imply prosperity for farmers as consumers bid up prices to maintain their daily intake. The stickiness in consumption of staples might imply a really substantial increase in prices — so significant that revenues of farmers and, therefore, their net incomes might go up despite a yield decline.

Predictions of yield decline due to climate change suggest a figure of 6% of present levels for temperate developed countries and as much as 20% for tropical developed countries. For developed countries like the UK and US, the associated price increase might be a mixed blessing with grumpy consumers and buoyant farmers. But we cannot jump to such predictionsfor India.

Given that our agricultural marketing system is still driven by a long chain of intermediaries, who monopolise positions in the marketing chain to siphon off a large amount of the consumer expenditure on farm products, any large increase in retail prices would be dampened by the time they reach the farm gate. Thus, for example, consider a Rs 10 per kg increase in the retail price of rice. In a developed country almost this entire price increase would benefit the farmer. However, in an intermediary ridden farm economy like India only a moth-eaten price increase, of say Rs1, results at the farm gate. This really would not compensate the farmer adequately for the yield decline; while farmers from the developed world benefit those from developing countries like India might be in a sorrier state.