WEAK AGRICULTURAL MARKETING SYSTEM: EXPLOITATION OF FARMERS AND BUYERS

FARMERS IN PAKISTAN HAVE NO CONTROL OVER PRICES OF THEIR PRODUCE

WRITING for Dawn, authors Khalid Wattoo and Rehema Hasan explain that agricultural farming is an inherently risky business due to its dependence on weather conditions and fluctuating crop prices influenced by national and international factors.

In Pakistan these risks are intensified by a weak agricultural marketing system, where farmers have little pricing power and face exploitation by intermediaries.

Farmers in Pakistan have no control over the prices of their produce and often sell immediately after harvest to settle debts and purchase inputs for the next crop. This leads to oversupply and a drastic decrease in market prices.

Many countries have improved their crop-marketing systems to enhance farmers' market power. By learning from their experiences, Pakistan can adopt a three-pronged strategy to empower farmers: reduce crop price risk, increase financial liquidity, and decrease the role of middlemen.

To reduce price risk, countries implement mechanisms like a minimum support price (MSP) that guarantees a viable price for crops. Pakistan should announce MSP for crops where it has a comparative advantage and substantial local production but still imports, such as garlic, onion, oilseeds, chickpeas, and mung beans.

Contract farming is another effective measure to mitigate price risk. Private companies provide farmers with seeds, inputs, credit, and buy-back arrangements at predetermined prices. Contract farming boosts technology transfer and capital infusion into Pakistan's agriculture sector.

Improving farmers' financial liquidity requires better access to formal and informal agricultural credit. Commercial and microfinance banks now offer loans to farmers, but collateral requirements need to be eased. Implementing a warehouse receipt system (WHR) can solve collateral issues. Farmers can store their crops in authorized warehouses and use them as collateral for bank loans, improving liquidity and stabilizing market prices.

Farmers often face exploitation from intermediaries like arthis (commission agents) in grain and produce markets. High commission rates and delayed payments erode farmers' profits. Government regulatory control over markets should be improved, and technology-based solutions should be promoted to directly link buyers and sellers, reducing the need for intermediaries.

Enhancing farmers' market power will provide implicit financial support to the agriculture sector, enabling farmers to earn more and compete globally. This approach can help address the challenges faced by the agriculture sector in Pakistan.

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