Pricing Vegetables, Part II
The following is a continuation of an earlier post by Beyond Profit Guest Blogger and agri-expert, Venkat Subramanian.
So who are these middlemen?
As the produce changes hands from the first local agent, to intermediate dealers, wholesalers, and end retailers, across each jump there is a repeat of the same price fixation routine. As there are no Harvard economists sitting and planning the demand supply, most calls are made on-the-fly and often there is no clear logic. The core idea is to sell the stock as quickly as possible and maximize returns as much as possible. That’s the primary and sole driver.
They keep close tabs on how many truckloads have been loaded up from villages and are on the way to a particular market. On a given day, if there are 20 trucks of tomatoes coming IN to the auction market, they may set price at INR10 (US$ 0.20). If they realize that only 10 truckloads are coming, then they increase it to INR20 (US$ 0.40). Often the farmers are unaware of this silent collusion between the transporters, loaders, and even local dabbha/mote wallahs and how information flows back and forth along the chain. Hence once price is set, it is unviable for farmers to even look for any other market as distances are too far and expensive. As a result, the farmer is forced to accept or dump the product in frustration.
These fluctuations impact both end points severely – the farmer and ultimate buyer.
But what about government regulated markets? Do they operate more fairly?
Has the government ever been ‘fair’? Well, strangely, these government markets also don’t have much volume to dictate terms. So they follow the leader. This is like the scenario where the Mumbai/NSE Stock Exchanges are the key players and other regional stock exchanges just mimic their moves.
So why don’t we just replace the middlemen? Aren’t Reliance and other stores doing that?
Is there ANY trade which operates without brokers/middlemen? Stock brokers, insurance brokers, real estate brokers, even marriage brokers – all have to be wiped out then! Well, they do play some role, which is breaking the bulk and splitting wholesale to retail volumes. We do need intermediaries, but what has happened is they have not added much value or professionalism in this trade and hence the agricultural traders/agents have become a very crude, hated community.
Well, most big name retailers are busy licking their wounds from the rapid splurge and expansion and the current recession. They too buy only from the local wholesale mandis. Don’t believe us – go there at 4 in the morning and look at their name brand trucks.
How much do prices vary from farm to city?
For example, today, the farm prices for tomatoes is around Rs 3/kg (US$ 0.06/kg). In the city is selling around Rs 18-20/kg (US$ 0.36-0.40/kg). On average, vegetable markup is 4 to 5 times.
How come no one is doing anything about this?
Well, for starters because YOU as a customer have been sleeping. The day YOU decide to wake up is when change will happen. In every industry, the products and prices are always driven by customer demand and tastes. But in India, the agri produce trade has always been driven by the supplier (or middlemen) and the end customers have faced the brunt.
So what should one do to change this?
Start asking questions. Why? In India, we are always very good at passing the blame on to someone else – corrupt politicians, media, and foreign hands – anything goes. But if YOU don’t care about what YOU eat, no one else will.
But be considerate of the poor little sabjeewallah who gets it to your doorstep. He too, like the farmer, has very little control of what happens in-between. Don’t kill the messenger. They hardly make INR150. But he is very knowledgeable about what happens and can greatly assist if you trust and appreciate his needs.
Next time, watch the price bill carefully for tell tale signs of price rise. Find local markets and roadside markets if close by, as they will be cheaper. Find where the products came from (in Chennai, they will all say Ooty, but trust me, REAL Ooty vegetables hardly reach Chennai), what chemicals have been used in transit/ripening etc.. Be a conscious consumer, because you are what you eat.
The Right to Information (RTI) act is a powerful weapon. Most government statistics on the agricultural sector are at least five years old and often projected from the last census. There is NO system tracking the exact cultivation patterns. Surprised? And we have been dumping several thousand crores without even knowing what is being sown. Ask your agricultural ministers when was the last time they visited a village and talked to a farmer?
Venkat Subramanian is the Founder and Managing Director of Matchbox Solutions, a company which uses technology to solve critical issues in India. Efarm, one such solution, uses technology to provide supply chain efficiency for procuring and delivering fruits and vegetables grown on rural farms.
