In India, rice and wheat comprise 70 per cent of agricultural produce by area, but less than 25 per cent by value. In other words, wheat and rice are low value crops to grow compared to other options. Yet, the land area dedicated to wheat and rice has not decreased much in the last decade.
Government data shows that the consumption of wheat and rice has been declining around 1-2 percent in both urban and rural India, while the demand for fruits and vegetables has been rising by 2-3 percent annually. This again begs the question: Why aren't farmers shifting to growing more fruits and vegetables? If Indian consumers are demanding more fruits and vegetables, and these crops are more lucrative anyway, why do Indian farmers keep growing more and more wheat and rice?
Moreover, detailed studies across the country have also shown that while farmers just about break even (gross return compared to gross costs) on cultivating wheat and rice, growing fruits and vegetables is a profitable undertaking (gross returns are on average double the costs). Besides fruits and vegetables, there are also other crops that generate a higher income than wheat and rice. Having gone through these reports and data, I have been wondering why, despite all this, farmers choose to grow mostly wheat and rice.
We might consider two different possibilities, by way of an explanation. Farmers may be completely unaware of the difference in returns, or, despite knowing the disadvantages of growing wheat and rice, they do so anyway, for other reasons.
The first possibility seems rather difficult to believe. While I am sure farmers have not done a detailed profit and loss analysis for growing wheat versus okra, it is unlikely that farmers are completely ignorant. They do have a rough idea of probable market prices, input costs and profits from growing different things in their fields.
So what is it about fruit and vegetables that keeps farmers from growing them? Out of intellectual as well as professional curiosity, I have being digging deeper into this question, with the help of field visits and people working in the agricultural sector. Here are the results from my own observations and discussions with agri-sector professionals and experts.
Minimum support price: Wheat and rice come with a government minimum support price, and fruits and vegetables don't. Farmers find it reassuring to know that an MSP exists, and may influence open market prices and/or demand for their produce.
Risk of crop failure: Pulses, fruits and vegetables are more vulnerable to adverse weather, leading to higher risk of failure. Rather than pay for crop insurance (where it is available), farmers prefer to simply avoid these crops.
Care and effort required in cultivation: Wheat and rice require less care and effort to grow than vegetables. Higher care for crops means reduced availability of farmers for alternate income-generating activities, whether crafts or wage labour.
Price volatility: Fruits and vegetables experience a much higher degree of price volatility than grains. Part of the reason for this is the high level of mismatch between demand and supply of fruits and vegetables. Another reason is the inefficiency of markets in matching supply and demand in different parts of the country. And of course, their inherent perishability and lack of a cold chain is an additional worry.
Price realisation due to spoilage: Lack of proper storage and transport facilities has yet another impact - spoilage of produce resulting in lower price realisation due to poorer quality of produce by the time it reaches markets. For example, I saw cracked coconuts at a sorting-and-grading facility - damage that could easily have been avoided with proper packing (and better roads).
Stored crops as financials assets: As one agri-expert put it, farmers treat grains like fixed deposits, for lack of other ways of saving/keeping money. Repeatedly, farmers told me that they store grains and sell them off as and when the need for cash arises. You simply can't do that with fruits and vegetables! Even cold storage would extend the life of fresh produce by only so much (unless processed, of course).
Dignity of transaction: Recent discussions with farmers revealed another reason why farmers with medium and large holdings not growing vegetables. Typically, vegetables are harvested and sold in smaller quantities at a time. When selling wheat, a large landholder farmer can arrive in the mandi with a truck-load full of wheat and be treated with respect. But if he arrives with a small vehicle of veggies, he will be treated just like small and marginal farmers, without much respect and attention. It is interesting to note how class dynamics plays into decisions about what to grow.
Many of the reasons listed here relate to risk - either production risk, logistics risk or market risk. Only two non-risk reasons can be seen in the list besides dignity of transaction: the opportunity cost of choosing crops which require greater care, and usage of stored crops as financial assets. In principle, the latter can be addressed with better financial access for small holder farmers.
Insurance products might be expected to address risks, as in any other sector. But typical crop insurance products available in the market covers only a subset of these risks. And in any case, insurance subscriptions in India have been much lower than hoped for by policy makers and NGOs alike.
So, what are the mechanisms and institutions needed to address the plethora of risks, to enable farmers to produce the crops people want to eat more
of, which also happen to be the crops that give higher margins to farmers? Or, if we expand our thinking to non-food crops, we can ask: what mechanisms
and institutions will help farmers shift to more lucrative crops with growing market demand? The answers to those questions may pave the way for new
hope in farming.