 "We wanted to see if there was more integration in the markets
since the 2002 reforms," said Kathy Baylis. "We were surprised
at how little integration we saw. Apparently there are still a
lot of regulations in place. A lot of the wholesale markets are
not open other than right around harvest. There is a strong
incentive to sell at harvest because if you don't, you'd have to
travel to Delhi or another major city. The ADM Institute for the
Prevention of Postharvest Loss that provided the funding for
this research is interested in storage, and what we found in
India is that there was a huge disincentive to invest in on-farm
storage because even if farmers could store their grain for six
months or so, they wouldn't be able to sell it then."Baylis
explained that prior to the reforms of the early 2000s, it was
difficult in India to transport grain across state lines. The
reforms made that easier and also expanded the number of people
who could purchase and trade grain. Farmers used to have to go
through a long, arduous process to become certified. The reforms
eliminated some of those issues, but other problems still plague
the system.
"Some people may think of this as only an engineering
problem, where we just need to develop a really good place for
them to store the grain," Baylis said. "But if there isn't an
incentive to store grain to sell later and get a better price,
the extra storage won't help farm income."
According to Baylis and her colleague Mindy Mallory, although
India still needs some serious policy reform, small innovations
could be facilitated to encourage more independent traders to
get into the market.
"Anecdotally we heard that in places where there were more
active traders, farmers were able to benefit from this market
arbitrage potential," Baylis said. "They weren't stuck looking
at their own local market. If they worked with a trader, they
could keep an eye on what's happening in the city and sell their
grain two or three months after harvest."
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Baylis said that fruit and vegetable crops, which are highly
perishable, tend to have less regulation than the grains and
oilseeds. Because they don't go through the government markets,
traders are making investments to get the food from the farmer to
the city.
"You have these parallel systems going on," Baylis said. "One is
regulated, very structured and not very efficient. One is
unregulated and in some cases works well; in other cases, it is also
a mess. For vegetable crops, if farmers don't have those linkages,
they really can't sell perishable products. There's a massive lack
of cold storage in India, for example."
Baylis said that as an economist, she studies how policy can
create headaches for farmers and on the consumer end of the supply
chain.
"Global food security is often seen as a production issue, but
often it's not just lack of water or access to the right seeds," she
said. "There has been evidence that major famines weren't due to a
lack of food production; they occurred because you had all of these
other institutional crises or economic crises.
"Some people on the outside look at the post-harvest loss in
India and say we need to develop a better mousetrap — to develop
better storage. Our point is that although that's a good thing, if
you don't have the right policy and economic incentives, the best
mousetrap still won't help."
"Food Corporation of India and the Public Distribution System:
Impacts on Market Integration in Wheat, Rice, and Pearl Millet,"
co-authored by Mindy Mallory, was published in an issue of the
Journal of Agribusiness.
[Text from file received from the
University of Illinois College of Agricultural, Consumer and
Environmental Sciences]
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