3-Part Series on Farmers Protest Part 1: Let’s Talk About Food: Why Farmers Deserve an Assured Price
This article is the first in a series to talk about food and the ongoing farmers protest in India. We begin with the most critical member of our food system: the small farmer. Imagine the global food supply chain as a giant brick and mortar building. Its foundation is the farmer. The farmer must hold the entire building together with the heaviest of burdens and the weakest of support.
Farming has evolved into a purposefully cost-prohibitive occupation. The debt to death trap is tough to escape in a system that requires small farmers to take out loans annually to pay for expensive inputs such as seeds, fertilizers, equipment and labor. All these “inputs” must be bought before receiving any profit. On top of that, small farmers are the most vulnerable to the unpredictability of droughts, floods, climate change, market volatility and rapid speed privatization. Small farmers and farmworkers also suffer from hunger more than any other profession. Add to that a deadly pandemic and the situation worsens. Yet, agriculture is the only sector of the economy where the net revenue is deliberately lower than the cost of production.
To address this unique problem, nearly all of the world’s governments provide support to their farmers. More than $700 billion is spent worldwide in total support to the agricultural sector. In a single day, 54 nations spend nearly $2 billion on support to their farmers. But, the subsidies merely act as a temporary bandaid and actually worsen the agrarian crisis in the long run. India subsidizes its farmers too. However, government subsidies to the farmers of India pale in comparison to other major agricultural nations. Let’s delve a little deeper into the political and economic underpinnings in India as we make the case for why farmers worldwide deserve an assured price at the farmgate.
India’s Political and Economic Lessons from the Past
India is one of the last standing agrarian bastions of family farming. As Indra Shekar Singh explains, in India, “land is still sacred and agriculture is Dharm.” It is also home to 120 million smallholder farmers who produce a supermajority of the wheat worldwide. However, India’s food system and its rural communities in particular are under attack with the controversial passage of three agricultural laws last year by the Indian Government to deregulate the farming sector and strengthen private markets, without any pricing safeguards for the small farmers. The farm laws, which are more accurately labeled “food system laws” create two markets where one is regulated by the State and subject to a price floor and the alternate market is not.
The Indian Government claims the free market will assure a competitive price to farmers and increase their incomes. The farmers disagree. They believe their livelihoods will be destroyed if their fate is put in the hands of the private market. On November 26, 2020, a nationwide strike was led by the farmers with 250 million people joining in from all walks of life. Later, the farmers were blocked from entering their Capital in Delhi. These farmers are fighting to maintain their livelihood and the future of food in the largest protest in human history. Six months later, they remain camped on the streets of Delhi, steadfast in their demand that the minimum support price be legitimized as a legal right for all small farmers.
Photo of Turbaned Indian Farmer in Chains with Fist Raised at Delhi Protest Site (Source: unknown).
Before we define or explain the minimum support price it is key to clearly see the average Indian farmer. Half of India’s population works in agriculture, of which 85% work on one to five acre lots. These are tiny farms where the farmers work day in and day out in the fields, and many without hired labor for support. This is not the big mac version of agriculture - yet. According to the WTO, 99.43% of Indian farmers are low income or resource poor. It is an ironic picture, for those who feed a nation to be going hungry.
India knows the depths of famine well. Two hundred years of British rule from 1757 to 1947 left the country with zero gains in per capita income but numerous famines of unforgettable proportions. Research shows that the British rulers refused to regulate volatile market prices despite exorbitant profits during multiple famines, and even dismissed them as a malthusian outcome of Indian overbreeding. Some scholars attribute this to the dominant economic philosophy of free trade and non-interventionism. It was not so long ago that the fruits and harvest of Mother India were siphoned off for export to the appendages of the British empire across the globe. In 1955, a newly independent India enacted the Essential Commodities Act to prevent traders from financially exploiting necessities for survival during a famine such as seed, food and medicine. India shifted its focus to figuring out how to feed its people - fast. In accepting assistance from the U.S. under its Food for Peace program, India exposed its land and its rural people to irreparable harm through the unregulated entry of foreign chemical fertilizer companies during the Green Revolution of the 1960s.
The “Green Revolution” was not green for being sustainable - far from it - it was strategically labeled green to symbolically separate a capitalist agenda from the communist color red, representing the Russian Revolution. Sustainable subsistence-based farming was swallowed by the Green Revolution and spit out as modernized monocropping. Traditional practices, in contrast, represented a practical understanding of nature such as the use of tree cover and leaving the land fallow for a long period to replenish the soil.
Raj Patel in his silver-tongued book A History of the World in Seven Cheap Things describes the Green Revolution as a combination of “agriculture, new crop varieties, fertilizers, pesticides, irrigation, landholding mechanisms, marketing approaches, and state power” to maintain a neoliberal economic order where the masses struggle and a few thrive. In late 1965, India agreed to controversial terms in a food loan from the U.S. involving $50 million and 1.5 million tons of wheat.
India in its quest for self-sufficiency and freedom from ship-to-mouth existence, capitulated to demands for devaluation of the rupee and opened the market to private fertilizer companies. In the interest of integrating their farming technology, namely chemical fertilizer use, these companies could control pricing and distribution without any government oversight or regulation. This corporate control remains today with Indian farmers cultivating monocultural cultivation of high-yield seeds.
There was immediate backlash against this historic policy decision as “bondage to the United States.” Many viewed the terms of this loan agreement as a lateral move from food import dependency to chemical fertilizer dependency. In the spirit of strengthening a nascent sovereign nation, alternative solutions using native organic fertilizers, domestic ventures, and state operation were proposed, but peevishly pulverized. This backdrop further supports the observation that the last half century of Indian agricultural policy has been a “carefully primed...corporate takeover” led by the United States.
The northern states of Punjab and Haryana, also known as the “food bowl,” became the guinea pigs for the Green Revolution technology (high yield seed and corresponding chemical fertilizer). American agri-diplomats did not lie about the seeds, they were indeed high-yield. Patel shares that between 1960 and 1980 Indian farmers produced a skyrocketing 87 percent increase in wheat yields (strikingly similar to corn yields experienced by U.S. farmers a hundred years ago). But what the agri-diplomats did not say was that these seeds would be costly in terms of fertilizers and intensive irrigation which would render Punjab a desert in 25 years. The seachange in the landscape of agriculture offered short term rewards in exchange for the long term suffering of the people and soil of Punjab.
In 1966, the Indian government established an Agricultural Produce Markets Committee (APMC or mandi yard) system where farmers would transfer crops for sale at a guaranteed Minimum Support Price (MSP). This basic benchmark was designed to protect against market volatility. The overarching goal was to persuade the farmers of the “food bowl” in Punjab and Haryana to grow the pricey seeds as a means of reaching food security. Although the program only applied to wheat initially, it was later expanded to the current list of 23 essential food crops. Yet, only 6 percent of Indian farmers actually benefit from MSP prices. This number is low because the government primarily procures wheat and paddy from APMCs in Punjab and Haryana. Many farmers from neighboring states come to these mandis to fetch a better price than in their home states where there is no MSP.
Another barrier to all farmers enjoying the MSP is the sheer shortage of Mandis (physical marketplace) which means that there is nowhere for them to take their harvest to receive an assured price. When a farmer cannot reliably access a mandi or receive MSP, the cycle of poverty kicks in. This leads to paralyzing debt from unpaid bank loans, dispossession of land and death by suicide.
India’s Minimum Support Price Helps Farmers and the Hungry but is Under Attack
Award-winning Indian Economist and Food/Trade policy expert, Devinder Sharma phrases it simply, in the absence of a floor price, farmers suffer immensely. But state sanctioned safeguards can serve as an antidote against market volatility. For example, the state of Kerala sets a price floor that is 20 percent above the cost of production for 16 vegetables. There, the private market has regularly paid the farmers at a rate above the price floor, which has relieved the state of having to interfere. This is evidence that the MSP operates in practice as a powerful price signal to private buyers. In turn, the MSP also serves as an assurance for a minimum level of return on the farmer’s investment. However, this longstanding practice was never codified into a statutory right. It has no legal authority and no teeth. The new laws at issue indirectly gut the MSP, even though the Indian Prime Minister Narendra Modi publicly assures farmers nothing will happen to the MSP.
These hollow promises threaten the future of food, farming and the malnourished. The APMC/MPC system serves a dual purpose in protecting farmers from a volatile market and in procuring food grains for resale at a lower price to those in poverty. India is home to a quarter of the entire globe’s food deprived population. These mandis are really “right to food” mandis because their existence enabled the Government of India to operate the largest public food system on Earth, remain in operation. The legislation passed last year refers to this system as something that is “for the time being in force” as if its applicability is temporary. Farm leaders such as Kavita Kuruganti call for the universal expansion of the public distribution program to include millets, pulses and oil. Nonetheless, the public distribution system is justifiably lauded as a successful program in reaching the largest number of hungry people in any country.
Ironically, the United States launched a similar program during the New Deal era that successfully raised prices for farmers and also fed the poor. This also resembles China’s efforts with the Minimum Procurement Price policy, which successfully reduced the size of its undernourished population from 289 million to 133.8 million between 1990 and 2016 (Table 1). Similarly, India reduced its population of undernourished people from 23.7% to 15.2%. Without the public sector markets, India will quickly reverse its gains and become dependent on profit-driven private markets.
Table 1: Number of undernourished people in China, India and the World over the last three decades. Even though the population of China and India has increased since 1990, the proportion of undernourished people has dropped significantly. Both countries have a massive procurement and distribution system which plays a major role in fighting hunger. Source: Regional overview of Food insecurity Asia and the Pacific 2015, FAO.
Figure 1: Expenditure on food security in India, China and USA. Source: WTO Notifications on domestic support to agriculture sector submitted by India, China and USA.
Policy analysts recommend that instead of destroying the MSP system in favor of privatization, the better route is to legalize the MSP. Other recommendations include expanding MSP to fruits and vegetables beyond the cash crop category and increasing the number of open markets (APMCs) from 7,000 to upwards of 40,000. Providing a nationwide MSP does not mean that the government has to procure everything. The government must simply do the proper arithmetic and consistently set a benchmark price below which trading is prohibited.
Other aspects of the law establish contract farming which farmers reasonably fear because of terms that prohibit the farmer from selling their produce at an APMC mandi. This translates into less money in their pockets because the mandi price would be higher based on the MSP. If the farmer violates this provision, the adjudication of the matter would be subject to one-sided non-judicial hearings in which the private trader can select the decision maker. This is a gross withholding of judicial review.
There is significant international, as well as domestic opposition, to the MSP system. In recent years, the United States and other nations have filed WTO disputes against India alleging that the MSP operates as a trade distortion. The persistent attacks on the MSP further distress the Indian farmer. The hypocrisy is well known that the developed nations or the Global North, led by the U.S., dump crop surpluses on the Global South at prices below the cost of production and heavily subsidize their own farm sector (Table while also demanding that the Global South stop providing its farmers with MSP. Despite WTO agreements for all nations to reduce agricultural support, the United States has substantially increased its agricultural support. The WTO Subsidy Discipline protects the dominance of the Global North in the international market.
Table 2: Domestic support per person who is economically active in agriculture sector. Source: (1) Domestic support notifications submitted by India, China and USA (2) World Bank, World Development Indicators and EconStats (accessed on 16th September, 2016)
The MSP system along with government procurement has worked as what Dr. Garrett-Graddy Lovelace calls a band-aid on the farmers wounds, giving them loose confidence to grow crops every year. Unlike the United States and China, India does not heavily subsidize its farmers. Data from the Organization for the Economic Cooperation and Development (OECD) shows that in net terms, Indian farmers receive negative support (-5.7%) because their expenditures are much greater than any subsidy support. This is in stark contrast with Norway where the subsidy support is over 60%.
To remain competitive, policy makers paint the choices as either follow the U.S. and other wealthy nations in heavily subsidizing agriculture or legalize the MSP. Otherwise, the small rural farmer cannot compete and is priced out and into the debt to death cycle. The displacement of indebted and priced out farmers will result in a groundswell of landless and jobless people. In fact, an Indian government think tank from 2017 repeated similar goals as U.S. reports in the 1960s to strategically displace rural farmers from farming and into urban setting jobs as cheap labor. More than twenty years ago, the World Bank dropped its prescriptive model for India by estimating that there would be a mass exodus of 400 million rural people into the cities. Not everyone will willingly transition into the day laborer struggle in the concrete jungle. The failure to recognize this reality is likely to lead to a catastrophic migrant crisis of unforeseeable magnitude. The fineprint of these laws is visible to the farmers. Slowly killing the minimum support price as a price signal locks in the farmer to selling their crops to a handful of agribusiness giants. These giants are motivated by profit, not fairness. The farmers of India are hungry not for food but for a state sanctioned benchmark price to be paid above a reasonable threshold. This is fair and this is just. To do so otherwise risks a catastrophic backwards decline of the Indian civilization of epic proportions.
Decentralized public procurement and distribution of fruits and vegetables, pulses and oilseeds is key to the survival of rural communities during lockdowns and the ongoing struggles caused by the recent wave of Covid-19. At the start of the two month lockdown in 2020, nearly 450 million migrant workers were uprooted without any income creating a colossal decline in food security. Small farmers suffered because they could not sell their crops at the mandis which were closed. Retailers were also blocked from access to fresh food and processed foods which impacted the consumer. A mix of missing farmworkers, loss of machinery and closed mandis led to serious supply chain issues in agriculture.
A resilient rural class means a resilient nation. Whether it is a minimum support price or a ban on the sale of food below the farmer’s cost of production, farmers all over the world require the support of their governments. Let’s explore a few key players in the global food system to understand why India should guarantee its farmers an assured price at the farmgate. The United States, European Union and China all Heavily Subsidize their Famers
The lion’s share of the $2 billion spent on subsidies is $536 billion to agribusiness by the United States. From a small Scandinavian nation like Norway to larger countries such as China and the United States, each nation subsidizes a significant percentage of the production costs in farming. Of all the member states of the World Trade Organization (WTO), the United States and the European Union spend the most on domestic support for agriculture. Incidentally, the majority of subsidies go to large corporate farms and not the smaller family farms.
The current subsidy system in the United States began in the 1970’s with a push for farmers to “Get Big or Get Out.” Prior to that, American farmers had price assurance much like the Indian MSP system. This system of “parity pricing” was designed to harmonize the cost of producing commodity crops with its purchasing power on the market. In 1979, the Carter Administration paved the way for the free market system leading to protests and a Tractorcade of thousands of farmers in Washington DC for several months. Millions of farmers were eventually forced to call it quits and find alternative sources of livelihood. This has led to a suicide crisis similar to India with the Centers for Disease Control and Prevention reporting last year that farmers are more likely to die by suicide than other occupations.
Since 1995, $425 billion in farm subsidies have been provided to farmers in the United States, unfortunately most of it to large farms. This has led to a few agribusiness companies with supermajority stakes in the U.S. food supply and the global grain supply.
Take a tour of the midwestern United States and it is obvious where most of the heavy subsidies go: corn production. Similar to the overproduction of wheat and paddy in India, corn isnt grown as a source of food but a source of revenue for the agribusiness paradigm producing corn for animal feed, ethanol and high fructose corn syrup. In a somber similarity, both commodity crops damage the environment and impact public health. As pointed out by others, the blame is not on the farmer but on the entire food system, which needs a desparate head to toe makeover. According to Sharma, despite heavy farm subsidies, the American farmer is still crippling under monumental debt for the same amount. He concludes that “even the visible hand of government subsidies has failed to make markets work efficiently for farmers.”
Large agribusiness companies can sell domestically and internationally for prices lower than the international price, which stifles global competition. A farmer from Wisconsin, Joel Greeno of Family Farm Defenders explains that “the citizens should consume the food produced by the nation’s farmers” an anchoring principle of food sovereignty. The prioritization of food as a commodity for trade pushes forward addictive government subsidies. The vicious cycle of overproduction of commodity crops enables a few multinational agribusiness empires to amass massive wealth and supreme market dominance.
Tractorcade with a farmer wearing a mask of President Jimmy Carter mask in Washington, D.C. on Feb. 6, 1979. (Associated Press)
This market dominance is maintained by the laws passed in Congress to increase subsidies for wealthier farmers to export crops. For example, in the cotton industry, the United States maintains its position at the top through enormous subsidies that threaten the ability of other nations to compete. Between 1995 and 2012, the United States provided $32.9 billion to cotton producers to incentive more production. Heavy subsidization in the United States has a negative impact upon the farmers of many developing nations, or the Global South, including Burkina Faso. This one-sided food export policy is known as “crop dumping” in the Global South.
The European Union (EU) spends 40 % of its annual budget on its Common Agriculture Policy. More importantly, the EU steadily provides farmer subsidies at 19 % of gross farm revenue. This amounts to more than $2.5 billion annually in domestic support. The EU has also increased its domestic support of sugar, butter, wheat and milk. In 2006-07, domestic support for sugar was twice the value of sugar produced at over $8 billion. But, the small farmer continues to suffer the most. For example, France is the largest agricultural producer within the EU and the top beneficiary of subsidies. Yet 1,500 small farmers in France lose their businesses every year. As Table 1 shows, the EU provides nearly three times more in domestic support (farmer subsidies) than India.
In 2004, China began to protect its rural farmer from foreign competition by increasing its domestic support of agriculture. Several farm support programs were launched, such as high fuel subsidies, high fertilizer subsidies, removal of taxes and even direct payments. The result of such massive support was a 40 % increase in grain production over the next ten years, meeting China’s goals to increase local income from farming. Grain production in countries like China and India is guided less by interests in export and more by feeding its people.
China has adopted a Minimum Support Price similar to India. The purpose of this MSP is to ensure domestic food security and maintain stability of grain market prices. China has largely seen its subsidy program as a temporary gap measure while it expands upon its minimum price policy. Some analysts see a decline in heavy subsidization, especially in light of a recent WTO decision finding that China’s MSP for wheat and rice was an unfair subsidy.
Spain: A Potential Template for Just Agrarian Reform
Tractorcade of farmers protesting on the streets of Spain in February 2020. Source: Reuters.
The Government is the best equipped to provide an assured price to small farmers. The recent farmer protests in France and other European countries reveals that the problem of increasing debt and distress is not restricted to farmers in poorer countries. In Spain, farmers protested for months at the start of 2020 demanding a minimum support price in essence. They staged tractorcades and blocked roads much like the farmers of India have been doing. In early 2020, retail stores priced products at four times the amount given to farmers at the farmgate. Ivana Martínez, General Secretary of Madrid’s Farmer and Agriculture Organization (COAG), explained that agri-food products “should cost what they are meant to cost, and not what they are priced by big distribution and food chains, which always keep the added value.”
In May 2020, Spain amended the “Ley de la Cadena Alimentaria,” known as the Food Chain Law, to ban the sale of food at prices below what farmers are paid. Union leaders attributed this historic amendment to the months-long farmers revolt. Spain is the first nation to legalize monetary penalties against retailers and wholesalers who sell food at a price that economically harms the food producer. This is a monumental milestone that must be heralded as a step in the right direction. Sharma explains that this approach does not require the country to procure the entire produce, but simply uphold a