untaggedMy basic premise is this: In a stable population, everybody requires some minimum amount of food. That means that everybody (even the poor) must be able to afford it. This means that food prices must be low and that the farmers are earning (on an average) the lowest per capita income.
I recognize that the hypothesis is not framed properly, but it kind of fits in with what I see in India.
Note: Farmers does not necessarily mean the people who own the farms, but people who work regularly on them (i.e. it includes agricultural labourers and such).
Interesting idea–I’ve never heard anything along those lines.
Unfortunately, that line of reasoning doesn’t quite work, hence the sad fact that there are over 1 billion (and increasing) chronically undernourished people in the world. Food prices don’t adjust so that everyone gets to eat sufficiently, the invisible hand doesn’t work that way (it is a dismal science indeed).
Population is still increasing (will reach 7b imminently), but (perhaps) more importantly, incomes are rising, especially in the middle-income countries. As this happens, demand for food generally, and especially for meat increases. Thus, more grain is fed to livestock, and quite a few calories are lost in the conversion from grain to meat. Supplying 1kg of beef, for example, requires over 7kg of grain. A less important, but also significant factor is the diversion of grain/sugar to energy production (especially in the US and Brazil). This tends to increase global agricultural prices, leaving the bottom billion in a bit of a lurch.
Further, farming in almost all countries is becoming more land intensive (increased land:labor ratio). Thus, this increasing amount of food is being produced by fewer people–the number of farmers per non-farmer is decreasing. Since partial productivity in labor and land are also increasing, returns per farmer are also increasing, even in low-income countries. (See fig 3.5 in Alston, Beddow and Pardey (2010))
Labor and land productivity (in $/worker and $/hectare) are both rising in agriculture in almost all countries, and have been since at least 1961. There is no evidence of agricultural value added (per worker or per hectare) decreasing except during some isolated events (e.g. land and labor productivity decreased in the Former Soviet Union after the state collapsed, but have been recovering over the past 20 years).
Remember that agricultural prices largely respond to global, not local (or national) markets (although there are significant price “wedges” in some markets). Thus, local ability to pay does not drive as much of the farm-gate price as one might think. However, prices can be depressed in local markets, but only insofar as transport and trade barriers drive a wedge between local and global prices. So, while local ability to pay can affect local agricultural prices, the effect is rather limited in many markets.
Even assuming everything you say is correct there is a logical leap here:
prices must be low —–> farmers are earning little
Earnings depends on prices, sure, but also on the quantity produced. It’s the product that matters. And, profit-wise, cost of producing.
Trading in cheap products is not poverty. Think Wallmart.
Agriculture is one of the more heavily regulated industries in the world. From the Common Agricultural Policy in the EU, to US subsidies on corn-fuel subsidies and even more surreal cotton subsidies (which also mean that the US subsidises Brazilian production), to Australian protectionism on imports (especially on bananas).
The conflicting demands of Western consumers, for small "organic" farms and low prices, tends to leave farmers much more open to market price fluctuations (especially in milk production) while, at the same time, facing social and regulatory pressure as consumers (through their governments) limit their scale or flexibility.
In the poorer emerging markets, property and inheritance rights are the concern. Subsistance farmers have little to no tenure on the land they work and can easily find themselves displaced. If they have daughters there is a high chance she will not be allowed to own the land. Given these limitations, it is difficult to plan or invest for the long term.
So, unfortunately, this degree of legal protectionism on the one hand, and lack of legal rights or freedom on the other, tends to lead to feast or famine. Under subsidy regimes for favoured products, farmers can become very wealthy. Under poor legal regimes, farmers will remain poor.
This has little to do with market demand on prices and supply and very much to do with the legal and political environment.
For everyone to be able to afford food, it must be the case that (percentage of population working as farmers) x (average earnings of farmers) is low. But you can reduce this just as well by having fewer and more productive farmers as by having low earnings for farmers.
When social or economic systems are designed to keep farmers in work, rather than aiming to have as few farmers as possible, it then becomes necessary for the farmers to have low earnings.
“This means that food prices must be low and that the farmers are earning (on an average) the lowest per capita income”
In India on most of the produce there is a minimum support price offered by Government. Food is subsidized to poor under various programs and the farmer is paid more price. At times the farmers get more than the market prices, typical example is sugarcane price.
Farmers in Punjab are amongst the most rich people. So they are not necessarily doomed.
” Farmers does not necessarily mean the people who own the farms, but people who work regularly on them (i.e. it includes agricultural labourers)”
Take any sector, say construction industry, the labors don’t make much money.
This has less to do only with Agriculture, but any industry. India is a growing economy and the divide between haves and have nots is large. It would take quite a bit of social revolution and good governance to change this equation. It also dosnt help much when the land mass is 7th largest and population is 2nd largest. This leads to fewer resources available. In such a situation, the haves can hold out better and drive the have nots to an extent they can in the process get more rich and leave the poorer more poor.
It is unfortunately true that farmers USUALLY get the “short end of the stick.”
It has been observed that farmers do best when food is scarce and worse when it is plentiful. That is because food is a necessity, meaning that its “elasticity” is low (less than 1). That is, if GDP increases by x%, farm income increases by less than x%.
It has been the makers of luxury goods that benefit in a fast-growing economy, because the “elasticities” for THEIR goods is high. If the economy grows by x%, the amount spent on luxuries grows by MORE than x%.
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