It’s changed for Spain’s farmers

Shaun Diver is a sheep farm manager in Ireland. He has 240 sheep on his farm. Last month, he sold 455 kg of sheep wool for euro 67. Tagging the receipt, he tweeted angrily: ‘It costs euro 560 to shear these 240 sheep. This is wrong, seriously wrong.’

This reminds me of a farmer from Maharashtra’s Ahmednagar district, who, in December 2018, sold 2,657 kg of onions for Re 1 per kg. After adjusting the transportation cost, labour charges and market fees incurred, Shreyas Abhale was left with only Rs 6 to take back home. To register his protest at the brutality of the markets that farmers are faced with, he had sent a money order of Rs 6 to the CM.

These are not just two exceptional cases. World over, farmers are struggling to make both ends meet. Victims of unfair prices, market manipulation, farmers continue to suffer ruthless exploitation at the hands of food supply chains. Even the US National Farmers Union acknowledges: ‘Over the past several decades, policymakers have weakened price supports for American farmers, resulting in a never-ending cycle of overproduction and low prices that has pushed tens of thousands of small and mid-sized farms out of business.’

That’s the reason why 20 big players, according to the Organisation for Economic Cooperation and Development, as per media reports, have provided farmers with a direct income support of $475 billion per year between 2015 and 2017 so as to meet the price shortfall farmers suffered. A clear indicator that supply demand criteria of determining the right price for farmers produce had left farmers high and dry.

No wonder, for decades farmer protests in most countries had remained focused on the need to provide a guaranteed price. But only recently, coming after months of protests by Spanish farmers, Spain has emerged as the harbinger of a global initiative — moving towards a new normal — by bringing in a law that prohibits sale of food below the cost of production. This is exactly what the farmers everywhere wanted. The historic initiative – to penalise retailers and wholesalers for the sale of food that results in losses for the farmers – will not only reset the food supply chain template, but also strengthen small-scale agriculture.

The reverberations will certainly be felt across the continents. Already France and Germany have introduced laws to stem the flaws in the food supply chain practices but these were not strong enough. In France, a 2018 Ordinance to amend an existing law to prohibit reselling below the actual price, allowing a 10 per cent increase in retail food prices, did not see a rise in farmer’s income as expected.

To prevent what it calls ‘destruction of value in the food supply chain,’ Spain has taken a lead by legalising what farmers had always been fighting for — guaranteeing a price that covers the cost of production — a definite decision that political leadership across the globe had shied away from. So far the effort has been to protect consumers (and the industry) at the cost of farmers. In other words, it is farmers who have been subsidising the consumers and corporate all these years. This has to change.

Bringing in amendments to the existing 2013 food supply chain law, Spain had made suitable amendments (under the new ‘Royal Decree-Law 5/2020’), which became effective from February 27. The objective is to ensure ‘that the price agreed between the primary agricultural, livestock, fishery or forestry producer or a group thereof and its primary purchaser covers the effective cost of production’. On the need to work out the ‘effective cost of production’, Spanish lawmakers can perhaps learn from the Indian experience.

Nevertheless, for those violating the provisions, in other words, selling below the cost of production, stringent penalties have been enshrined, ranging from euro 3,000 to 1,00,000 that can increase to euro 1 million in severe cases. France had earlier announced a punitive fine of euro 75,000.

To the question that ensuring cost of production to farmers would force the supply chains to pass the additional cost to consumers, Marita Wiggerthale, senior policy adviser with Oxfam Germany, said as the implementation had begun recently, there were no analyses of the impact on consumer prices. Earlier, at the time of introducing the new law, Luis Planas, the minister of agriculture, fisheries and food had told the media, that if everyone ‘takes responsibility for the food chain’ the retail prices will remain normal. His French counterpart, Didier Guillaume, too, had earlier appealed to supermarkets to stop the practice of extracting 30 to 40 per cent margin on food products.

Spain’s new law will also have greater implications for India, especially at a time when protesting farmers have been seeking repeal of the Central laws and demanding MSP to be made a legal right for farmers, ensuring that no trading takes below this price. What it effectively means is ensuring a minimum assured price that covers the cost of production, plus profit for all 23 crops (not only for wheat and paddy) for which MSP is announced. And like in Spain, making MSP a legal instrument does not mean the state has to procure the entire produce. It only raises the price band for farmers, making it obligatory for private trade to ensure fair price delivery to farmers.

Experience shows unless farm incomes are connected with realistic food prices, it is futile to expect farming turning into a profitable venture. The claim that increased private investments will bring enhanced incomes to farmers hasn’t worked either. Nor has unregulated markets ensured a higher farm price. Like in Spain, to penalise any trading below MSP will go a long way in making farming overcome agrarian distress and become an economically viable proposition.