Small growers at the mercy of middlemen

MIDDLEMEN are individuals/business concerns who perform various marketing functions involved in the purchase and sale of goods as these move from producers to consumers. They are classified as commission agents, brokers, wholesalers and retailers.
The middlemen play the role of an institution between producers and consumers. But in Pakistan it is perceived that the role of middlemen is a bit exploitative and detrimental to the interest of farmers. Farmers sell their produce to middlemen at cheaper rates mainly because they do not have direct access to markets. It is the middlemen who control market prices.

Agricultural production mainly comprises small-scale operations. In most cases, direct marketing by individual producers becomes impossible due to small marketable surplus. Consumers can not contact growers directly as crops scattered over a vast landmass, are inaccessible due to poor condition of farm-to-market roads and inadequate transportation system. The poor transportation system also makes marketing of perishable/horticultural commodities difficult for the farmers.In such a situation, the middlemen come forward, provide their services and often play an exploitative role. Most of the growers are small farmers who do not have the means to fund their day-to-day needs. In most cases, they borrow money from the middlemen to run the affairs of their farms and consequently sell their produce to them at cheaper rates.
The role of middlemen is very complicated in the marketing chain. They are the most powerful players and set the rules. Farmers and other players of the chain such as consumers and processors, have to depend on them. Contractors/middlemen most of the times buy premature crops/orchards well below the market price. They determine the price themselves and the farmers have no say in the fixation of prices.
The middlemen sometimes secure up to 50 per cent or even more by exploiting extreme conditions in the market. Farmers cannot sell their produce directly to processors, factories and markets due to strong network of middlemen. If farmers take their produce directly to markets, they have to face many problems due to close links of middlemen with brokers, commission agents, transporters and market committees. Commission agents refuse to buy produce from the farmers due to self-created low demand.Transporters want early unloading, and market committees pressurise producers to vacate market at the earliest. All these factors compel farmers to sell their produce at very low price and they have to wait for a long time to get the payments.Different studies were carried out to calculate the marketing margins of different people involved in growing and trading fruits and vegetables. The Table given below has been obtained from a number of studies carried out during the recent past which summarises the calculated marketing average margins of different fruits and vegetables in local markets.
The Table reveals that producers earn a margin of Rs0.95 to Rs4.75 per kg, contractors’ margin varies from Rs1.55 per kg to Rs5.76 per kg, commission agents earn a margin of Rs0.09 per kg to Rs1.22 per kg, while margin for wholesalers varies from Rs0.94 per kg to Rs1.53 per kg, and finally retailers earn a net margin of Rs1.30 per kg to Rs6.23 per kg for different fruits, respectively. It was observed that the lowest margin was in banana and the highest in mango.
In case of vegetables, the producers were found earning a margin of Rs3.71 to Rs14.02, commission agents as Rs0.28 to Rs0.89, wholesalers between Rs0.75 and Rs1.52 and margins for retailers ranged from Rs1.55 to Rs2.93, respectively.
There should be proper regulations to determine the role of each player in the chain. The government should fix the middlemen’s margins justifying the services they provide. Farmers have also stressed the need for laws which bind the contractors to harvest produce on time. There should be improvement in market access facilities specially construction and maintenance of roads and provision of efficient means of transportation to reduce time and cost.
The participation of farmers should be more effective in the market committees to weaken the role of exploitative agents of the chain. Inclusion of modern retailers in the chain is considered is necessary to minimise the role of contractors and middlemen. The modern retailers could only help, if they buy directly from farmers.
The role of middlemen in citrus industry is complicated and very exploitative. The other stakeholders have ‘no voice’. The middlemen purchase immature fruits(orchard) on their own terms and conditions. They usually fix the price which is much lower than the market price and make at least a profit of 50-60 per cent. They also extend harvesting period, severely hampering production for the next season.For resolving the problems faced by farmers, the following steps need to be taken:Strict marketing policy: The government has to go for new marketing policy to cope with the challenge of new markets with special focus to streamline the role of middleman and introduce regulations, which bind the limits of margins. The small producers should be included in market committees. The government should also try to encourage direct linkages between farmers and business houses to increase profit margin for farmers.Bargaining power: If farmers unite, they can easily minimise the role of contractors in the supply chain. With the farmers’ union, farmers can have a stronger voice to bargain collectively. Other options could be commodity exchanges and commodity boards.
Improvement in infrastructure: Due to poor infrastructure, farmers often have difficulty in taking their produce to bigger markets and have to sell their produce at lower cost in the local markets. With improvement in infrastructure, they can not be connected to wider areas which could help them make more choices to sell wherever they get a better price.
Vicinities: Better access to bigger markets in near vicinities can provide farmers with an opportunity to establish relations with bigger businesses and retailers. They would no longer have to rely on middlemen and get their right share of profit. Markets in the near vicinity would also reduce the cost of transportation.
Linkages: Establishing linkages with factories, processors and retail chains would take away burden of middlemen off the farmers’ shoulder. Not only would farmers benefit out of it but also factories, processors and modern retailers would greatly benefit since middlemen have been acting as a buyer and seller between the two ends and making more than 50 per cent of the profit. Efforts should also be made to make arrangements so that growers of vegetables and fruits in the peri-urban areas can have direct contact with the ultimate buyers.
Regulations: Since middlemen have established networks in the market, they rule the market. The government should play its role as a watch dog in the market so that forces of demand and supply can act freely in determination of prices.

Courtesy: The DAWN

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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