Featured Research

from universities, journals, and other organizations

Incentives needed to improve grain markets in India

Date:
March 18, 2014
Source:
University of Illinois College of Agricultural, Consumer and Environmental Sciences (ACES)
Summary:
Even after the agricultural reforms of 2002-03, for wheat, rice, and pearl millet farmers in India, grain markets are still pretty sticky. Economists analyzed infrastructure of interstate trade for food-grain crops in three Indian states and found that grain farmers are unable to cash in on India’s market reforms and take advantage of a price difference between two or more markets.

This is a photo of a rice field in India.
Credit: University of Illinois

Even after the agricultural reforms of 2002-03, for wheat, rice, and pearl millet farmers in India, grain markets are still pretty sticky. Two University of Illinois economists analyzed infrastructure of interstate trade for food-grain crops in three Indian states and found that grain farmers are unable to cash in on India's market reforms and take advantage of a price difference between two or more markets.

"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," Baylis said, "where we just need to develop a really good place for them to store the grain. 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."

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."

As an economist, Baylis said that 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 postharvest loss in India and say we need to develop a better mouse trap -- 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 mouse trap still won't help."


Story Source:

The above story is based on materials provided by University of Illinois College of Agricultural, Consumer and Environmental Sciences (ACES). Note: Materials may be edited for content and length.


Journal Reference:

  1. Mindy Mallory and Kathy Baylis. The Food Corporation of India and the Public Distribution System: Impacts on Market Integration in Wheat, Rice, and Pearl Millet. Journal of Agribusiness, 2013

Cite This Page:

University of Illinois College of Agricultural, Consumer and Environmental Sciences (ACES). "Incentives needed to improve grain markets in India." ScienceDaily. ScienceDaily, 18 March 2014. <www.sciencedaily.com/releases/2014/03/140318140229.htm>.
University of Illinois College of Agricultural, Consumer and Environmental Sciences (ACES). (2014, March 18). Incentives needed to improve grain markets in India. ScienceDaily. Retrieved August 23, 2014 from www.sciencedaily.com/releases/2014/03/140318140229.htm
University of Illinois College of Agricultural, Consumer and Environmental Sciences (ACES). "Incentives needed to improve grain markets in India." ScienceDaily. www.sciencedaily.com/releases/2014/03/140318140229.htm (accessed August 23, 2014).

Share This




More Plants & Animals News

Saturday, August 23, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Endangered Red Wolves Face Uncertain Future

Endangered Red Wolves Face Uncertain Future

AP (Aug. 22, 2014) A federal judge temporarily banned coyote hunting to save endangered red wolves, but local hunters say that the wolf preservation program does more harm than good. Meanwhile federal officials are reviewing its wolf program in North Carolina. (Aug. 22) Video provided by AP
Powered by NewsLook.com
Farm Resurgence Grows With Younger Crowd

Farm Resurgence Grows With Younger Crowd

AP (Aug. 22, 2014) New England farms are seeing a surge in younger farm hands as the 'buy local' food movement grows across the country. (Aug. 22) Video provided by AP
Powered by NewsLook.com
Drug Used To Treat 'Ebola's Cousin' Shows Promise

Drug Used To Treat 'Ebola's Cousin' Shows Promise

Newsy (Aug. 21, 2014) An experimental drug used to treat Marburg virus in rhesus monkeys could give new insight into a similar treatment for Ebola. Video provided by Newsy
Powered by NewsLook.com
Terrifying City-Dwelling Spiders Are Bigger And More Fertile

Terrifying City-Dwelling Spiders Are Bigger And More Fertile

Newsy (Aug. 21, 2014) According to a new study, spiders that live in cities are bigger, fatter and multiply faster. Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins