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Small growers at the mercy
of middlemen
By Dr Muhammad Ashfaq and Arif Raza
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
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Pakissan.com;
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