Addressing Farmers’ Income
Critical in developing any agricultural program is the resulting income for farmers. At the end of the day, the measure of success of adopted program is viewed in how much economic benefits have come the way of our agriconstituents.
It is important to take into account two distinct ways of addressing the economic improvements or increasing income of farmers.
The most common route taken is to open agri-ventures in response to a market need. This could be the introduction of new commodities to produce and sell, further processing or value adding (as it is commonly talked of) the opening of new markets, etc. or by revenue mechanism.
The other route is the reduction of cost of production, or the cost of doing business. The level of farm expenditure in relation to how much is sold and earned from the farm determines the level of motivation for a producer to carry on and continue farm production.
As in any economic enterprise, earning a margin (or the expectation of it in the future) is a motivation to work and produce a product to be sold in the market. A consistently earning from an enterprise taken is most ideal to sustain production over a period of time.
And addressing cost component of any agricultural undertaking must take top priority if we are to address the environment where our farmers are operating.
The lack of physical infrastructure is a condition we have to work with. Meanwhile that government is unable to respond to all these deficiencies, solutions must be worked on local levels to increase income of farmers.
The establishment of farmers associations and cooperatives is a step on the right direction. Energies must be exerted to create success stories among these groups by nurturing newly established groups, supporting wavering ones, and further strengthening those that have achieved some level of success. While admittedly, there were many failures along the way, grouping or uniting farmers is an enabling solution to handle common concerns that ultimately touches on income levels.
Cooperatives are the most visible vehicle in the creation of wealth in the countryside. There are now many of them with million pesos surplus on top of the yearly declaration of dividends or rebates given to members. And in a large way, cooperatives have increased farmer’s income in many ways.
The accumulation of small investments from members had enabled cooperatives to venture in enterprises that benefited everybody. And some coops had assumed the role of input suppliers and buyers (or the market) of products from members, on top of credit extention enabling members to earn good margins from their respective enterprise.
Clustering is another solution in addressing the cost of doing business for farmers. Commonality in an area results in better technology introduction; facilitate extension services, buying farm inputs in bulk or bigger volume, establishment of community pool of services and equipment, and the like to benefit everybody.
Though existing farm clusters have been formed through the years via voluntary and individual decisions, planned clustering can be introduced in areas where distinct advantages have been established. The market dynamics necessitate a periodic review of plans and programs, and introduction of changes or revisions must be done in response to market changes as in the cost of investment or its projected profitability.
In here, I am more concerned with investments that are within the reach of grouped farmers as they should be given the first option to invest on forward or back-ward integration such that income flows back to them as a group.
Success stories for clustered corn or dairy farmers or piggery farms supporting a local meat processing plant or fishermen will be good to disseminate so that lessons can be learned by new agri entrepreneurs.
Government investment in physical infrastructure will go a long, long way in reducing the cost of doing business for farmers.
As an example, any sustained reduction in cost of transporting farm produce to market will ultimately reflect of “higher” price received by farmers as the cost incurred in bringing production input will be lower. While the farm gate price might not increase, the cost of transporting inputs is reduced, resulting in greater farm margin.
Simply stated, free market forces determine price levels. Farm produce in its commodity form is highly susceptible to the boom and bust cycle. Providing bigger margin made possible by lower cost of production can provide that extra cushion. This could motivate farmers to produce more over a period of time that will ultimately benefit consumers, and of course, increase their income.
Cost component is the other determinant of income!
