1/ A summary of the @CASIPenn Ag Markets research w/ Mehkala Krishnamurthy, Devesh Kapur & @the_orientieer

Conducted in 2018-19 in 7 districts of Bihar, Odisha & Punjab.

Ethnographic research and quant surveys of farmers, intermediaries & other actors in the supply chain

2/ Market participation of farmers very low in Bihar & Odisha (B&O)

40-60% of farmers do not sell; farm for self-consumption.

Linked to the scale of farming. Farmers who sell are 2-3 times larger.

3/ Important predictor of realized prices in B&O is the VOL of sales. 1% higher qty sold is associated with ~2.5% higher prices

Consistent w/ (1) a higher bargaining power for larger farmers (2) buyers passing the cost reduction from not having to deal with many small farmers

4/ The primary site of sale for farmers in Bihar is farmgate and in Punjab the mandi. In Odisha, it is overwhelmingly farmgate but some farmers (~20-30%) also sell at a govt. procurement center or a haat (local markets).

5/ In Bihar & Odisha, Farmers DO NOT sell to the same trader over years. Persistence in farmer-trader relationships is weak. No evidence for interlinked transactions.

This is not the case in Punjab.

6/ Farmers in Bihar & Odisha choose the buyer who offers them the best price. This is also the case for Maize in Punjab, not for Paddy & Wheat due to assured Minimum Support Price (MSP).

7/ Price discovery in Bihar & Odisha primarily via bilateral negotiations. Regulated auctions are rarely held except in the case of maize in Punjab.

8/ [SURPRISE] Electronic weighing scales are used in Bihar and Odisha but NOT in Punjab.

9/ Payments to farmers are mostly made in CASH but there isn’t much delay. Within a week in Bihar and Odisha. B/w 2-4 weeks in Punjab.

10/ Public procurement @ MSP almost absent in Bihar & Odisha. Only 5% & 11% of farmers report selling to govt agencies in B&O resp. These are usually larger farmers.

11/ Reasons: (a) poorly timed procurement windows – several weeks after harvest, (b) delayed payments, (c) larger farmers & traders get first dibs to sell to gov, (d) exclusions due to improper data & of tenant farmers.

12/ The price gap between open market sales & public proc is significant ~30%

BUT even when farmers sell to Gov agencies B&O then get a 2-5% deduction, hence not receiving the full MSP as compared to Punjab

13/ Agriculture is a high-risk business due to (a) price volatility (b) yield volatility (c) trade policy volatility. MSP the only available risk-mitigation instrument for farmers. Only 6-7% of farmers benefit from PMFBY.

14/ Bihar: Deregulation -> reduction in taxes -> benefitted traders not farmers -> no investment in market infrastructure. Erstwhile mandis still remain main market sites but now unregulated and with dilapidated infrastructure

15/ Complexity in intermediation. village traders, commission agents in mandis, and brokers provide different services. e.g. While village traders aggregate produce, brokers facilitate trade by solving COUNTER-PARTY RISK and do not handle produce.

16/ Little evidence of intermediaries charging big margins or delays in transport. Veg harvested in Nalanda reach Patna (~100 km away) in a matter of hrs

When cartelization exists among traders (e.g. chillies in Odisha), farmers seek regulatory support & mandis but to no avail

17/ Odisha: regulation remains limited to fee collection by various actors like the panchayat. Revenues not used for marketing infrastructure development.

18/ Whether it is the site of sale, the manner of sale, post-harvest processing, storage, and aggregation, all point to the need for context-specific public investments. Also, interventions to expand the economic market.

19/ The market system with many intermediaries at multiple levels is less a sign of market inefficiency and more a rational response to the dominant structure and condition of Indian consumption and production -- small farm sizes.

20/ In B&O, farming is primarily for self-cons & land key for insurance. Potential gains from scale & consolidation. Structural transformation requires the development of other sectors, pulling people into productive jobs rather than pushing them into unemployment.

21/ No LOW-HANGING fruits. The idea that simple interventions will result in significant gains is as mistaken as it is seductive.

N/ The full report can be downloaded here: https://casi.sas.upenn.edu/agricultural-markets-study