why dont farmers sell their produce immediately
Answers
Explanation:
Selling the crops is one thing that sets all other farm activities in motion. After all, sales is the only activity that actually brings money to the farm. Not only this, it also provides valuable information to a farmer.
Answer:
Very good question. In one simple word, it is finance.
You want to know more, read on. “Middlemen” whom you call are actually financiers, rolling in “liquid” cash. In fact, they walk around with huge amount of cash (now Rs.2000 and Rs.500 notes) and “beat” the farmer with this liquid cash contracting the expected quantity of produce at rock bottom prices, much before the harvest by entering into verbal contracts, across many villages.
So, in a sense the farmer has sold his produce in the desi “futures market” and pocketed the NPV (Net Present Value) now. As a result, any uncertainty in terms of crop failure for whatever reason may be is taken over by the “middlemen”. So, having made the sale and pocketed the money, the farmer has little or no reason to squeal about the price.
The middleman however, now has volume and scale of economy to play on. He is also able to be in the market for a long time period and spread out the sale over time. As a result, he gets different prices across time, beginning with high price (low production) to low price (maximum production period) and again high price (low production). Being a bulk seller, he can again “beat” any small seller (read farmer) who comes into the market for a day or two with his / her produce. The “market power” is with the middlemen.
Being once bitten twice shy, farmers further so only what they know. . . . production and leave marketing entirely to the “middlemen”.
Unfortunately, this contract is detrimental to the fertility of the land since neither the farmer nor the “middleman” is interested in nurturing the soil, on a long-term basis.
A vicious cycle, not unknown to policy makers. Do they have links with those “middlemen”? Search yourself for the answer. . . .