Farmer and Consumer: Who Benefits from High Vegetable Prices?


farmland

Ammar Al Shuqairi

Friday, June 12, 2020

During the early days of the curfew imposed due to the Coronavirus pandemic, retail and vegetable markets witnessed an increase in prices. Citizens complained about these prices through local media. The Ministry of Industry and Trade interfered and set price caps for some items, while the security services closed some vegetable stores because of the high prices, without knowing who raises the prices, how, and when.

The high prices of vegetables and fruits during the Coronavirus crisis brought back the old debate that has been coming up for years: If the consumer complains about the high prices of vegetables and fruits, and farmers complain about the low prices in which they sell vegetables and fruits, then who earns the money?

For years, stakeholders have recognized this gap between farm sale prices and consumer purchase prices, and have developed solutions to address this gap, but to no avail. Experts in the field of food sovereignty warn against the impact of such a problem on the agricultural sector and citizens alike, especially in light of the extraordinary circumstances that Jordan and the world go through.

In this report, before the start of the current Coronavirus crisis, we followed the vegetable journey that starts from the farm, and the marketing stages it goes through until they make it to the consumer. The report documents the price of these items at every stage they pass through; until the stage where price increases occur. We chose two main items for the farmer and the consumer being of the most produced in Jordan and available at the Jordanians’ table; tomatoes and potatoes.

Crops, before reaching the market
Tomato cultivation in Jordan is ranked first among vegetable cultivation in terms of quantity of production; followed by cucumber, then potatoes. It is also the most widely consumed vegetable among Jordanians, followed by potatoes, then cucumber.[1] These items are grown in different regions of the Kingdom, and in this report we will focus on those grown in the northern Jordan Valley.

On sunset of February 29, Ammal Hamid, a farmer in the town of Qarn in the northern Jordan Valley, finished harvesting, packing and loading his potato crop. The driver of the pick-up truck, which usually carries 350 to 500 potatoes boxes, went to the central market of vegetables and fruits under the Greater Amman Municipality, where it is to be sold there to an agent. The wholesale market system prohibits the sale of horticultural products or offering them for sale in bulk unless they are inside the market, and it is required that the agent sells them.

The system defines the agent as the merchant who sells the horticultural product for the farmer’s account in exchange for commission. The system sets the percentage of agent’s commission at less than 6% of the “real value of the sale obtained from the wholesale selling of the horticultural product”.

The porters offloaded Hamid’s crop in front of the shop of agent Abu Al-Amin, located at the edge of the market, at the beginning of the dawn hours. The driver then returned to the northern Jordan Valley. Farmers do not know the price at which their crops will be sold, but rather wait until the next day when the crops is sold in two periods; 4 am, and 10 am. These are the times that market management has determined according to regulations. Hamid describes the waiting period s a dream, and says, “You keep your hands on your heart until next day.”

Farmer Ahed Al-Shobaki, just like Hamid, supplied vegetables for several days at the end of February and the beginning of March. He sent potatoes, tomatoes and other varieties grown in the Karima area in the northern Jordan Valley, and he was waiting for news of prices to come from the market.

Jordan farmers import their crops to the central markets of Irbid, Zarqa and Amman, in addition to the Al-Ardah market for export. The central vegetable market of the GAM has the largest share of these markets. The market receives about 70% of the kingdom’s production of vegetables and fruits, according to market director Anas Mahadin

Inside the market
Every day between 6 and 8 thousand people enter the central Amman market, as a seller, retailer, farmer, employee and worker in the market. The buyers will enter after 4 am, as brokers who work with the agents open auctions on the agricultural crops they got from the farmers.

The system states that the manager of the market shall announce the opening hours of the auction and its closing date, “I have two sale periods; The first period begins at 4 in the morning, and the second period, which is the 10 am market, during this period, sales continue inside the central market”, says Mahadin.

On the morning of March 1, i.e., the day after the arrival of Hamid’s crop, retailers from stalls, shops, and malls entered the market for purchase, and the average price of the potato box (capacity of 10 KG) inside the market was JD2 (i.e. 20 piasters per KG), while the majority selling price is JD2.5, as the daily market bulletin for prices shows that a kilo of potatoes was sold that day at a price of 255 piasters per KG. As for Hamid’s crop, the box was sold for JD2.25, that is (22.55 piasters per KG), as he told us.

The Central Market announces the prices at which crops are sold daily, which are three prices according to the quality of the crop; lowest price, high price, majority price. In the case of potato prices for the first week of March (from Sunday March 1, to Thursday March5), prices were close to those in which Hamid’s crop was sold, as the average minimum price per KG of potatoes was 17.5 piasters, while the average higher price per KG was 32.5 piasters. It is sold for a majority price of 25 piasters per KG.

Mahadin says that the factors that determine the pricing of items in the market are multiple. “Supply and demand are a major reason, and quantities (…) The more quantities decrease, the higher the price. This is the main rule, then the element of quality and staging”. Staging means crop arrangement and classification according to quality in several categories.

On the same day that Hamid’s crop was sold to retailers at a price of 22.5 piasters per KG, the price of a kilo of potatoes in vegetable stores in five different regions in Amman (namely Al-Rabieh, Al-Weibdeh, Sugar market, Wadi Saqra and Sweileh) ranged between 50 – 90 piasters per KG. Thus, the price gap between the price at which the farmer sold and the price at which the consumer bought from the retailer reached 122% to 300% of the original price.

If retailers bought potatoes at the lowest price: 17.5 piasters per KG, then they have sold with an increase in price between 186% and 414%. If they bought potatoes at a higher price of 32.5 piasters per KG, they have sold them at an increase of 54% to 177%. And if they bought it at the majority price of 25 piasters per KG, then they have sold it for an increase ranging from 100% to 260%.

In his visits to Amman, Al-Shobaki was exploring the prices of vegetables on the stands and shops. He was shocked by the high prices that are sold in relation to what he sold his crop: “A bad news after the other”.

Variation in prices between Amman and the governorates
On the outskirts of Amman, the price gap between the prices of the central market and the prices at which the retailer sells differs from one region to another and from one category to another. Ahed Al-Shobaki, a farmer from the Al-Karima region, sold his potato crop on the central market on Wednesday, March 4, for JD2.5 per box (12 KG of capacity per box), i.e. at 21 piasters per KG.

On the next day, March 5, the price of one KG of potatoes in Salt reached 50 piasters, and in Ain al-Basha 39 piasters, i.e. an increase from what was sold in the central market by 138% in Salt, and 86% in Ain al-Basha.

What happens with the potato crop applies to the tomato crop. For example, Shobaki crop of tomatoes was sold in the central market on February 29, at 27.5 piasters per KG, and tomatoes were sold the next day at 59 piasters per KG. On March 4, a kilo of tomatoes was sold in the central market at 21.25 piasters per KG, while the kilo was sold the next day in Ain al-Basha, at 49 piasters per KG, and in Salt at 35 piasters per KG, an increase of 131% in Ain al-Basha, and 65% in Salt. This price gap is applied to a wide variety of vegetables and fruits.

The true cost of agriculture
From the price at which Hamid sold his crop of potatoes [JD2.25 per box] Hamid paid a 6%commission to the agent, JD10 per ton of vegetables arrived at the central market for the purpose of selling according to the market system, in addition to a penny for the service of offloading every box, 30 piasters per worker for each box for the collection and packaging, about 20 piasters for transporting each box from the farm to the market, in addition to 25 piasters for the empty box. Hamid says that the cost of the potato box above ground is JD1 for harvesting, packaging, arranging and transporting to the market. What farmers call the above-ground cost are post-ripening costs.

As for the first stage of costs, it starts from buying seeds, fertilizing, spraying pesticides, watering, agriculture, and medicines. This cost varies according to the weather, and if the farmer works on the land according to the guarantee system, JD200 are added to the cost of guaranteeing the agricultural unit (30 dunums).

“One KG of potatoes is costing 27 piasters at the market. If you sell it for less than 27 piasters per KG, you lose.” Shobaki says about the total costs of producing one KG of potatoes, while Hamid says that the cost of producing one KG ranges between 20 and 30 piasters.

Sometimes farmers refuse to deliver their crops to the central market; the process of harvesting, packing, arranging and transporting the crop to the southern valleys costs more than the selling price. In this case, farmers are reluctant to supply to the central market. Farmer Aabed Al-Dhala’in, who grows tomatoes, says what he should do in this case: “Mostly, when I see this, I pull it out. I know I am done”.

Why the gap?
Experts at the Jordanian Farmers Union in the area of ​​food sovereignty agree that the reasons for the price gap are due to two main reasons, namely, crop scale, and the multiplicity of marketing stages. An amount of money is added to the price of the product in every stage that the product goes through during the marketing process, which makes its price high if compared to its first price.

These marketing stages start from the central market, as it is spread by what is called retail selling, a sale made by the so-called borrowers, who are individuals who borrow crop boxes from the agents and offer them for sale in the market square, while placing a profit margin on what they took from the agents. This act according to the market system is considered a violation, as it resells crops in bulk, as the regulations prohibit the resale of horticultural products wholesale inside or outside the market except for one time only. [2]

“The borrower buys 100 boxes of tomatoes, by moving them from one place to another, and he sells them while being sold,” says Mahadin. In theory, the price of a box increases if the seller is the borrower and not the agent, as he sets a profit margin for self. Yet, there are cases in which the borrower sells to another borrower, which leads to an increase in marketing stages, and thus an increase in price. “Sometimes you but something for a set price, then someone would come and offer you 7-10 extra JDs. You sell it and return to buy another.” Ziad Al-Khatib, who has been a borrower in the market for 21 years, says.

Mahaden admits that this type of sale has existed for decades, “not systematic but present, in some cases inside the market, we find big cases, it become habitual.” Market management is fighting this phenomenon, Mahaden says, “as much as possible.”

The phenomenon of retail sales, according to Mahadin, is attributed to the fact that retailers do not come at the appointed time to sell. Some of them come late, after the goods were sold. They would look for someone [borrower] who did everything and is ready to sell it to them. This (…) increases the price to the retailer.”

Mahmoud Al-Oran, general manager of the Jordanian Farmers Union says that one of the reasons for the high price is borrowers. He also suggested that the Directorate of Markets intervene to adjust the process of opening the auction within the central market so that the auction starts on vegetables at the cost price of crops, and it is not permissible to offer the crop at a price less than its cost.

In addition to the multiplicity of marketing stages in the central market, the market manager, attributed the increase in prices outside the market, to the absence of price controls in retail stores.

Meanwhile, Director of the Markets Department, Mustafa Al-Khawaldeh, said that the Ministry of Industry, and Trade and Supply, in partnership with civil society organizations, are studying “anything possible that prejudices prices, rises or falls, and exports and imports are all of monitored.” On the mechanism of price control, he says: “We automatically do not wait for a problem to take place in order to solve it. We do our studies so that if there is an indication of a problem, we can solve or neutralize it.”

Al-Khawaldeh asserts that the Ministry did not monitor a significant increase in the prices of vegetables, at the beginning of this year, “what happened is exaggeration.” He confirmed that items other than vegetables had increased prices, which forced the Ministry to set their prices.

The Ministry of Agriculture acknowledges the existence of this gap, and a study of the cause of the gap attributed this to several factors, including the failure of the farmers to arrange their crops. In the event that the farmer does not arrange vegetable boxes; that is, classification of boxes into units between good, medium quality and low quality, and having put the units of different qualities in the same box, the retailer is forced to increase the price to compensate for the damage from the units in the box.

A retailer in Ain al-Basha says that he usually finds some damage in the vegetable box, which forces him to raise the price of one kilo to compensate for this damage. But when we wanted to buy a box from the same merchant, the price was as in retail. That is, the presence of damaged items in the box does not affect the price increase. For example, the price of the capsicum box (5 kg) in Ain al-Basha on March 5 reached JD5, although it was sold by the agent of Al-Shobaki in the central market a day earlier at a price of JD2.5 per box, an increase of 100%.

Ayman Al-Salti, Director of Marketing and International Trade at the Ministry of Agriculture, says that selling by weight is one of the proposed solutions to solve the problem of the price gap that comes due to the variation in the quality of items and their lack of arrangement. The Ministry encourages the private sector to establish arranging centers within production centers (farms).

Some farmers are already arranging their crops, but the prices at which they sell are the same as those who do not arrange. Ali Al-Asouli, who guarantee farms in the Saberra area of the northern Jordan Valley, including 20 dunum land of potato says: “I took them for JD10,000, and I swear I paid the workers’ wages from my pocket,”. He sells in KG, not boxes. We used to sell at 25 piasters, and we sold at 20 piasters one day, grade “A” potatoes.”

Al-Asouli classifies potatoes into three varieties; the first degree is “sold at JD0.25 [kilo], the third degree is by sack, the sack has 10 kilos for JD1.5-JD1.25.”

Engineer Razan Zuaiter, president of the Arab Network for Food Sovereignty, proposes the creation of social economies geared towards protecting farmers. “Not just for profit. A profit-oriented economy does not help with food security. The economy must be directed to protecting farms. It must have cooperatives to protect it. You want to adopt real agricultural unions and support them. The state must encourage them. The goal is general good, not profit.”

Regarding prices, Zuaiter suggests that there should be protection for farmers, along the lines of some experiences in Europe and the United States. “They are protecting their farms, we can’t protect the farmers. We are committed to the World Trade Organization, which says open markets open prices.” Zuaiter fears that the cultivation of vegetables in Jordan will meet the same fate as wheat cultivation, if the government does not have mechanisms to protect farmers, as the area of ​​wheat cultivation has decreased over the past fifty years from two million dunums in the early seventies to less than 300,000 dunums in 2016.

Zuaiter believes that protecting the farms by setting the price of some crops, such as tomatoes, leads to the protection of the farmer and the citizen at the same time, so that the price of selling the corps is determined taking into account the setting of a profit margin for farmers “both face prejudice, the consumer and the farmer”.

For this, she proposes to reduce the marketing stages; the core of the imbalance in the marketing of agricultural products, and to establish markets for vegetables in the governorates, where vegetables are marketed by farmers themselves, provided that these farmers participate in managing these markets in some way. Not that the items go through several marketing phases, “If they go astray and do not know how to market their crops, it may lead to their import in the future.”

According to Zuaiter, the current abnormal conditions the world is going through today increase the importance of protecting the agricultural sector “for the sake of food sovereignty and ensuring the right to food for all at fair prices for the producer and the consumer.”

*Supported by JHR

Original posted here: https://bit.ly/30AVmj0



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