Farmers do not reap benefits of rising food prices

June 20th, 2008 - 2:57 pm ICT by ANI  

Washington, June 20 (ANI): A new study has found that farmers do not reap benefits of rising food prices, as there is no rise in the price they receive.

According to a report in the Chicago Journal, the study was conducted on the commodity coffee market in Uganda, where it was found that when prices rise, coffee windfalls dont fully reach the growers.

Coffee is the worlds largest agricultural commodity, and is also one of the worlds most volatile. Large global coffee price fluctuations mean coffee has seen many periods of rapidly increasing prices.

But the research shows that when global coffee prices rise, farmers do not see the same rise in the price they receive.

The study was carried out by researchers Marcel Fafchamps and Ruth Vargas Hill, who looked to the long-time coffee producing nation of Uganda to attempt to answer this riddle.

Ugandas economy is fully liberalized, and the large coffee market makes up nearly the entire bulk of its agricultural exports.

Normally as economists we believe that competition is good, yet here it does not achieve the desired result, said Fafchamps and Hill.

To their surprise, they found that the influx of seasonal buyersthe so-called ddebe boysthat attends higher prices actually means price increases are not fully passed on to the growers.

Fafchamps and Hill found that increases in the international coffee price are reflected relatively rapidly in domestic prices paid by exporters and large traders. However, increases in the international price are not fully reflected in the price paid to farmers at the farm gate.

An analysis of marketing costs such as transport, handling, storage, and processing by the researchers found that those costs do not increase with price.

The authors instead found that rising prices bring additional small, occasional traders into the market.

These traders, called ddebe boys after the twenty kilogram ddebe tins they use to buy the coffee, tour the countryside in search of coffee taking advantage of farmers ignorance about price movements to insert themselves between farmers and larger permanent traders and mills.

The research shows that even competitive agricultural markets do not ensure global price increases to be immediately passed on to farmers. (ANI)

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