Developing World: Cash in on agricultural goods exports

By Dr B K Mukhopadhyay

The very fact remains - economies that still attach top priority to the agriculture sector stand to gain in the aggregate sense in as much as the big market globally offers ample opportunity for such economies to cash in on the increasing demand pattern, which, in turn, is all set to continue.

Though most successful developing countries have not relied significantly on agriculture for export expansion and growth, yet growth in agriculture has a disproportiote effect on poverty in as much as more than half of the populations in developing countries residing in rural areas as poverty is much higher in rural areas than in urban areas.  As the things stand now:  57 percent of the developing world’s rural population lives in lower middle- income countries, and 15 percent lives in the least-developed countries. Even though historical trends show that agriculture’s importance diminishes over time [2-3 percent in US as compared against around 18 percent in India] and the share of population in rural areas declines, there will still be more poor people in rural areas than in cities for at least a generation.

The trends indicate that developing countries increased their share in manufacturing exports during the 1990s but saw little expansion in agricultural exports, barely maintaining their share of around 36 percent after losing market shares during the 1980s. All of their gains in agriculture during the 1990s came from expansion of their exports to other developing countries. Share of India’s agri-exports in the global trade in agri-commodities till now hovers around 1 percent! More than 48 percent of world agricultural trade is still accounted for by trade between industrial countries— about the same share as in 1980–81.

One  CII-Mckinsay report published in the recent past  located that farm products could change India’s agriculture landscape: mangoes, ba, potato, soybean and poultry are the five main farm products which could form bedrock of rejuvetion in India’s agriculture and allied activities landscape in the next two decades.

“This can be created by building a strong brand for these products in the intertiol markets, reducing wastage by almost half and doubling the per hectare yields,” according to the 3rd Food and Agriculture Integrated Development Action Report titled- ‘India as an agriculture and high value food powerhouse: A new vision for 2030, prepared jointly by CII and McKinsey and Company’.

Global market for these products is a tremendous one and it goes without saying that if systematically tapped there lies immense scope ahead especially for the least developing economies as the latter virtually depends on a handful of agri-commodities to earn foreign exchange. Of course the absolute advantages as well as comparative advantages must be fully reaped. For example India produces grapes twice a year – a rare advantage and gift of the ture here which other leading producers do not have.

Especially, trade in fruit and vegetable products has been among the most dymic areas of intertiol agricultural trade, stimulated by rising incomes and growing consumer interest in product variety, freshness, convenience, plus year-round availability. Undoubtedly, advances in production, postharvest handling, processing, and logistical technologies- coupled with increased levels of intertiol investment- have played a facilitating role. Specifically, for developing countries, trade in these products has been attractive in the face of highly volatile or declining long-term trends in the prices for many traditiol export products. This is also a fact simultaneously that  in spite of the fact that many developing-country suppliers have entered the field [process is on: Venezuela, Bangladesh  in mango market], relatively few have achieved significant, sustained success, which, in turn, adequately, reflects  the fact that the industry is intensely  competitive plus  rapidly changing.

It remains a fact that the steadily marching forward ongoing preferential and regiol agreements often bar low-cost producers from entering the interl markets covered by the agreements. Quota allocations are concentrated in a few, often high-cost countries, which are generally not the poorest [viz.  Mauritius has 38 percent of EU quotas. Thailand, a very low-cost producer, is limited to a 15,000 ton quota in the United States, whereas the Philippines have a quota 10 times larger that often goes unfilled].

In spite of all these this is a fact that emerging economies had injected new dymics into global trade and the emerging economies are certainly doing a great deal by way of pushing up the global average. The region of Asia, which covers many of the emerging economies, had outperformed all other regions with an increase of 23 percent in terms of export volume. Chi led the growth by a massive 28 percent growth in exports and imports up by 22 percent, while India’s exports and imports gained around 20 percent and 11 percent, respectively.

Major problems are required to be tackled at a quicker pace so as to ensure that the future prospects are far more brightened. Major problems that have been telling upon on this score may be summarized: lack of a broad raw material base in terms of the kinds and varieties of fruits and vegetables suitable in all respects for processing and their availability in commercial quantities at prices economical to the processing industry. Invariably, the cost of the raw material is high; low productivity and poor quality of the produce as compared to the very high levels obtained in the advanced countries affect processing and none of the processing units work to full capacity utilization. What is more; much of the produce taken up for processing is devoid of the quality attributes or characteristics required for processing.

Lack of a proper marketing strategy geared to meeting the raw material requirement of processing units and ensuring a sustaible export market for the processed products has been keenly experienced. Due to poor infrastructure in handling, transport, marketing and processing, horticulture, as an industry, has failed to register commendable growth in economies like India. Infrastructure stands tall to block the prospects - particularly transportation, road networks, and freight and cargo facilities [the freight rates in India are reported to be higher than those prevalent in some other countries, the very fact that does very little to improve our competitiveness], cold storage facilities, etc., coupled with idequate post-harvest magement affect the produce and products. Poor and inconsistent quality of processed products and idequate export promotion are also hindering the growth prospects [Vitamin C content in guava must be raised to expect better acceptance]. It is the residual rather than the fresh produce that is often taken up for processing, which has a bearing on quality.

Till now it is a fact that fruits and vegetables are generally constrained by poor price support, credit support and delivery system. Idequate supply of power, water and research and development support exist as no less constraints. The quality of packaging also leaves much to be desired – simply not market-oriented - in as much as importing countries demand specific packaging for each produce and the use of bio-degradable materials resulting in high cost of packaging.

Farmers in developing countries could form agricultural cooperatives, which could then sell their shares to both domestic and foreign citizens and institutions. The generated funds could be used to improve irrigation and storage facilities as well as undertake agronomic research. This should help to increase both country specific and world supply and do away with export restrictions.

(The writer, a noted Magement Economist and an Intertiol Commentator on Business and Economic Affairs, Director, Netaji Subhas Institute of Business Magement, Jharkhand, can be reached at m.bibhas@gmail.com)