According to farmers sampled for the January 2024 Agriculture Sector Survey, price distortion by middlemen which was cited as a concern by 52 per cent of farmers occurs from two factors.
First, the middlemen exert significant influence on buyers who source fresh produce directly from farmers. Second, the middlemen provide barriers to entry in the physical markets where farm produce is sold by preventing individual farmers from selling their produce directly to customers.
Other challenges cited included the long distance from markets (35%), poor road network (52%), limited demand (37%), and competition from imports (35%).
Contract farming pros & cons
These challenges affect contract farmers less, since the terms and conditions governing the engagement between the farmers and buyers are agreed upon in advance. Additionally, the contract farmers are spared the transport costs because the produce is collected directly from the farm by the buyers.
However, this model has its challenges. A sharp dip in prices due to post-harvest flooding of the market can orchestrate huge losses to the farmer because they bear the highest risk. This affects highly weather-sensitive crops such as cabbages, potatoes, and tomatoes.