This post is the fifth in a series sharing findings from a research project Sam Kornstein and Paul Artiuch are working on throughout the month of January. Paul Artiuch and Samuel Kornstein are graduate students at the MIT Sloan School of Management. Throughout the month of January they are in India researching market-oriented approaches to reducing agricultural food waste.
Part IV can be accessed here: A Look at India’s Agricultural Chains
By Samuel Kornstein and Paul Artiuch
Note: This post and the accompanying photographs were originally published on the MIT Public Service Center website and subsequently reproduced on Sam Kornstein’s personal blog somethingsbrewing.com. We are greatful to Sam and Paul for sharing their experience and research project with InPEC. All photographs included in these series are courtesy of Sam Kornstein.
January 16, 2012
As we mentioned in our post on cold storage, this year there’s an excess supply of potatoes in India, and prices have plummeted. After spending a day speaking with professors at the Punjab Agricultural University, we learned that there tends to be a 4-5 year cycle for the prices of certain staple crops such as potatoes.
When potato prices are high for a season, farmers decide it’s a good idea to abandon existing crops and grow potatoes instead. After all, they seem to be a fairly lucrative crop. The problem is that everybody has the same idea so when the next season comes around, prices fall a little bit. But they’re still profitable, so the farmers double down and grow even more.
By the third year, farmers are barely breaking even, but it can be costly to switch crops, and with hopes that prices will rise, they keep growing potatoes. At this point the market is completely saturated with potatoes, and prices plummet to unprofitable levels. This is what happened throughout India in late 2011. Potatoes were selling at 1 rupee per kilo. At current exchange rates, that’s $0.02 per kilo, or less than a penny per pound.
At those prices, it’s not even worth the cost and effort for farmers to harvest their potato crops, so many choose to let them rot in the fields. Others harvest them, but only in protest of the government, as described in this December 15th article:
‘Residents and motorists in Jalandhar city and some other parts of Punjab were greatly inconvenienced as farmers dumped hundreds of quintals of potatoes on the streets to lodge their unique protest Thursday against falling prices.
Having announced last week that they would dump their bumper crop in Jalandhar and other places Thursday, the farmers brought nearly 300 tractor-trolleys towards Jalandhar Thursday morning.
With tight police security at all entry points of Jalandhar city being tight, only about 50 tractor trolleys were able to get into the city and started dumping their potato produce on the roads. This led to traffic being affected on these roads. The rest of the trolleys were stopped at the city’s entry points.
Potato growers in Punjab, led by the Jalandhar Potato Growers Association, are protesting against the failure of the government to help them after a bumper crop this year has brought a glut in the market and potatoes are being sold at Rs.1 to Rs.1.50 per kg.
We stopped by a produce marketplace outside Chandigarh in Punjab and, not surprisingly, found a pile of potatoes rotting on the ground next to other fresh produce. We also came across quite a few potatoes still in the ground in the countryside. The farmer who owns this crop has to decide whether to invest valuable time and resources into harvesting the potatoes. Given the recent drop in prices, it may be more economical to leave them in the ground and let them go to waste:
This problem is challenging. But it could be at least partially solved through a combination of investment, information dissemination, and thoughtful policy. Investments in food processing – to convert the potatoes into higher-value non-perishable goods such as potato chips – could increase the value of the excess supply while significantly extending shelf life. Additionally, if both the government and farmers had better information about the expected supply of certain crops in the coming season – which could be achieved through a combination of surveying, outreach initiatives, and analysis of historical trends – prices could be estimated within a range, and farmers might have better information when deciding which crops to grow. For the time being, though, the information flow continues to be extraordinarily inefficient, and some are predicting a potato shortage next year as farmers abandon the crop altogether.