Middlemen play an important role by linking farmers to traders and final markets. This is particularly the case in developing countries, where market failure is ubiquitous and food chains still consist of many stages.
In the absence of a direct link with the consumers, the farmers are at the mercy of the middlemen who occupy the entire space between the production and the ultimate sale of the produce.
This makes middlemen very powerful and the farmers often find themselves at a disadvantage despite being the producers. Monopoly is hazardous whether it is established by a public or a private entity.
While climate and weather are known limiting factors of production in agriculture, middlemen intervention also raise the price for consumers. Farmers encounter high production costs in their efforts to boost production, but hardly get fair pricing of their products from the middlemen, the bulk farm gate buyers.
In fact, the real profit goes to the middlemen who buy up the farm products - including livestock - at almost give away prices and sell at outrageous prices to score huge profit margins.
This attitude of middlemen appears to have discouraged genuine investors getting into agriculture because of the marginal profit associated with it as the middlemen cart away the bulk of the profits. Thus, the activities of middlemen seem to be a threat to food security.
In most cases, farmers are plagued with poverty syndrome, comprising factors such as low income and low productivity, leaving them with low bargaining power.
On the other hand, the buyers or middlemen are relatively financially strong, as they are flush with capital and operate in the large-scale businesses of buying and selling. The farm-level market is also concentrated with very limited competition.
For instance, livestock farmers face a limited choice of buyers, as their choice is limited to one or two large-scale auctioneers in their area.
History has shown that livestock agents in a concentrated market have the tendency to be exploitative to maximise profit because of the market power that they possess.
In order to combat the exploitation of farmers, we need to take active policy action to increase farm productivity, post-harvest technology, and better storage and holding facilities. If we want the consumer to pay less and the farmer to gain more, the role of the private sector has to be enhanced.
Concurrently, to ensure that farmers can fully utilise the benefits of this, entrepreneurship development should be encouraged along with better marketing skills to right the information asymmetry.
The current ‘buyer regulated’ system is dangerous for the long-term sustainability of the farmers.
If the two, the middleman and the farmer can cooperate and work together the sky becomes the limit for their mutual achievable goals.
magine the combination of the middleman with precise data on market pricing and strategies and the farmer with expert knowledge and skills on how to grow and produce what the market requires.
The power of two!
Lest drastic changes are made, this shall remain but a pipe dream.