Adding value and inter-temporal shifting are indeed the essence of agricultural development

This newspaper reports that Dinajpur is awash with tomatoes that cannot be shipped to market because of Covid-related transport restrictions. 

I, having spent a childhood in the Naples area of Italy, see lakes of passata just waiting to be made and shipped on later. 

This is not just the idiot musing of some foreigner – it is at the very heart of the economic development process. 

Perhaps not tomatoes into passata, that liquid form of tomato concentrates that can be preserved and then used in sauces, but the general idea of adding value to an item, also, of being able to spread consumption of seasonal items over time. 

Adding value and inter-temporal shifting are indeed the essence of agricultural development.

There are also varied ways of achieving these goals. The basic idea being that in this specific example we can see a more general economic problem for farmers. 

Crops of the same fruit or vegetable will tend to ripen and become available at the same time from all the different farms in an area. 

This means, inevitably, that on this day here, it will not be possible to gain a fresh tomato for love nor money and then two weeks later there are tonnes piled on the roadside. Production is necessarily coordinated with the seasons. 

We would like to have some method of spreading the consumption – the possibility of consumption – over time.

One method is to do as the farmers are currently asking. 

A system of cold storage would mean that the picked crop could be stored for a time and thus spread that consumption possibility out over the months ahead between this crop and the next. 

Getting the government to build it might not be quite the right idea. Getting the government to aid in it being built sounds like an excellent idea though. 

Different ways of this being done are possible. 

One way of describing “supermarket” is that while we all think that it is the shop we buy from in the Big City in reality the core of the business is the entire logistics chain that gets the food to where we collect it. 

That includes those chains of cold stores and trucks and lorries between them and so on. 

Walmart, as a large American supermarket group, is well known as being one of the best in the world at this. 

So much so that after a weather crisis – a hurricane, a flood – it is entirely usual to see the Walmart trucks bringing in goods before the Federal Government has managed to send people to ask what might be needed. 

People who do these things for their living can be very good indeed at them.

However, the supermarkets will want to make their profit and might not offer the farmers all that great a deal on prices. 

So another way to do this is to create a cooperative of those local farmers. This is again an entirely common solution around the world. 

Each farmer still grows his own crops but the storage and transport become a collective effort of all the farmers in the area. 

This does require government action. 

Such collective action can break anti-monopoly laws unless specific allowance is made. 

Collections of farmers can find it difficult to raise the necessary capital so perhaps provision might need to be made. 

On the other hand, of course, it can be the entirely private speculator who builds the cold store. 

He will not be all that popular among the farmers as he’ll buy when tomatoes are cheap and sell when they’re expensive but as Adam Smith did point out, that’s the point. 

Buying cheap means that the purchases increase that price at that point of purchase. 

Selling when expensive means pushing the price down from where it would be without such sales. All entirely true, still not very popular. 

Alternatively, there is that option of processing the tomatoes. Passata being only one form of tomato concentrate, one particularly suited to Italian forms of cooking. 

This might not be a majority taste in Bangladesh so might not be quite the right idea. But processing fresh tomatoes into something that can be stored does indeed solve that basic problem of a glut at harvest time. 

Exactly how such a factory is built and who owns it runs through the same decision tree as the cold stores. 

It can be a supermarket or brand of sauce, it can be a farmers’ cooperative, it can be a lone businessman. Each method works, in that there are places where it is done that way. 

Farmers always have had the same basic economic problem. Crops come in gluts and crops – often enough – cannot be stored for long periods of time. 

Thus we need two things, to find methods of adding value to the crops and to be able to spread consumption over time – which is also value adding. This is where our efforts into agricultural development need to be made. 

Oh, and the best way to go about this is to use markets to do so. That way we get to make all the mistakes and so then also find the ways that work best. 

Instead of some strange person from far away planning it all and insisting upon making passata. Or whatever different mistake a bureaucrat from Dhaka might make.   

 

The author is a senior fellow at the Adam Smith Institute in London



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