Cheap Crops, Not Fancy Ingredients, Keep Farmers in the Black

While it might not be the best for the environment, growing commodities is where the money is at.
Pumpkinsteins. (Photo: Flickr)
Oct 20, 2015· 3 MIN READ
Tove Danovich is a journalist based in Portland, Oregon.

Here’s a fall-themed hypothetical for you: You’re a farmer, and you have a choice to make. Will you grow regular pumpkins that you can sell for 7 cents a pound, about $1.50 for a 20-pounder, or ones molded to look like Frankenstein’s head that can retail for more than $100 each?

At first, option two sounds like a much better way to make some extra cash. But as a first-time “pumpkinstein” grower, you might find 40 percent of your crop dying off because of unexpected issues with pests or growing conditions. Maybe you work in an area where no one has $100 to spend on a pumpkin. To varying degrees, this is a question that affects farmers throughout the world and even with far less niche crops. For some, growing something as pedestrian as vegetables is the economic equivalent of getting into the pumpkinstein game. Premium foods—including organic or expensive specialty crops—often sell at higher prices but are more work to market and often produce lower yields.

“The demand for commodity crops like cereal is much higher than it will ever be for specialty crops or organics,” said Mark Rosegrant, director of the environment and production technology division at the International Food Policy Research Institute. He explains that in the developing world, farmers are often growing food for home consumption as well as sales at the market. Producing more of something multipurpose like commodity corn is a better fit for these goals than a landrace variety.

But a local variety of corn might be a better fit for the climate, soil, and pests—a crop that, as a result, can be grown with fewer inputs, including fertilizer and water—even if it is at odds with the global market. Nitrogen and phosphorus runoff from agricultural fertilizers cause algal blooms in water sources that lead to oxygen depletion and decrease biodiversity. A crop that requires less water is better suited for dry climates or places experiencing drought. Decreasing these inputs isn’t just about looking after the environment—each one of them costs the farmer money.

Still, Rosegrant noted, the answers are “not always obvious,” and intensively grown crops with higher yields per acre can “save a lot of land.” Farming sustainably is about balance and looking at the whole environmental picture, he said. What’s right for one farmer’s situation may not be for another—and the same goes for markets and what they will pay for.

Take China, where food safety scandals are all too common. More than 94 percent of rural and urban households have reported high levels of awareness of food safety and quality. Despite this, 30 percent of consumers “were unwilling to pay any price premium,” according to a 2012 study in the Canadian Journal of Agricultural Economics, and 60 percent wouldn’t pay more than a price increase of less than one-third. Despite the rise of the Chinese middle class and its increasingly Westernized diet, organic sales represent a minuscule segment of the market. Two of the biggest barriers to spending more on premium foods are family responsibilities (as the number of people in a household rises, food budgets fall) and general income levels.

“For a niche group of farmers, mainly around large cities, it is a profitable opportunity,” Rosegrant said of the people who can grow higher-value foods for burgeoning urban markets. “But it’s not going to be a solution to raising incomes for the vast majority of farmers in the developing world—or for that matter, in the USA.”

Because demand for specialty crops tends to rise and fall with consumer income, farmers in countries without a stable market might be more likely to lose their investment in specialty crops than they would if they invested in cheap staples that people rely on for survival. The reliability of commodity foods makes them “absolutely essential for long-term economic growth,” according to Rosegrant.

Yet there are cases in which the market has forced farmers to grow specialty crops. On the island of Mauritius, wrote The New York Times in a recent article, sugar used to provide “95 percent of the island’s gross domestic product, and cane was grown on a third of the island’s land.” But global competitors “have taken their toll on sugar prices,” Christopher F. Schuetze wrote, and the crop now only accounts for 1 percent of GDP. Some of those who have continued farming switched to premium crops like Mighty Rice.

Except for some sophisticated packaging, Mighty Rice pretty much looks like any other brown or white rice—only it touts its growth in “volcanic soil,” avoidance of GMOs, and sustainable farming as marketing tools to help it command prices of $4,800 per hectare compared with sugar’s $2,880. It is mainly sold for export to Europe and the United States as a specialty food product for health-conscious, higher-income customers.

This is happening in other parts of the world as well, Luis A. Ribera, a professor in the Department of Agriculture at Texas A&M University, told Schuetze. One Mexican state has almost entirely shifted its focus from commodity crops to “irrigated vegetables destined for supermarket shelves in the United States.” Schuetze added, “In some cases vegetables replacing row crops or cane in Central and South America are grown organically and sold at a premium.”

Even in places where food isn’t being exported, markets for premium foods are developing. “There’s a so-called supermarket revolution going on in Asia and Latin America and at least beginning in parts of Africa,” Rosegrant said. Many of these markets contract directly with farmers to increase quality standards—for slightly higher prices.

“You could say it’s the old-style commodities with fewer blemishes,” Rosegrant said.