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Late payments, especially from governments, ail farmers

News   •   Mar 04, 2019 09:01 +08

Late harest: A farmer, image from Pexels

On paper, farmers get subsidies and a lot of benefits, with some governments paying over market price for their produce and providing subsidies. But farming carries very high risks and potentially low returns.

The reality is farmers who depend on loans and subsidies from the government sometimes get paid late, if at all.

In the United States, the government shutdown led to missed government payments and loans to farmers, leading to the farmers not getting federal subsidies to help with the impact of the trade war. Some farmers were missing out on federal crop payments, were unable to pay their mortgage, or secure loans to buy seed products.

Besides political risk, farmers are also exposed to other risks such as animal mortality or natural disasters, but the empty government offices meant they could not get emergency loans to keep their businesses going.

The situation should improve now that the government shutdown is over, but delayed payments from government bodies seem to be a common complaint across nations.

Tanzanian President John Magufuli recently called for the relevant authorities to promptly pay cashew nuts growers who sold their cash crop to the government but have not been paid yet. Farmers in the country's cashew-growing regions have been complaining of delayed payments for more than two months.

The Tanzanian government said in November 2018 that it would buy all cashew nut stocks from farmers at the minimum price of 3,300 Tanzanian shillings (US$1.44) per kilogram through the Tanzania Agricultural Development Bank. The government stepped in after farmers rejected lower prices which were set by traders.

In the UK, a farmer said it took so long for the government to pay him for an environmental project to reduce water run-off on his 2,000 acre farm that he was forced to take out an £80,000 personal loan to cover expenses.

The Financial Times reported that many farmers who have taken part in the UK’s green subsidy schemes since they began in the early 1990s have similar complaints about payments coming up to a year late. Green subsidy schemes are efforts to encourage farmers to improve air, water and soil quality, or foster animal habitats. The reason behind these late payments have been pinpointed by government audits to inadequate staffing at the two UK agencies administering the programmes.

In India, angry farmers burned the offices of around 10 sugar mills. Farmers are counting the increasing dues from their loans, but the mills are concerned with pending stocks and falling prices. When times are good, reports The Indian Express, farmers are paid on time. But the mills sometimes make partial payments or do not pay on time.

The Sugar Commissioner of Maharashtra Shekar Gaikwad warned in a letter to sugar mills to stick to the government-declared Fair and Remunerative Price, or cough up interest at the rate of 14% for late payment.

But we are not sure how well the warning works on the ground.

Farmers in developing areas with minimal government aid usually borrow money informally and at high interest rates, while they supply to businesses who do not heed government guidelines for fair prices. Indian farmers in particular are exposed to these systemic risks, in addition to the usual farming ones.

In late November 2018, tens of thousands of farmers marched through New Delhi to the gates of parliament. They demanded debt relief and payment of MSPs (Minimum Support Price) for their produce. There have been similar marches by farmers in the past two years.

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