Mon, Jul 18, 2011 - Page 8 News List

Be creative to stabilize crop prices

By Du Yu 杜宇

It is a familiar story in Taiwan. First there was an oversupply of eggs, and now the price of bananas and papayas has tumbled, hitting farmers’ incomes. Government leaders are calling on ministries to help out by buying up and using the goods, and they say they will work to boost exports. Once again, China has said it is willing to help out by buying more of the produce that is not selling well in Taiwan.

Prices for these fruit crops will normalize eventually. However, the problem remains that Taiwan seems particularly susceptible to this kind of glut, which happens year after year and even more often. People wonder why the government does not implement a long-term system for keeping production and prices stable, instead of stepping in with short-term stopgap measures each time a crisis hits.

Big fluctuations in farm produce prices have widespread effects, one of which is contributing to an overall rise in the cost of living. One measure the government has taken to stabilize farm produce prices is the so-called “95 system,” meaning that any time the bulk price for fruit or vegetables falls below a specified level, the authorities agree to protect farmers’ basic incomes by buying the produce at a price equal to 95 percent of production costs.

This is paid for out of the government’s budget. The problem is that this system is only a remedial one, kicking in once the problem already exists. Moreover, the purchase price is less than the cost of production, so farmers still take a loss. Consequently, farmers are not enthusiastic about signing up for such a plan, which basically addresses a symptom, not the cause.

Taiwanese farmers have long faced the problem of disequilibrium between production and sales, and the key to finding an effective solution is to figure out how to reduce or eliminate the factor of irrational decision-making by farmers. Farmers try to anticipate future prices and market demand and on that basis they decide the types and quantities of produce they are going to grow.

When they do not have access to sufficient information, they are bound to be unsure about what to produce, and that is why we often see farmers all rushing to plant one crop or another. If we could set up an effective channel for information about the market for agricultural produce, it would definitely help farmers make timely forecasts about market demand and decide what to grow accordingly.

Given that information technology is widespread in Taiwan, it should be possible to use the Internet and other media to present daily aggregate reports on prices and supply for the main kinds of agricultural produce. Making this information open and transparent would reduce opportunities for artificial manipulation and quell irrational speculation.

Although the government has started to promote electronic commerce for farm produce, there is still much room for improvement in quality and safety standards, logistics and delivery, and the training of expert modern “e-farmers.”

With instances of extreme weather becoming increasingly common, farm production around the world is facing ever-greater risks. Taiwan should improve its agriculture-oriented weather forecasting as well as improving farmers’ ability to respond.

The ideal way to manage agricultural production and marketing would be to implement planned production, with mandatory registration of who is producing what, although this would be difficult to implement in practice. In the past, the government promoted “planned production” of the kinds of produce that are often overproduced and unsellable.

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