Thu | May 28, 2020

Editorial | What future after Denbigh 2019?

Published:Sunday | August 11, 2019 | 12:00 AM

The 67th annual Denbigh Agricultural, Industrial and Food Show was, from most reports, a success in terms of quality of the exhibitions and attendance. There was the usual colour and spectacle, and large family-related activities. The Jamaica Agricultural Society is to be congratulated for keeping this iconic tradition alive.

But the success of the show can hardly mask the fact that the agriculture sector, despite its tremendous potential, is undergoing significant strain. Not even the soothing lullaby and dancing feet of the minister of agriculture can hide the challenging reality of farmers across the country.

The sugar industry, a huge component of agriculture, faces an existential threat, with the very real possibility that only the Frome and Worthy Park factories in Westmoreland and St Catherine, respectively, will survive over the medium term.

There has been very little by way of a comprehensive plan or strategy that has come from the Government about how to deal with the crisis in the sugar sector. Apart from the general statements that there have been expressions of interest by farmers in leasing or buying redundant sugar lands, the country needs to hear more about the actual plans for the future of the industry and the use of the lands.

The problems of agriculture, however, go way beyond sugar.

The failure of governments over decades to do anything sensible about praedial larceny has meant that the costs of this scourge are simply passed on to the rest of the country in the form of much higher prices to consumers and greater poverty for farmers. This is a clear instance where crime is a major impediment to growth and development.

Abnormally high

The high levels of poverty in the rural areas is directly related to the underperformance of the agricultural sector. The overall prices for Jamaican agricultural products are abnormally high because of elevated production costs. In addition to the real cost that praedial larceny imposes on the sector, high costs are linked to the inability of small farmers to benefit from greater economies of scale; low productivity linked to archaic technology; and the high cost of transportation for both inputs and outputs. In some areas, labour is scarce and very expensive.

One area of deep frustration is the cost of capital and very often the lack of access to capital by many small and medium-size farmers. Agriculture represents 7% of overall GDP, but only about 10% of farmers have access to credit from the financial system. In fact, less than 3% of the overall credit is allocated to agriculture.

Farmers are unable to access credit from the formal financial system because of a variety of factors, including lack of collateral, and inadequate or no formal financial records. In fact, most small and medium-size farmers cannot get past traditional risk assessment by formal financial institutions.

The result of all this means that overall cost of production in Jamaican agriculture is extremely high. The subsectors that are growing often do so behind very significant trade protection by the State, using both tariff and non-tariff barriers. Removal of these protective walls would see sections of the livestock industry, for example, going under very quickly.

As a result, domestic consumers pay much higher prices for agricultural products than would be the case under an open trade regime. Given that other countries do subsidise their agricultural sector, there is not likely to be a fully open trade regime anytime soon in produce and livestock.

If the country could find ways of reducing the cost of production in agriculture, thus reducing the need for the current degree of trade protection, living standards of farmers would improve, and prices to consumers would fall. This would have a dramatic impact on the levels of poverty in the country.

So while the minister of agriculture serenades us and shuffles on the dance floor, he needs to contemplate these major objectives as his contribution to growth and prosperity. Agriculture has the potential to make a bigger contribution to national development, but not as currently structured.