I will explain how high cost of land coupled with low yield value is driving farmers to the brink.
In Konaseema region of East Godavari district in Andhra Pradesh, you cannot get even agricultural land below Rs. 1.5 crores per acre. Most of the lands there are coconut plantations and they have 70 coconut trees per acre which yield about 7 to 8 or some times 10 coconuts per tree per month for about 10 months in a year. Coconut selling price would be Rs. 1.5 to Rs.2 The laborer who climbs the tree charges like say 500 per day and 2 laborers can cover one acre a day. If you calculate, the incomes would be very low even for a person who owns 10 aces of land. Some of them survive by inter cropping bananas and they get about Rs 30K to 50K per acre per year for this additional exercise. Some farmers do not prefer banana inter-cropping because it temporarily increases the coconut yield due to the additional fertilizer used in banana and in the years that they stop planting bananas, the yields fall impacting the long-term output of the coconuts. It is difficult to live on some 5 acres there, but if you are diligent, you can inter crop and grow all your family vegetables, live stock etc and you can survive. But if you sell you get 1.5 crores per acre and your children should study well and get out of the place to survive. But if you keep owning and surviving, sometimes government throws incentives like loan waiver or direct benefit transfer etc. Some become coconut traders, they hoard coconuts and dry them under the sun and make oil. This requires knack of business and it worked for some and it did not for many. The trading part is similar to our stock trading. You play with the fluctuating prices.
Lands near Sangli in Maharashtra cost around Rs. 1 crore per acre. They cultivate grapes and convert them to kismish. When the crop comes for harvesting there is a lot of processing to be done. They dry the fruit for about 2 months in the sun. In California, they use electric driers for the same. Then they store the product in cold storages for about 5 or 6 months and the cold storage charges Rs, 4 to Rs. 6 per box per month. Cost per box to buy in wholesale markets is just Rs. 800 to rs. 1500 and then you store them to later sell in Kanpur for green Kismish, or to bakeries for black low grade one etc. The transportation from Sangli to Hyderabad or Bengaluru or Mumbai costs Rs. 15 per box and the product has a shelf life and it has to be stored in cold storage paying the rent and it is like playing with options in the stock market, a product with high potential and low shelf life. I think I covered more of trading part here than farming part because that is what I know. Hyderabad used to have grape farms on its outskirts similar to Sangli and when they started building the International airport all grape farmers sold out their lands for Rs. 1 crore to Rs. 2 crores, and, enjoyed life driving SUVs, and, now dont even ask me what they are doing. Now there is not a single acre of grape plantation around Hyderabad.
Lands in Coorg in Karnataka are very fertile and they grow coffee, jackfruit etc. India's biggest land owner running listed companies committed suicide in that state by jumping into Netravati river few months ago. He thought that every acre should be valued for atleast Rs. 1 crore by the banks for rolling over his loans and the banks do not want to value those 22,000 acres anywhere more than Rs. 8,000 crores. Why? Because if the banks have to liquidate them, imagine them putting 22,000 acers in just 3 districts on sale! The prices crash and there wont be buyers. That you can compare to circuit breaker situation on our stock markets. But there are no circuits there. The only circuits are the minimum bid prices that the banks set. Some lenders are doing the same thing with promoter pledged shares. Dumping them in the markets and they hit lower circuits.
Lands in Kerala are very fertile, but that did not stop our Kerala brothers from migrating to other places for work and survival.
High land values kill business even if it is agricultural business. New entrepreneurs cannot set up businesses even if it is trading because they need to stock their goods and they need land for that.
Why some of these farmers do not sell out the land and bail out? Several reasons like lack of education, indebtedness to banks or moneylenders where the lands are not of free titles anymore. Psychological pressure in the village and family and they do not know any alternate trade or skill to survive if they sold their lands. If they sold lands they turn themselves from landlords to tenant farmers or agricultural laborers. Also if they own the land they still hope some government will throw freebies when elections are around. They get into debt. In the stock market scenario, this is like not exiting when stop losses are hit.
Later during the day, if somebody is interested, I will explain how agriculture operates differently in the USA and Canada as compared to that of our country.
