INTRODUCING co-operatives and contract farming, and breaking the monopoly enjoyed by Padiberas Nasional Bhd (Bernas), are among the steps that must be taken to improve the livelihood of padi  farmers, said an academic today.

Professor Fatimah Mohamed Arshad, a visiting senior fellow at the Khazanah Research Institute, said padi farmers remained poor due to serious structural issues which have not changed in the last six decades.

“Problems remain the same; farmers remain poor despite six decades of market intervention – guaranteed minimum price (GMP), ceiling price, crop monopoly, support to the millers, increasing subsidies and input and output in the last 60 years. Why do farmers remain poor?

“If the problem continues from year to year, it is a basic fundamental structural problem. The structure for the industry has not changed and is getting much more divisive,” she said at the launch of the Khazanah report, “The Status of the Padi and Rice Industry in Malaysia”, today.

She said there needed to be a change on the farm level, where farmers could go beyond just producing padi.

She said they should be adding value to the process which in turn could generate more profits, and empowering them with technology, machinery and entrepreneurial skills.

This she said, can be done through cooperatives and contract farming.

What could have been

Fatimah said the supply chain was stronger in the 1970s when there were more than 971 mills, 60% of them owned by cooperatives belonging to farmers. Today there are only over 100 mills in Malaysia.

She attributed the change to the formation of Bernas in 1971, and its gaining a gaining monopoly over local rice production and distribution.

She said the Bernas monopoly needed to end.

“Reduce the divide between the smallholders and the downstream sector. Bernas did very well for itself but we forget what could have been without Bernas.

“What could have been in terms of competitive market, more players, more hectares, farmers in rice trading… these are the opportunity losses we have suffered.”

Fatimah said government policies should also be supportive of the growth of smallholders and promote healthy competition in the segment.

The Khazanah report today stated that the household income Muda Agricultural Development Authority (MADA) farmers, the largest contributor of padi production, was only at RM2,527 a month compared to the national median of RM6,958 a month.

The report added that without subsidies, the cost of production supersedes the net profit.

A farmer’s income via cultivation of padi is determined by the price of padi, which is fixed at RM1,200 per metric tonne, and the cost of production.

In 2014, the cost of production for a renter was RM3,766 per hectare per season compared to the net profit of just RM2,892 per hectare per season.

The largest contributors to production cost are land rental and machinery.

Malaysia has 200,000 padi farmers and 31 million consumers, and the padi farmers remain poor despite the segment receiving the largest chunk of the Agriculture and Agro-based Industry Ministry’s funds.

In Budgets 2018 and 2019, allocations for padi subsidies and incentives were RM1.7 billion and RM1.1 billion, respectively.

The report also noted that Malaysia has also been slow to release new padi varieties and is overly dependent on the Malaysian Agricultural Research and Development Institute to carry out research and development. – April 10, 2019.