Addressing Supply Chain Inefficiencies in Türkiye

The disparity between producer prices and market prices for agricultural products in Türkiye presents a complex issue with significant implications for both producers and consumers. This gap often leaves farmers struggling to cover their costs and consumers paying inflated prices for essential commodities. Understanding the causes of this price disparity is crucial for developing effective policies to benefit all stakeholders in the agricultural value chain.

The Core Problem

Agricultural products, especially fresh produce, are inherently perishable and bulky, making transportation and packaging costs a significant portion of their final price. For example, if the price of watermelon at the farm gate is 10 Turkish Lira (TRY) per kilogram, the cost of transporting it to urban markets can easily add another 10 TRY, doubling the price before it reaches the consumer. Additional costs such as packaging, wholesale markups, and retail margins can result in 3-4 times increase in the consumer price. While this might seem disproportionate, it reflects the logistical challenges of moving agricultural goods from farm to market.

Contributing Factors

1. High Transportation Costs

Fresh produce often requires careful handling to prevent spoilage, significantly increasing transportation costs. The fragmented agricultural sector in Türkiye means that many small-scale farmers rely on intermediaries to move their products to markets. Each step in this chain adds a layer of cost, driving up consumer prices while leaving producers with minimal returns.

2. Inefficient Packaging Practices

Traditional packaging methods, such as using standard wooden crates, are less efficient and more expensive than modern alternatives like plastic or disposable wooden crates. Poor packaging often leads to damage during transit, further reducing the value of the produce.

3. Intermediary Dominance

Multiple intermediaries between the producer and the consumer inflate prices. Farmers, focused on production activities, often lack the resources or knowledge to market their products directly. This reliance on intermediaries ensures that a significant share of profits is captured at the distribution stage, leaving little for the original producer.

4. Natural Variability in Agricultural Production

Agriculture in Türkiye is closely tied to natural conditions, leading to fluctuations in production volumes and quality. In seasons with poor yields, limited supply drives up prices, while surplus production can depress farm-gate prices below the cost of production.

The Global Context and Türkiye’s Position

Developed countries have implemented systems to address these issues effectively. For instance, integrated harvesting and packaging processes help reduce costs by combining multiple activities into a single step. This approach minimizes handling and transportation costs, ensuring more of the final price reaches the producer. Türkiye can adopt similar practices to improve efficiency.

In countries like Canada and the Netherlands, marketing boards play a significant role in stabilizing prices. These boards regulate the supply of agricultural products, buying excess produce when prices fall and releasing stocks when prices rise excessively. This system protects both producers and consumers from market volatility.

Possible Solutions for Türkiye

1. Establishing Marketing Boards

Türkiye could implement a marketing board system similar to those in other countries. By buying produce at predetermined prices when market rates fall below production costs, the board could stabilize farmers' incomes. Releasing stored produce during periods of scarcity would help keep consumer prices affordable.

2. Investing in Infrastructure

Developing better transportation and storage facilities, such as cold chains, can reduce spoilage and transportation costs. Improved rural roads would also lower the cost of moving goods from farms to markets.

3. Promoting Direct-to-Consumer Channels

Encouraging farmers’ markets or online platforms where producers can sell directly to consumers can eliminate intermediaries. This model has been successful in countries like the United States and Germany, where consumers often prefer purchasing fresh produce directly from farmers.

4. Encouraging Cooperative Models

Farmers’ cooperatives can play a pivotal role in reducing marketing costs. By pooling resources, farmers can negotiate better transportation rates, invest in modern packaging, and access larger markets.

5. Modernizing Packaging Practices

Transitioning to cost-effective and durable packaging materials like plastic crates can reduce damage and waste. Standardizing packaging practices across the supply chain would also enhance efficiency.

6. Enhancing Farmer Education and Awareness

Providing farmers with training on market dynamics, efficient production techniques, and direct selling methods can empower them to capture a larger share of the market value. Government and NGO-led programs could facilitate this knowledge transfer.

Examples from Türkiye and Beyond

In Türkiye, some regions have started experimenting with cooperative models. For instance, hazelnut farmers in the Black Sea region have organized cooperatives to negotiate better prices and market access. However, similar models need to be scaled up across other agricultural sectors.

Internationally, the success of the European Union’s Common Agricultural Policy (CAP) offers valuable lessons. CAP subsidies ensure that farmers receive a fair price for their produce while maintaining affordable prices for consumers. Türkiye could explore adapting elements of this policy to suit its unique agricultural landscape.

Conclusion

The gap between producer and market prices for agricultural products in Türkiye reflects systemic inefficiencies in the supply chain. While high transportation and packaging costs are unavoidable to some extent, strategic interventions can significantly reduce these expenses. By modernizing infrastructure, adopting innovative practices, and empowering farmers through education and cooperative models, Türkiye can create a more equitable agricultural market. Such reforms would not only improve the livelihoods of farmers but also ensure that consumers have access to fresh produce at reasonable prices, fostering a sustainable agricultural sector that benefits all.

Please note that the views expressed in this article are of the author and do not necessarily reflect the views or policies of any organization.

Mithat Direk is serving the Department of Agricultural Economics, Selcuk University, Konya-Türkiye.

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