What do Jamaican and Mongolian tomatoes have in common?

In talking with vegetable farmers last November I learned that financial support (or lack thereof) was one of the biggest hindrances to small, developing farms. Farmers told me that in Mongolia there is an endless cycle of the banks supporting the farmers and the farmers supporting the banks with no net growth (at least on the agriculture side of things). Most farmers lacked basic tools and equipment, so they would take out a loan in late Autumn (if for a year's term) or early Spring (if for 6 month's term), use it to rent a tractor to plow their fields, purchase seeds or a new irrigation hose. Because of this, their work is relatively inefficient. Doing most of the work by hand, on small plots of land and growing all of their vegetables organically, their season's yields are relatively low and in order to make a profit they have to charge higher prices per kilogram (e.g. the price of a farmer's market tomato vs. an industry grown, box-store tomato).

Many of them spend months in the capital selling their produce on the streets or at expos hoping to pull in a profit. In Autumn, at the peak of harvest, sales prices are low and its hard to compete in the market. But loan terms quickly approach and farmers are forced to sell their produce all at once rather than selling in winter when prices are high. Most sell to wholesalers who buy cheap (irrespective of season) because produce imports are cheap, which are mostly from China. All of this means that the little profit they make in Autumn is barely able to pay back the loan amount with such high interest rates. With no profit made, they take out the same loan the next year.

And so the process repeats itself.

Farmers I spoke with talked about several investments they'd like to make in their farms: irrigation systems, greenhouses, storage facilities, tractors, tools, jarring and pickling equipment, barcodes. But they needed considerable amounts of money to invest in these things, amounts of money that they can't seem to find.

By the time I had identified this as a primary problem afflicting reportedly all small vegetable farmers in Mongolia, my month was over and my research report was due. So, I returned this summer (thanks to the Rawlings Cornell Presidential Research Scholars program) to look into it further.

I just returned from my revisit to Shaamar and in meeting with 37 farmers there (about 3% of the population) this problem was made more clear.

About 90% of the farmers I spoke with this trip who had received loans in the past said that loans that were available to them were lent in low amounts at high interest rates and for short terms (between 6 to 12 months). The above bank-farmer cycle was prevalent. They also explained that the low amounts were only enough to pay for yearly chores (renting a tractor for plowing, buying seeds, etc) and with high interest rates farmers were hesitant to take out more than 300,000-1,000,000₮ (about 200-700 USD). Farmers were putting down their land, their houses, their furniture, everything that they owned for collateral to get a few hundred dollars a year, every year. If a drought, a blight or a bad sales year in Autumn hit they could lose everything. They explained that every year they stressed about the fact that their entire livelihood was a risky bet.

There was a recent Planet Money podcast on NPR I heard that sounded strikingly familiar. I encourage you to listen to the podcast, as I won't use this space to repeat it, but I will mention what perked my interest most.

Tomato farmers in Jamaica are competing with industrial farms abroad with technologically advanced equipment and efficient processes on large plots of land. When the question was posed as to why Jamaican farmers don't take out a loan to buy the same equipment, the response was that most farmers didn't have the proper paperwork to put down their land as collateral and banks thus wouldn't lend to them the amounts that they needed, if at all. Sounds a little bit like Mongolia; farmers are just in need of a financial support to become competitive in the globalized market.

In contrast to Jamaica, however, Mongolian land is not a very valuable piece of collateral. After the revolution in 1990, land was more or less privatized as part of the nation's decentralization process. Mongolia's land privatization scheme is a little unique, however. Since nomadic herding is such an integral part of the nation's culture, heritage and lifestyle, only a small proportion of its land is privately owned or leased (to farmers, residents, companies, etc). Rivers, lakes, forests, pasture lands and everything else is owned by the government and is essentially open use. So there is a lot of land available. In fact, Mongolian nationals can obtain less than a hectare of land (it varies depending on where you want to claim it) for free! Farmers explained to me that, unlike Jamaica, putting down their property as collateral isn't enough--it's not worth enough to the banks. So they have to put down their house, their furniture, their tractors or cars (if they have them) just to get the $200-700 a year. Barely enough to make it through the year and hardly enough to invest in the competitive equipment that they need.

My goal now is to find out what is being done about this. If it's a matter of food security the government should be interested, no? I have two meetings with government representatives on Monday (copious thanks to Batmunkh!) to hopefully get some answers.