The Welfare Effects of Trade in Phytomedicines: A Multi-Disciplinary Analysis of Turmeric Production

Abstract

Summary International trade in medicinal herbal products is growing, while value chains are becoming more complex and governed by a range of public and private standards. There is a debate over the extent to which phytomedicine production can be beneficial for farmers in low- and middle-income countries. More generally, there are varied views about the extent to which small farmers are disadvantaged by stringent public health and private consumer standards in northern markets for agricultural products. This paper proves a comparative analysis of value chains, using case studies of turmeric production in India. It marries a qualitative investigation of turmeric producing sites in India with an investigation into the chemical quality of various turmeric products. The aim of the paper is to understand the way that varied structure and governance of value chains changes the benefits to both producer and consumer. When production is for the organic northern market, we found evidence of a “captive” value chain, where the lead firm requires strict adherence to conditions of production and processing. Prices for farmers were relatively stable, at a reasonably high level. In contrast, where farmers were producing for local markets, including the major auction at Erode, prices were volatile and farmers bore considerable risk. We found that competition and volatility in the market-based chain can lead to turmeric adulteration and contamination, both intentional and unintentional. Our case study suggests that many small turmeric farmers would find it difficult to meet both public and private health standards, in contrast to some academic literature that argues that public health standards do not discriminate against small farmers. More than this, our study adds to the discussion of the impact of standards, suggesting clear consumer benefits in northern markets. However, there are also indications that only larger and more dynamic farmers can participate in the lucrative phytomedicine trade. As such, our study tentatively supports previous literature suggesting that the application of standards in northern markets lead to increasing farmer differentiation.