Linking Farmers to Markets through Agricultural Supply Chain

Transcription

1 Linking Farmers to Markets through Agricultural Supply Chain Harbir Singh National Centre for Agricultural Economics and Policy Research, New Delhi 23 rd National Conference on Agricultural Marketing CRIDA, Hyderabad November 2009

2 Background Future agriculture sector A vibrant highly productive, commercial farm sector that can ensure food and nutritional security, generate employment opportunities, stimulate industrialization, and produce renewable energy from biomass and fuel crops ( India Vision 2020, Planning Commission, 2002) Changes in Indian dietary patterns Rising incomes, urbanization, globalization Demand for high value food commodities expected to double by 2025 (Kumar et al., 2003; Pingali and Khwaja, 2004) Greater focus on food safety, quality and traceability Vertical coordination of primary production Input suppliers and processing/exporting firms in South and Southeast Asia (Gulati et al., 2005)

3 Background Potato the 4 th important food crop after rice, wheat and maize has attracted lot off private interest because of its potential for value addition Irregular supply and low quality of raw material (potato) lead to poor quality output Market imperfections, poor institutional linkages and inadequate knowledge dissemination (extension system) New institutional mechanisms (supply chain) coming up to address market imperfections (PepsiCo; Merino)

4 Gaps in knowledge Focus of most of the research studies only on one aspect of supply chain framework Marketing; contracting; input delivery, etc. Inadequate attention on the institutional linkages which could transform agriculture sector How public R&D in agriculture develops linkages with private sector? What is needed to enhance public-private cooperation to meet market demand and consumer preferences? How can farmers benefit from new institutional set up?

5 Approach New Institutional Economics (NIE) framework How information asymmetry is overcome? How quality is ensured along the supply chain? How the new institutional arrangements benefit the farmers in supply chain?

6 An illustration of potato supply chain R&D Seed multiplication Imports Farm production Exports Processing & packing Grading & packing Traders Retailers Storage Agrimandi Wholesaler s Retailers Consumers

7 Linkages among stakeholders Public R&D Negligible Satisfactory? Industry Upto mark? Farmer

8 Framework of information flows in traditional agricultural supply chain??????

9 Sources of information on seed (% cases) Source: Singh, et al, 2008

10 Driving factors for entering into linkages with the firms Sr. Reasons for contracting Response (%) No. 1 Timely payment 93 2 Guaranteed sale 92 3 Guaranteed prices 89 4 Access to credit 39 5 Higher prices 38 6 Access to new technology (inputs) 35 7 Higher income 15 8 Other 9

11 Yield, prices and returns in potato supply chain Particulars Supply chain (PepsiCo) Yield (q/ha) (-30.54) Price received (Rs/q) (+22.08) Transport and handling cost (Rs/q) (-25.00) Open market Supply chain (Merino) (-13.43) (+11.11) (-74.60) Open market Net returns (Rs/ha) (+14.51) (+23.85) sold to firm N/A N/A - sold in market

12 Spill-over effects of institutional linkages Sr. No. Spill-over effects of contracting Response (%) 1 Invested more in acquiring farm assets 52 2 Expanded area under potato cultivation 45 3 Utilized the experience in other crops 16 4 Other 13

13 Policy response Lot of focus on food processing 100 percent FDI permitted under automatic route in food infrastructure (cold chain, warehousing) Investment in retailing restricted (51% FDI in single brand allowed) Emphasis on food safety & quality Thrust areas: Mega food parks, integrated cold chain infrastructure at different levels, establishment of collection/aggregation centers, capacity building (NIFTEM, Haryana) Food Safety and Quality Year Food Safety and Standards Authority (Food Safety & Standards Act, 2006)

14 Conclusions Potato supply chain linkages suffers from information asymmetry No clearly defined linkages between public & private sectors Need to reconcile public R&D focus, industry needs and consumer demand Guaranteed price, assured market and timely payment are driving forces for farmers participation in supply chain Substantial scope for enhancing farmers realization from what consumers pay for processed products Policy vision on food safety and quality assurance can be realized to a greater extent by removing weaknesses in agricultural supply chain

15 Policy implications Increasing importance of information (compared to other resources) Facilitate coordination, communication and collaboration (CCC) for effective PPP Support for proactive research for technology development Need for consistent policy for development of agricultural supply chains Food safety initiatives and regulations might become easier to enforce with lower implementation cost

16 Thank you!