Analyzing pro-poor value chains- Study of post-rainy season sorghum in Maharashtra state of India Basavaraj G, Parthasarathy Rao P, Sachin More and Pokharkar V G Workshop Global value chains for food and nutrition security 25-26 September 2014, Roma Tre University, Rome, Italy
Sincere thanks Workshop organizers & Manlio Rossi-Doria Centre for Economic & Social Research
Outline Post-rainy season sorghum - A pro poor value chain Research challenges Objectives, study area, sample & methodology Value chain mapping & its stages Chain constraints Upgrading options & strategies Conclusions
Why post-rainy season sorghum a pro-poor value chain A dryland cereal grown by small holders Staple in household consumption basket- primarily in southern and Western states of India Consumed on farm a basic food security crop for the poorest people A dual purpose crop- provides fodder and income security Ideal crop choice under limiting conditions of soil, water and harsh environments- drought tolerant A crop for nutritional security- high levels of iron and zinc
Research challenges Yield kg/ha Rs/l00 kg 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 gen-03 ago-03 mar-04 ott-04 mag-05 dic-05 lug-06 feb-07 set-07 apr-08 nov-08 giu-09 gen-10 ago-10 mar-11 ott-11 Low productivity levelstarting point 0.6 8 ton/ha 1000 900 800 700 600 500 400 300 200 100 0 Years Low production with rising prices 3500 3000 2500 2000 1500 1000 500 0 200 %
Food availibility ( million tons) Quanity /100 kgs Price-Demand Nexus A paradox 20,9 19,1 17,2 Urban Rural 52 % decline in rural households 68 % decline in urban households 14,2 8,5 9,0 9,6 8,0 6,7 6,0 4,8 5,2 3,5 2,6 2,7 2,2 72-73 77-78 82-83 87-88 93-94 99-00 04-05 09-10 Years Declining demand Increase in price Purchasing power Inferior good 9 8 7 6 5 4 3 2 1 0 Rabi sorghum Kharif sorghum 72-73 77-78 82-83 87-88 93-94 99-00 04-05 Year Increase in fodder demand due to demand for milk & meat products
On the demand side Sorghum consumption (qty / kg / annum) Primarily staple for low and middle income people 17,6 24,8 High Middle Low Rural households 33,5 32,9 14,5 27,9 12,4 2,0 5,5 Maharashtra Karnataka Andhra Pradesh The hypothesis Improving productivity will help in moving small holders from subsistence to market orientation Increased production could trigger price collapse due to inefficient markets or lack of demand States Hence understanding markets is important along with constraints along the value chain and options for up gradation
Objective Discover and develop strategies for improving markets for sorghum Specifically Map the value chain to understand Production constraints & competitiveness Functioning & efficiency of the chain Factors limiting demand and options for upgradation of the value chain Evaluate conditions to improve farmer access to input and output markets
Study locations in Maharashtra The Samples Producers, traders, commission agents, middlemen processors and retailers across selected markets of Maharashtra
Value chain support The chain operators own the product at different stages of the value chain Adopted GIZ Valuelinks methodology Stage of chain Input supply Sorghum production Trade Transfo rmation Final use Seed, Fertilizer, Credit Grow, Harvest, Threshing, Transport Operators of chain Process, Grade, Pack, Sell Input service providers Producers Traders Retailers Universities Banks Extension agents APMC s
Input supply The stages of the chain Seed, fertilizer, credit, information providers Sorghum production Grow, harvest, thresh & transport Trade Process, grade, pack & sell Transform ation Final use
Producers constraints in nutshell Input service providers Seed, Fertilizer, credit Farmers travel between 13-35 kms Marketing costs vary between $ 1.5 to 2 Sorghum production Grow, Harvest, Threshing, Transport Input service providers Producers Farmers used their own seed for sowing due to non-availability of improved seeds Non availability of improved technologies (high yielding & drought resistant) Universities Banks, Fertilizer suppliers Extension agents University APMC s Farmers have to pay commission to get credit Farmers purchase fertilizer in black markets Capacity building on agricultural practices & post-harvest Non availability of cleaning and grading facilities and storage
The flow of trade Trader constraints Trade Transformation Retail Final use Process, Grade, Pack & Sell Quality constraints (Poor and inferior quality grain) Traders Retailers APMC s High transport and labor costs Lack of storage facilities
Sl. No. A summary of distributional shares of the chain Particulars Fortnight ending prices of post-rainy season sorghum for jute variety- Rs/100 kg 08.03.2013 15.03.2013 22.03.2013 1 Primary wholesale Price of sorghum 2100 2200 2200 2 Charges borne by the producer seller per 100 kg of sorghum 65 65 65 3 Producer s Price (1 2) 2035 2135 2135 4 a Charges borne by the trader at primary market per 100 kg of sorghum 123.1 123.1 123.1 4 b Charges borne by the wholesaler of secondary Market 90 98 98 5 Secondary Wholesale Price 2450 2375 2400 6 a Margin of Secondary Wholesaler [5 {1+4(a)+4 b)}] 132 22 47 6 b Percentage to Consumer s Price 5.17 0.86 1.74 7 Charges incurred by the Retailer 25 25 25 8 Retail Price at Secondary Market 2550 2550 2700 9 a Margin of Retailer [8 {7+5}] 75 150 275 9 b Percentage to Consumer s Price 2.94 5.88 10.19 10 Producer s share in Consumer s Price (%) 82 86 81
Opportunities - Upgrading options Demand enhancing strategies Process upgrading Product upgrading Strengths Strong demand for cleaned and graded produce Small packets and branding Consumers willingness to pay Process upgrading Weakness Producers lack awareness on cleaning & grading Investment & infrastructure constraints Opportunities Small proportion of the produce is graded Value addition can enhance incomes Growing awareness of health benefits of nutri cereals in urban areas Threats Farmers denied premium price premium by traders Non availability of graded produce throughout the year Government policies subsidizing fine cereals
Opportunities - Upgrading options Demand enhancing strategies Product upgrading Strengths Strong demand for value added products Nutraceutical benefits of sorghum Consumers willingness to pay Opportunities Increased employment & enhanced incomes Product choice for consumers Investment opportunities for chain operators Weakness Inability to procure supplies consistently (quality, quantity, price ) Investors skepticism about investment Threats Business threats Government policies subsidizing fine cereal products Chain sustainability
Market Strategies & Policy Initiatives Capacity enhancement of farmers in seed selection Strengthening the input distribution system Awareness creation both for producers & consumers Provision of small scale machinery & infrastructure Investment incentives for small scale processing Public- Private partnerships Linkages with existing schemes for chain improvement Research & development on value addition
Conclusions Increased production of sorghum should be accompanied by process and product upgradation of the value chain To capture the: Changes in consumption habits due to urbanization Growing middle class & double incomes Growing awareness about health benefits of millets Growing demand for ready-to-use products & processed foods Unavailability of RTU products of sorghum unlike other cereals
Conclusions Contd.. Sorghum presently is given a subsidiary status in terms of policies related to production, procurement and processing Appropriate support will enable millions of small holders to capture emerging opportunities Hence It s critical to upgrade the sorghum chain to improve market access, nutritional and food security of small holders
Acknowledgment Bill & Milenda Gates Foundation & CRP2 PIM Legacy project for Funding support on Harnessing Opportunities for Productivity Enhancement (HOPE) Also, the farmers of two regions of Maharashtra & value chain operators for sharing information
Thank you for your attention!