Market Opportunity• Double income families looking for convenience• Declining availability of domestic help• Media exposure induces the need for variety - preference for both for regional and international foods.• Health consciousness adds a new dimension to consumption trend• Occasional demand can become regular only when the consumer gets the right price quality equation• Food processing industry growth a must for maintaining high GDP growth rate• High employment multiplier for this sector makes it a focus area for inclusive growth• Need to move beyond primary processing to secondary and tertiary processing• Sector can be bridge for moving people from agriculture to industry
Food Processing Sector’s Unique Characteristic• Quality at a reasonable price expectation can not be met by just improving the process efficiency and quality parameters in the factory• Need to go in for improvements at primary production stage-Farmer’s field• Need to create a balance between the aspirations of the grower and the consumer• Need to grow produce focused on processing needs and the changing demand pattern of the consumer• Ensure sustainability of the agricultural production system given rising demand and static arable land while declining water resources
Historical Perspective of the Agricultural Production System• Post independence, single minded focus on removing shortages and self reliance for basic cereal crops• Research system served this purpose by delivering dramatic productivity increases by introduction of new varieties and use of chemicals for nutrition and protection• Knowledge dissemination through Training & Visit (T&V) Extension system successfully managed technology transfer to the farmers• Given limited choices consumer demand was considered of little relevance• It was believed that “Market Forces” could not adequately address the needs of both farmers and consumers. Regulatory framework was designed to circumvent the market
Historical Technology Dissemination Model Information Flow ICAR R&D system & Create Extension Farmer Agricultural Universities Knowledge Teams Product Flow Processors Brand Marketers Farmer Mandis Aggregators Distributor/ Consumer Retailers State Procurement System• No market risk for the farmer – Support price system• Firm contract with the government• Neither the research system nor the farmer required any connect with the consumer and its demands.Burdened with this baggage of historical success - search for the new paradigm
Why the need for the new paradigm?• Falling trend growth rate of agriculture. Productivity increases are not keeping pace with the rising population trends.• Falling water tables & rising soil salinity. Soil degradation due to intensive chemical usage.• Piling food grain stocks and increased dependence on oil seed & oil imports.• System has to deliver on the "increased income aspirations” of the farmers and changing needs of the consumer.• India’s factor price advantage & diverse agro-climatic conditions, not leveraged to become a player in the international market.
Ploughing ahead …..times have changed Domestic International Market Consumer Consumer Distributor/Retailer Exporters Processors Imports Brand Marketers Aggregators Mandis Farmers- Inadequate information with farmers to plan production– Little or no linkages with the market- Research system with limited connect with the market- Public actions focused on crisis resolution, not at systemic solution- Private sector focus on articulating problem only a few initiatives to show for.
Higher sustainable income for the farmers and value creation for the consumer Company Farmer Reliable Supply at Higher Income Predictable Prices Value Addition Sharing Surplus Value Creation Improved Technology Dis-aggregation Improved High Yielding Better Reduced IntermediarySustainability Varieties Productivity costs
One Of The Ways To Create Surplus Value InAgriculture Is Through CONTRACT FARMING
What is Contract Farming ?ESSENTIALLY• The farmer is contracted to plant the contractor’s crop on his land• Harvest and deliver to the contractor a quantum of produce, based upon anticipated yield and contracted acreage• This could be at a pre agreed price• Towards these ends, the contractor can supply the farmer with selected inputs IS THIS REALLY ANTHING NEW ?
Building Blocks For Contract Farming To Work Farmer payment system Processing & Packing Harvesting & Transportation Commercialisation Crop monitoring Land preparation & Planting Farmer education program Field trials Technology transfer - multi location & crop timing The extension services team - selection & trainingDemonstration farmingEvaluation of farmer economics modelTrials & short-listing - selection R & D ActivitiesBlue print for agricultural practicesIdentification of varieties & hybrids Need to create partnerships to make it work
There is no shortcut to bridging the price quality equation for the consumers