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  • 1. A STUDY OF INTERMEDIARIES’ INTERVENTION IN AGRICULTURE SUPPLY CHAIN AND ITS EFFECT ON FARMERS’ INCOME A Project Report Submitted to G. B. PANT UNIVERSITY OF AGRICULTURE AND TECHNOLOGY PANTNAGAR-263145, (U. S. NAGAR) Uttrakhand, India Submitted by Prince I.D. No. 31996IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF Master of Business Administration (Food Retail and Supply Chain) May,2011
  • 2. CERTIFICATE We, the undersigned, members of Project Advisory Committee of Ms. Prince, I.D.No. 31996, a candidate for the degree of Master of Business Administration (Food Retail and Supply chain), agree that the project report entitled “A Study of Intermediaries’ Intervention in Agriculture Supply chain and its effect on Farmers’ Income” may be submitted in partial fulfillment of the requirements of the degree. Advisory Committee (Ashutosh Singh) Chairman(Mukesh Pandey) (Nirdesh Kumar Singh) Member Member i
  • 3. ACKOWLEDGEMENTI take this opportunity to express my sincere and deepest gratitude to Govind BallabhPant University of Agriculture & Technology and college of Agribusiness Managementfor providing me a chance of learning. This project not only helped me to understandabout the Indian agriculture, but widened this vision in field of management too, byvirtue of being associated with an esteemed and professional institute.This report is the result of contribution made by numerous people too many to mentionindividually, therefore I thank all the respondents who have given their valuable time,views and authentic information for this project. At the very outset, I would like tothank my advisor Dr.Ashutosh Singh, Associate professor, department of HumanResource and personal management for providing me all types of support, constantencouragement and his relentless efforts to motivate me to achieve my goal. His closesupervision and precious input have made me able to refine this project to this extent. Iconsider it my privilege to express my deep sense of gratitude to Dr. Mukesh Pandey,Associate Professor Department of marketing and Mr. Niredesh Kumar Singh,Assistant professor, for their continuous guidance, motivation and providing valuablesuggestion and critically analyzed my project work.I am grateful to Dr B.K.Kumbher Dean post graduate studies for providing me the B.K.Kumbher,necessary research facilities. Also I would like to express my sincere thanks toDr.Devendra Kumar Dean, College of Agribusiness Management, Dr.B.k. SikkaFormer Dean, College of Agribusiness Management, Pantnagar for providing a chanceto undertake this present study.This acknowledgement would be incomplete if I don’t mention a special regard to myparents, my sister Preety, my batch mates, administrative staff of my college and allthose who motivated me to perform better than the best.Last but not the least; I thank The ALMIGHTY, for blessings me with enough patienceendurance and strength in accomplishment of the Endeavor.Pantnagar Prince ii
  • 4. EXECUTIVE SUMMARY Intermediaries in agri-supply chain are very important component with various pros andcons. Among the several shortcomings that plague this sector is the high intermediary margin asa result of numerous intermediaries in the agri-supply chain. These intermediaries add-on theirmargins to the produce during its transit from farm gates to the final consumer. The proposed study was conducted in Rudrapur, Kashipur, Bazpur, Gadarpur and Jaspurblock of district Udham Singh Nagar. The study was conducted in two phases; the initial phasewas survey, information collection regarding farmers and intermediaries while second phase ofstudy was to analyse the data of survey. This study was conducted to identify the intermediaries in agri-supply chain and tocompare the income of farmers who market through commission agents and through Rice/flourmillers. The study also analyses the impact of intermediaries on cash flow of the farmers. Duringthe study it was found that four types of intermediaries are involved namely commission agent,rice/flour millers, wholesaler and retailers. A major portion of farmers sell their produce throughcommission agents .It was also revealed that the farmers who sold their produce to rice millersreceived higher profit as compare to farmers who sell through commission agents. The variousfacilities provided by intermediaries include assured prices, advance credit, information aboutagricultural input and transportation facilities. As a result of these activities the income offarmers increase considerably. The study suggests that the farmers should sell their produce directly to the rice/flourmillers as it gives them higher profit. Commission agents are necessary evil in agri-marketing.But, it is expected that as a result of better extension activities and enforcement of APMC actthe role of commission agent is expected to decrease in future. iii
  • 5. TABLE OF CONTENTS S.No Title Page No. Acknowledgement i Executive summary ii Table of Contents iii List of Exhibits iv List of Tables iv1 Introduction 1-3 Background 11.1 Agriculture Marketing in India 11.2 Role of Intermediaries 21.3 Problem Statement 31.4 Objectives 32 Review of Literature 4-63 Research Methodology 7-103.1 Research Design 73.2 Information required 73.3 Data source 73.4 Area of Study 83.5 Sampling Plan 83.6 Research Instrument 93.7 Duration of Study 93.8 Data Analysis 10 iv
  • 6. 4 Result and discussion 11-204.1 Classification of farmers 114.2 Intermediaries in agri-Supply chain 124.3 Different links in supply Chain of Wheat and Rice 124.4 Income of Farmer who sell directly 144.5 No. of farmers who are taking credit 164.6 Factor affecting the selection of Commission agents by Farmers 174.7 Income of farmer who sell through Intermediaries 174.8 Comparison of Farmer’s Income 184.9 Factor affecting the selection of Farmers by Intermediaries 184.10 Facilities Provided by Intermediaries to the Farmers 194.11 Increase the Income of Farmer 225 Conclusion 236 Suggestions 24 Reference vi Annexure I vii Annexure II viii Vita v
  • 7. LIST OF EXHIBITSS.No Exhibit No. Title of Exhibit Page No.1 Exhibit 4.1 Classification of farmers 102 Exhibit 4.2 Intermediaries in Agri-supply chain 113 Exhibit 4.3 Different links in agri –supply chain 134 Exhibit 4.5 No. of farmers who are taking credit 166 Exhibit 4.6 Factor affecting the selection of Commission 17 agents by Farmers5 Exhibit 4.8 Comparison of income of farmer 187 Exhibit 4.9 Factor affecting the selection of Farmers by 18 Intermediaries8 Exhibit 4.10 Facilities Provided by Intermediaries to the 20 Farmers9 Exhibit 4.11 Increase the Income of Farmer 22 vi
  • 8. LIST OF TABLESS.No Table No. Title of Table Page No 1 Table4.1 Variable Cost of Production 14 2 Table 4.2 Changes in the cash flow of farmer 21 vii
  • 9. 1. INTRODUCTIONBackgroundThe marketing as a term is broader than traditional trading and agricultural marketing as aconcept is still evolving in the Indian agrarian society. The National Commission onAgriculture defined agricultural marketing as a process which starts with a decision toproduce a saleable farm commodity and it involves all aspects of market structure of system,both functional and institutional, based on technical and economic considerations andincludes pre and post- harvest operations, assembling, grading, storage, transportation anddistribution.Agricultural marketing also reflect another dimension from supply of produce from rural torural and rural to urban and from rural to industrial. In modern world it became challengingwith the latest technologies and involvement of middlemen, commission agents who keeptheir margins and move the produce further. As it is well known more the number ofmediatory more will be the costs as each transaction incurs expenses and invites profits.Ultimately when it comes to the producer the cost of the produce goes up steep. In the entireprocess of marketing the producer gets the lowest price and the ultimate consumer pays thehighest as the involvement of more middlemen.1.1 Agriculture Marketing in India In the case of agricultural marketing in India it isnot exactly the marketing in the literal sense and we can call it as ‘distributive handling’ andto go further we may call it as ‘distributive handling’ of agricultural produce as there arenumber of intermediaries who are involved in marketing the agricultural produce. Marketingsystems are dynamic; they are competitive and involve continuous change and improvement.Businesses that have lower costs, are more efficient, and can deliver quality products, arethose that prosper. Those that have high costs, fail to adapt to changes in market demand, andprovide poorer quality, are often forced out of business. Marketing has to be customer-oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. Thisrequires those involved in marketing chains to understand buyer requirements, both in termsof product and business conditions.Activities include market information development, marketing extension, training inmarketing and infrastructure development. Improvement of marketing systems necessitates a 1
  • 10. strong private sector backed up by appropriate policy and legislative frameworks andeffective government support services. Such services can include provision of marketinfrastructure, supply of market information, and agricultural extension services able toadvise farmers on marketing. Training in marketing at all levels is also needed.1.2 Role of Intermediaries The number of middlemen or intermediaries is shrinkingdramatically as the structure of the food and agriculture system changes. Major customers arerequiring their producer-suppliers to perform many of the services previously accomplishedby middlemen. This fact may be detrimental to small- to mid-sized producers in maintainingtheir access to important customers. Producers attempting to accomplish all of the assemblyand distribution functions otherwise performed by intermediaries will need to bear that costthemselves. In some cases, producers may be able to perform those functions profitably but inmany cases the actual costs of assembly and distribution are underestimated by producers,resulting in losses. Some producers may be in a position to accomplish all of the necessaryassembly and distribution functions themselves or as a group. However, for others not in thatposition, eliminating “middlemen” may not be as desirable at first glance as producers mightthink, unless they can accomplish all of those functions at a lower cost as those individuals orfirms who performed those assembly and distribution activities on their behalf.Intermediaries are an important link in the supply chain. One should not forget that even ifthere are 3 to 4 intermediaries in the existing supply chain, still the chain is very efficient.Just ignoring them will lead to no fruitful result. Taking out the middle man from the chaindoes not guarantee a higher realization of price for the farmers. The Commission agents playa very important role by providing finance to the farmer. Though there are arguments that theintermediaries is exploiting the farmer by charging high interest rate and also that the farmeris forced to sell the produce to the middle man but he provides finance to farmer when it isrequired, procures from the farm level, gives extra credit to meet the house hold needs of thefarmer. The farmer knows that he is not getting the best price from the middleman; He isfully aware where the mandi is even in the mandi he has to sell to commission agent so whynot sell the produce in the village itself without the hassle of additional transportation cost. 2
  • 11. 1.3 PROBLEM STATEMENTThe traditional agriculture supply chain model that is operational in India results insignificant reduction in farmers’ income. The farmers have the option to sell his produce invarious agriculture agencies. However selling in mandis in most cases is unprofitable due totwo notable reasons – (1) cost issues involved in transporting produce to mandi, and (2)structural deficiencies rampant at mandis. On an average, the distance between regulatedmarkets (mandis) and farm field ranges from 7.7 kilometres to 15 kilometres in India. Indianagriculture being dominated by small and marginal famers, it may not be economically viablenor commercially feasible for a small farmer to sell their produce directly to consumers. Herethe agri intermediaries play a crucial role, they add values at several stages of the goodsmovement in the value chain because of their specialized role which everyone cannot doesand the biggest role they are playing is the aggregation of goods from large number of smallfarmers scattered across a vast area but the negative impact of the agri intermediaries indowngrading the efficiency of the agricultural marketing in India. It won’t be fallacious tostate that intermediaries also have a role in increasing price of several food commodities. Sothe proposed study has been undertaken with the following objectives.1.4 OBJECTIVES1. To identify different intermediaries who are involved in supply chain of rice and wheat.2. To compare the revenue of farmers who market through commission agents and through Rice/flour millers.3. To analyse the impact of intermediaries on Income of the farmers. 3
  • 12. 2. REVIEW OF LITERATUREPatel (2009) in his study found that agriculture intermediaries in form of commission agentsat mandis (government regulated markets) operate at 4-5 percent margins, intermediaries atwholesale markets get around 30 percent, and retail vendors make around 20 – 40 percent.Consequently, the price of commodities that range between Rs 5 – 7 per Kg at farm gateeventually costs in the range of Rs 15 per kg at the consumer. Among the severalshortcomings that plague this sector is the high intermediary margin that results from thenumerous intermediaries in the agri value chain. These intermediaries add-on their margins tothe produce during its transit from farm gates to the final consumer.Vasisth and Bhardwaj (2009) observed that Farmers have been at the mercy of traders orintermediaries while selling their produce, who pay less to farmers and in turn sell it atexorbitant rates and thus getting huge trading margins as the margin between consumer priceand producers’ price gets added due to several levels of intermediaries prevalent in Indiamainly due to the market infrastructure. Many farmers lack instant access to the presentmarket price.Michael and Jusman(2008) states that the rationale for emergency of intermediaryinstitutions in marketing channel has been the focus of research for marketing scholarsreview of the work done in this area reveals two broad approaches of this issue. One group ofscholars focus on the ability of intermediary institutions to reduce the cost of the physicalflow of goods and services from producers to users. Another approach adopted by severalresearchers has been focus on the role of marketing intermediary in facilitating transmissionof information within the marketing channel between producers and users.Thorat (2007) analyzed the state level APMC acts, acc. to that the products of the early1960’s and 1970’s and enacted with the view that the state alone could protect farmers fromexploitation at the hand of traders to overcome this the APMC act were passed, whereinwholesale trade was conducted under the presence of the responsible government officialswho are designated. The market mandis were administrated by a marketing committeecomprising of representative of farmers traders and other stockholders.Mohana Rao(2005) in his study formal credit institutions have largely failed to provideaccess to farm credit to small and medium-scale landowners, or zamindars. This paperexamines interlocked transactions between traders and landowners in the wheat markets in 4
  • 13. UP that facilitate the provision of credit by traders. It is concluded that the case examinedprovides an example where traders lend to landowners in a segment of the credit market thatapproximates competitive behavior, without surplus extraction by traders. Key conditionsresulting in this favorable outcome are the existence of both competition for market share andinformation sharing on borrowers between traders. Whether this outcome is also beneficialfor other rural groups who may borrow from landowners, in particular sharecropping tenants,is independent of market relations between landowners and traders and is not determinedhere.Verma and Patidar (2004) describe in his study that the producers may either send theirproduce to commission agents who arrange the sale in market or they may themselves bringthe produce to the commission agent premises for sale. After purchasing from the agents, thewholesaler and exporters sort the crop, pack and then dispatch to different distributing orconsuming market. In the process of marketing the producer has to incur various marketingcosts. Agriculture marketing is costly with high commission charges, trader’s profit margins,wastage and malpractices.Bieri (2002) states that the welfare consequences of price instability critically depend on thetype of market intermediary. Both a producer marketing board and a pure middleman willstabilize consumer prices; but the latter, unlike the producer marketing board, will find itadvantageous to "manufacture" price instability for producers.Deepak et al.(1999) worked against the backdrop of viewing marketing intermediaries indeveloping countries as parasites, Necessary information was collected from all majorstakeholders such as farmers, collectors and commission agents, and the relative position offarmers in terms of their gains was analyzed. Marketing margin and farmers’ share of grossincome are also analyzed ‘with’ and ‘without’ the cost of malicious practices by marketingintermediaries.Matsuda (1997) in his study addressed that functional structure of agricultural electronicmarketplaces, together with associated pricing mechanisms. The analysis of transaction costssuggests that electronic commerce with intermediaries provides more efficient tradingenvironments than electronic marketplace without intermediaries. This indicates that existingintermediary institutions will remain important for agricultural transactions even after the 5
  • 14. adoption of electronic market systems. Compared to other industries or markets, agriculturalmarkets are characterized as competitive markets and pricing is a key factor for efficientresource allocations. 6
  • 15. 3. RESEARCH METHODOLOGYKeeping in view the formulated objectives, the project was carried out with the followingresearch methodology-3.1 Research DesignThe methodology adopted for the completion of study was descriptive and analyliticalresearch approach. Descriptive research was used for the identification and role ofintermediaries’ in marketing of agriculture produce while, analytical research approach wasused for analysing the impact of intermediaries on farmers’ income.3.2 Information RequiredFor completing the study, information required was about background of Udham SinghNagar district, data regarding different blocks and villages of district. Data related to landholding of farmers, their cropping pattern, their socio-economic status..3.3 Data SourceSecondary data as well as primary data were used for the information generation. Theinferences were drawn mainly from primary source.Secondary Data-Secondary data were collected from internet, journals, book researcharticles, different mandis and government booklet issued by district agricultural department.Primary Data-This data was first hand information for the study. This was collected withthe help of survey method using a self structured questionnaire consisting of both open endedand close ended questions. The questionnaire was used for conducting the personal interviewof farmers and intermediaries.3.4 Area of StudyThe study was conducted in the Udham Singh Nagar district of Uttrakhand within the districtUdham Singh Nagar different areas like Rudrapur, Gadarpur, Bazpur, Kashipur, Jaspur wastaken. 7
  • 16. Figure 3.1 Map of district Udham Singh Nagar3.5 Sampling Plan3.5.1 UniverseThe universe of sampling was comprises of farmers, intermediaries government personnelwho are directly or indirectly related with marketing of agriculture produce of districtUdham Singh Nagar.3.5.2 Sampling Unit- Farmers and intermediaries were the sampling units for the study.These were selected from two villages of each block. 8
  • 17. 3.5.3 Sample Size-S.No Block Farmer Intermediaries1 Rudrapur 25 42 Gadarpur 25 43 Bazpur 25 44 Kashipur 25 45 Jaspur 25 4 Total 100 203.5.4 Sampling Technique-Convenience and simple random sampling employed for theselection of farmers and intermediaries. Farmers were selected on the basis of their landholding. In some places judgemental sampling was also used for selecting intermediaries.3.6 Research InstrumentQuestionnaire containing both open and close ended questions was used as main researchinstrument. Questionnaire was structured in such a way that it has contained all the questionswhich was helpful in getting the objectives of study fulfilled.3.7 Data AnalysisData obtained from the survey of samples was analyzed with the help of graphicalrepresentation, tabulation and classification of data and by using statistical tools like 5 pointscale method, bar diagram, pie charts and other related methods. 5 point scale method is usedfor analyzing the factors which are affecting the selection of commission agent by thefarmers.3.8 Duration of StudyThe period of study was from 7th of March to 30th April, 2011. 9
  • 18. 3.9 Limitation of Study i. There may be discrepancies in the actual data and the recorded data due to misinterpretations and wrong selection of respondents. ii. Topic is vast but availability of information and timeline was short.iii. In some cases there were some contradictory answers given by farmers which were create confusion regarding intermediaries’. 10
  • 19. 4. RESULT AND DISCUSSIONIn accordance with the objective of the study, the data collected from primary and secondarysources were analyzed and interpreted.4.1 Classification of FarmersIt is very important to know that the categories of the farmers for understanding the theirsocio-economic status. The farmers are classified into three main categories –MarginalFarmer, small Farmer and Large Farmer.It is evident from the Exhibit 4.1 that out of total sample, 17 percent are marginal farmers, 50percent are small farmers and 33 percent belongs to the category of large farmer. Marginal Farmer 17% Large Farmer 33% Small Farmer 50%Exhibit 4.1 Classification of Farmers t 11
  • 20. 4.2 Identification of Different Intermediaries involved in Supply Chain of Rice and entWheatFarmers producing agricultural produce are scattered in remote villages and t produce has thisto reach to the consumers for its final use and consumption. There are dif different agenciesand functionaries through which this produce passes and reaches to the consumer. A marketchannel or channel of distribution is therefore defined as a path traced in the direct or indirecttransfer of title of a product as it moves from a producer to an ultimate consumer or industrial produceruser. There are several channels of distribution which annels used by farmers according to theirneed. Exhibit- 4.2 shows that 60 percent that, farmers sell their produce to the commissionagents, 35 percent farmers ers sell to the rice/ flour millers directly and on 5 percent onlyfarmers sell their produce to others (Wholeselor and Retailers). other 5% Rice/Flour millers 35% Commission agents 60% Exhibit 4.2 Proportion of Intermediaries in Distribution of sold produce4.3 Different links in Supply Chain of W erent Wheat and RiceThe Exhibit 4.3 illustrates that in Supply chain of wheat and rice in Udham Singh Naga Nagardistrict, there is linkage of four kinds of intermediaries that is Commission agents, Ricemillers/ flour millers, wholesaler and retailers These intermediaries are involved for flow of retailers.produce from farmer to ultimate consumer. 12
  • 21. Farmer Commission Others agent Rice millers /Flour millers Export Wholesaler Retailer ConsumerExhibit 4.3 Different links in Agri-Supply Chain of Rice and Wheat 13
  • 22. 4.3.1 Different Types of Marketing Channel for Rice and Wheat 1. Producer– Miller- Consumer 2. Producer– Miller- Retailer– Consumer 3. Producer- Miller- Wholesaler- Retailer- Consumer 4. Producer– Commission agents - Miller– Retailer– Consumer 5. Producer– Govt. procurement– Miller– Retailer– ConsumerThese above are the different type of marketing channels for rice and wheat supply chain. Infirst channel produce is directly sold to the millers and then it reaches to the ultimateconsumers. In second type of marketing Channel produce is sold to the millers and then it isfurther sold to the retailers and finally it reaches to the ultimate consumer. In third type ofmarketing channel there is involvement of 3 kinds of intermediaries, produce is sold to themillers, and then it sold to the wholesaler and again sold to the retailers and finally reaches tothe ultimate consumer. In forth kind of marketing channel there is also involvement of threekind of intermediaries, in this case produce is first purchased by commission agent then theysell it to millers, then from millers it sold to the retailers and finally from retailers to theconsumer. In fifth kind of marketing channel produce is first procured by the Governmentpeople then produce is sold to the miller and from milers to retailers and from retailers to theultimate consumers.4.4 Income of Farmer4.4.1 Cost of ProductionCost of production of paddy and wheat is different. There are different kinds of costinvolved in paddy and wheat production. These costs are two type Fixed cost and variablecost. Cost of Rice production is high because variable cost is high.Following items are considered for cost of productionFixed cost (Land Rate) = Rs 8000/acreVariable cost = cost of ploughing , seeds, Transplanting, Irrigation, Fertilizer, Pesticide, Harvesting and Threshing, Transportation 14
  • 23. Table 4.1 Variable cost of productionS.No Parameters Cost /acre Total Paddy Wheat1 Ploughing 1500 800 23002 Seed 400 700 11003 Transplanting 1200 12004 Irrigation 1500 500 20005 Fertilizer 1200 1200 24006 Pesticide 1000 500 15007 Harvesting and Threshing 700 900 16008 Transportation 1000 1000 2000 Total Cost 7600 4700 Rs.14100Interest on variable cost = 10.5 percent/year = Interest on variable cost for 3 month period = [(Variable cost* Rate of interest* Time)/100] = [14100*0.105*3/12] = Rs 370/acreTotal cost = Fixed Cost + Variable cost + Interest on variable cost = 8000 + 14100 + 370 = Rs.22470 /acreTotal cost of Production is = Rs. 22470/acre4.4 .2 Value of Total Produce in MarketTotal produce from farmers’ field is 32 quintal/acre Paddy and 22 quintal/acre Wheat. Marketprice of the produce is for paddy Rs1000/quintal and for wheat Rs1100/quintals. So the totalvalue of produce is [{(32*1000) + (22*1100)}] = 56200.Total revenue in market is = Rs.56200 15
  • 24. 4.4.3 Income of Farmers Who Sell their Produce without Intermediaries ho 40 percent of farmers who directly sell their produce to Rice millers/flour millers. So the income of these farmers is- Income = (Total Value of produce – Cost of production) (56200 -22470) Income = Rs. 3373 / acre 337304.5 No. of farmers who are Availing Advance Credit FacilityIn India number of marginal farmers is more than large farmers and the chunk of these creditfacilities is used by these marginal farmers. The reasons for using these facilities by marginalfarmers is unavailability of sufficient amount of money used for crop production .Creditfacilities providing to the farmers are very important feature of commission agents Farmers s agents.are selling their produce through commission agents because they are taking credit from rthem. Exhibit 4.5 shows that only 37 percent farmers take credit from the commission age agentswhile 63 percent farmers use their own money for farming. Availing Credit 37% Not Availing Credit 63%Exhibit 4.5 No. of farmers who avail credit 16
  • 25. 4.6 Factors Affecting the Selection of Commission Agents by F FarmerThere are many factors responsible for the selection of commission agents by the farmers.Factors affecting the selection of commission agents were devised on 5 point scale. Exhibit4.6 shows that the two facto which affect the most in the selection of commission agent orswere amount of advance credit and rate of interest on credit. The other factors were also dvanceimportant like period of credit and behavior of commission agent. 5 5 4.5 4 4 3.5 3 5 point Scale 3 2.5 2 2 1.5 1 0.5 0 Period of Credit Amount of Rate of inerest on Behavior of Advance Credit credit Commission agent factorsExhibit 4.6 Factors affecting the selection of commission agent4.7 Income of Farmers’ Who S their Produce through Intermediaries SellFarmers sell their produce to the commission agents because they have taken advance creditfacility from the commission agents Rate of interest on that advance credit is 2 % per month agents.or 24 % per year. So the income of farmers who sell their produce through commissionagents is Income = (Total cost of produce – Cost of cultivation- interest on investment Capital (56200 –2247 -5304) 470 Income = Rs. 28426 / acre 17
  • 26. 4.8 Comparison of Farmers’ Income Who Market Their Produce withoutIntermediaries and Those Who Market Through IntermediariesAfter comparison of both the farmers it has been found that there is a difference of Rs 5304 inthe income of farmers. Exhibit 4.8 shows that farmers who sell their produce directly to theRice/flour millers have an income of Rs 33730 while the farmers who sell their produce tothe intermediaries have an income of Rs28426. 35000 33730 34000 33000 32000 31000 Income 30000 29000 28426 28000 27000 26000 25000 Direct With Intermediaries FarmersExhibit no- 4.8 Comparison of farmers’ Income4.9 Factors affecting for selection of farmers by intermediariesThere are many factors responsible for the selection of farmers by commission agents.Factors affecting the selection of farmers were devised on 5 point scale. Exhibit 4.9 showsthat the two factors which affect the most in the selection of farmers are trust on farmer andinterest on credit. The other factors were also important like quantity of produce and qualityof produce. 18
  • 27. 5 5 4.5 4 4 3.5 3 5 Point Scale 3 2.5 2 2 1.5 1 0.5 0 Interest on Credit Quality of Produce Trust on Farmer Quantity of Produce FactorsExhibit no-4.9 Factors affecting for selections of farmers by intermediarie intermediaries4.10 Facilities provided by intermediaries to the farmersCommission agents provide many facilities to the farmers. Commission agents are the needof farmers for selling the product in the market. They are giving credit to the farmers and pay givingassured prices. Exhibit 4.10 has shown that 20 percent farmers get information aboutagriculture input, 20 percent of farmers get information about transportation facilities, 60percent farmers get advance credit facility as well as other information like marketinformation and 100 percent of farme get information about assured prices. They give them farmersinformation related to the different markets, knowledge regarding their agricultural activitiesand information of agri-inputs. inputs. 19
  • 28. 100 90 percentage of farmers 80 70 60 50 100 40 30 60 20 40 10 20 0 Assured Price Advance Credit Agriculture input Transportation Facilities FaclitiesExhibit -4.10 Facilities provided by intermediaries to the farmers4.10.1 Impact of Intermediaries on Farmers’ IncomeIntermediaries support to the farmers by providing them different facilities. They also give providingthe information related to high yielding varieties which results in better q quality and quantityof the crop. These activities are very much helpful in the farmers’ cash flow. helpfulTable 4.2 shows improvement in the cash flow of the farmer. Earlier the yield of farmers’field was 30 quintal/acre paddy and 20 quintal/acre wheat. Market price of the produce wasRs 900/quintal and Rs 1000/qui /quintal for paddy and wheat respectively. Now, after the Supportof intermediaries yield of farmers’ field has improved and market price of the produc has produceincreased. Yield of paddy and wheat is 32quintal/acre and 22 quintal/acre respectively andmarket price is Rs 1000/quintal for paddy and Rs 1100/quintal for wheat. /quintal 20
  • 29. Table 4.2 Changes in the Income of Farmer Before , Income After ,IncomeYield/Acre Price/Quintal Yield/acre Price/QuintalRice- 30 Rice – 900 Rice- 32 Rice – 1000Wheat-20 Wheat – 1000 Wheat-22 Wheat – 1100 Revenue B = [{(3o*900) + (20*1000)}] Revenue A = [{(32*1000)+(22*1100)}] Rs. 47000/acre Rs.56200/acreFarmers’ Income B = Revenue - Cost of Cultivation Farmer Income A= Revenue-Cost of Cultivation 47000 - 22470 56200 – 22470 =Rs.24530/acre = Rs.33730/acre Percentage Change in the Income of Farmers % change = [{ ( Income A-Income B)/Income B}*100] = [{(33730-24530)/24530}*100] = [(0.3750)*100] = 37% 21
  • 30. 4.11 Increases in the Income of FarmerExhibit 4.11 shows that 37 percent improvement in cash flow of farmer. Earlier the income .of the farmers was Rs.24530 but after the help from rice/flour millers the income of f 0 farmershas increased up to Rs.33730. Improvement in the income of farmer is by Rs 9200 9200.Thisimprovement in the cash flow of farmers helps in the further capital formation of farmer. 33730 35000 30000 24530 Income of Farmer 25000 20000 15000 10000 5000 0 Earlier Situation of Farmer Current Situation of Farmer Farmers SituationExhibit – 4.11 Increase in the Income of Farmers 22
  • 31. 6. CONCLUSIONAgricultural marketing includes the movement of agricultural produce from farmers toultimate consumer through intermediaries. Intermediaries are important aspect of agriculturalmarketing and affect the price paid by consumers as well as the profit received by farmers.The present system of agricultural marketing is not well-organized and the farmers have todepend largely on the intermediaries for the disposal of the farm’s yield. The intermediarieshave no hesitation in taking advantage of the farmer’s dependence upon them. Intermediariesare necessary evil that cannot be removed but efforts can be made to reduced them in orderto bring about efficiencies in the supply chain. The study was conducted in five blocks of district Udham Singh Nagar namelyRudrapur, Gadarpur, Bazpur, Kashipur and Jaspur. This study identified the variousintermediaries in agri-supply chain.These include commission agent, rice/flour millers,wholesaler and retailers. The survey revealed that majority of the farmers were smallfarmers. The study identifies two important channels of marketing viz farmers selling theirproduce directly to the rice/flour millers and farmers selling their produce to the commissionagents.During the study it was revealed that the farmers who sell their produce directly to therice/flour millers received greater profit as compared to those who sell through commissionagents. It was found that a difference of Rs 5304 existed between the two channels whichmeans that a farmer who sells his produce to commission agent will receive Rs. 5304 less.The study also emphasizes on the role of credit in case of commission agents. Majority of thefarmers who sell to the commission agents take loan from them at a higher rate of interest.Various factors are involved in the selection of commission agents by farmers. These includeperiod of credit, amount of advance credit, rate of interest on credit and behavior ofcommission agent. On the other hand a commission agent also selects a farmers on basis ofcertain factors namely interest on credit, quality and quantity of produce and trust on farmer.The various facilities provided by intermediaries include assured prices; advance credit,information about agricultural input and transportation facilities. These facilities improve theincome of farmers. 23
  • 32. 6. SUGGESTIONS1. Most of the farmers depend on agriculture as their main source of income. So, they should focus on selection of marketing channel like in which mandi or through which channel they should sell their produce.2. The farmers should try to sell their produce directly to the rice/flour millers instead of selling to the commission agent for getting higher profit.3. Farmers should avoid the habit of taking advance credit from the intermediaries because they charge a higher rate of interest.4. The loan providing process of the commercial bank should be simplified, so that the farmers could easily approach to banks instead of the commission agents.5. There should be proper government norms in the mandi for selling of produce. There should not be any fraud in the market pricing strategies of produce.6. There should be the appointment of ombudsman for keeping the farmer updated and providing them proper information regarding marketing practices.7. There should be nonprofit firm to educate the farmer from time to time regarding the market situation so that they will be able to understand where they should sell their produce.8. There should be involvement of cooperatives for selling of produce to the government warehouses. Cooperative employees should be placed for communication between farmers and government. 24
  • 33. 25
  • 34. References1. T Matsuda,TH Clark System Sciences,(1997) Market Intermediaries and Price Instability: Some Welfare Implications.2. Laurence E. D. Smith and Michael (1999)Facilitating the Provision of Farm Credit: The Role of Interlocking Transactions Between Traders and Zamindars in Crop Marketing Systems in Sindh.3. Deepak M. Pokhrel and Gopal B. Thapa (1999)A study based on market price, marketing margin and income distribution analyses4. Verma A.R,(2004) “Price spread marketing Efficiency and Constraints in Marketing of wheat”Vol-8,No-2,Page 171-1945. Thorat Y.S.P(2007) “Issue in agriculture marketing in India”Vol-4,No-3,Page 59-686. Vashisth A.K(2009) “Price Dynamics of Agriculture Commodity Future and its impact on demand-supply situation of Agriculture commodities”7. Kothari C.R. Reserch Methodology8. www.agricultural marketing ,Retrieved on 17/03/2011 at 16.309. www.kpmg.ie, Retrieved on 18/03/2011 at 12.3010. www.google.com, Retrieved on 18/03/2011 at 17.0011. www.wikipedia.com, retrieved on 19/03/2011 at 16.3012. www.ficci.com, retrieved on 25/03/2011 at12.00 at 14.0013. http://www.agriculturemarkrting retrieved on 2/04/201114. http://www.agricultural Marketing service - history and Scope.mht retrieved on 12/04/2011 at 08.1515. http://www.project matterScience Direct - Agricultural Systems and marketing retrieved on 10.00 viii
  • 35. Annexure I Questionnaire for farmer1. Name-2. Age-3. Land Holding-4. Crop currently grown-5. Village-6. Educational qualification: Illiterate Primary Middle school Intermediate Graduate Post Graduate School7. What are the major crops you grow? 1.Kharif 2. Rabi 3.Zaid8. What is the Yield from Your Field? I. Rice ( ) II Wheat ( )9. What is the market price of these produce? i. Rice……………………. ii. Wheat………………….. iii. Other crop………………10. Three years before what was the yield from your field? I.Rice ( ) II Wheat ( ) ix
  • 36. 11. Where do you market your produce? 1. Major market…………………… 2. Minor market………………………12. How you market your produce? i. Directly to consumer ( ) ii. Through intermediaries ( ) iii. Both ( ) iv. Any other ( )13. If through intermediaries, What is the level of that intermediary? i. Commission agent ( ) ii. Rice/flour millers ( ) iii. Whole seller ( ) iv. Retailer ( )14. At what price produce has been sold to intermediary? i. Rice ……………… ii. Wheat……………… iii. Other crops………….15. Costs involved in farming? i. Agri- input……………………… ii. Labor……………………………. iii. Transportation…………………… iv. Irrigation………………………….16.Are you availing credit facilities from the intermediaries? Yes ( ) No ( )If Yes how much amount you are borrowing? I. Less than 5000 ( ) II. 5000 to 10,000 ( )III. More than 10,000 ( ) x
  • 37. 17. Factors involved in the selection of Commission agent? Factors PointsPeriod of CreditAmount of advance creditRate of interest on advance creditBehavior of commission agent18. What are the facilities being provided to you? 1. Assured price ( ) 2. Advance credit ( ) 3. Transportation facilities ( ) 4. Agricultural input ( ) 5. Agricultural extension activities ( )19. What is the impact of these activities on your farming with respect to i. Price of the produce ii. Quality and Quantity of produce iii. Transit time iv. Reduction in wastage20. Annual IncomeLess than 50,000 50.000 to 1 lakh 1 Lakh to 2 lakh 2 lakh to 4 Lakh More than 4 lakh21. Are you having livestock’s? If yes how much the income from livestock’s…………………………………………. xi
  • 38. 22. Have you ever face any kind of problem? Yes ( ) No ( )If yes what kind of problems…………………………………………………………………………………………….………………………………………………………………………………………………23. If no what other facilities you expecting from the intermediaries……………………………………………………………………………………………………………………………………………………………………………………………… xii
  • 39. Annexure II Questionnaire for intermediaries1. What are the major crops of this area? Season Crops Sowing time Kharif 1 2 3 Rabi 1 2 3 Zaid 1 2 32. What is your level in that supply chain? i. Commission agent ( ) ii. Whole seller ( ) iii. Retailer ( )3. from where you purchase that produce?(1) Direct from farmers ( ) (2) Middleman ( ) (3) both ( )4. if Farmers, Do you having permanent farmers ? Yes ( ) No ( )5. How do you decide the price of produce?Quality basis ( ) Quantity base ( )6. Where do you finally sale that produce?(1) Mandi ( ) (2) Rice mill ( ) (3) Directly to consumer ( ) (4) any other ( )7. At what price you purchase the produce? I. Rice…………. II. Wheat…………III. Other crop……….. xiii
  • 40. 8. At what price you sale the produce? i. Rice………. ii. Wheat……………. iii. Other crop……………9. Do you having storage facilities?Yes ( ) N0 ( )10. If yes how much amount you store…………………………………………………………11. 17. Factors involved in the selection of Farmers? Factors PointsInterest on creditQuantity of produceQuality of ProduceTrust on Farmer12. What are the other special services which you are providing to farmers? 6. Assured price ( ) 7. Advance credit ( ) 8. Transportation facilities ( ) 9. Agricultural input ( ) 10. Agricultural extension activities ( ) xiv
  • 41. VitaPrince Verma, the author of this manuscript was born on 18th December, 1988 inGadarpur, Uttrakhand. She has completed her high school and intermediateexamination from uttrakhand board, further she took admission in the prestigiouscollege of agriculture, a constituent of G.B.P.U.A & T (Uttrakhand) batch 2005and obtained B.Sc. Agriculture degree in 2009 with first division. Thereafter shegot selected in MBA (Food Retail and Supply Chain) management degreeprogramme in college of Agribusiness Management of the same university. In themonth of November 2010 during campus placement she got selected by D2ktechnologies as management trainee.AddressPrince VermaShiva Colony, Kartarpur RoadGadarpur (U.S.Nagar)UttrakhandEmail address-PrincV2008@gmail.com