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Farmer Price
Realization
Javed Akhtar Khan
Anans S. Thokal
1
Current Scenario in F & V Market
• 10% of total Indian agriculture
• 81.285 million metric tones of fruits and 162.19 million metric
tones of vegetables produce in 2012-13
• 2nd rank in world production
• 1% share in world market
• Dominated by intermediaries in supply chain
• Poor infrastructure, poor linkages in supply chain, lack of price
transparency
• Poor resultant price realization by producers
• High prices for consumers with lesser value
2
Stats at Indian Market
Price/kg of:- Tomato Potato Cabbage Cauliflower Bnana
Price paid by
consumer(INR)
8.2 12 9 9.5 12
Price received by
farmer(INR)
2 6.6 5 5.5 4
Markup % 310 82 80 73 200
Price Realization % 24.5 55 55 58 33.5
Yet Risk taken by
farmers is highest!!!
3
Field Study on
• Price received by farmers and consumers
• Wastage at various stages
• Role of each intermediary and risk vs realization
• Operations at agricultural market yards
• Quality, hygiene, and shelf life of produce
4
Price
• Lack of price transparency
• Compulsion on selling due to poor logistics
• Smaller harvest lots, higher carrying costs
• Pilferages in SC (stealing money)
• Mix of size, shape, quality undifferentiated
• 1 farmer fooled and trapped by so many factors
5
Wastages
• Poor infrastructure, poor logistics
• 24% for potato to 40% for tomato across SC
• Poor multiple handling
• Improper bagging; no crating
• Lack of temperature controlled vehicles; storage facilities
Tomato Potato Cabbage Cauliflower Banana
Wastage % 40 24 36 24 30
6
Risk vs Realization
Risk Taken Cycle Time Margin
Farmer 4 ~3 months
~11 months banana
55% cabbage;
33.5% banana;
24.5% tomato.
Consolidator 1 ~2 days 5%-10%
Market Wholesaler 3 ~2 days ~7% cabbage;
~28% banana
Semi-wholesaler 2 ~2 days ~2% cabbage;
~14% banana
Retailer 2 ~4 days ~10.5% cabbage;
~55% banana
Considerably lesser margin as compared to the risk
taken by producers
7
Quality
• Congested market
• Lack storage capacity for daily arrival volume
• Unsanitary conditions
• Accumulated wastage and poor drainage etc.
• Lack of preservation under cold storage
8
Operations at Market Yard
• Set of regulatory agents
• Unionized labors
• Regulated transportation system
• Results in Red-Tapism
• Auctions with prices by commission agents/traders
• Retailers pay fixed price and not the quoted one
• Dominant role of agents and traders
9
Suggestions by Writer
Modern System in Tomato
Producer
Price: Rs.2
Wastage: 10%
Consolidator
Commission: 10%
Wastage: 2%
Processor
Organized
Distributors
P: Rs. 3.33
W: 5%
Retailers
P: Rs. 6.5
W: 10%
Consumer
P: Rs. 6.5
Markup 225%;
P Realization up
by 25%
Total Wastage= 27%
10
Benefits to Farmers
Realization/qtl Tomato Potato Cabbage Cauliflower Banana
Traditional(INR) 79.15 561.6 426 390 342
Modern(INR) 98.76 583.44 430.13 474.36 353.4
Improvement % 25 4 1 22 3
11
Solution
Farmer Producer Company(FPC)
PRODUCER GROUPS
PRODUCER ORGANIZATIONS
12
What is Producer Group
• Farmers Producer Company (FPC) is a legal form of the
company. In 2002 an Act was passed in Parliament
• Only farmer – producers can be members of the FPC and the
farmer members themselves will manage this company.
• Paid staff can be employed
• Producers run the FPC.
• Promoted by the farmers, run by the farmers and for the
benefits of the farmers.
• Surplus would be shared among the farmers only.
13
Why FPC
• Collective inputs purchase
• Collective marketing
• Processing
• Increasing productivity through better inputs
• Increasing knowledge of farmers
• Ensuring quality
14
Impact on SC
FPC System in Tomato
Producer
Price: Rs.2.2
Wastage: 10%
Processor
Organized
Distributors
P: Rs. 3.33
W: 5%
Retailers
P: Rs. 6.5
W: 10%
Consumer
P: Rs. 6.5
Markup 196%;
P Realization up
by 35%
Total Wastage= 25%
15
Impact Cont.
Realization/100kg Tomato
Traditional(INR) 79.15
Modern(INR) 98.76
FPC(INR) 106.85
Improvement % 25
16
Advantages of FPC
• Let’s take a look at the problems faced by farmers
17
18
THANK YOU
19

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Farmer price realization

  • 1. Farmer Price Realization Javed Akhtar Khan Anans S. Thokal 1
  • 2. Current Scenario in F & V Market • 10% of total Indian agriculture • 81.285 million metric tones of fruits and 162.19 million metric tones of vegetables produce in 2012-13 • 2nd rank in world production • 1% share in world market • Dominated by intermediaries in supply chain • Poor infrastructure, poor linkages in supply chain, lack of price transparency • Poor resultant price realization by producers • High prices for consumers with lesser value 2
  • 3. Stats at Indian Market Price/kg of:- Tomato Potato Cabbage Cauliflower Bnana Price paid by consumer(INR) 8.2 12 9 9.5 12 Price received by farmer(INR) 2 6.6 5 5.5 4 Markup % 310 82 80 73 200 Price Realization % 24.5 55 55 58 33.5 Yet Risk taken by farmers is highest!!! 3
  • 4. Field Study on • Price received by farmers and consumers • Wastage at various stages • Role of each intermediary and risk vs realization • Operations at agricultural market yards • Quality, hygiene, and shelf life of produce 4
  • 5. Price • Lack of price transparency • Compulsion on selling due to poor logistics • Smaller harvest lots, higher carrying costs • Pilferages in SC (stealing money) • Mix of size, shape, quality undifferentiated • 1 farmer fooled and trapped by so many factors 5
  • 6. Wastages • Poor infrastructure, poor logistics • 24% for potato to 40% for tomato across SC • Poor multiple handling • Improper bagging; no crating • Lack of temperature controlled vehicles; storage facilities Tomato Potato Cabbage Cauliflower Banana Wastage % 40 24 36 24 30 6
  • 7. Risk vs Realization Risk Taken Cycle Time Margin Farmer 4 ~3 months ~11 months banana 55% cabbage; 33.5% banana; 24.5% tomato. Consolidator 1 ~2 days 5%-10% Market Wholesaler 3 ~2 days ~7% cabbage; ~28% banana Semi-wholesaler 2 ~2 days ~2% cabbage; ~14% banana Retailer 2 ~4 days ~10.5% cabbage; ~55% banana Considerably lesser margin as compared to the risk taken by producers 7
  • 8. Quality • Congested market • Lack storage capacity for daily arrival volume • Unsanitary conditions • Accumulated wastage and poor drainage etc. • Lack of preservation under cold storage 8
  • 9. Operations at Market Yard • Set of regulatory agents • Unionized labors • Regulated transportation system • Results in Red-Tapism • Auctions with prices by commission agents/traders • Retailers pay fixed price and not the quoted one • Dominant role of agents and traders 9
  • 10. Suggestions by Writer Modern System in Tomato Producer Price: Rs.2 Wastage: 10% Consolidator Commission: 10% Wastage: 2% Processor Organized Distributors P: Rs. 3.33 W: 5% Retailers P: Rs. 6.5 W: 10% Consumer P: Rs. 6.5 Markup 225%; P Realization up by 25% Total Wastage= 27% 10
  • 11. Benefits to Farmers Realization/qtl Tomato Potato Cabbage Cauliflower Banana Traditional(INR) 79.15 561.6 426 390 342 Modern(INR) 98.76 583.44 430.13 474.36 353.4 Improvement % 25 4 1 22 3 11
  • 12. Solution Farmer Producer Company(FPC) PRODUCER GROUPS PRODUCER ORGANIZATIONS 12
  • 13. What is Producer Group • Farmers Producer Company (FPC) is a legal form of the company. In 2002 an Act was passed in Parliament • Only farmer – producers can be members of the FPC and the farmer members themselves will manage this company. • Paid staff can be employed • Producers run the FPC. • Promoted by the farmers, run by the farmers and for the benefits of the farmers. • Surplus would be shared among the farmers only. 13
  • 14. Why FPC • Collective inputs purchase • Collective marketing • Processing • Increasing productivity through better inputs • Increasing knowledge of farmers • Ensuring quality 14
  • 15. Impact on SC FPC System in Tomato Producer Price: Rs.2.2 Wastage: 10% Processor Organized Distributors P: Rs. 3.33 W: 5% Retailers P: Rs. 6.5 W: 10% Consumer P: Rs. 6.5 Markup 196%; P Realization up by 35% Total Wastage= 25% 15
  • 16. Impact Cont. Realization/100kg Tomato Traditional(INR) 79.15 Modern(INR) 98.76 FPC(INR) 106.85 Improvement % 25 16
  • 17. Advantages of FPC • Let’s take a look at the problems faced by farmers 17
  • 18. 18