An overview about indian farming industry and its future deals .. detai about family , corporate farming

1. Smot- School of Business
7&8, 2nd cross street,
nehru nagar,
perungudi
(near taramani railway station)
chennai-600096
Ph-044 43593570

2. CORPORATE FARMING

3. OVERVIEW
 INTRODUCTION
 FARMS +CORPORATE A NEW SUPPLY CHAIN
 CORPORATE FARMING VS FAMILY FARMING
 FOOD PRODUCTION AND CURRENT
SCENARIO
 CASE STUDY
 SCOPE OF CORPORATE FARMING IN INDIA
 COMPANIES INVOVLED IN CORPORATE
FARMING
 CONCLUSION

4. Corporate farming
 Corporate farming is a term that describes
the business of agriculture, specifically, what
is seen by some as the practices of would-be
mega corporations involved in food
production on a very large scale

5. INITIATIVE OF CORPORATE
FARMING
 National Agricultural Policy (NAP) of Govt. of India
announced in 2000 envisaged that “Private sector
participation in Agriculture shall be promoted through
Contract Farming and Land-leasing arrangements
(Corporate Farming) to allow accelerated technology
transfer, capital flow and assured markets for crop
production.

6. Corporate Farming
 This is a system for the production and supply of
agricultural / horticultural produce under forward
contracts between producer / supplier and
buyers.
 Essential to this is the commitment of the
producer/seller to provide an
agricultural/horticultural commodity of a certain
type, at a specified time and a price and in the
quantity and quality required by a known and
committed buyer.

7. REASONS FOR CORPORATE
FARMING
 Consolidation of small farm lands into larger
land holdings
 Increase in agricultural productivity
 Introduction of value added products

8.  The farmer/producer will be required to plant
contractor’s crop on his land, harvest and
deliver a quantum of produce (based on
anticipated yield) to the contractor.
 He shall provide land and labor necessary for
this. The contractor shall supply all required
inputs for the production of the said crop

9. FARMS + CORPORATE A NEW
SUPPLY CHAIN IN INDIA
 Collaborative partner ship
 Oilseeds , cotton and horticulture
 new agri business
 Knowledge intensive farming
 Better solutions for farm related problems
 More opportunities

10. CORPORATE FARMING
VS
FAMILY FARMING

11. WHAT IS FAMILY FARMING ?
 A family farm is a farm owned and operated by a family, and
passed down from generation to generation. It is the basic unit of
the mostly agricultural economy of much of human history and
continues to be so in developing nations.
 Many remember the years when farming was a way of life. When
you grew all your own food...eggs, pork, beef, poultry, gardens
full of bountiful vegetables.
 You didn't have to plant thousands of acres to make a living.
 Those days are gone. Gone forever we're afraid. Along with
those days, the Family Farm is disappearing.
 In developed countries the family farm is viewed
sentimentally, as a lifestyle to be preserved for tradition's sake, or
as a birthright.
 What once was an occupation thought to be unskilled by
many, (even though it wasn't), has become a very technical job.

12. ALERT
INDIA.
.?
W H Y I S T H E FA M I LY FA R M D I S A P P E A R I N G ?
 Many farmers feel this is in the plans either by the government or by big
corporations. If they run most of the farmers off of the farms, big corporations
can take control of agriculture completely, thereby eventually being able to set
their own price for agriculture products.
 Today's prices are driving farmers out of business. What occupation do you
know of that still receives the same wages received in 1972?
 How many products sold in the world today has someone else setting the price
the producer receives for it? A farmer can not say I want $2.50 per bushel for
corn, as that is what it cost me to raise it. Someone else sets a price, and there's
nothing a farmer can do about it. Someone else controls their destiny. No
matter how hard they work, someone else controls the life of a farmer.

13. Farming is not an easy job. Fighting the weather is a constant situation. Either
it's too dry, too wet, too cold, too hot, too windy, not windy enough. Every aspect
of the weather affects farming. Fields can be destroyed by INSECTS, PEST like
grasshoppers or red spider mites. Weeds can become out of control and drastically
reduce yields
Farming is a HUGE gamble and even if farmers work as hard as they can, are as
honest as they can be, their lives are controlled by others. Their livelihood is in
jeopardy constantly.
Farming is a 'labor of love' for most farmers. Why else would they be
doing this for the prices they are getting in today's market?
Some day soon, it will be too late to save the Family Farm.
Wake up INDIA !! The Family Farm is about to go. When this does
happen, big corporations will ask whatever price they need for crops to make a
profit. This, in turn, will increase your cost at the grocery store tremendously. By
then it will be too late. ” The Family Farm will have disappeared
forever.”

14. WHY ARE FAMILY FARMS IMPORTANT?

In addition to producing fresh, nutritious, high-quality foods, small family farms
provide a wealth of benefits for their local communities and regions.
Perhaps most importantly, family farmers serve as responsible stewards of the
land. Unlike industrial agriculture operations, which pollute communities with
chemical pesticides, noxious fumes and excess manure, small family farmers live
on or near their farms and strive to preserve the surrounding environment for
future generations. Since these farmers have a vested interest in their
communities, they are more likely to use sustainable farming techniques to
protect natural resources and human health.
The existence of family farms also guarantees the preservation of green space
within the community. Unfortunately, once a family farm is forced out of
business, the farmland is often sold for development, and the quality land and
soil for farming are lost.
the current situation, for the quot;family farmerquot; to regain any sort of practical
economic independence, it would seem necessary that the entire food industry
be restructured. Furthermore, given the extreme number of defunct family
farms, it is not so much a matter of saving or preserving the family farm
(whatever it was, it is effectively already gone), but of using the remaining
knowledge, expertise and farms as the framework for the quot;new family farm.quot;

15. Corporate farming is a term that describes the business of agriculture, specifically, what is
seen by some as the practices of would-be megacorporations involved in food production
on a very large scale. It is a modern food industry issue, and encompasses not only the farm
itself, but also the entire chain of agriculture-related business, including seed
supply, agrichemicals, food
processing, machinery, storage, transport, distribution, marketing, advertising, and retail
sales.

16. Corporate farming is often used synonymously with agribusiness (although
agribusiness quite often is not used in the corporate farming sense), and it is seen as
the destroyer of the family farm.
CONTRACT FARMING:
quot;Contract farmingquot; is a form of vertical integration where the farmer is contractually
bound to supply a given quantity and quality of product to a processing or marketing
enterprise.
(The buyer agrees in advance to pay a certain price to the farmer and often provides
technical advice and inputs (the cost of the inputs being deducted from the farmer's
revenue once the product has been sold to the buyer).

17. Benefits of Corporate Farming
The core argument for the methods criticized as corporate farming is essentially: quot;This is
the way to keep up with population growth, and to make inroads into feeding billions of
people to developed nation standards—this is the only way to feed the world.“
Indeed, rapid technological development and large-scale global production
management are responsible for an unprecedented abundance of inexpensive, widely
available, attractive, quot;safequot; food.
By lowering the cost of raw food inputs, creating sophisticated long-distance
distribution networks, producing processed convenience foods, and making food
available year-round in vastly stocked supermarkets, corporate farming has presented
consumers in the wealthiest regions of the world with an immense variety of food, at
relatively low cost. Today, in North America, only about 10% of average income is spent
on food. By this measure, provided these methods are sustainable, corporate farming
would appear to be a tremendous success.

19. Corporate farm vs family farm
One major difference between independent farming and corporate farming is that
a corporate farmer is usually a contracted employee, rather than the owner of the
farm.
However, ownership itself does not mean independence. An owner-operated farm
today faces many constraints that are completely out of the owner's control.
Most of these can be seen in light of increasing concentration of ownership, not
only of farms, but of the equipment and inputs necessary to farm, and the available
sales channels.

20. PRODUCTION
AND
CURRENT SCENARIO

21. Introduction
 CORPORATE farming encompasses the production
of all crops as well as allied activities including
processing of seeds and businesses relating to
pesticide, fertilizers, agricultural
machinery/equipment used and related research
activities
 The average agricultural growth rate over last 40
years was 4.3 per cent which reflects good
performance. Population growth rate averaged
around three per cent over the last 40 years which
is slightly below the growth rate of agriculture
sector.

22. Current scenario
 With the advancement in technology and
awareness, the trend of food consumption is
changing towards high nutritional and
hygienic foods. This is also widening gap
between demand and supply. Food crisis is
being observed now-a-days which is likely to
persist in future
 In this scenario, a higher growth rate of
agriculture sector is needed so that the
domestic needs could be fulfilled

23. Contd…
 The scope of horizontal expansion in
agriculture production has become limited
due to shortage of irrigation water .

24. Solution for the scenario
 The scope is now in vertical expansion through
improving farm productivity levels. This can be
accelerated through corporate farming.
Measures and actions
 There is a need to make quality seeds and fertilizers
available at competitive cost; improved pest/weed
management; transfer of agriculture-related
technology and providing technical knowledge to
farmers together with the requisite funds needed by
them and introducing well-planned marketing
mechanism.

25. Policies and laws
 In addition to improving facilities given to small
growers, the government should formulate
policies for initiation of corporate farming on
persuasive basis.
 Agriculture research and extension department
needs to be revamped and its policies and
programmes re-designed so that they may play
vital role in bringing a revolution through
corporate farming

26.  There is a need to make stringent laws in respect
of adulteration of pesticides/fertilisers to
enhance crop yield and protect farmers
financially
 Investment in agriculture sector needs to be
increased significantly
 The govt should ensure that any genuine and
legitimate request in respect to corporate
farming is not turned down by any financial
institution.

27.  Higher and sustainable economic growth cannot
be achieved unless we succeed in doubling our
agriculture production in the next 10 years.

The govt has to encourage banks to invests in
productive sectors like agriculture and industry

28. A case study…
KUPPAM PROJECT IN A.P
Location: Kuppam, Chittoor district, A.P
Project start date: June,1997

29. Why Kuppam?
 Kuppam area is part of Drought Prone Areas
Program(DPAP) block and chronically
drought affected
 Eighty-five percent of the population in the
area live below the poverty line
 Only 10% of the gross cropped area is under
assured source of irrigation
 Saline lands
 Soil composed of gravel and stones of varying
sizes with low level of organic matter

30. A Pilot demonstration project
 The Kuppam Pilot Project was primarily
undertaken by the Government of Andhra
Pradesh through its Rural Development
Department to promote and demonstrate
Corporate Agriculture
 Demonstrate use of corporate farming
 Area coverage 170 acres of land
 Corporate: M/S. BHC Agro (India) Pvt. Ltd

31. Estimated project cost
I year 1997 - 98 Rs. 521.09 Lakhs
II year 1998 - 99 Rs. 133.83 Lakhs
III year 1999 - 2000 Rs. 156.59 Lakhs
Sub Total Rs. 811.51 Lakhs
II year Farmer's
Rs. 152.16 Lakhs
Share
TOTAL Rs. 963.67 Lakhs

32. Objectives
 To develop a new concept and view for
agriculture production (based on modern
agricultural methods and equipments)
 Making the farm as a commercial Demo-farm
which is managed by
one hand (Corporate farming)

33. Investments made
 Total investment 10 times more than those of
rich farmers adopting modern cultivation
practices
 Technology transfer from Israel for the
purpose

34. Management
 Lands taken from farmers managed by the
corporate body- M/s BHC Agri India Pvt. Ltd.
 Every farm operation including Marketing, is
managed by Corporate body
 Employed heavy mechanization except for
harvesting and cleaning of produce
 Corporate control from stages of planning
through the stages of development and
management

35. Costs for farming & Income
 Average cultivation cost Rs.20,000 per acre
(agro-chemicals 23%, fertilization 18.1%,
power and fuel 26%, seeds 8%, labour about
25%)
 The company claimed that after an average
period of 1.5 years, an income of Rs. 150 lakhs
was realised and so far Rs. 29 lakhs income
was distributed to the farmers @ Rs. 17,000/-
per acre.

36. Labour
 mostly for machine operators or for field
supervision and used only to a limited extent
for harvesting and for shifting of pipes
 Family members, whose lands have been
taken over, are engaged as daily laborers.
 educated persons have been given
supervisory/managerial role on the farm
 They get employed only when there is work
on the farm

37. Cropping
 The major crop was gherkins ( with a net
income of Rs. 12,000 - 15,000 per acre)
 The local food crops have almost been
eliminated
 main guiding principle in deciding the crop
was maximisation of crop income.
 Farmers were never consulted while deciding
on the crops to be grown.

38. Sustainability
 Any system of production to be sustainable-
in the first place, the energy (inputs) needed
for production must be generated by and
within the system itself. In the second
place, since the system has to support and
provide for those maintaining it, such a
system must be able to generate more
energy (outputs) than what it needs for its
own growth.
 the Kuppam project is not sustainable in net
energy terms.

39. PAYMENTS TO FARMERS
 It is only the government and not the
company, which is making payments to the
farmers for the lands taken over for the
demonstration
 payment for the land is , surprisingly not
uniform
 Farmers were not happy with the payments
because of the big gap between what was
promised at the time taking over the lands
and the actual payment.

40. SOCIAL IMPACT
 Lands of many farmers were taken against
their will
 Good cultivated lands, which were supporting
cultivation of sugarcane, rice and other food
crops, were also taken over
 Farmers became totally dependent for a
living on the corporate body losing their
earlier independent livelihoods.

41. Positives
 Drip irrigation which is a hallmark of
the Demo Corporate farm
 Proper power supply to the farms
toward operating the machineries

42. SCOPE OF
CORPORATE FARMING?

43. Current situation:
 Total cultivable area: 160 million hectare
 People involved: 60 crores
 Total output: 200 million tons
Future estimates:
 Total cultivable area: 100 million hectares
 People involved: less than 60 crores
 Required output: 400 million tons

44. Benefits
 Increases out put
 Reduces fragmentation
 Increases export performance
 Technology

45. Sharad joshi says that “The state should
facilitate the exit of small and marginal
farmers from farming by buying their land at
market prices and provide them capital and
training to go for non-farm occupations. Only
those who have the
mindset, technology, management, and
financial resources to face the challenge of
the Second Green Revolution should be
permitted to do farming as an agribusiness “

46. Limitations
 It makes farmers landless
 Undermines local production
 Failure of corporate farming in many
countries

47. Few Cases Of Corpotate farming in India
Company Area/region and
crops
1, IEEFL, Pune Maharashtra,
(subsidiary of the Tamilnadu, and
Ion Exchange Goa; Plantations
India set up in mainly fruit trees
1995)
2. Jamnagar Gujarat, and
Farms Pvt. Ltd.- a Punjab;
subsidiary of Agroforestry and
Reliance horticultural crops
Industries
(Mukesh Ambani
group)
3. Anil Dhirubhai Punjab; Fruits and
Ambani Group vegetables
(Reliance)
4. Field Fresh an Punjab; fresh
equal partnership fruits and
venture between vegetables
Bharti Enterprises
(Airtel group) and
Rothschild
5. Vimal Dairy Narmada canal
with a capacity to area in north
process 2.5 lakh Gujarat; milk for
litres of milk ( a captive
part of the Rs. 900 consumption
crore Vimal
Group),

48. PEPSICO
 Pepsi's tomato farming project was primarily responsible
for increasing India's tomato production.
 Production increased from 4.24 million tonnes in 1991-92 to
5.44 million tones in 1995-96 due to the use of high yield
seeds.
 Pepsi offered its contract farmers advanced equipment
such as transplanters and seeding machines to help them
carry out their task efficiently and speedily.
 Contract farming has been encouraged by Pepsi.

49.  In late 1990, the company finally met its commitment to set up agro
research centers in Punjab and Karnataka.
 Pepsi imported superior technology from china and transferred it to
the farmers in Punjab and Gujarat and as a result the Yield per
hectare improved from 1 tonne to 3.5, 4.5 tonnes.
 Company had invested 18 billion by 2000 in India.
 Agri-program had been successful because of its unique laboratory-
farm-factory approach.

50.  In 2000, company‘s export added up 3 billion. The item exported
included food, basmati rice , gaur gum and soft drink concentrate.
 Pepsi met the soft drink requirements of many of its plants world
wide through its Indian operation.
 Pepsi had done so much for country’s agriculture sector although It
was not bounded to do so after change in regulatory framework.
 In 2002, join hands with Punjab Agri-Export corporation to process
citrus fruit.

51.  Pepsi is also in talks with Heinz India to supply tomato paste for
ketchup production and is negotiating similar deals with
Hindustan Lever and a few other FMCG majors for farm
products like tomatoes, potatoes and citrus fruits
It grows potatoes for sister company Frito-Lays India’s chips

and maize for ‘Kurkure’. It also grows basmati rice for Pepsi’s
Season’s Harvest brand sold entirely in the Gulf.
 For UB, Pepsi will cultivate 20,000 acres with barley, and plans
to scale up to 1 lakh acres.

52. THANK YOU