Agricultural Price Rise – Addressing the Supply Side Constraints
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Transcript of Agricultural Price Rise – Addressing the Supply Side Constraints
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B Y :
V E N K A T S U B R A M A N I A N
M D & C O O
M V S E F A R M P V T L T D
C H E N N A I
Confederation of Indian Industry“Agricultural Price Rise”
Addressing the Supply Side Constraints26th August, 2011: TAFE’s MDCC, Chennai
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overview
How is Price being Set Today in Market ?
What is a ‘good price’ ? Who should determine this ?
Why is Price rising ?
Can we have stable agri prices ? How ?
Solutions
1. Supply Side data
2. Demand Prediction, KYC – Know Your Customer
3. Cost of Production – set MRP
4. Planning and Supply Chain Management
5. Promote Agri-Entrepreneurship – target Youth & Educated
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How is Price being Set Today in Market ?
What is price of tomato , potato, onion today ?
Who has most influence in this price ?- farmer, wholesaler, retailer, customer, government
Who is the middlemen ? How do they set a price ?
Is ‘middlemen’ the REAL cause ?
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What is a ‘good price’ ? Who should set it?
Why farmer is unable to set his own price ?
Who is the ‘end consumer’ ? The housewife ?
Will increasing the ‘yield’ automatically give ‘better price’ ?
Should price be ‘one sided’ – what about ‘customer affordability’ ?
‘Customer satisfaction’ – absent in agri sector !
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Why is price rising ?
Demand/Supply mismatch – Daily ‘satta’ bazaar
Land under cultivation is shrinking by over 20% each year - Land value is several times agri output value !!
1 acre land = 10 lakhs
Avg .Income from 1 acre land = 50,000 per year
What farmer would earn in 20 years = spot cash !
It is more profitable to ‘sell’ the land than ‘work’ on it
Over 20% farmers+family each year quit and move to cities – supply is going down
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Can we Set a stable price ?
Demand/Supply Match
Standardisation is the key – Weight,Grade
5th P : perishability – Fire sale ?
Stable prices : Product v/s Brand
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“ M O S T S O L U T I O N S I N A G R I S E C T O R A R E D R I V E N B Y E M O T I O N S
, S E N T I M E N T S A N D U R B A N M Y T H SR A T H E R T H A N
„ A C T U A L E N D U S E R N E E D S ‟ , S U S T A I N A B L E A N D
L O G I C A L ”
Why current solutions have failed?
By trying to solve a problem , we have created more problems ….
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From Constraints, To Solutions
1. Know The Supply Side : Data collection
2. KYC – Know Your Customer – Retail and Wholesale
3. Calculate Cost of Production – Set MRP
4. Baseline standards and measures
5. Plan and Manage the Entire Supply Chain
6. Promote Agri-Entrepreneurship – target Youth & Educated
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Supply Side data
Current data is all government owned, redundant and outdated
Key Supply Side data :
Farmer Contact Info
Land Info
Produce grown , Variety
Harvest dates
Expected Yield
DATA SHOULD BE UPDATED FREQUENTLY
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Customer Demand Prediction
ONE SIZE DOES NOT FIT ALL !
Retail customer – HIG, MIG, LIG, BPL
Hotels & caterers
Food processors
Export
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Cost of production
eFarm Farmer's guideHow to calculate the sale price of a produce (sample : Ladies finger / Vendaikaai)
A . Expenses
Enter approximate monthly expenses
1 Land cost ( Owned or leased) Rs 0
2 Labour expenses Rs 9000
3 Seeds Rs 500
4 Fertilisers Rs 750
5 Pesticides Rs 500
6 Ripening costs Rs 1000
7 Water Rs 50
8 Electricity Rs 50
9 Tractor & equipment rentals Rs 2000
10 Transportation Rs 500
11 Bagging Rs 50
12 Other expenses Rs 0
B . Loans and repayments
1 Monthly loan repayment Rs 100
Total expenses (A + B ) 14500
C . Yield (aggregated per month)
1 Land area (in acres) 1
2 Approximate yield (in tonnes/acre) 5
Total yield (in tonnes) 5
D. Farmer's Returns
1 Monthly minimum return or profit expected Rs 10000
E . Wastage ( in percentage of volume of produce) 5%
F. Min. Sale price Rs 5.16 per kilo
G . Current Market price Rs 12.00 per kilo
H . Profit/ Loss 34211
Based on data for over 200 farmers across 10 items
Labour cost is MOST significant cost (70%)
Avg. cost of production of most local horti. Crops = rs 5/kg
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Price Analysis
•Analysis of past price trends reveals ‘patterns’ of UPS and DOWN swing•Most price variations can be mapped back to farmer sowing seasons
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Standardisation of weights, grades
1) Weighing machine = standardise agri business transactions !
Bundles, baskets , bags Kilograms , Counts
2) Simple grading = right quality to right customer!!
Mixed grades S / M / L (Or) excellent / OK /bad
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Focus on ‘entire supply chain’ constraints ..not JUST SUPPLY SIDE
Farmers
Cooperatives
Collection centers
Village ICT kiosks
Phone booths
Mobile operators
Storage
Warehouses
Value added resellers
Sorting , Grading , Processing, Packing
Small Independent transporters
Intra-city small tempos
Kiranas
Self Help
Groups
Hawkers
Bulk
buyers
Exporters
Logistics
Fleet
operators
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Technology driven supply chain
Other industries have gained immensely from IT solutions
Agri sector –poor usage of technology solutions
Price Decisions need to be ‘system driven’ than ‘people driven’
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Promote Agri Entrepreneurship – bring the youth and educated BACK into agriculture
•Stop thinking ‘farmer is a superman’- he cannot do everything , nor does he WANT to
•Scope for agri-entrepreneurs in various categories
•Other industries growth is fuelled by entrepreneurs
•Government should set policies and guidelines and should NOT interfere in ‘running’ the agrisector