Liberalising Domestic Agricultural Markets: Gains for India

Select Indian Agricultural Markets: A Primary Survey

(Work in Progress)

February 10, 2006

Outline

• The issues

• The sample

• Some results

The Issues

• Small quantities to sell; urgent cash needs; poor infrastructure;

• Who will bring output to distant markets: cooperatives? Traders? Who will ensure fair trading?

• What marketing channels exist?

• What do the farmers say? What do the traders say? What are the marketing issues on the ground?

• And what are the alternatives?

The Sample

Sampling Strategy: A Spatial View of the Markets with focus on farmer-market linkage

Market: in nearby town

Farmers: in the village

Consumers: more distant

Selection of the Sample

• Objective is to get an understanding of the working of the markets where farmers sell their produce

• To cover major crops grown and sold under a variety of agricultural conditions

• The sample covers farmers, traders and market officials

Selection of Sample: Crops

• Crops: Crops where market interventions prevail; marketing alternatives exist;

– Kharif crops• Paddy• Cotton• Tur • Groundnut

Selection of Sample: States

• States: Important in production of selected crops; marketing alternatives exist

– Paddy: West Bengal, UP, AP, Tami Nadu, Maharashtra

– Tur/ Arhar: Maharashtra, UP

– Cotton: Maharashtra, Gujarat, AP

– Groundnut: Gujarat, AP

Selection of Sample: Paddy

• Markets: Important in the selected states for selected crops; contiguous with major markets in neighbouring states

• Paddy– AP: Guntur, Nellore– MT: Raigarh, Thane– UP: Pratapgarh, Jaunpur– WB: Burdwan, Birbhum– Tamil Nadu: Thanjavur, Thiruvallur

Selection of Sample: Cotton

• Markets: Important in the selected states for selected crops; contiguous with major markets in neighbouring states

• Cotton– AP: Adilabad, Guntur, Kurnool

– MT:Yeotmal, Jalgaon

– Gujarat: Bhavnagar, Amreli

Selection of Sample: Tur

• Markets: Important in the selected states for selected crops; contiguous with major markets in neighbouring states

• Tur/ Arhar– MT: Yeotmal, Wardha

– UP: Pratapgarh, Jaunpur

Selection of Sample: Total Markets

• Total Markets Across States– AP: 5

– Gujarat: 2

– Maharashtra: 5

– UP: 2

– WB: 2

– Tamil Nadu: 2

The Sample of Markets: Total Markets

Cropwise Markets Statewise MarketsPaddy/ rice 10 AP 5Tur 4 Gujarat 2Groundnut 7 Maharashtra 5Cotton 4 Tamil Nadu 2

UP 2WB 2

Total 25 18

•Three villages per market: 3 distance ranges (0-10 kms; 11-20; >20 kms from market

The Sample of Farmers

• Paddy: 300 • Tur/ Arhar: 100• Cotton: 175• Groundnut: 100

Total 675

The Sample Farms: Characteristics

Operated Land Category

AverageOperated

land (acres)

Households%

Operated land%

Marginal 1.77 18.4 4.00

Small 3.94 34.4 16.8

Semi-medium 7.77 26.2 25.3

Medium 16.5 17.0 34.9

Large 38.11 4.0 18.9

All 8.05 100 100.0

Some Patterns Across Farm Groups, Crops, States

Preliminary results: Do not quote

Value of Output per Farm (Thousand Rupees)

State Paddy Tur Groundnut Cotton

AP 61 - 29 72

Gujarat - - 61 80

MT 18 13 - 51

TN 55 - - -

UP 25 4 - -

WB 61 - - -

•Avg output of the largest size group is about double the average size

Market Dependence: % of Output Sold by the Farmers

Crop AP Gujarat MT TN UP WBPaddy 74 30 49 89 53Tur 61 74Groundnut 95 91Cotton 99 99 100

•AP= Andhra Pradesh, MT=Maharashtra, TN= Tamilnadu, UP=Uttar Pradesh, WB = West Bengal

How Big are the Sales?: Output in Rs per acre

Crop AP Gujarat MT TN UP WBPaddy 10353 5159 6565 7286 9849Tur 5431 3614Groundnut 4824 10131Cotton 12001 13011 8624

Price Realised Rs/ Qtl: Paddy

Operated Land Category

AP TN WB

Marginal 483 546 511

Small 593 802 514

Semi-medium 615 530 525

Medium 642 629 518

Large 456

All 592 623 519

Price Realised Rs/ Qtl: Cotton

Operated Land Category

AP Gujarat MT

Marginal 1875 1756 2100

Small 1920 1788 2113

Semi-medium 1873 1768 2034

Medium 1886 1763 2170

Large 1525 1796 2133

All 1874 1772 2115

Average Market Distance for Sales (Kms): Paddy

Operated Land Category

AP TN WB

Marginal 0.0 0 0.6

Small 0.3 0 0.7

Semi-medium 1.0 0 0.3

Medium 0.8 0 0.4

Large - 0 -

All 0.3 0 0.5

Average Market Distance for Sales (Kms): Tur

Operated Land Category

MT UP

Marginal 12.7 0.0

Small 11.5 6.4

Semi-medium 12.2 19.0

Medium 15.1 20.0

Large 13.6 -

All 13.4 9.6

Average Market Distance for Sales (Kms): Cotton

Operated Land Category

AP Gujarat MT

Marginal 12.9 20.3 8.4

Small 8.1 22.8 8.3

Semi-medium 6.7 16.9 10.8

Medium 6.9 18.8 11.5

Large 15.8 17.3 13.4

All 8.4 19.6 10.4

Major Marketing Problems(% of farmers): Paddy

Concerns AP TN WBHigh Cost of transportation 48 92 33Lack of government procurement 35 7 3Lack of market information 10 82 2Traders collusion 100 3 47

Major Marketing Problems(% of farmers): Tur

Concerns MT UPHigh Cost of transportation 60 12Lack of government procurement 50 38Lack of market information 24 54Traders collusion 92 24

Major Marketing Problems(% of farmers): Groundnut

Concerns AP GujaratHigh Cost of transportation 62 86Lack of government procurement 44 72Lack of market information 44 92Traders collusion 54 2

Major Marketing Problems(% of farmers): Cotton

Concerns AP Gujarat MTHigh Cost of transportation 33 76 72Lack of government procurement 35 58 76Lack of market information 23 82 32Traders collusion 93 4 20

Major Reasons for not selling in APMC: Tamil Nadu

Market very far

High Transport

cost

Reasonable price in

village/rural mkt.

Convenient to sell in

village/rural mkt.

Marginal 100 50 100 38 50Small 100 44 83 39 44Semi Medium 88 60 93 73 87Medium 100 27 73 55 55Large 100 0 100 67 50All Classes 97 41 88 53 59

% of farmers not selling in APMC

Farm Size

% not selling atleast 1 reference crop in APMC

Satisfaction with the APMCs: Traders’ Response (No. of traders)

State Yes No Total

AP 30 20 50

MT 18 32 50

TN 14 6 20

UP 2 18 20

WB 8 12 20

No information collected in Gujarat

Traders in APMCs: What other alternatives may work?

• Out of those who felt that other channels offered a better deal

– Only 9 out of 20 traders in AP said private markets would be better for the farmers

Traders in APMCs: Is there enough competition?

• When asked if there should be more traders in the market

– Only in UP the traders were nearly unanimous saying no.

• They felt there were not many buyers in the market

– In the other cases, about 50% of the traders said more traders would be fine.

• Small lots to sell

• Differences in patterns of market requirements for crops like paddy and Tur vs Cotton and Groundnut (larger transactions)

• Smaller farms not able to bear higher marketing costs

• Many transactions within village or close to village

• Smaller farms growing better quality?

Findings

Findings

• Trader responses vary from commission agents to others

• Location of the markets important for traders and farmers

Moving forward

• Alternative channels of marketing for the farmers: understand reasons for choice

• How much do prices vary under alternative channels?

• What are the merits and weaknesses in APMCs?

Thank You

Major Reasons for not selling in APMC: Uttar Pradesh

Market very far

High Transport

cost

Reasonable price in

village/rural mkt.

Convenient to sell in

village/rural mkt.

Marginal 100 50 100 38 50Small 100 44 83 39 44Semi Medium 88 60 93 73 87Medium 100 27 73 55 55Large 100 0 100 67 50All Classes 97 41 88 53 59

% of farmers not selling in APMC

Farm Size

% not selling atleast 1 reference crop in APMC