Value Chain in Agriculture Market

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Delhi School of Management

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Value Chain in AgricultureMarket

NAME ROLLNO.

HITESH KUMAR 21

RITURAJ SAROHA 45

TARUN DAGAR 58

VIPIN KUMAR 63

DEERAJ YADAV 66

Submitted by :-Submitted to Prof. P.K. Gupta

Date of Submission

4/12/2009


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Content

S. No. Topic Page

1 What is value chain. 3

2 Agriculture Market in India 5

3 Causes for poor marketing of AgriculturalProducts

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4

5

6

7 Measures for Improving Agricultural Marketing

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9

10

2



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What is Value Chain ?


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The Value Chain is a set of

activities, services and productsthat lead to a product or servicethat reaches the final consumers


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Delhi School of Management 4

InputSupply

Agriculturalproduction

Firsthandling

Processor

Wholesalers/Distributors

Retailers

Consumers

A typical value chain for agricultural products.


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Agriculture Market In India


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It operates primarily according to the forces of supply and demand in the privatesector.

Indian Government intervention is limited to protecting the interests of producers

and consumers and promoting organized marketing of agricultural commodities.

Various central government organizations are involved in agricultural marketing,including the Commission for Agricultural Costs and Prices, the Food CorporationofIndia, the Cotton Corporation ofIndia, and the Jute Corporation ofIndia.

A network of cooperatives at the local, state, and national levels assist inagricultural marketing.


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Agriculture Market In India (contd.)


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Large enterprises, such as cooperative Indian sugar factories, spinning mills, andsolvent-extraction plants mostly handle their own marketing operationsindependently.

Medium and small-sized enterprises, such as rice mills, oil mills, cotton ginning and

pressing units, and jute baling units, mostly are affiliated with cooperative marketingsocieties.

The Indian Ministry of Agriculture's Directorate of Marketing and Inspection isresponsible for administering federal statutes concerned with the marketing ofagricultural produce.

Most agricultural produce in India is sold by farmers in the private sector tomoneylenders (to whom the farmer may be indebted) or to village traders.

Produce is sold in various ways. It might be sold at a weekly village market in thefarmer's own village or in a neighboring village.


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Causes For Poor Marketing Of Agricultural ProductsIn India


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Fluctuations in agriculture prices and supplies(surpluses/scarcities).

Conflicting interests of farmers, middlemen andconsumers.

Under utilization of resources such as rural godowns,market yards etc.

Inadequate transportation, communication andinformation network.


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Causes for poor marketing of Agricultural Productsin India (contd.)


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Imbalance in the spread of internal marketing network aswell as in products.

Other factors such as distribution, season ability, perishability and enormity of production, storage, lack of processing make the problem of marketing more complex.

P

roblem of plenty due to increased agricultural productionleads to glut in the market and ultimately fall in price.


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Measures for Improving Agricultural Marketing


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Establishing regulated markets.

Constructing warehouses.

Grading and standardizing produce.

Providing information on agricultural prices on All IndiaRadio (AIR).

Providing reasonable prices for food commodities usingPublic Distribution System.

Food Corporation ofIndia was set up in 1965 as the publicsector marketing agency for implementing governmentpolicies.


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Primary Value Chain Activities


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Primary Value Chain Activities


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Inbound Logistics: Includes receiving, warehousing andinventory control of input materials.

Operations:Value creating activities that transform input intooutput products.

Outbound Logistics: Gets the finished product to the customer,including warehouse, order fulfillment etc.

Marketing Sales: Gets the customer to buy the product, includingchannel selection, advertising, pricing etc.

Service: Maintain and enhance the products value includingcustomer support, repair services etc.


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Secondary Value Chain Activities


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Procurement: Function of purchasing the raw materialsand other inputs used in value creating activities.

Technology Development: Includes research and

development, process automation, and other technologydevelopment used to support the value chain activities.

Human Resource Development:Associated withrecruiting, development and compensation of employees.

Firm Infrastructure: Includes activities like finance, legal,quality, management etc.


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Value Chain At Every Level


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The Value System


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A firms value chain is part of a larger system that includes thevalue chains of upstream suppliers and downstream channels andcustomers.

Linkages exist not only in a firms value chain but also between

value chains.

While a firm exhibiting a high degree of vertical integration ispoised to better coordinate upstream and downstream activities, afirm having a lesser degree of vertical integration nonetheless canforge agreements with suppliers and channel partners to achieve

better coordination.

Porter calls this series of value chains the value system as shownabove.


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Reasons For Rise In The Price OfTheAgricultural Products


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Value Addition At Each Level

Change In Weather Patterns

Increase In Basic Costs

Arrival Of Bio-fuels

DisparityIn Demand And Supply

Increase

In Demand For Nutritious Food

Products

Currency Fluctuations

Rising Price OfTransportation


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Value Addition At Each Level


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Adding value to the raw material at every stage inthe value chain process.

Consumers have been focusing on quality, healthand variety of food products.


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Change in Weather Patterns


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Very high temperatures in summer causingdrought and thus destroying the crops.

Monsoon season is no longer regular, no uniformrainfall, heavy rainfall also damages the crop.

Decline in underground water level.


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Increase in Basic costs


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Energy ( fuels and power).

High cost of equipment.

High cost of fertilizer


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Arrival of Bio-Fuels


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Resulting in diversion of food production byusurping the arable land such as cutting down

forests to plant soyabeans and other oil crops.


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Disparity in Demand and Supply


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Population is increasing at a very high rate. It becomesextremely difficult to fulfill the demand of each andevery individual.

There has been progressive decline in the productionof food grains which further compounds the situation.

Speculation on commodity prices as reserve stockshave dwindled, some degree of panic on the markets as

well as policy decision taken by several countries alsohave amplified the upward movement of prices beyond

what could be justified by the demand and supplysituation.


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Increase In Demand For Nutritious Food Products


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Households are earning more and they are willing

to spend for more nutritious food products.


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Opportunities In Agricultural

Marketing


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Opportunities In Agricultural Marketing


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As part of 10th five year plan, government ofIndia has earmarkedRs. 1000 crores for the promotion of organic agriculture. Themain components of this initiative include farming of standards,negotiating with different countries and putting in place a system

of certification for organic products.

Central government is promoting the production underNational Project On Development and Use of Bio-Fertilizers.Its main objectives are:

Releasing of grants for setting up bio-fertilizers units.

Developing standards for bio-fertilizers and quality control.


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Opportunities In Agricultural Marketing(contd.)


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Growing export market for organically produced crops.

Diverse agro-climate region across the country that providesenvironment for wide range of crops that can cater to differentmarket demands.

Increasing involvement of private companies in the field of agricultural extension, trade, consultation and other services.

Presence of Non-Government organizations as active promoters

of farming in different agro-climatic region.

Increase in number of agro based industries leading to increasein market of agricultural products.


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Threats To Agricultural

Marketing


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Threats To Agricultural Marketing


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Lack of proper infrastructure for distribution and conservation ofagricultural inputs.

Changing the cultivation patterns and technology is low and time

consuming process given the high levels of illiteracy and largenumber of small and marginal farmers.

Lack of market information in general is biggest drawback forIndian agricultural marketing.

The current information base is low and even the limitedinformation available does not get disseminated due to lack ofadequate channels.


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Threats To Agricultural Marketing (contd.)


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Lack of proper infrastructure in terms of roads from remotevillages, cold storage facilities and slow transportationinfrastructure which affects the cost and quality.

Indian agricultural marketing is very fragmented and there are noorganizations for managing the entire value chain.

Our agro based products still lack behind in the quality ininternational market.

We still need to identify our key areas for the products to besuccessful in the international market.

International markets are still far from the reach of average Indianagricultural product manufacturer and proper distributionchannels are not recognized yet.


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Value Chain in Agriculture Market

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