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Linking markets for better incomes

Building market linkage is crucial for enabling farmers get better incomes. Facilitating market linkage involves understanding the demand and supply situation, transient storage opportunities, transport infrastructure and easy access to markets. The National Agricultural Innovation Project succeeded in fostering collective marketing by farmers and enhancing their bargaining power.

Retailers lift the produce at the farm gate.

Retailers lift the produce at the farm gate.

Most of the rural areas are characterized by subsistence economy. The surplus farm produce is offered for sale after meeting the family requirements. Further, individual production units (families) mostly operate separately making it difficult to pool the produce for efficient marketing.The present marketing system in most of the villages is fraught with many constraints viz. unorganized, unregulated and unprofitable systems, middlemen-dominated, and unreliable marketing channels.

Facilitating market linkage involves understanding of the demand and supply situation, transient storage opportunities, transport infrastructure and easy access to markets. The idea is to intervene at any of these steps in the value chain to enhance farmers’ share in the retail market price. Pooling the farm produce and marketing through producers’ groups/organizations can be one of the means to overcome the constraints faced by small and marginal farmers.

As a part of the National Agricultural Innovation Project (NAIP), a focused attempt was made to encourage group approach for marketing of farm produce, which provides critical mass of produce and also improves farmers’ bargaining power. The project aimed at providing strong market linkages for enhancing returns to farmers on their produce, as non-remunerative prices were found to be the major cause of low profitability to farmers.

The project titled “Sustainable Rural Livelihoods through Enhanced Farming Systems Productivity and Efficient Support Systems in Rainfed Areas” was implemented in Adilabad, Anantapur, Kadapa, Khammam, Mahbubnagar, Nalgonda, Rangareddy and Warangal districts of Andhra Pradesh during 2007-2012. The project piloted a few interventions in Ibrahimpur (Rangareddy), B.Y. Gudi (Kadapa) and Dupahad (Nalgonda) clusters to remove bottlenecks in marketing of farm produce by small holder families.

Value addition and marketing of pigeonpea

A large number of farmers in Ibrahimpur cluster (Rangareddy) cultivate pigeonpea. To provide value addition to pigeonpea, a dal processing unit of one-ton capacity per day was established in the name of Village Organization (VO). This was registered as “Ibrahimpur Grama Sneha Sangam NPM Dal Processing Unit”, with District Industries Centre, Rangareddy district. A five member committee drawn from different SHGs was formed as Dal processing group, and enabled to operate the unit on behalf of VO.

A revolving fund of rupees two lakhs was advanced as loan to the members from the project for procurement and processing of the pigeonpea produced through non-pesticidal management (NPM). In addition to this, another Rs 4 lakhs revolving fund was advanced to watersheds of Budalpur, Basireddypalli, Bompally villages, to procure pigeonpea produced through NPM practices. Procurement of pigeonpea was done through different SHGs and about 8 tons of pigeonpea was procured by SHGs for processing during 2010-11 (Table 1).

Table 1: Pigeonpea procurement by SHGs
Village SHG Loan amount (Rs.) Quantity procured (t)
Ibrahimpur Chaitanya 1,00,000 2.48
Basireddypalli Swathi 2,00,000 3.75
Bompally Mahalaxmi 45,000 1.22
Bompally Bisimilla 20,000 0.52
Total 3,65,000 7.97

The trial running of the machine showed that there was recovery of 58% Grade-I Dal and 12% Grade-II Dal. Overall recovery was about 70%. The processing charges worked out to be Rs. 550/q including the rent for infrastructure. The byproducts such as third quality broken dal, flour and husk were not taken by the SHGs and were valued at a token rate of Rs. 10/kg. After deducting the costs and overheads, the procurement groups realized profits to the tune of Rs. 627/q, over and above the procurement costs (Table 2).

Table 2: Details of investments and profits made by SHGs (2010-11)
Village SHG Quality procured (t) Amount invested (Rs.) Amount realized (Rs.) Profit (Rs.)
Basireddypalli Swathi 3.75 1,30,000 1,54,471 24,471
Bompally Mahalaxmi 1.22 44,250 53,753 9,503
Bompally Bisimilla 0.52 20,500 23,326 2,826
Ibrahimpur Chaitanya 2.48 90,000 1,03,134 13,134
Total
  7.97
2,84,750 3,34,684 49,934

Further, linkage was established with Safe Harvest Pvt Ltd. of non-pesticide management initiative group (NPMI) for marketing of NPM pigeon pea dal. The company has established direct linkages with various retail chains, wholesalers etc., for building a market for NPM produce across India. Apart from the Safe Harvest Pvt Ltd., market linkages were established with Hyderabad based retail chains such as Spencers, Hyper Market and Heritage Foods.

Marketing linkages for watermelon

In Dupahad cluster of Nalgonda, farmers generally cultivate large sized watermelons and sell them to the middlemen who would enter into some pre-harvest agreement. However, the farmers usually lost about 10% of the produce while selling, rejected as waste by middlemen. Many times, the buyers fixed the price for the produce on an area basis irrespective of the quantity.

After studying the issues related to melon cultivation and marketing, farmers were engaged in a series of meetings to switch over to small sized watermelons which are in demand with the retailers. They were facilitated with purchase of seeds from reputed seed producers and trained on package of practices by experts. Later, consultations were held with a number of retailers based in Hyderabad including Heritage Foods India Ltd. (HFIL), Aditya Birla Retail (MORE), Reliance India Ltd. (RIL), Spencer’s Retail, Arunodaya Enterprises (Taaza stores), ITC Choupal Fresh, Vedic Foods, Future Group (Big Bazaar) and Spar Stores. All except Big Bazaar were convinced with the marketing linkage concept of the project.

Further, farmer interactions were arranged with major retailers like Aditya Birla Retail and Heritage Foods India Limited. A pre-harvest agreement was facilitated with the retailers. Harvesting of watermelons was done as per the orders received by the retailers and a total of 26 tons of watermelon was sold to retailers during the season. Farmers realized higher returns by selling the produce to retailers compared to traditional system of selling, either to middlemen or in the local market (Table 3). The melon farmers were pleased with the cultivation and marketing of small sized watermelons.

Table 3: Comparative efficiency of different marketing channels
Particulars Traditional system Market linkage
Farm gate Local market
Cost (Rs/kg)
Seed (per kg of harvest) 0.05 0.05 0.15
Transport 0.50 1.20
Commission (10%) 0.40
Others 1.00 1.00 1.00
Total 1.05 1.95 2.35
Price (Rs/kg)
Gross 3.00 4.00 6.35
Net 1.95 2.05 4.01

Mango growers’ groups

Women grade mangoes based on quality.
Women grade mangoes based on quality.

Mango farmers tend to sell the produce as soon as the local market opens, in anticipation of getting higher price at the beginning of the season. Once harvest time approaches, all mango growers start to dump the produce at local market, resulting in a glut in the market, leading to lower price for the produce.To overcome this, mango growers were organised into societies in cluster villages of Kadapa and Nalgonda for establishing direct market linkages with the retailers. These mango societies comprised of President, Vice-President, Secretary, Joint Secretary, Treasurer and two Executive members representing the group. Sri Aurobindo Mango Growers’ Society in Dupahad cluster, Nalgonda, is one of them.

Similarly, a women’s group was formed in B.Y. Gudi (Kadapa), which took up marketing of graded mangoes with the brand name of Pakka Honey in the urban markets. They were linked to a number of retailers including Heritage Foods India Pvt. Ltd., Reliance India Limited, Spencer’s, Spar, More, ITC’s Choupal Fresh and Metro. A few mango growers were also linked to M/s Subhiksha, a leading retail chain. The retailer price was always higher compared to the local market in Suryapet and Gaddiannaram market (Hyderabad). On an average, farmers realized 24% higher profitability during the 4 year period (Table 4), owing to linking to retailers.

Particulars Year Average Total
2008 2009 2010 2011
No. of buyers 1 2 2 5
No. of beneficiaries 1 2 6 9 12
Total tonnage 8 20 41 164 233
Retailer net price (Rs/kg) 10.5 13.9 14.7 13.4 13.1
Net price in local markets (Rs/kg) 9.0 11.2 11.3 10.8 10.6
Total transaction (Rs) 96000 377000 649956 2405388 Rs 35,28,344
Benefit (%) to farmers 16.7 23.7 30.4 24.5 23.6

However, one of the most important problems encountered was that the indent required by retailers was too less compared to the farmers’ production in the project clusters. For example, the production capacity of Dupahad cluster crosses 250 metric tons in a season which is much more than the required indent by retailers. Therefore, farmers still need to explore newer markets to offload their produces.

Sreenath Dixit, K A Gopinath, B Anuradha and L Uday Kiran

Sreenath Dixit, K A Gopinath and B Anuradha
Central Research Institute for Dryland Agriculture (CRIDA), Santoshnagar, Hyderabad 500 059, India.
E-mail: sdixit@crida.in

L Uday Kiran
IKISAN, IKISAN Limited No 1, Nagarjuna Hills, Panjagutta, Hyderabad 500 082, India.