To promote direct sales to consumers, farmers’ markets have been started in the form of Apni Mandis in Punjab, Rythu Bazaars in Andhra Pradesh, Uzhavar Santhai in Tamil Nadu, and Shetkari Bazaar in Maharashtra.
1. Gate Sales:
When farmers sell agricultural produce directly to consumers, it is called farm gate sales. Farmers either sell directly by putting up a stall on the highway near their farm or establish contacts with bulk consumers such as restaurants, caterers and independent retailers to supply directly to them. Gate sales are a common type of marketing among farmers who have access to direct markets, are located on highways, or have the transportation and means to supply directly to their consumers.
2. Rural Primary Markets:
There are many regular and periodical markets in rural and interior areas known as haats, shandies, painths and fairs. Farmers bring their produce there on fixed days of the week and sell it to consumers. However, these markets lack facilities and hygiene, and are highly congested, in deep contrast to agricultural markets in developed countries. There is much to be done to increase the marketing efficiency of these markets so that farmers get remunerative prices. These markets are usually managed by panchayats and municipalities who collect ground rent and fees but the funds are not used for their betterment or for developing infrastructure.
3. Apni Mandi Initiative in Punjab:
The Apni Mandi was started by the Punjab Mandi Board on the lines of the ‘Saturday Market’ in the UK and the USA. It offers farmers and growers a place in towns of Punjab and Chandigarh to sell their produce directly to consumers. It was an effort to eliminate middlemen so that both the growers and consumers benefit – the former by way of better prices while the latter get fresh produce at low prices.
Apni Mandi was first established in 1987 at Mohali (Punjab) and after its success, it was introduced in 27 towns in the state. The number of farmers that participated in these mandis were 10,278 in 1988 which increased to 353,610 in the year 2010. The approximate sale of produce in these mandis were for Rs. 29,624,761 in the year 1988, which increased to Rs. 629,347,474 in 2010.
A study of Apni Mandis of Ludhiana by Sukhmani and Goyal (2014) showed that the initiative had been a success but many retailers and middlemen also participated in them, and there was no way of identifying registered and non-registered farmers. The markets also suffered from lack of facilities and infrastructure despite farmers paying huge ground rents and fees.
4. Contract Farming:
When farmers enter into an agreement with a company to grow their produce as per its requirements and supply all of it to the company, it is called contract farming. The buyer specifies the quality, quantity and price, and the farmer delivers products to the buyer’s premises.
Food companies such as Pepsi, Nestle and KFC enter into long-term contracts with them for supply of food items. The companies help farmers by providing them high-yield seed varieties, knowhow and other inputs and are assured of supplies for their business. Contract farming is used for many agricultural products.
Efforts are being made to link agricultural markets to provide easy access to farmers. The biggest of these initiatives is the creation of NAM.
5. National Agricultural Market:
The Economic Survey and Budget for 2015 called for bold actions such setting up a national common agricultural market. It severely criticized the operations of the APMCs on the grounds that their key positions were occupied by politically influential persons. Realizing that the APMC works to the detriment of the farmer, the Central government decided to integrate 585 wholesale markets across India and allocated Rs. 200 crore for three years to set up an online NAM, as reported in The Hindu Business Line (2015).
It is hoped that unifying markets both at state and the national level would provide better price to farmers, improve the supply chain, reduce wastages and create a unified national market through an e-platform.
It is hoped that since agriculture markets are highly fragmented, NAM, with an online trading portal, would open up markets by linking farmers and consumers. Farmers can offer their produce to buyers in any part of the country through the e-platform. The Small Farmers’ Agribusiness Consortium (SFAC) was designated as the lead agency for developing the NAM e-platform. Integrating wholesale markets across India and linking them online would also help farmers realize better prices.
The government launched the NAM on 14 April 2016. Initially, 21 mandis in eight states were integrated. Chana, castor seed, paddy, wheat, maize, onion, mustard and tamarind were to be traded in these mandis. The NAM is a nationwide electronic trading portal comprising a network of mandis and market yards. It envisions one license state-wide, a single-point levy and use of electronic auctions for price discovery. It removes institutional and legal barriers to free circulation of commodities.
Farmers or traders can sell with the same freedom across states as within their own state. Since a fragmented and high-cost agricultural economy prevents economies of scale and seamless movement of goods, NAM seeks to change this by lowering intermediation costs, wastage and ultimately prices for consumers. In NAM, the existing mandis provide the backend support for the electronic platform.
There are two major shortcomings of the NAM – fruits and vegetables have not been included in the NAM. Secondly, the country’s two biggest mandis—Azadpur (Delhi) and Vasi (Mumbai)—have not agreed to come on board. By November 2016, only 250 regulated wholesale markets out of 585 such mandis were integrated with the NAM platform, reports Financial Express (2016). As a consequence, NAM has seen only tepid response. Haryana contributed a major portion of the turnover of NAM. Even among these NAM-linked mandis, electronic trade is limited to very few commodities.
Whether this scheme will help the farmers get better prices, however, remains to be seen. Mishra and Mukherjee (2015) write that setting up a trading portal alone is unlikely to bring substantial changes in a highly fragmented market. One major problem is that even if a farmer, using an online portal, is able to locate a buyer in a distant part of India, would it be possible to arrange transport and send the produce over large distances?
Would the buyer be confident of getting the same grade and quality of produce that was shown on website? That is why, infrastructure such as transport, storage and grading is the backbone of agricultural marketing. There is a crying need to improve the facilities and systems for the NAM to succeed.
Cooperative marketing could well provide farmers with easy access to markets.
6. Cooperative Marketing:
A cooperative marketing association is a voluntary organization established by its members to market farm products collectively. Small farmers, who do not have resources to market themselves, come together to benefit from a larger organization. Cooperative members are the owners and operators and are the direct beneficiaries of the earnings of the society. Cooperatives can help achieve economies of scale, hire talent and gain better bargaining power, which individual farmers cannot do. They also help in removing intermediaries.
Every state has a cooperative marketing society or marketing corporations run by the state governments.
Some of these are:
i. The Haryana State Cooperative Supply and Marketing Federation.
ii. Maharashtra State Agricultural Marketing Board.
iii. Gujarat Agro Industries Corporation Ltd.
iv. The Spices Trading Corporation Ltd.
v. The A.P. State Trading Corporation.
vi. The Karnataka State Cooperative Marketing Federation Ltd.
vii. National Cooperative Consumers Federation of India Ltd.
viii. The North Karnataka Onion Growers Cooperative Society.
ix. West Bengal Essential Commodities Supply Corporation Ltd.
x. M.P. State Agro Industries Development Corporation.
xi. Karnataka State Agricultural Produce Processing and Export Corporation.
xii. Madhya Pradesh State Cooperative Oil Seeds Growers Federation Ltd.
xiii. The Andhra Pradesh Marketing Federation.
xiv. Himachal Pradesh State Cooperative Marketing & Consumers Federation Ltd.
xv. The Kerala State Cooperative Rubber Marketing Federation Ltd.
xvi. National Federation of Farmers’ Procurement, Processing and Retailing Cooperatives of India Ltd (NACOF).
xvii. Agricultural and Processed Food Products Export Development Authority (APEDA).
The main functions of cooperative marketing societies are as follows:
1. Marketing of agricultural produce of members.
2. Act as an agent for the supply of produce, provide transportation, safeguard the interests of members, get better prices for them, and save them from malpractices and excessive costs, and achieve economies of scale.
3. Provide credit facilities to members against their produce.
4. Build or provide scientific storage for agricultural produce.
5. Provide market information for better prices and also grading, processing and packing facilities.
6. Develop better bargaining power than the individual members.
7. Participate in exports of agricultural produce.
8. Arrange supplies of agricultural inputs for farmers, such as improved seeds, fertilizers, insecticides and pesticides.
Cooperatives work on the principle that people will get together and form organizations to help them achieve objectives that they individually cannot. They encourage voluntary and open membership, democratic control, economic participation of members and mutual benefit with limited interest on share capital. They can help in building common storage areas or other infrastructure, marketing agricultural produce and using collective power to get better prices, source raw materials and achieve economies of scale. They work on the principles of equality, equity and mutual self-help.
Cooperative marketing societies are of three types:
1. Single Commodity Cooperative Marketing Societies
2. Multi-commodity Cooperative Marketing Societies
3. Multi-purpose, Multi-commodity Cooperative Marketing Societies
1. Single Commodity Cooperative Marketing Societies:
Societies for marketing of only one agricultural commodity. Examples of such societies are Sugarcane Cooperative Marketing Society, Cotton Cooperative Marketing Society and Oilseed Growers Cooperative Marketing Society.
2. Multi-Commodity Cooperative Marketing Societies:
Societies marketing a number of commodities produced by the members, such as food-grains, oilseeds and cotton.
3. Multi-Purpose, Multi-Commodity Cooperative Marketing Societies:
Societies that market a number of commodities and perform other functions as providing credit, arranging inputs and even providing domestic consumption goods.
Cooperative societies are active in Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu, where large quantities of food-grains are marketed by them. Sugarcane, cotton and plantation crops are marketed by the cooperative societies in Maharashtra, Uttar Pradesh, Gujarat and Karnataka. In Gujarat, 84 percent of milk is marketed through cooperatives. The performance of cooperatives in dairy and sugarcane sectors is very good. They have resulted in transforming the social and economic landscape of Gujarat and some other parts of the country. Dairy cooperatives present the most successful example of cooperative marketing.
However, the progress of cooperative marketing societies has not been very satisfactory in many parts of the country. They are dominated by politics and chairmen of these societies are appointed by politicians. Farmers feel that they are not able to get the best prices for their produce. The success of cooperative marketing is not universal across commodities, sectors and geographical regions. Most cooperatives are running in losses.
Cooperatives as a whole account for only 10 percent of the total quantities of agricultural commodities marketed by the farmers. Singh and Pundir (2000) point out that there are many institutional, economic, social, political, organizational and managerial factors that affect the performance of cooperatives. When cooperatives are imposed by the government, they fail to get participation of members. It is only when cooperatives are established by the people themselves to solve common problems that they are likely to succeed.
Acharya and Agarwal (2004) point out the reasons of slow progress of cooperative marketing:
1. Cooperative marketing societies are located in big cities or towns and have been unable to connect remote villages.
2. Farmers are indebted to local traders and enter into advance contracts with them for the sale of their crops.
3. Farmers are in immediate need of cash after the harvest and sell their produce to local traders before harvest.
4. Members lack confidence in cooperative organizations. There is lack of loyalty among members of cooperative societies as they fail to stick to the principles of democratic and cooperative functioning. Members feel betrayed by cooperatives if they are not able to influence decisions.
5. Cooperatives are not treated as business organizations and so they are inefficient and unprofitable. They lack professional management and working and are grossly under- managed or mismanaged. Since many cooperatives are small, they are unable to attract the best people and compete with companies in marketing their produce.
6. The societies do not provide financial access or act as banks for the farmers. They also lack the means to raise resources from banks and capital markets.
7. Societies lack sufficient storage facilities. They, therefore, try to dispose of the produce soon after their arrival, which results in lower prices for the farmers.
8. Cooperatives suffer from excessive government control and political interference. They operate under the thumb of the government. Politicians or civil servants are nominated by the government to run these societies.
9. Cooperatives lack good leadership. A cooperative needs a dedicated leader, for instance, like Dr. Kurien, who laid the foundation of Operation Flood in the country. But such people are rare.
10. Societies do not provide food or shelter to farmers at mandis and are ill-equipped to trade in mandis on behalf of farmers.
As a consequence of these limitations, many cooperative marketing organizations are not even financially viable and suffer from many shortcomings. If they cannot attract good managers and good leadership, they remain destined to serve limited interests. Outdated laws and excessive government control also limit their growth. Cooperatives could have a bright future in India if they had become member-owned autonomous organizations managed professionally and serving interests of the members.
Agricultural marketing is aided by commodity markets. Well-developed commodity trading platforms facilitate easy trade in such farmers’ produce.
7. Commodity Marketing:
A commodity market is a market that trades in primary economic sector rather than manufactured products. It facilitates trading in various agricultural commodities such as spices, coffee, cocoa, sugar, soya beans and others. There are two types of trade: spot market means that commodities are bought and sold for immediate delivery, and in derivatives market, financial instruments based on commodities are traded.
Commodity futures are regulated under the Forward Contracts Regulations Act, 1952 by the Forward Markets Commission (FMC) set up in 1953. Commodity trading is done through regional exchanges and national commodity exchanges, such as the Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), and National Multi Commodity Exchange of India Ltd (NMCE).
These markets help farmers by providing them price information, reducing the risk and enabling better returns. Transparency in prices helps them know about trade margins, improving the efficiency of marketing.
8. Spices Marketing:
India is the largest producer of spices. The spices market in India consists of chilly, garlic, ginger, turmeric and coriander. The spices market in India is dominated by the unorganized sector. Some large companies that are into spices marketing are MDH, ITC, Tata, Everest and Catch.