In this article we will discuss about the stages involved in the marketing of agricultural produce.
An agricultural ‘value chain’ defines the set of activities that bring a basic agricultural product from production in the field to final consumption, where value is added to the product at each stage. Here, we break up this chain further and see that value can be added to agricultural products in a number of ways. Each stage is analyzed to understand how farmers and consumers can benefit from the process.
Stage # 1. Production:
Agricultural productivity in India continues to be low. Raghavan (2014) writes that India’s yield rates for rice and wheat measured in tonnes produced per hectare, are drastically lower than even BRICS counterparts. “If India’s yield rates for the two crops were at China’s levels, we could almost double our yields or halve the land used for the purpose,” he writes. For example, in 2013, the productivity of rice was 2.4 tonnes per hectare, compared to China and Brazil who have yield rates of 4.7 and 3.6 tonnes per hectare, respectively.
Stage # 2. Harvesting and Cleaning:
Crops can be harvested through manual or mechanized means. The latter is faster and leads to fewer crop losses, but it is also expensive. Many farmers cannot afford the high rentals of harvesting and threshing machines. Manual harvesting depends on availability of labour, which is in short supply during the season. Delayed harvesting add to crop losses.
Stage # 3. Transport:
Farmers have to transport their produce to the nearest market or mandi. Tempos and tractor trollies are hired to take goods to the market over muddy village roads. The operation has to match with government buying schedule or the demand in mandis. Unsold stock has to be sold at distress prices as farmers cannot store it or transport it back to their farms.
Stage # 4. Primary Processing and Storage:
Primary storage refers to storage of minimally processed produce. As the crop is harvested, it must be cleaned, graded and stored in a safe place protected from rodents and weather till it is transported. Cold storage facilities are required for vegetables and animal products. Usually farmers in India lack primary storage facilities.
Stage # 5. Secondary Processing and Storage:
When the produce goes through some more processing or is graded or cleaned, it is called secondary processing and storage. Cold chains and processing facilities close to the farm are needed for these stages. Farmers are mostly unable to add value at this stage also as they lack such processing and storage facilities.
Stage # 6. Grading:
One important value addition activity is grading, in which the produce is separated on the basis of size or quality. Grade A, referring to the best quality, is able to fetch the best prices. Through grading, farmers are able to get better prices for their produce as compared to selling ungraded produce. However, farmers have to spend time and effort to grade and must have storage facilities to be able to take advantage of this step. In the case of ungraded produce, the value addition activities are passed on to traders, who do this job instead.
Stage # 7. Distribution:
Distribution refers to sending the farmed produce where it is needed. Farmers can achieve economies of scale and logistical efficiencies at this stage, besides getting better prices. However, it needs good transport and storage facilities, the ability to hold on to their stock and knowledge of markets and prices. Many farmers fail on all fronts, and that is the reason that they depend on agents to lift their entire stocks at whatever prices they can get.
Stage # 8. Packaging:
Consumer goods manufacturers know the value of attractive packaging and labelling. Consumers are willing to pay higher prices for goods that are packed attractively and certified for their quality. Absence of grading and packing makes this step quite difficult at farm stage.
Stage # 9. Wholesale:
Usually farmers sell at wholesale prices (WSP) to agents. This saves them from spending long hours at mandis, which are usually without facilities. But this also means that they are unable to take advantage of price changes or value addition. At the mandis, farmers are under pressure to sell, as the longer they hold on to stock, the more is the deterioration of their produce.
Stage # 10. Direct Marketing:
Agricultural produce is sometimes sold at farm gate or at nearby markets directly to consumers. This depends on the location of the farm. Though better prices can be obtained, it poses several problems for farmers. Some farmers do direct selling at mandis in nearby towns. Foreign retail chains cannot invest in modern supply chains because of limitations on FDI. Indian retail chains such as Reliance Fresh and Big Bazaar source a limited amount of produce to sell in their stores.
Stage # 11. Food Processing:
One way to add value to agricultural produce is to process it for later consumption. Though very limited village level processing facilities exist in some pockets, they are the exception rather than the rule. Some companies have made interventions to source quality produce for their factories, but in most areas farmers cannot sell to distant processors directly because of APMC limitations.
Stage # 12. Waste Management:
Agriculture produces a lot of waste at all stages. Much of this waste is organic and can be recycled. Such facilities, however, do not exist in India, and the waste is simply thrown in mandis, which in turn are a picture of dirt. The country has no facility for processing agricultural and animal wastes. Crop residues are burnt on the fields, causing health problems to nearby residents.
It is seen from the discussion that agricultural value chains are skewed against farmers and consumers. While farmers get low prices, consumers get expensive products. The produce is also adulterated at the multiple points where they are handled. Farmers prefer to sell out to pre-harvest contractors, giving up their opportunity for value addition. A series of legal and infrastructural problems prevent them from adding value on their own.
On a macro level, the country struggles to become more efficient and add value to be able to capture new global market opportunities. Modernization of value chains can help solve these problems but, since independence, a suspicion of agricultural modernization has stymied efforts to do so.