The Hindu Business Line : Growing problems

Earlier, we saw how several adverse factors — fragmented landholding, low level of input usage, inadequate irrigation, antiquated agronomic practices, poor rural marketing infrastructure and tardy flow of market information — combine to frustrate the efforts of the average Indian farmer. The result: unsteady output, non-standard quality, low yields and often, unremunerative prices. The table reveals the extent of year-to-year variation in major field crops output.

With rising incomes and population growth, demand for food products has been rising relentlessly in recent years. However, food output has failed to keep pace with the demand. As a result, shortages have begun to appear in some commodities (wheat) and in some cases, extant shortages are becoming chronic (pulses, oilseeds). Having looked at production and the challenges associated with it, let us examine the nature and characteristics of the agri-produce markets.

Two seasons

In India, given the varied agro-climatic conditions, agriculture is seasonal and regional. There are two seasons in which planting and harvesting take place — Kharif season is when planting takes place in May/June/July and harvest in September/October. Major kharif crops are rice, (paddy), coarse cereals (maize, bajra, jowar), pulses (mainly tur/arhar), oilseeds (mainly groundnut, soyabean), sugarcane, cotton and jute/mesta. For Rabi season, planting takes place in October/November and harvest in March/April/May. Major crops of the season are wheat, rice, pulses (mainly gram) and oilseeds (rapeseed/mustard, groundnut).

It may be seen that different crops are grown in the two seasons. But some crops, such as rice and groundnut, are grown in both seasons. The two seasons mean farming activity goes on for most part of the year. This raises land use intensity and ensures near-continuous supply of food grains and oilseeds throughout the year.

Regional differences

There are also regional differences in agricultural production. Crops such as paddy (rice), groundnut and cotton can be termed national crops as they are grown in a large number of States across the country. Fruits and vegetables may also be termed as such. There are crops with regional orientation.

For instance, wheat and rapeseed/mustard are grown almost exclusively in the northern parts of the country while soyabean is grown in central India. Coffee is grown in South India only, while tea is grown in both Southern and Eastern India. While production is seasonal and/or regional, consumption is round the year and the consuming market is national, in most cases. This creates huge market opportunities for all the stakeholders in the agricultural system.

Agricultural produce markets are either national or regional, depending on the geographic dispersal of cultivation/production. The seasonal and regional nature of agricultural production and the need to market the crop across the country and round the year are key determinants of market prices. The Indian agri-produce market is highly fragmented and decentralised. There are a large number of small producers, traders and trade intermediaries.

Inefficient supply chain

The supply chain for agri-produce is rather long and inefficient. Too many intermediaries add to the cost but little to the value. From the primary producer to the retail consumer, there are no less than seven intermediaries. As a result, the primary producer ends up obtaining only a small part of the price paid by the retail consumer, with the intermediaries eating away a large share of the profit.

Primary processing, or even minimal grading and sorting, is largely absent because of poor infrastructure (warehousing facilities, cold chains) in rural areas. Because of varietal differences in the seeds planted, the quality of the produce is non-standard.

Non-standard items get mixed in the market place and depress prices. These are some of the challenges that players in the agri-produce market have to consider.

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