"LINKING FARMERS TO CONSUMERS - NOT JUST MARKET LINKAGE"
Economics, Capacity Building and Technology: The Impact can be BIG
“We have been farming for generations; we have had some good years as well as many bad years. We have good or bad luck, but never know why.” A basmati farmer in Haryana sums up his experience as a farmer in India.
Among the different stakeholders in the field of agricultural production, the farmer faces the maximum risk. His high risk profile forces him to adopt short cuts in order to cut cost; in turn, he is not maximizing his return and is, instead, minimizing his probability of losses. No wonder, then, that the agriculture sector in India is one of the lowest in terms of return on assets despite being blessed with the best lands, water, sunshine, biodiversity and farming knowledge.
Farmers grow their crops to sell to intermediaries – traders, millers, packagers, retailers, processors, etc. Contrary to popular belief, these intermediaries are not the reason behind the low incomes earned by farmers. In fact, they perform very important roles much more effectively at a very low cost. The problem, though, is that the supply chain is not a straight line; each link speculates on the price of agricultural produce without corresponding with the next link in the chain. This serves to multiply the risk to the farmer who is at the one end of the chain and is in complete darkness as to what happens to his produce. It is not uncommon to hear each link of the chain complain of losses.
At LT Foods, we are trying to straighten this chain, bring clarity to farmers about who the final consumers of their products are, what are the consumer’s requirements and why he/she will pay or not pay
for a particular product. The model we have established in place has been working; more and more farmers are now adopting market specific technologies and have been able to earn ~15% more profits consistently.
Connecting Farmers to the Consumers
LT Foods, along with its global partners, bring in actual consumers to rural villages and facilitate one-on-one conversations between farmers and consumers. This has led to a much better understanding among farmers as to the changing needs of todays consumers and why they need to use safe pesticides. Once they understand that safe food is not just a good thing to do but also a good economic proposition, farmers become more willing to take up newer agronomic and pest management practices.
This is where the intermediary becomes a partner with the shared goal of harnessing the market together. LT Foods creates ecosystem, partnerships, infrastructure and systems for capacity building, while aiding farmers in the seamless adoption of newer methods. With significant investments in the agriculture sector, LT Foods has substantial skin in the game and farmers understand it very well.
The Technology Lever
When producer and consumers are connected, both are visible to each other. Producers, thus, no longer operate from a speculative, inefficient and cost minimization mindset. Profit maximization or resource optimization for farmers requires a holistic visualization of the farming system. The agriculture sector today is developing, and is now the site of an interplay of agricultural technologies, IT, informatics, remote sensing, imaging, sensors, switching automation, mechanisation, storage, logistics, manufacturing, etc. Farmers need to evolve to be adept in using many of these newer technological methods and information processing systems. Farmers and intermediaries also need to evolve their relationship from a mere transactional relationship to a collaborative one. LT Foods has taken the lead in creating an end-to-end ecosystem. LT Foods has also joined Sustainable Rice Platform (www.sustainablerice.org) or SRP, which is an UN and IRRI initiative to create standards for sustainable rice cultivation, to further work in this area. We also work with partners like ICAR, Bayer Crop Sciences, Rallis India Limited, Syngenta, KVKs and many more to adopt the latest in cultivation, chemistry as well as informatics. Remote sensing imaging, IoT based water management tools, and mobile apps are now being used to monitor, advice and capture data for product traceability. The use of other advanced technologies, with newer developments in AI (Artificial Intelligence) and AR (Augmented Reality) systems as well, are expected to play a larger role in farm management in the coming years.
Economics and the Impact
Framers having a better understanding of the consumer requirement and with direct sync with the concerned intermediary have been able to reap better returns compared to those who are not. Apart from the better crop productivity and significant cost reductions, they are able to fetch premium. The final destination market requires a reliable supply chain on it which can depend to commit to final consumers, either by way of brand communication or with compliant product supply guarantees. The gains due to premium and better efficiency, lower uncertainties and better forecast are shared to the whole chain. Farmers are supposed to gain the maximum. If growing acceptance and adoption of not just the newer technology but newer ways of working with downstream players in the value chain is of any indication, we are in the threshold of seeing more such partnering examples. The gains are real both in terms of economics and for environment. In 2017, a group of farmers working with LT foods, whose activities, cost and revenues are tracked and audited have shown very encouraging results. While income has increase ~16%they have been able to save ~35% water compared to normal farmers.
While world become connected and technological advancements enables to fix various sources of inefficiency, it is time to adopt these changes. Moreover, farmers and intermediaries can no longer work in isolation. This is time for partnership. Green and prosperous future awaits us, we need to learn from these success stories and build on it.
By: Tractors and Farm Equipment Limited