Connecting farms to folk: Linking agri-tech to FPOs can create value

November 13, 2020 5:15 AM

Farmers should not let go of this opportunity and should connect with the new high-value segment, change production processes to meet the specifications and command a higher price.

Their success depends on getting farmers to produce these to their specifications!In other words, despite a higher share of fruits and vegetables in the total VOP, Bihar did not record a correspondingly higher VOP per hectare than in Punjab.

By T Nanda Kumar

Covid-19 has transformed the market. My grocer of three decades, in my small hometown, operates via a smartphone and says ‘you can order on WhatsApp’. He home delivers stuff and collects payments through any United Payments Interface (thank RBI) option. He accepts cash, like before, but prefers digital transactions.

A farmers’ group near Bangalore offers grapes, guavas and mangoes for home delivery ‘direct from the farm’. Fresh quality produce, paid for digitally and delivered at the doorstep. It is not the big guys, but the farmers and small traders who are changing the market. Welcome to the new ‘Phygital’: Digital finance & commerce, physical delivery: ‘WhatsApp’ for small groups, ERP for Amul or Big Basket! Each in their own space in the market.

The central government recently initiated significant reforms in the agri-market ecosystem with three new laws, easily understood as EC Act amendment, ‘mandi bypass law’ and the contract farming Act. These laws have given freedom to the farmers to sell their produce anywhere in the country. But what use is such freedom if they are not technologically and financially empowered to get a better value? Of course, there are new initiatives in infrastructure funding, forming farmers’ collectives and ease of doing business. But, can farmers use this opportunity for their prosperity?

Commerce is going digital, so are payments! Small traders are using digital platforms, and farmers’ groups are learning to access markets using digital technologies. Covid-19 has brought irreversible changes in the way food markets operate. Smartphones have become an important tool for sellers and buyers across India. Small traders and farmers have mastered the use of various ‘apps’, which provide value to them. Farmers’ groups have made valiant efforts to connect with consumers during lockdowns. The number of such groups and the volumes were small, but the effort have generated confidence.

The ‘food’ market is witnessing interesting changes too. The shift from fashionable, high-sugar, high-salt processed foods to traditional, home-made, safe, healthy, and wellness foods is clearly visible; this accords a new opportunity for farmers to capture higher value.

Since more food is getting cooked at home, better ‘quality’ fresh, frozen and processed ingredients have become a necessity. ‘Homemade’ has led to ‘premiumisation’ of agri-produce and food ingredients. ‘Safe’ food has always been a priority at the top end of the value chain. It has acquired wider support now from the middle and lower-income buyers. ‘Safe’ is not restricted to FSSAI standards: it has perceptive differences across market segments. Safe can be perceived as a part of a large quality system or seen as pesticide or antibiotic-free, or as quality at the retail point. Given the new consumer worries on food safety, we might see less of ‘wet’ markets for poultry and fish, more of pasteurised milk and more of cold chain retail outlets.

‘Healthy’ has many layers, but the trends point to a return to traditional foods with more fibre, natural anti-oxidants, vitamins et al. ‘Wellness’ is an interesting new segment which is likely to grow fast. The almost immediate popularity of ‘haldi doodh’ ( ‘turmeric latte’ for the urban elite) and increased emphasis on spices like ginger, garlic, pepper, basil etc, is an exciting dimension. Spices Board had tried to promote these in the 1990’s as ‘grandma’s remedies’ (nutraceuticals) with limited success. Three decades later, this has become the trend!

The market is indicating that it is willing to pay higher for ‘better quality’ and for ‘direct from farm’ produce! An urban niche market at this stage, but still a big opportunity. Large food companies have picked up the trends already, and new products are getting launched. A reference to Ayurveda is the icing on the cake. Their success depends on getting farmers to produce these to their specifications!

Farmers should not let go of this opportunity and should connect with the new high-value segment, change production processes to meet the specifications and command a higher price.

This is the time for farmers to collectivise and make use of digital platforms to sell direct to consumers (converting markets like ‘rythu bazaar’ and savvy ‘uzhavar santhe’ to ‘phygital’ is an option) or to connect with the new ag-tech companies or link up with large chains. The key is the aggregation of the right kind with digital connect to the market. Am I saying ‘eNam’? Not necessarily.

The trends in the market open up a profitable space for Farmer Producer Organisations of ‘size’ (emphasis mine) who understand the market and tailor their operations (Kurien’s famous words: no Bombay market, no Anand!), and not remain sellers of excess produce! There are over 7,000 FPOs registered at present, and plans are to add 10,000 more. Large numbers with low turnover will not make any dent in the market, nor will it capture enough value. Most of these are ‘produce aggregators’ searching for a market; not market savvy producers catering to high-value demand. FPOs have to learn to become big in a single commodity (success stories in milk, grapes, bananas) and/or remain ‘focused’ on the market for urban consumers. The best way forward for FPOs is to connect with the ag-tech start-ups: there are about 400 of them, mostly in the post-harvest, aggregation & distribution space! Connecting with input companies will also help them change processes and get tailor-made solutions.

Undoubtedly the market is changing, creating new opportunities for farmers to increase their share of value. A strategy based on demand to increase incomes of farmers requires a careful understanding of the different layers of the market. It is not about the number of FPOs, it is about taking a fair share of the volume and price in the market. Remember, Anand succeeded because they took the Bombay market, but ‘utterly butterly’ Amul looked beyond Mumbai.

Government has created an enabling environment, farmers’ collectives and Ag-tech start-ups have to create profitable partnerships. There is a market beyond APMCs.

The author is Former secretary, food & agriculture, Government of India & former chairman, NDDB

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