Changing the face of farming

A truck loaded with 20 tonnes of castor seeds lumbers on to a weigh bridge in a warehouse, situated in the small town of Kadi in Gujarat’s Mehsana district. After the weighing is done, the truck moves on to the unloading dock, while another takes its place; drivers honk impatiently, awaiting their turn to unload bags of seeds from their trucks.

As soon as the truck is flush against the unloading dock, Mukesh, an employee of Sohanlal & Company, picks up a standard-size metal container to collect a random sample of the seeds. Sohanlal is sub-contracted by National Spot Exchange Limited (NSEL) to issue quality certificates for the castor, after a standard weighing and quality testing process. The commodity, packed in 75 kg bags, is then stacked away and Mukesh issues a receipt of weight and quality to Babubhai Poda, the farmer who has deposited the castor seeds.

Babubhai then briskly walks to the office of IFMR Trust’s Agricultural Terminal Markets Network Enterprises (ATMNE), where there is an NSEL terminal providing online data on prices of castor and other agricultural commodities for the day.

Valkesh Prajapati, team member, ATMNE, scans Babubhai’s receipt. The price Babubhai can get is determined by the weight of the randomly selected sample, which reflects the commodity’s quality. Price adjustments have to be made according to deviations from set norms. Valkesh explains: “If the net weight of the sample is 2,230 grams, then there is no deduction in price. But in Babubhai’s case, we can see that the weight of the sample is 1,950 grams. As per procedure, we will deduct Rs 3 per 20 kg of the commodity.”

The net weight of Babubhai’s 36 landed bags of castor seeds is 2,383 kg. The market price for that day, shown on the NSEL terminal, is Rs 500 per 20 kg, which is higher than the price offered in the nearby wholesale market (mandi). With a price adjustment of Rs 3 per 20 kg, the amount payable to Babubhai works out to Rs 547 per 20 kg, or a total of Rs 67,175.

Valkesh places a ‘sell trade’ at the trading terminal and prepares a sale bill. Once the sale goes through, Babubhai is issued a receipt and a ‘self’ cheque drawn on a local bank. Within an hour of coming to Kadi with his produce, Babubhai is richer by Rs 65,175.

It’s just another day at ATMNE’s Kadi office, a pilot project aimed at changing the way business is done by small and medium farmers.

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By ifmr

Comments

Ankit Agrawal March 25th

Hi..

It is very good to see these type of efforts to scale up right price discovery for farmers in India, a very much needed efforts, before higher productivity interventions are being explored. Some questions that comes to mind are:

– Cash management: Looking at the turnover of this business, supporting cash cycle ar remote places will offer challenges.

– Revenue for Trust: One revenue clear is brokerage from NSEL, but that margin probably would be very thin to base this model upon. How much is that margin and what are the other revenue modus for Trust?

– Other Buyers for commodity: There potentially could be more returns with more risks to get involve into direct trading either at NSEL or with direct buyers.

– Backward Integration: Is Trust looking upon to offer backward integration services to economize farmers costs like logistics, production raw materials etc. as additional revenue stream. Definitely there seems to be great potential of influencing good farming practices by serving farmer's bottleneck.

There seem to be small calculation mistake in above blog. The selling price should be set at Rs. (500 – 3) = Rs. 497 and not Rs. 547. Also price to Babubhai is given differently at two places.
Joby C O March 26th

Thank you very much for the feedback. Cash handling is a challenge in the rural areas and now there are a lot of efforts by MFIs and BCs of banks which can handle this. Currently we are equipped to offer only 2 services – 1. a transparent electronic trading platform to farmers to sell their produce and 2. Offer warehouse receipt loans to farmers. As we are a start up, our focus has been in creating and delivering value first and will off course figure a way to sustain it.

Thanks for pointing out the mistakes in text. The price is actually Rs. 550 before deduction and the total value is Rs. 65,175/-
Abhishek Kapoor May 10th

Great initiative on part of IFMR.

Would like to know how its scaling up to capture more share of the market and also how its going to compete with the private players slowly getting strong in the mandi system.