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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Mr. Popatbhai (picture below) is the owner of Pooja Oil Mill in Junagadh and a registered buyer on the National Spot Exchange. During our (Nachiket, Bindu, Deepthi and the Agri Terminal Markets NE team) visit to Maliya where we are a broker for NSEL’s groundnut spot contract, we spent some time with him to seek feedback on how our operations could be further strengthened. He fired the opening salvo by stating that our inability to tell the difference between G-10 and G-20 has resulted in a Rs. 5000 loss to him! He then proceeded to give us an insider account of the groundnut market in Saurashtra.
Mr. Popatbhai with G-10, G-20, and Tata Sumo grades of groundnut
The supply chain comprises the farmer at one end who sells upon harvest to a “kachha arthiya” who picks up the produce at the farmgate and sells it in turn to a commission agent who then aggregates and sells to local oil mills like Pooja. (We are trying to re-configure this supply chain by allowing the farmer to sell directly on an open exchange platform to a buyer). There are 300 oil mills that operate in and around Saurashtra that process the groundnut into oil and sell it in bulk to branded sellers all over Gujarat.
Popatbhai felt that the biggest value proposition of the ATMNE effort would be in helping buyers like him discover a national price and market beyond Saurashtra in addition to the price benefits to the farmer from direct and transparent sale. We agree with him!
The challenges for us to figure out are: good commodity testing and grading mechanisms (for oil content determination for instance), warehousing solutions close to the farm, transportation from village warehouses to exchange accredited warehouses and getting more national buyers to steadily participate in the exchange. The ATMNE team is all set to achieve these breakthroughs in the coming year and is eagerly seeking partners.
Popatbhai bid us farewell by saying that he started off as a farmer and if we could pull this off, the benefits to the farmers would be such that none of us “would need to go a temple again”
Ps: Tata Sumo is a grade of groundnut so named after its shape.
Snapshots from ATMNE’s launch of groundnut trading operations in Maliya, Junagadh District on 16th November 09.
- Sea at Somnath ,35 Km from Maliya
- Groundnuts farm on the way to Maliya
- Quality testing of groundnuts in progress at Maliya
- Gathering of farmers on the inaugural day at Maliya
- The camel cart carrying sacks of groundnuts is waiting to get unloaded on the inaugural day.
More photos at IFMR Flickr Group
The Agri Terminal Markets NE (ATMNE) launched its groundnut trading operations in Maliya, Junagadh District on 16th November 09.
The launch saw a lot of farmers evincing interest in trading on the NSEL powered platform as they had been deprived of an organized system because of which they had to contend with dealing directly with the available buyers or travel long distances to the traders in the mandi.
Though the groundnut farmers had turned up in large numbers, they were held back due to the initial hiccup as regards the pricing that NSEL offered. This was primarily due to the uniformity in the rates offered for both grades of groundnut – Oil millers and Export quality. NSEL is working towards overcoming this issue and trying to get more buyers registered on its platform so that farmers in the region get the best rates.
With an objective of enabling farmers achieve better price discovery on their agricultural produce and to provide commodity backed finance to increase their holding capacity, Agricultural Terminal Markets Network Enterprise (ATMNE), has been piloting a project in Kadi Taluka of Mehsana district in Gujarat.
Working with the National Spot Exchange Limited (NSEL) as an institutional trading and clearing member, ATMNE through its online trading terminal at Kadi, provides farmers access to NSELs commodity trading system, helping farmers realize the best possible price for their agricultural commodities.
Castor seeds, being the largest traded commodity in the area, saw peak volumes at the ATMNE trading centre with NSELs maximum member trading limit of Rs. 10 lakh (Rs. 1 Million) a day being reached on 1st September 09. All the trades were placed by farmers from villages surrounding Kadi. The new trading limit for ATMNE was set at Rs. 25 lakh per day.
Castor Seeds
Recent trends show commodity prices across the country on the rise on account of deficit in rainfall. Anticipating such increase in prices, a lot of farmers and traders have been storing castor seeds in their homes and backyards. Castor seed prices touched a high of Rs. 552 per 20 kg on 21st August 09.
However heavy rainfall in Andhra Pradesh, one of the major castor seed producing states in India, resulted in concerns among farmers/traders who were holding on to huge stock of castor seed in anticipation of a price increase beyond Rs. 600 per 20 kg. Also as per the IMD, it now seems that next year’s castor seed crop will not be as poor as was being anticipated. To capture profits before likely price reduction, farmers have begun to sell their stock.
Trading Terminal
Last few days of transaction details are given below:
Date Amount traded at Kadi Rate
26/08/2009 152000 537
27/08/2009 120000 533
28/08/2009 772000 535
31/08/2009 985000 525
01/09/2009 1000000 520
Given the fact that arrival of castor seed at the Kadi mandi and at the ATMNE trading centre had dropped significantly during the last couple of months, the sudden spurt in trading activity over the last few days is a welcome change.
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Rajendra Kumar of ATMNE and Kshama Fernandes of IFMR Capital team, contributed to this post.
