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AGRIBUSINESS (An Optional Course)

1.0 Credit Facilitator: Prof. S.R.Asokan Room 213 Extn: 627 Email: asokan@irma.ac.in Background Till a century or so ago farming was basically a subsistence activity and was self contained. Farmers basically produced their own inputs such as seed, manure etc farm tools were supplied by local artisans and the production was largely consumed on the farm or in the village. The small surplus that might remain was collected by itinerant traders. Technology especially after World War II had revolutionized agriculture in many ways. Inputs such as seed and fertilizer which the farmer himself was producing had become specialized activities. The modern inputs and improved farming practices increased production manifold. The huge surplus began to be shipped to distant markets. This has spawned a range of activities away from farms such as processing, storage, transportation and marketing giving rise to functional specialization and segmented organizational handling. For each of these activities there are supporting activities such as finance, research and development and others such as government policies. Further, the actions of one entity in the chain affect other entities. If the consumers’ preferences are not incorporated in processing it not only affects the processor but also the wholesaler and retailer of the products. However, these activities had no center for control and the firms separately perform the various functions and make their decisions. Price is the coordinating mechanism across the structure and that influences the behaviour of various components. However, price and market mechanism alone is not sufficient to coordinate the various activities when a firm is offering a differentiated product to the consumers. So other governance structures apart from price and market mechanisms have emerged in order to coordinate the actions of the various players in the agribusiness sub sectors effectively. Agribusiness Agribusiness sector is a 'chain' of industries directly and indirectly involved in the production, transformation and provision of food, fibre, chemicals and pharmaceutical products. Agribusiness encompasses all activities that are relevant to the eventual production, transformation / value adding, differentiation, distribution and retailing of food, fibre and associated products. The question then is, what to manage in the various sub sectors? Is it marketing, Is It finance or human resources? Participants have exposure to these subjects in their first year. What is the gap in their learning from other subjects which could impart some additional knowledge or skill relevant in the context of agribusiness? Agribusiness system consists of three broad subsystems. They are the input supply sector, farm sector and the processing and distribution sector. It covers all the institutions and arrangement that coordinate various activities in each of the subsystem. With the rising income and changes in consumer preferences agribusiness firms are trying to cater to these consumer needs. Depending on the target segment the firms are organizing their governance structure. Instead of spot market dealings which are fraught with risk and uncertainty the firms are increasingly resorting to managed coordination that is, building relationship along the supply chain through non market mechanisms. Such governance structures have

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their own set of challenges. It is, therefore, pertinent to have an understanding of the entire picture in which the firm operates in order to formulate appropriate strategy to perform better. The course is covered in four modules. Module 1 Introduction to Procurement Environment Module 2 Procurement Methods Module 3 Food Retailing Module 4 Agricultural Inputs Objective of the course The overall objective of the course is to provide an understanding of agribusiness environment which impact the management decisions. More specifically the emphasis would be on procurement systems of agricultural commodities under different market structures and marketing of processed products at the firm level. Since agricultural inputs are part of the supply chain which impacts the products agribusiness firms provide their target segment the input industry is also covered in the course. Pedagogy As there are no standard text books available in the market, the teaching materials are collated from various sources. These materials basically cover strategic management, supply chain, risk management etc. Case materials available in different sources pertinent to agribusiness are used to further sharpen the understanding. Assignments and a Project work form part of the learning. Evaluation Components Percent Assignments (2-3) 30 Mid and End term Exam 40 Project 20 Class Participation 10

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Course Session Plan Session Topic Material

Module 1 Introduction and Environment

1 Introduction to Agribusiness

Agribusiness: A Prelude Procurement and Competitive Strategy

2 Agribusiness Environment Procurement Environment for Agri Raw Materials Risk and Risk Management

3 Procurement and Logistics

Discuss From Supply Chain to Customer Value-The McDonald’s Way Read Supply Chain Management-

4 Global Environment for Agribusiness

Discuss : Honey Case Read The WTO Agreement on Agriculture Global Gap

5 Food Safety

Discuss : Cakewalk Read Food Safety and Consumers’ Concerns Food Regulations in India

Module 2 Procurement Methods

Demand Forecasting, Planning and Scheduling

Discuss Varietal Planning, Production and Harvest Scheduling Practices in the Indian Sugar Industry Read Demand Forecasting Production Planning

6 Quality Management in the Supply Chain

Discuss Case will be distributed Read Quality in Procurement

7 Procurement Methods Spot Markets

Read Agricultural marketing Missing Chain ; E Mandis: Market of the future

8 Contract Farming

Discuss Introducing Contract Farming for Gherkins Read Role of Contract Farming in Agro-Processing Ryot Act

9 Procurement Methods e- platform The ITC e Choupal Story

Submission of Assignment

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Session Topic Material

10 Vertical Integration

Discuss Amul Speeds up to Drive Past Retailers Biyani Shelves Cadbury products on Pricing Tiff Case of Broiler Chickens Read When and When not to Vertically Integrate

11 Case Discussion (will be distributed)

12, 13 Futures Market Read : Derivatives Future Trading and Procurement

14 Community Based Organisations

Discuss Girish Mohan’s Dilemma and Pepsi

15 Guest Lecture Mid Term Examination

16 Warehousing 17 Case Discussion (will be distributed)

Module 3 Food Retailing

18 Food Retailing

Discuss Case will be Distributed Read Retail Success and Key Drivers Organised Food Retailing: A Blessing or a Curse? FMCG vs Private Labels; Foreign Retail Investors

19 Cash and Carry Submission of Assignment Status of Organised Retail in India

Franchising Read Franchising The Entry Route; Franchise in India

Module 4 Agricultural Inputs

20-26 Policy and Market Environment for Inputs

Agricultural Input Industry Seed industry in India Fertilizer Industry in India Indian Pesticide Industry Agricultural Machinery Case will be Distributed

27 Channel management

Discuss Kisan Bazaar Read Channel Management in Agricultural Input Industry

28, 29 Presentation of Reports 30 Feedback and Review

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Form Groups of 5 for assignment and project work. In addition to the assignment in the schedule short assignment will be given from time to time based on the progress. Important web pages that may be referred from time to time. 1 http://agmarknet.nic.in/ 2 ministry of food processing : http://mofpi.nic.in/ 3 Food safety and Standards Authority: http://www.fssai.gov.in/ 4 Apeda: http://www.apeda.gov.in/apedawebsite/index.asp 5 National Horticultural Mission: http://nhm.nic.in/ 6. National Commodity and Derivatives Exchange: http://www.ncdex.com/Aboutus/profile.aspx 7. Multi Commodity Exchange : http://www.mcxindia.com/ 8 Directorate of Economics and Statistics, Ministry of Agriculture and Cooperation Govt of India http://eands.dacnet.nic.in/Default.htm 9. World Trade Organisation : http://www.wto.org/ 10. Codex Alimentarius Commission: http://www.codexalimentarius.org/ Besides you may have to refer to the web pages of different agropocessng companies, input firms and modern retail.