Analyzing pro-poor value chains- Study of post-rainy season sorghum in Maharashtra state of India

Basavaraj G, Parthasarathy Rao P, Sachin More and Pokharkar V G

Workshop “Global value chains for food and nutrition security”25-26 September 2014,

Roma Tre University, Rome, Italy

Sincere thanks

Workshop organizers &

Manlio Rossi-Doria Centre for Economic & Social Research

Post-rainy season sorghum - A pro poor value chain

Research challenges

Objectives, study area, sample & methodology

Value chain mapping & its stages

Chain constraints

Upgrading options & strategies

Conclusions

Outline

Why post-rainy season sorghum a pro-poor value chain

A dryland cereal grown by small holders

Staple in household consumption basket- primarily in

southern and Western states of India

Consumed on farm – a basic food security crop for the

poorest people

A dual purpose crop- provides fodder and income

security

Ideal crop choice under limiting conditions of soil, water

and harsh environments- drought tolerant

A crop for nutritional security- high levels of iron and zinc

Low productivity level-starting point 0.6 – 8 ton/ha

Research challenges

0

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900

1000

1966

1969

1972

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2008

2011

Yie

ld k

g/h

a

Years

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3500

gen

-03

ago

-03

ma

r-0

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ott

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ma

g-0

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dic

-05

lug-0

6

feb

-07

set-

07

ap

r-08

no

v-0

8

giu

-09

gen

-10

ago

-10

ma

r-1

1

ott

-11

Rs/

l00

kg

200 % Low production with rising prices

Price-Demand Nexus – A paradox

0

1

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9

72-73 77-78 82-83 87-88 93-94 99-00 04-05

Fo

od

av

ailib

ilit

y(

millio

n t

on

s)

Year

Rabi sorghum Kharif sorghum

8,5 9,08,0

6,7

4,8

2,6 2,7 2,2

19,120,9

17,2

14,2

9,6

6,05,2

3,5

72-73 77-78 82-83 87-88 93-94 99-00 04-05 09-10

Qu

an

ity /

10

0 k

gs

Years

Urban Rural

52 % decline in rural households68 % decline in urban households

Declining demand

Increase in price

Purchasing power

Inferior good

Increase in fodder demand due to demand for milk & meat products

On the demand side

17,6

14,5

2,0

24,8

27,9

5,5

33,5 32,9

12,4

Maharashtra Karnataka Andhra Pradesh

So

rgh

um

co

ns

um

pti

on

(q

ty/ k

g / a

nn

um

)

States

High Middle Low

Rural householdsPrimarily staple for low and middle income people

The hypothesis Improving productivity will help in moving small holders from

subsistence to market orientation Increased production could trigger price collapse due to

inefficient markets or lack of demand

Hence understanding markets is important along with constraints along the value chain and options for up gradation

SpecificallyMap the value chain to understand

Production constraints & competitiveness

Functioning & efficiency of the chain

Factors limiting demand and options for upgradation of the value

chain

Evaluate conditions to improve farmer access to input and

output markets

ObjectiveDiscover and develop strategies for improving markets for sorghum

The SamplesProducers, traders, commission agents, middlemen processors and retailers across selected markets of Maharashtra

Study locations in Maharashtra

Adopted GIZ Valuelinks methodology

Sorghum

productionTrade

Final

use

Input

supply

Seed, Fertilizer, Credit

Grow, Harvest,

Threshing, Transport Process, Grade, Pack, Sell

Input service

providers Producers Traders Retailers

Transfo

rmation

Universities

BanksExtension

agentsAPMC’s

Operators of chain

Stage of chain

Value chain supportThe chain operators own the product at different stages of the value chain

The stages of the chain

So

rgh

um

pro

du

ction

Tra

de

Final

use

Inp

ut

sup

ply

Transfo

rmatio

n

Seed, fertilizer, credit, information providers

Grow, harvest, thresh & transport

Process, grade, pack & sell

Producers constraints in nutshellSorghum

production

Input

service

providers

Seed, Fertilizer, creditGrow, Harvest, Threshing,

Transport

Input service

providers Producers

Universities

Banks, Fertilizer suppliers Extension agents APMC’s University

Farmers used their own seed for sowing

due to non-availability of improved seeds

Farmers have to pay commission to get

credit

Farmers p

urch

ase fertilizer in b

lack

markets

Non availability of cleaning and grading

facilities and storage

Non availability of improved technologies (high

yielding & drought resistant)

Capacity building on agricultural practices &

post-harvest

Marketing costs vary between $ 1.5 to 2

Farmers travel between 13-35 kms

The flow of trade

Trade Final use

Process, Grade, Pack &

Sell

Traders Retailers

Transformation

APMC’s

Retail

Lack of storage facilities

Quality constraints (Poor and inferior

quality grain)

High transport and labor costs

Trader constraints

A summary of distributional shares of the chain

Sl.

No.Particulars

Fortnight ending prices of post-rainy season

sorghum for jute variety- Rs/100 kg

08.03.2013 15.03.2013 22.03.2013

1 Primary wholesale Price of sorghum 2100 2200 2200

2Charges borne by the producer seller per 100 kg of sorghum 65 65 65

3 Producer’s Price (1 – 2) 2035 2135 2135

4 a Charges borne by the trader at primary market per 100 kg of

sorghum123.1 123.1 123.1

4 b Charges borne by the wholesaler of secondary Market 90 98 98

5 Secondary Wholesale Price 2450 2375 2400

6 a Margin of Secondary Wholesaler [5 –{1+4(a)+4 b)}] 132 22 47

6 b Percentage to Consumer’s Price 5.17 0.86 1.74

7 Charges incurred by the Retailer 25 25 25

8 Retail Price at Secondary Market 2550 2550 2700

9 a Margin of Retailer [8–{7+5}] 75 150 275

9 b Percentage to Consumer’s Price 2.94 5.88 10.19

10 Producer’s share in Consumer’s Price (%) 82 86 81

Opportunities - Upgrading options

Process upgrading

Strengths

Strong demand for cleaned and graded produce

Small packets and branding

Consumers willingness to pay

Weakness

Producers lack awareness on cleaning & grading

Investment & infrastructure constraints

Opportunities

Small proportion of the produce is graded

Value addition can enhance incomes

Growing awareness of health benefits of nutri cereals

in urban areas

Threats

Farmers denied premium price premium by traders

Non–availability of graded produce throughout the

year

Government policies subsidizing fine cereals

Demand enhancing strategies

Process upgrading

Product upgrading

Opportunities - Upgrading options

Product upgrading

Strengths

Strong demand for value added products

Nutraceutical benefits of sorghum

Consumers willingness to pay

Weakness

Inability to procure supplies consistently (quality,

quantity, price )

Investors skepticism about investment

Opportunities

Increased employment & enhanced incomes

Product choice for consumers

Investment opportunities for chain operators

Threats

Business threats

Government policies subsidizing fine cereal

products

Chain sustainability

Demand enhancing strategies

Capacity enhancement of farmers in seed selection

Strengthening the input distribution system

Awareness creation both for producers & consumers

Provision of small scale machinery & infrastructure

Investment incentives for small scale processing

Public- Private partnerships

Linkages with existing schemes for chain improvement

Research & development on value addition

Market Strategies & Policy Initiatives

Changes in consumption habits due to

urbanization

Growing middle class & double incomes

Growing awareness about health

benefits of millets

Growing demand for ready-to-use

products & processed foods

Unavailability of RTU products of

sorghum unlike other cereals

Conclusions

Increased production of sorghum should be accompanied by process and product upgradation of the value chain To capture the:

ConclusionsContd..

Sorghum presently is given a subsidiary status in terms of

policies related to production, procurement and processing

Appropriate support will enable millions of small holders to

capture emerging opportunities

Hence

It’s critical to upgrade the sorghum chain to improve market

access, nutritional and food security of small holders

Acknowledgment

Harnessing Opportunities for Productivity Enhancement (HOPE)

Also, the farmers of two regions of Maharashtra & value chain operators for sharing information

Bill & Milenda Gates Foundation&

CRP2 PIM Legacy projectfor

Funding support on

Thank you for your

attention!