Agricultural Markets and Risks in Asia:

Challenges to Manage both for Dryland Cereals & Pulses

KV Raju, Ranjit Kumar, D Kumara Charyulu, V SurjitPolicy and Impact UnitResearch Program- Asia Region

Asia Regional Planning Meeting 4-5th May, 2016CF Bentley Conference Room, ICRISAT, Patancheru

Context

Challenge:Consistently improving farm income for the smallholders growing dryland cereals & pulses

• In Asia, steady population growth and

rising per capita incomes more demand for protein, less carb…

• Besides technologies, markets and other risks factors drive dryland cereals and pulses.

• In real terms, prices for all food items are expected to decline in the long run, … (intensification high agri-output)

(Hazell and Wood, 2007; OECD-FAO, 2015)

ISSUES: Declining demand for dryland

cereals crops loosing grounds…

Demand for pulses rising, but acreage allocation not encouraging…

Imperfect market smallholders not getting benefits

Huge production, market and price risk for SMFs

Volatility of farm incomes for DC & GL farmers on the rise & profit margin shrinking

WH

Y

Sorghum

• Production in Asia declining by 2.26% annually.

Asia (TE 2014-15)Total area: 7.8 mhaTotal prodn: 9.6 mt

0

100

200

300

400Index of Sorghum Area (1995 area =100)

Asia Bangladesh China

India Myanmar Pakistan

0

50

100

150

200

250

300

350

400

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Index of Millets Area (1995 area = 100)

Asia Bangladesh ChinaIndia Myanmar NepalPakistan

Millets

Asia (TE 2014-15)Total area: 11.0 mhaTotal prodn: 13.9 mt

• India 80% of total millets prodn in Asia.

• Total production stagnant

Pulses

0

50

100

150

200

250

300

Index of Area under Pulses (1995=100)

Asia Bangladesh China India

Myanmar Nepal Pakistan Sri Lanka

Area: TE 2014/15Asia- 41.2 mhaIndia- 28.3 mhaMyanmar- 3.8 mhaChina- 2.9 mha

Production in Asia: TE 2014/15

41.2 million tonnes

0

20

40

60

80

100

120

140

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

19

75

19

77

19

79

19

81

19

83

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13 A

sia

Ind

ex (

Pro

dn

19

95

=10

0)

Share in total pulses production in Asia

Bangladesh China IndiaMyanmar Pakistan NepalAsia- Index

• Myanmar emerged as 2nd

largest pulses producer in Asia.

• Pulses prodn ↑ by 2.5% p.a. in Asia (IND, MYN, NPL)

Sorghum

Millets

Creating new demand ???e.g. multigrain products, nutri-cereals

0

50

100

150

200

250

2005 2006 2007 2008 2009 2010 2011 2012 2013

INDIA

Net export ('000 t)

-400

-200

0

200

2005 2006 2007 2008 2009 2010 2011 2012 2013

CHINA

Millet Sorghum-1180.7

Domestic demandExport demand

Pulses Meeting growing demands

-4000

-3000

-2000

-1000

0

1000

2000

2005 2006 2007 2008 2009 2010 2011 2012 2013

Net export of pulses ('000 t)

China Bangladesh India Myanmar Pakistan

Pulses imports growing, despite good production.

Area expansion is limited

For Myanmar, huge dependence on export to single country big risk

CRP-PIM Window 1-2 activityCluster 3.3: Interventions to Improve Value ChainsActivity title: Measuring Post-Harvest Losses of Select Pulses in South Asia and Options For Remediation

Maharashtra Andhra Pradesh

Pigeon pea (PP)

Chick pea (CP)

2 districts 2 districts

Villages – 16 PP farmers – 250CP farmers - 250Traders - 20Dal mills - 5Warehouses – 10Wholesalers - 10Retailers - 20APMC mandi - 4

• Understanding pulses value chain• Various constraints and risks faced by the farmers• Policy and institutional gaps• Options for interventions and feedback for innovations

WH

AT

Production risk

Weather- less/more rain, untimely rain

Pests & disease-input dealers driven solutions??

Technology-knowledge gap ???

Input market-quality ???

Political measures-land-based benefit schemes (large section out)

0

20

40

60

80

100

Prakasham Anantpur Mahbubnagar

Yield instability, % (1993-2004)

Sorghum P Millet Maize F Millet CP PP Cotton

Source: Kumara (2007)

Area allocation to a crop depends more on market signal (demand/price), than the technology alone.

26 23 29 24

70 5580

61 66 62

59 4955 60

29 4520

38 29 3615 28 17 15

1 0 1 5 2

0

100

TE2001

TE2010

TE2001

TE2010

TE2001

TE2010

TE2001

TE2010

TE2001

TE2010

Chickpea Pigeonpea Blackgram Greengram Lentil

%age of pulses growing districts by crop yield in India

>1 t/ha 0.5 to 1 t/ha <0.5 t/ha

Yield of all pulse crops <1 t/ha in majority of pulses growing districts.

WH

AT

Who is driving pulses value chain?

Farmers

Retailers

Commission agents

Fertilizer

Seed

Irrigation

Rainfall

Plant protection

Harvesting

Threshing

Own/ Fellow farmers (80-90%)

Mach.

labour

100%

Human

Labour

>95%

Mandi(M/LF)

Village traders/ Local market

(SMF)

Cold storage/

Warehouse(M/LF)

Wholesalers(Grain/Processed)

Big cities

Import

ConsumersFarmers’ group

PRICEVARIETY

WH

AT

Dal mills

Flow of inputsUncertainty in inputsFlow of commodity

Flow of information

Large traders(M/LF)

Quality assessed by experience of traders

Traders buy & sell produce, not Govt. agency

APMC ensures timely payment to farmers by traders

Markets

Grading/ cleaning done

by traders

Mostly large/Med

farmers keep stocks in

warehouse

SMF sell the produce directly after threshing

No objectivity in quality assessment

Farmers need to bring the produce to mandi

No agency to ensure MSP

SMF can’t keep small quantity in warehouse

Price risk

Price at Kurnool mandi80% lower than that at Hyderabad B2B market

0

1000

2000

3000

4000

5000

6000

29

-Fe

b0

2-M

ar0

4-M

ar0

6-M

ar0

8-M

ar1

0-M

ar1

2-M

ar1

4-M

ar1

6-M

ar1

8-M

ar2

0-M

ar2

2-M

ar2

4-M

ar2

6-M

ar2

8-M

ar3

0-M

ar0

1-A

pr

03

-Ap

r0

5-A

pr

07

-Ap

r0

9-A

pr

11

-Ap

r1

3-A

pr

15

-Ap

r1

7-A

pr

19

-Ap

r2

1-A

pr

23

-Ap

r2

5-A

pr

27

-Ap

r2

9-A

pr

(Rs

pe

r 1

00

kg)

Chickpea price at Kurnool mandi

Min Max MSP

0

2000

4000

6000

8000

10000

12000

29

-Feb

02

-Mar

04

-Mar

06

-Mar

08

-Mar

10

-Mar

12

-Mar

14

-Mar

16

-Mar

18

-Mar

20

-Mar

22

-Mar

24

-Mar

26

-Mar

28

-Mar

30-M

ar01

-Ap

r03

-Ap

r05

-Ap

r07

-Ap

r09

-Ap

r11

-Ap

r13

-Ap

r15

-Ap

r17

-Ap

r19

-Ap

r21

-Ap

r23

-Ap

r25

-Ap

r27

-Ap

r29

-Ap

r

(Rs

per

10

0kg

)

Pigeonpea price

Investigations needed ???(Who, Where, Why, How)

o Characteristics of farmers selling produce at lower than MSPo Small/marginal/large?o How many?o Any particular region/ random?

o What %age of their produce fetched lower price?o Total produce or just small

portion?

o What was the reason?

o Different variety?o Poor grain quality?o Uncleaned stock?o Poor bargaining power?o …

How to control/ manage such shock?

What is the mechanism to cover risk of value erosion?

Risk Factors

Yield volatility: Improved variety playing important role. Farmers demand such variety which can performmuch better than existing one in all conditions.

Price volatility: Consistent price policy, with enabling factors (markets, procurement)

Resource scarcity: water, fertilizers, plant protection chemicals

Policy changes: domestic as well as global

Demand volatility: Fast changing demand add additional risk of value erosion. Value chain actors to create demand.

Market acceptability of new product: e.g. Dal millers prefer Maruti (pigeon pea) and JG-11 (chick pea) due to easy removal of skin. Other variety fetch less price.

HO

W

Volatility in agriculture is expected to increase - farm, market and price

Happy farmers

Improved technology

(availability & access)

3 is

Infrastructure,Institutions, Information

Enabling policy

environment

(Insurance, price, etc.)

Growing market

demand

Heavily subsidized rice and wheat (PDS) in SAT India eroded competitiveness of rainfed cereal crops and altered market price ratios.

In Myanmar, domestic marketing reform with export liberalisation in 1987-88, led to area expansion under pulses by 247% in 1990s.

Rural Godown Scheme(2010) backed with Pledge financing/WRhelped chickpea growers in realising better price.

HO

W

Markets & Risk- Way forward

Short duration and wilt resistant cultivars, multi-crop seed-drillers & threshers, new age PP chemicals, etc.

INDIA: The National Agriculture Market (NAM)/ E-Mandi

HO

W

Ganguli (2012)

Mobile assayer for quality check in Gulbarga pigeon pea market

Challenges for SMF may continue???

Need: - decentralise market at

farmers’ doorstep- standardized process - transparent pricing

Crop Insurance

HO

W

Comprehensive Crop Insurance scheme (CCIS) launched in 1985.

National Agricultural Insurance Scheme (NAIS) launched in 1999.

Prime Minister Crop Insurance Scheme(PMFBY) launched in 2016: Farmers pay only-2% of the premium for Kharif FG/oilseed crops;1.5% for rabi FG/oilseed crops5% for horticultural & commercial crops

Insurance cover for yield loss of standing crops, prevented sowing/ planting risk, post harvest losses and localised risks, including inundation.

Challenges to implement:- Increasing coverage from

current level of 23%(Compulsory with purchase of new seed??)

- Assessing individual crop loss(Application of technology to assess the crop loss at plot level engaging

local body)

- Inclusion of marginal/ sharecroppers and non-loanee farmers

(Digitization of plot and insurance based on plot-ID, rather than ownership)

- Weather-based insurance (lack of technology & service provider)

Markets & Risk Managing both

2. New market structure

(e.g. mobile seasonal market, backed with

warehousing)

4. Plot-wise crop insurance

(using technology, apps, information flow,

etc.)

3. Linking farmers to consumers

(FPO/FIG- Processing & retailing, new

consumers in rural area- PDS, Mid-Day)

1. Assured & transparent

price

(measured quality)

Post-harvest technology:o Mid-size

processing unit

o Storage & Warehousing

Production technology: Varieties- for

all weather Plant

protection Small-size

harvester

Institutions: Seed system Farmers’ group Contract

farming

NRM: In situ

rainwater harvesting

Residue management

HO

W

Future Work Plan-

Policy framework and operational guidelines for formation & promotion of FPOs in Andhra Pradesh on PPP model (Ongoing activity)

Brief Strategy document for DCs and GLs- Country level and State level (for India)

Already prepared 2-pagers Strategy briefs for Bangladesh, Myanmar, Nepal and, Indian states of Rajasthan, Andhra Pradesh

detailed strategic action plans will be prepared, subject to requests from states/countries/ donors.

Integrated value chain analysis and PPP options

ICT-based market development strategy like e-market in India under PPP framework

Risk mitigation framework & strategy for smallholders

Identifying policy gaps and developing new focus area-Framework and guidelines

Thank you!

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