Socio-economic modelsfor integrating the poor into large-scale

sweet sorghum feedstock supplychains in dry land India

Dr.K.P.C RaoPrincipal Scientist (VLS)

ICRISAT

In the Global Consultation on Pro-Poor Sweet Sorghum Development for Bio-Ethanol Production and Introduction to

Tropical Sugar Beet

Jointly Organized by

IFAD-FAO-ICRISAT At IFAD Head Quarters, Rome, 8-9 November, 2007

Outline of presentation

• Declining importance of grain sorghum in the rainy (kharif) season

• Re-launching of sorghum as a commercial crop • Promise of sweet sorghum as a feed stock• Factors holding promise to the commercialization of

sweet sorghum • Constraints to the popularization of sweet sorghum • Experience of sweet sorghum in Medak district during

rainy season of 2007• Economics of sweet sorghum under alternate

scenarios • Sensitivity analysis• Procurement models • Socio-economic models

Declining area under grain sorghum in rainy (kharif) season

The area under rainy (kharif) sorghum fell from

6.56 million ha in 1968-71 to 2.43 million ha in 2000-03 in India (63 per cent drop)

2.55 million ha in 1955-58 to 0.72 million ha in 1998-2001 in the state of Andhra Pradesh (72 per cent drop)

159 thousand ha in 1979-82 to 94 thousand ha in 1998-2001 in Medak district (41 per cent drop)

Costs and returns of sorghum in Mahabubnagar villages (Rs/ha)

Operations 2001-04 (average)

Land preparation 820

FYM/Compost 296

Seed and sowing 581

Fertilizer Application 558

Inter-culture 751

Weeding 116

Plant Protection 59

Irrigation 136

Bird scaring 35

Harvesting 477

Threshing 393

Marketing 101

Total variable costs 4323

Value of grain 3162

Value of fodder 1271

Gross returns 4433

Returns over variable costs 110

Percentage return to the cost 2.5%

Re-launching of sorghum as a commercial crop

• Re-positioning sorghum as a commercial crop rather than as a subsistence crop

• Provision of improved seeds, fertilizer and weedicide by the processor on credit terms to farmers

• Buy-back guarantee by the processor • Extension support through training, periodic visits and

technical advice • A decent return over variable cost of Rs.6000 per

hectare and a net profit of Rs.2500 per ha (after accounting for fixed costs)

• Long term and sustained partnership with the processor

Promise and performance of sweet sorghum

Location and condition Yield levels reported/expected

(tons of green stalk/ha @ 95 days age)

Cost per hectare (Rs)

Expected/actual returns over variable costs (Rs)

Research station 50 to 80

20,000 to 25,000

10,000 to 23,000

Potential yields on farmers fields with irrigation support 40 to 50

15,000 to 18,000

9,000 to 12,000

Potential yields on farmers fields under rainfed condition

25 to 30 10,000 to 12,000

5,000 to 6,000

Yields obtained during 2006 7.7 4,240 250

Yields observed during 2007 with timely procurement

20.0 10,000 2000

Yields observed during 2007 with delayed procurement

15.0 10,000 0

Factors holding promise to the success of sweet sorghum

• Hybrid varieties in the pipeline expected to yield 25 to 50 per cent higher in the future

• With the firming-up of crude oil prices, the price of petroleum products expected to go up

• Chance of higher prices of bio-ethanol leading to higher prices of sweet sorghum stalk

• Input supply on credit terms to motivate farmers

• Possibilities for decentralized crushing units

• Technological improvements in processing technology and economies of scale to bring down the cost of conversion of sorghum stalk in to bio-ethanol

Constraints to popularization of sweet sorghum

• A number of highly dispersed and poor farmers to be serviced

• Being a rainfed crop in the monsoon season, sowings likely to cluster around one or two dates

• Narrow sowing window of about a month

• Need to make very elaborate arrangements for transportation, crushing and processing

• Honoring the buy-back contracts and making timely payments with out any delays

• Need for excess capacity for crushing

• Highly labor intensive in cultivation and processing

Sweet sorghum growers and sample for evaluation study, 2007

Knowledge centre

Extension agency Area under sweet sorghum (ha)

Number of farmers

Sample size

Doulathabad Agricultural Associates of India (AAI)

324 482 120

Jogipet Rusni Distilleries Ltd 120 177 46

Sadhasivapet Rusni Distilleries Ltd 47 66 17

Jharasangam Rusni Distilleries Ltd 47 66 17

TOTAL 538 791 200

Data collection carried out from 15th October to 2nd November, 2007Data entry and analysis expected to be completed by 20th December, 2007The presentation is based on quick look at data, field visits and observations of the survey team

Experience of sweet sorghum during rainy season of 2007

• Rainfall was slightly short of normal rainfall but distribution was reasonably good for the rainfed crops

• About 538 ha area was sown with sweet sorghum variety, NTJ-2 by 791 farmers

• 75 per cent of the sweet sorghum growers were quite poor (small and medium sized farms – less than 4 ha)

• Nearly one half of the growers belonged to scheduled tribes, who are both socially and economically disadvantaged

• Nearly 50 per cent of the crop was on red soils, followed by black soils(30 per cent) and sandy soils(20 per cent)

• About 20 per cent was early sown (June 10-15); 60 per cent was sown in right time (June 26-30); 15 per cent was late sown (July 1-10); and 5 per cent was sown very late (after July 15th)

Contd.,

• Sole crop of sweet sorghum was sown in about 60 per cent of plots while it was inter-cropped with pigeon pea in the remaining 40 per cent plots

• Nearly 25 per cent of the farmers did hand weeding twice while another 50 per cent did it once

• Hand weeding was not done in the remaining 25 per cent plots. Top dressing of fertilizer was not done in about 15 per cent plots

• About 5 per cent plots were abandoned due to poor crop stand, pest incidence and flooding

• Thinning was done by about 50 per cent of the farmers • The best yields obtained were in the range of 30 to 35

tons (stalk) per ha while the poorest yields were as low as 8 to 10 tons per ha

Contd.,

• Had all the plots been harvested at the optimum age of 95 to 100 days, the farmers would have realized an average yield of about 20 tons per ha

• The farmers were generally happy with the out turn of stalk, but they had a very bad experience with the procurement of stalk on time

• Only about 20 per cent of the plots were harvested on time i.e., before the grain setting (95-105 days)

• Another 25 per cent of output was procured between 105 to 120 days

• The remaining 60 per cent was not harvested with in the age of 120 days

• A substantial fraction of the remaining crop was not harvested even by the age of 135 days

Contd.,

• The average yield came down to 15 tons per ha because of the delays in procurement

• Some farmers could harvest about 400 kg of grain per ha

• Only about 15 per cent farmers made profits. Another 20 per cent have just recovered the variable costs. Another 40 per cent would have recovered costs if the crop was harvested on time.

• Only 25 per cent would have incurred losses if the procurement was timely. But nearly 65 per cent ended up in losses

• 15 per cent of growers have favorable impression about the crop and are willing to grow it again

Contd.,

• 25 per cent of the farmers have some negative opinion about the crop while the remaining 60 per cent are hostile

• Challenges in large scale planning and management, technical and labor constraints, and operational bottlenecks delayed the procurement of the crop, degrading its quality

• The processor partially compensated the loss of farmers by raising the procurement price of grain from Rs.550 per 100 kg to Rs.600 and that of dry stalk from Rs.500 to Rs.600 per ton

• The processor sustained losses in recovering only 40 liters of ethanol per ton of stalk as against 55 liters per ton expected due to the poor quality of stalk received

Contd.,

• The processor also lost in weight of stalk due to the delay in processing

• A substantial part of the procured stalk was not processed due to low brix reading

• While the losses to processor were also quite high, the poor farmers lost considerably due to delay in procurement

• The whole procurement strategy needs a re-visit in the light of this experience

• It may be considered a teething trouble and future planning and implementation strategies have to be designed to avoid such bad experiences

Overview of Sweet sorghum

• Average yield of sweet sorghum stalks (green) at 95 days : 20 tons/ha

• Average juice yield per hectare: 6 tons (30% of stalk)

• Average sugar yield per hectare: 1 ton (0.05% of stalk)

• Ethanol yield per hectare: 800 liters (@ 40 lit per ton)

• Value of ethanol produced from one hectare of sweet sorghum at the factory gate: Rs. 17,600 (@ Rs.22 per lit)

Performance of sweet sorghum in 2007 under different scenarios

Condition of crop management and procurement

Yield(tons/

ha)

Variable cost Rs/ha

Return Rs/ha

Return over the variable cost

(and percentage return)

Return from the competing crop

Rs/ha

Rainfed, good management and timely procurement 30 12,000 18000 6000 (50.0%) 5000

Rainfed, indifferent management and timely procurement

20 9,000 12,000 3000 (33.3%) 4000

Rainfed, good management and delayed procurement 22 12,000 13,200 1,200 (10.0%) 5000

Rainfed, indifferent management and delayed procurement

15 9,000 9,000 0 (0.0%) 4000

Supported by irrigations, good management and timely procurement

35 13,500 21,000 7,500 (55.6%) 6000

Sensitivity analysis

• If the procurement price of stalk is raised to Rs.700 per ton, the margin of advantage due to sweet sorghum will move up to Rs.4000 per ha

• If the labor wages and other input costs go up by 10 per cent, the margin of advantage due to sweet sorghum will be reduced to zero per ha

• If better varieties and hybrids can raise the yield of stalk by 20 per cent, the margin of advantage due to sweet sorghum will move up to Rs.4500 per ha

• If there is a drought, depressing the yield of stalk by 30 per cent, the returns over variable costs from sweet sorghum will only be Rs.600 per ha

Crops competing with Sweet sorghum in Medak district (kharif)

Soil and condition

Crop Cost(Rs/ha)

Returns(Rs/ha)

Returns over variable cost (percentage return) (Rs/ha)

Red soil, Rainfed Maize 9000 14,000 5000 (55.5%)

Black soil, Rainfed Green Gram 3,500 6000 2, 500 (71.4%)

Red/Black soil, Irrigated Sugarcane 20,000 32,000 12,000 (60.0%)

Sandy soil, Rainfed Sorghum 6,000 7,500 1,500 (25.0%)

Mixed soils, Rainfed (good management and timely procurement)

Sweet sorghum 12,000 18,000 6000 (50.0%)

Procurement models

Decentralized procurement model • In dry land areas where sowing window is of limited

duration and clustering of sowings around one or two dates is to be expected, the processors have to plan for four decentralized crushing units and cold storage of juice extracted

• Each crushing unit with 20 crushers or three rotary crushers can service an area of 150 hectares

Centralized model • The processor may install 80 crushers or 12 rotary

crushers at the factory site and engage sufficient number of trucks to transport to service a total area of 600 hectares

Socio-economic models-1

Processor – crushing unit – grower model Processor establishes his own crushing units, each to

service 150 ha Each crushing unit to have 20 crushers or 3 rotary

crushers Growers bring the stalk to crushing unit and they will

be paid purchase price + transportation cost The crushing unit to have facilities for cold storage of

juice extracted or to convert it to jaggery Juice/jaggery will be taken to the factory site for further

processing Processor provides the technical support and supplies

the critical inputs

Socio-economic models -2 Processor – self-employed entrepreneur owning crushing

unit – grower model o The factory will assist self-employed entrepreneurs to

set-up crushing units o The factory will enter in to contracts with the

entrepreneurs for procurement of juice/jaggery at specified prices

o The entrepreneur will be responsible for managing the crushing unit

o The entrepreneur will enter in to contracts with farmers for supply of stalk at specified prices

o The entrepreneur will provide technical services, supply inputs and arrange transport for procurement of stalk

Socio-economic models -3

Farmers co-operative owning crushing unit with a contractual tie-up with the processor

Sweet sorghum growers organize themselves in to a co-operative society

The co-operative society establishes a crushing unit with the support of processor and banks

The co-operative society enters in to a contract with the processor for supply of a specified quantity of juice/jaggery at specified prices

The co-operative society provides inputs, technical services and transport for procurement of stalk from the farmers

The society buys the stalk at a minimum price and shares the profits with members after completing the operations

Socio-economic models -4

Village agent organizing production – crushing unit – processor

• Either the processor or self-employed entrepreneurs establish the crushing units for every 150 ha of proposed sweet sorghum area

• The crushing units engage an agent in the village to mobilize farmers to grow sweet sorghum

• The agent supplies inputs, provides extension support and organizes harvesting, transport and procurement

• The factory/entrepreneur pay a specified percentage of value of output procured to the agent

Rating of different socio-economic models (scale of 1 to 5)

Item Model-1 Model-2 Model-3 Model-4

Profitability to farmer 3 3 4 3

Risk to the farmer 2 3 4 2

Profitability to the middle man/agent

3 4 1 3

Profitability to processor 5 4 2 4

Efficiency of production 5 4 3 5

Sustainability of model 2 4 4 3

Complexity of the model 3 3 5 3

Thank You