New-age farmers say no to middlemen, yes to profits

New-age farmers say no to middlemen, yes to profits
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First Published: Wed, Jul 08 2009. 01 15 AM IST

Supply chain: Organic produce being sold at the Besant Nagar beach in Chennai, Tamil Nadu. Farmers in smaller towns, too, are adopting newer supply chain models to their advantage. Ganesh K / Mint
Supply chain: Organic produce being sold at the Besant Nagar beach in Chennai, Tamil Nadu. Farmers in smaller towns, too, are adopting newer supply chain models to their advantage. Ganesh K / Mint
Updated: Wed, Jul 08 2009. 10 15 AM IST
Chennai: Every Saturday, S. Sekhar, a 69-year-old paints businessman-turned-organic farmer, travels in his sports utility vehicle up to 100km out of Chennai to pick bundles of spinach and other greens from his two plots.
On Sundays, his son S. Shyam takes the produce to Chennai’s Besant Nagar beach in his car and, from the parking lot, sells the greens directly to joggers and early walkers. No middlemen for them.
Supply chain: Organic produce being sold at the Besant Nagar beach in Chennai, Tamil Nadu. Farmers in smaller towns, too, are adopting newer supply chain models to their advantage. Ganesh K / Mint
“Dealers offered prices that had no correlation to costs and whatever cushion we had created by switching to organic farming was being squeezed by rising labour costs,” said Sekhar. His son, a businessman, is working at opening their first retail outlet in the coming weeks.
Close to half of India’s land area is fertile enough for agriculture compared with less than a quarter in China and the US, according to the US Central Intelligence Agency’s factbook. Yet, 40% of Indian farmers want to quit agriculture, a 2005 study by the India’s agriculture ministry shows.
“The whole sustainable profitability of this market is a myth,” said Ireena Vittal, a partner at consulting firm McKinsey and Co. “Most of our farmers are still producing what they have been historically producing, while consumption in the front end is changing.”
Despite subsidies, farmers continue to struggle with the risks of fluctuating pesticide and fertilizer prices, inadequate irrigation facilities, erratic power supply and unpredictable monsoons. They also have no sight of the final consumer because of the long chain of middlemen, Vittal said.
New-age businessmen or professionals-turned-farmers such as Sekhar are now knocking directly at consumers’ doors, including corporate campuses for bulk sales, and some are looking at the tourism business via farm stays.
“Farming is like the stock market,” said Vijay Prabhu, a 35-year-old Ooty-based lawyer who started farming in the Nilgiri hills 10 years ago. “So you can suddenly have a big bounty or you can really lose your pants.”
Prabhu, too, hopes to set up a shop and sell straight to consumers, avoiding wholesalers and other distributors. But he estimates he has to produce five times his current output to be able to offer stock through the year.
While he expands his existing 25 acres and gets his 1,000 sq. m greenhouse ready to grow vegetables even in the frost-prone months of January and February, he has reduced cultivation of basic and price-volatile produce such as carrots, potatoes and cabbage by 65% to focus on more profitable produce such as zucchini, lettuce and red cabbage. He also started a farm-stay business in 2006 to stabilize revenues.
Sekhar, meanwhile, is trying to grow and sell 2,000 bundles of greens a week in about three months. That, he expects, will help him cover the monthly costs at his 25- and 100-acre farms and start making a profit. He also expects a majority of the 3,000 mango trees in his farms, now in their fourth year, to bear fruit next year and add to his revenues. Sekhar declined to disclose the costs or estimated additional profits.
His son Shyam currently sells about 200 bunches of greens including spinach as well as packaged rice, cereals and turmeric powder—processed produce from his farm—every Sunday. He sells the organic greens for Rs10 a bunch—twice the price at stores. By 7am, the leafy bundles are sold.
“It was an act of desperation,” said Shyam, who takes care of his father’s paints company, Western India Paint and Color Co. Ltd, in addition to managing the marketing end of their agriculture business, Org Chards. “My survival strategy is to process my produce and sell it at a higher price.”
Three years ago, a dealer who wanted to buy 1 tonne of paddy from Shyam was willing to pay only 60% of the cost. Unwilling to sell at a loss, Shyam converted the paddy into rice at some additional cost and sold it at a 25% profit by approaching prospective consumers for his organic produce at the beach.
Now, Shyam also delivers at homes and has increased his product basket by sourcing wheat from another organic farmer in Karnataka. He is targeting a 200% jump in monthly revenues to make his 600 sq. ft. store—coming up at T-Nagar, a busy shopping area in Chennai—viable in a couple of months. In June, he chose another spot—a local park—to reach new consumers.
“The important thing is where is the market?” McKinsey’s Vittal said. “The farmer needs to find his market and establish his market linkages.”
Farmers in smaller towns too are adopting newer supply chain models to their advantage. D. Sunderapandian, a management graduate with a specialization in finance who turned to farming a year ago, will soon supply 2,000 tender coconuts a week to Frigoscan Foodtech Pvt. Ltd, an organic food marketer and consultancy, from his family’s 10 acre coconut farm in Dindigul district—500km from Chennai.
Frigoscan will use the coconuts for the coconut water vending machine it markets—one of which is located at technology company Infosys Technologies Ltd’s campus 40km from Chennai.
“My father steered clear of agriculture because he found a cushy and stable government job,” Sunderapandian said in Tamil. When Sunderapandian got into the farming business a year ago, he hoped to make it profitable by avoiding middlemen. He struck a deal with Frigoscan to supply the coconuts at Rs10 a piece, almost double the rate dealers in his town would give him.
“Normally, the farmer gets a raw deal because of the middlemen,” said Subramannya Kadandale, an associate in charge of facilities at the Infosys campus that has about 7,500 people. “Here the bulk of the revenues go to the farmer and that appealed to us.”
anupama.c@livemint.com
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First Published: Wed, Jul 08 2009. 01 15 AM IST