Monday, December 29, 2008

IITian a Farmer, Private Equity in Agri

1. Rediff has featured the story of R Madhavan, an alumnus of IITM, who has chosen to become farmer by means of a slideshow. He came to the notice at this year's Pan-IIT event. Couple of interesting points:

"They [Israel] treat each plant as an industry. A plant producing one kilo of capsicum is an industry that has 1 kilo output."

Drip irrigation is not only for saving water but it enhances your plant productivity. We commonly practice flood irrigation where they just pump water. As per the 2005 statistics, instead of 1 litre, we use 750 litres of water."

And the most important of all:
My target is a net income of Rs 100,000 per annum per acre. I have achieved up to Rs 50,000."

I think this is too ambitious goal and if it is possible, lot of farmers can get rich including my Father.

f I have 200 acres of land, I can go for food processing, etc. My next project is to lease land from the small farmers for agriculture. The village will prosper with food processing industries coming there. My yield will also be more with more land."

Morgan Stanley Private Equity (MSPE) has invested Rs 182 crore for a “significant minority stake” in Biotor Industries, an integrated manufacturer of castor oil and castor derivatives in the world. This may be the first deal in the country in agriculture sector.

Saturday, December 27, 2008

Flood tolerant rice and pomegranate

1. Scientists have identified a gene, called Sub1a, that confers a tolerance to submergence and precisely transferred that genetic information into popular rice varieties in South and Southeast Asia.
The new rice varieties passed field tests last month in Bangladesh and India. They will be made available within two years to smallholder farmers in flood-prone areas where seasonal rains have destroyed crops, according to University of California-Davis news releases.

2. Farmers in Punjab are moving to grow fruits like pomegranate instead of crops like wheat and cotton.

Debt relief

The Maharashtra government is set to announce another farm loan waiver package to cover all those who were excluded by the central government's waiver package. The latest package is likely to cost between Rs 5,000 crore and Rs 7,000 crore, and "benefit" 2.7 million farmers.

I think this is more for taking out political mileage than really benefiting the farmer. Here is the proof that these things do not work out. The front page story in businessline points out that "Nearly 40 per cent of these banks’ eligible farmer-borrowers, who own over 5 acres of agricultural land, are believed to have not coughed up even the first instalment towards one time settlement in order to avail themselves of the 25 per cent rebate on their loan overdues."

Under the Debt relief scheme-2008, the government gives 25 per cent rebate on the overdue loan amount if farmers bring in the balance 75 per cent for one-time settlement.

Monday, December 22, 2008

Commodity Future, Prahalad and water infrastructure

1. Do farmers really benefit from commodity future market. They may not do so directly but indirectly they get affected as brought forward by this article. The author also gives example of Mondragon Cooperatives of Spain to put emphasis on his point.

2. C.K. Prahalad discusses on opportunities in agriculture - "Till now the focus has been on pre-harvest elements like fertilisers and pesticides. But India has serious post-harvest issues of wastage, poor preservation of perishable products and inadequate access to markets. Companies like ITC, Amul, Reliance and Bharti are investing to address these issues. And it is benefiting farmers. Amul does not waste anything. You can do something similar in products as varied as shrimp, arecanut, coconut. But you can't simply replicate the Amul model, you will need to build separate structures."

3. Something that we need to do in India as well - implementation of integrated water, agriculture and energy programmes to enhance sustainable development.

Fight over Minimum Support Price

Minimum support prices fixed by the government continue to be a matter of debate for some right reasons.

Sugarcane farmers are asking for increase in the SMP (statutory minimum price) for sugarcane. Their logic: MSP of wheat and other crops has been increased by about 37% which that of sugarcane remains the same. Very valid point as the cost of cultivating has not remain same and has grown in more or less the same proportion to that of wheat and other crops.

MSP of cotton has also been in lime lite ever since they were declared just before the economic slowdown began. Private players are no longer ready to pay the MSP, which is very high according to them. CCI (Cotton Corporation of India) had to come in fill the gap in the supply-demand equation to keep the MSP alive. This is the reason why CCI has been able to procure lots of cotton.

Several people have raised their voice about the ways in which MSP prices ought to be fixed. Here is the link to the article in Businessline by Sharad Joshi.

My take: Its best to leave the prices to be fixed by market forces.

Tuesday, December 16, 2008

Rubber, GM debate and Rice intensification

1. Rubber plantations are taking strong roots in Maharashtra's coastal Konkan region, thanks to a salubrious climate, improved yield and the state's own initiative to popularise the cash crop. And the fact that several farmers from Kerala, the traditional home for rubber plantations, have invested in the business in the coastal districts is only helping the trend catch on further.

2. Update on GM debate: Environment ministry is for the GM crops like Bt Brinjal but as we noted down some days back, health minister is against any such moves.

Rice Intensification technology known as System of Rice Intensification (SRI) for having bigger yields with less seeds, water and fertilizers is gaining popularity in India. SRI is a novel approach to increase the rice production by constructively reducing the capital fertilizer, labour and water and promoting more abundance, diversity and activity of soil biota in and around the plant’’s rhizosphere.

Gold Rush, Vertical Farming and Bt corn

1. Rich countries and companies are eying land in poorer countries as an investment in future for food security. Some poor countries are happy to trade it with other desirable options like dollar and oil. More details here.

2. This article discusses about rooftop farming and vertical farming. Rooftop farming is nothing but planting the crops on the rooftop. Though it sounds very simple, it is not so. Check out this company called SkyVegetables. Vertical farming was coined by Dickson Despommier, an environmental health sciences professor at Columbia University. His idea is to grow and harvest food in multistory structures specifically designed for this purpose. Though it is an interesting idea, but an expensive solution.

3. Monsanto sees India adopting bt corn in five years.

Saturday, December 13, 2008

Organic Farming and GM debate (again)

1. Some interesting things happening in organic space. "Lalbhai Group’s flagship Arvind and State Bank of India are set to cement a relationship later this month by signing a memorandum of understanding that will link over a thousand farmers in Vidarbha region’s Akola district to a demand-driven supply chain and an assured cash flow. The company buys back cotton at a 30% premium to conventional cotton varieties such as Bt and hybrid, and uses it to produce organic denim for export to Frankfurt." Details here.

As posted earlier on this blog, there has been lot of interests by corporates like Pepsi, RCF to get into contract farming. This is a kind of win-win situation for both the farmers and the corporates. The former get to sell their produce at higher prices without paying a "rip" to the middleman and the later get the supply of raw material without much hassles.

2. Union Minister for Health Anbumani Ramadoss has again touched the controversial topic of GM food. He said he will oppose introduction of such a variety without conducting proper tests.

Crop insurance, Debt waiver

1. Have you ever heard about Agriculture insurance company (AIC). It was set up to dispense insurance protection over agriculture and allied activities. Despite having such an organization in our country, crop insurance is rarely heard. There is hardly any effort to spread the awareness about various crop insurance schemes despite having so many rural banks, agriculture institutions and rural-based economy. This article list down some recommendations to increase the awareness and strengthen the agri-insurance.

2. Our ex-finance minister had given a generous 72,000 crore farm loan waiver in the union budget. This brought lot of happiness among the farmers and will probably fetch him some extra votes in the next election. However, he forgot, or pretended to ignore a fundamental problem. After giving this waiver, what will be the incentive for the profit-motivated banks to give fresh loans to farmers. And this is what farmers are facing today - non-availability of fresh loans. This story discusses this problem in detail.

Sunday, December 7, 2008

Farm profitability and Olives

1. ET carries an article about profitability in farm sector.

2. Businessline carries an interesting story on Olives from Italy.

Tuesday, December 2, 2008

Slowdown, Targeting farmer

Slowdown has becoming a buzzword for lunch discussions nowadays. Its difficult to find any newspaper front page without a mention or hint towards this global economic turmoil. However, for rural India, whose dependence is on agriculture, global downturn hardly matters. Although it may have some impact with a lag (eg. textile industry suffering, cotton prices falling and so on), but the relative difference is not much. And so companies are targeting rural India - as this article in livemint says. "due to its primary dependence on domestic consumption rather than exports, rural India would be even more insulated, given that almost 60% of its households are dependent on agriculture, where fortunes fluctuate more on the basis of vagaries of the monsoon than those of the Sensex or Lehman Brothers and AIG! Even the increasing spiral of inflation, with its direct impact on prices of vegetables, would indeed benefit the farmer, fetching him a better price for his produce."

Not quite true as I mentioned earlier. The prices are falling and the effect goes to source i.e. agricultural commodities. Government is already finding it difficult to maintain the MSPs. There is another interesting article about how government meddling is creating the slowdown in the agricultural sector. The first few lines have got some sense of humour, but sadly it is true partially - " How will Indian agribusiness fare over the next six months? The answer lies not in demand-supply, volatility in international markets, credit supply or weather. It all depends of sarkari mood".