The Rise of Agriculture

The Economist has got an interesting story on the happenings in the world agriculture market recently. Prices of agricultural produce are rising despite the economic crisis. Part of it is because of shift in use of agricultural land for fuel instead of food. But more prominent reason is the demand form poorer countries. People are consuming more and better nourished, however they are far behind as compared to developed countries.

Lot of companies are milking profits and planning investments considering this boom in agriculture sector. BASF, one of the largest producers of agrochemicals, saw 9% growth last year in agricultural sales, including 16% growth in Asia. The competitors like Agrium, CF Industries, Bunge and Syngenta are also prospering. Monsanto is celebrating the glory of genetically modified seeds.

Investment is also growing. Terra Firma, a private-equity firm based in London, announced it would buy 90% of Consolidated Pastoral Company, the vast Australian cattle holdings of the Packer family, which encompass 5m hectares (12m acres) of land. Nufarm, an Australian agrochemical maker, won approval for its acquisition of AH Marks, one of Britain’s oldest chemical companies, which has a valuable portfolio of herbicides. Last year COFCO, China’s state-controlled food conglomerate, bought 5% of Smithfield, the world’s largest pork producer. Al Qudra, an Abu Dhabi-based investment company, said it had bought big tracts of farmland in Morocco and Algeria, and was closing in on purchases in Pakistan, Syria, Vietnam, Thailand, Sudan and India. China Agri-Industries, a subsidiary of COFCO, established a partnership with Wilmar, the world’s largest trader in palm oil. Landkom, listed on London’s AIM market, and Black Earth Farming, listed in Stockholm, have each made big investments in farming in Ukraine. And reports are circulating in China about local investors buying 50,000 hectares of farmland in Argentina, and considering other investments in Argentina and Brazil.

I am sure stock analysts (in India as well) will soon hailing agriculture as next sunrise sector.

ITC's eChaupal, Sour Grapes

1. A brief case study on ITC's eChaupal. Started in year 2000, it serves more that 50,000 villages through its 7000 kiosks. Each kiosk costs around 1.5 Lakhs and includes a VSAT connection, a PC and a printer. e-Choupal facilitates farmers with the latest weather reports and best farming practices. Additionally, e-Choupal offers various farm-critical services, such as soil and water-testing for the betterment of yields. The softwares have local language support and an easy user interface.

2. Economic cycle is showing its impact on the grape farmers of Maharashtra. The wine consumption has fallen down and with it the demand for grapes. Ironically, farmers shifted to growing wine fruit varietals based from table grapes on projected wine industry demand.

Farm Income Commision, Politician speaks and Zameen Organic

1. M S Swaminathan, who needs no introduction on this blog, talks about his expectations from the regular budget. He suggests that all political parties commit to establishing a Farm Income Commission which can go into the totality of the income of farmers from crop and animal husbandry, fisheries, agro-forestry and agro-processing, so as to ensure a minimum take home income to farmers. He also emphasizes on the need for ensuring minimum support price not only for wheat and rice but for a wide range of millets, pulses, oil seeds and tuber crops. Further provision needs to be made for establishing a national grid of warehouses for grains and cold storage structures for perishable commodities. The prevailing mismatch between production and post-harvest technologies should be ended.


2. Sharad Pawar's column on commodityonline. Sounds like a pre-election campaign.

3. An interesting story on Zameen Organic, a farmer-owned private limited organization aimed at closer collaboration between farmers. Zameen Organic is a pioneering marketing company for Fair Trade, Organic and Pesticide Free cotton in India. They have partnered with Yes Bank to ensure credit flow for their initiatives. The link of their website: Zameen Organic.

Agri Stocks and Bio-Valley

1. With world economy going for a toss and Indian economy performing not as expected, stock market analysts are looking at rural customers as the light in the tunnel. The disposable income of rural India has been on uphill in the past decade. With agricultural sops in the interim budget, stocks of companies in agriculture sector have already started showing the movements (Read: Agri stocks rise on FM focus on agriculture). This article in business-standard also draws that in times of the prevailing uncertainty, it is better to invest in companies catering to the rural market. Detailed analysis of companies like Airtel, SBI, Jain Irrigation, Rallis, Hero Honda, HUL and Punjab Tractors are covered.

However, there is a catch: The improvement in the living standard of rural India has been mainly because of increase in price of agricultural commodities. Monsoon has also been very merciful. Falling commodity prices will definitely have an impact of rural incomes which will be seen after some time with a time lag. And let us pray that monsoon carry on with its mercy for Indian farmers who very much depend on it.

2. Well-known agriculture scientist Dr M S Swaminathan called for the creation of a Bio-Valley on the lines of the Silicon Valley to help India speed up the Second Green Revolution in order to remove hunger and increase the contribution of agriculture to GDP to over 25% and create huge agricultural employment. The proposed Bio-Valley should create a perfect balance between organic farming and green agriculture in an absolutely integrated manner in which genetically modified (GM) crops should be discouraged in a proportionate manner.

Barley, Interest rates

1. Barley, a key ingredient for brewing beer promises to be a big opportunity to the farmers in Rajasthan. Companies like Pepsico and SABmiller are partnering with farmers for the supply of barley.

PepsiCo had signed a three-year memorandum of understanding (MoU) with more than 1,200 farmers from Sriganganagar and Hanumangarh districts of Rajasthan to produce high yielding malt barley for the United Breweries group (UB).

SABMiller India sources its barley from Rajasthan and Haryana. While it has a contract farming agreement with HAFED, in Rajasthan, it has a barley project called 'Sanjhi Unnati', for which it has tied up with an NGO, Morarka Foundation.

(source: Times of India)

2. Farmers are not benefiting with the lowering of interest rates. Agriculture cooperative banks and regional rural banks are forced to continue with the high interest rates while offering investment credit for agriculture development and allied activities. These banks offer agriculture investment credit at an interest rate band of 11-to-13% a year. The ticket size of their investment loans are typically less than Rs 50,000. By contrast, agriculture investment loans below Rs 50,000 from public sector banks these days are available at 8.5-9.5% per annum rates.

PrimeAg, Farmers-turn-Managers, Food Outsourcing and Sugar Prices

1. An article on Australian food company PrimeAg which borne out with a vision to meet the world's food security. An example of corporate farming we may soon see in india.

2. IIMA is launching a course on Food supply chain management to upgrade the knowledge of the farmers. "The course will cover all challenges and bottle-necks of the supply chain from the times the seed is sowed, till it reaches the consumer. Also, exports and reaching the food to poor will be discussed."

3. Mr Piruz Khambatta, Chairman & Managing Director, Rasna Pvt Ltd says that the food outsourcing business from India has an opportunity of $5 billion as of today. “Only six per cent of the total amount of food produced in the country is processed. This has led to an annual loss of Rs 33,000 crore in the agricultural sector through perishable commodities.”

“Agri business for rural India can do what Information Technology has done for urban India. India should be promoted as the food factory of the world in terms of both production and marketing,” he said.

3. This article in business-standard suggests that raising the retail price for sugar is the only and surest shot to resolve all the problems of the sugar industry.

India-Canada MoU, Fresh baby corn..

1. India and Canada have signed a memorandum of understanding here to extend co-operation in agriculture, including sharing of knowledge technology, marketing of farm products and animal development.

2. Indian baby corn has now carved itself a very definite niche in the regular cuisine of a growing retailers such as Sainsbury, ASDA, Morrison and Sommerfield.

Punjab green fields have become the country’s biggest producers of the commodity for export markets. Bharti Del Monte India Pvt. Ltd, a joint venture between Bharti Enterprises and DMPL India Ltd. (a subsidiary of Del Monte Pacific Ltd.) has become the country’s largest exporter of fresh baby corn, preferred over the frozen variation, more in the world’s fine dining and haute cuisine. The company's total baby corn exports currently exceed 200 tons, all from Punjab.

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.

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.

Farm profitability and Olives

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

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

Nokia Life Tools

Nokia has launched a service, dubbed "Life Tools" to provide the latest agricultural information, such as weather updates and grain prices; educational tools, such as English-language training and general knowledge; and appealing entertainment--namely horoscopes and downloadable ringtones.

Monthly subscription prices have been pegged at between Rs 30 and Rs 60 (62 cents to $1.23) for the agriculture and education modules. Entertainment services are paid for as downloads. Nokia hopes the platform will fill a big gap in 3G-starved markets like India where consumers are unlikely to have the flat-fee data bundles or fast download speeds that developed-market phone users have become used to.

Government policies, PDS and B2B meeting

1. A call for change in Government policy in agriculture in Indian Express. There should be more emphasis on investments in marketing and processing infrastructure, on expanding and modernizing the trading centers and on increasing the rural connectivity.

2. According to this article, "to give entry to various giant grain corporations, the Indian government slowly and systematically weakened its Public Distribution System (PDS) by slowing down grain procurement, especially wheat". This is leading to food crisis, specially for the people below poverty line.

3. B2B meetings for Agriculture and Food processing in India - The Bangalore Chamber of Industry and Commerce (BCIC), in partnership with BCI - global leader of B2B meetings and professional events - will be setting up a first international trade show dedicated to agriculture machinery and food processing on March 4-6, 2009 and fully contribute to this process.

The show will combine a 3 day exhibition for Indian and international companies to showcase their products and capabilities and a matchmaking service to facilitate contacts. They will feature their technologies for agriculture and food processing.

Contract farming, Private investments and low MSPs

1. RCF (Rashtriya Chemicals and Fertilizers) is planning to get into contract farming and green house businesses by leveraging its customer network and land holding. The company plans to build a network of at least 1,000 farmers to grow flowers, fruits and vegetables. Recently similar announcement was made by Bayer CropScience.

2. Contract farming verses cooperative farming - what is the difference. My guess is that in former, some corporate guy takes over farm land from small farmers or bound them by the contract, while in the later one, farmers unite and make a society like Amul and sow and sell the produce together.

3. Farmers are unhappy with the low MSP fixed by government. The input costs have risen much faster that the final output. Some comparative numbers with 1966 are given. According to Mahendra Singh Tikait, farmers' leader, fair price for wheat should be rs 3000/quintal and for sugarcane it should be Rs 250 a quintal.

Sygneta's tropical sugar, Contingency plan for Bihar, Pepsico

1. Sygneta's Tropical Sugar Beet receives world business and development award. The award is for the development and successful introduction of a new sugar beet that can be grown under tropical climate conditions and brings significant advantages to farmers, the environment, the sugar and ethanol industries and the economy.

2. The Indian Council of Agricultural Research (ICAR) has evolved a plan for farmers to deal with the flood risis.

3. Pepsico CEO Indra Nooyi says her company will extend its partnership with Indian agriculture by covering 10,000 acres and 50,000 farmers by 2011.