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.

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".

Cotton Prices

Farmers are finding it hard to sell cotton at good prices. Although MSP prices are pretty decent this year, farmers are finding very few takers. Government is stepping up the procurement process to support the prices but unfortunately it if not working out. Some farmers are selling cheaper either to pay off the debt or because they dont have infrastructure to store. It is ironical that a higher yield of cotton is adding woes to the farmers instead of helping them.

One important thing to note is that when demand soars and prices are high, government alters it policies (like capping the price, increasing the imports etc) to keep check the prices. Most of the times it is successful in doing so but it fails miserable to keep up the prices in the times like this. So for a farmer, its always like loosing on any side of the coin.

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.

God's own crop, CCI to buy cotton and Agri-sector alliance

1. Millets are getting the charm back again after finding the way in Indian supermarkets and increasingly becoming part of urban diet. Decant herald carries an interesting article on Millets like jowar, bajra, ragi etc, which are also called "God's own crop"

2. Cotton Corporation of India (CCI) has assured Punjab government that it would purchase maximum quantity of cotton from the mandis in the state so that the farmers could get remunerative price of their produce.

3. Indian commerce minister Kamal Nath calls for alliance among developing nations in Agriculture sector to fight against the subsidies provided by rich nations.

Agriculture growth, useless MSP and Australian wheat

1. The Hindu Businessline writes about slow growth in agriculture. Agricultural policies are to be blamed.

2. Farmers are not benefiting in spite of high MSP prices as open market prices fall much lower. Manipulative actions by traders also hit the profitability.

3. Indian mills can have custom grown wheat from Australia and enter into contract farming and long term agreements. South India flour mills, in particular, prefer Australian wheat not only for its quality but also due to logistical advantage.

Conservation agriculture, FDI in agriculture and Agri-entrpreneurs

1. Business standard covers this interesting story on new farming techniques to improve land productivity as well as to reverse the climate change. Suggestions include rice-wheat cropping sequence, zero tillage agriculture, raised bed planting, laser land-lavelling and drip irrigation.

2. It is surprising to hear the suggestion coming from a minister to get foreign investment in agriculture. The food processing minister says that it is the "next sunrise sector".

3. Interesting story covered by ET on Agri-entrepreneurs. It covers various ventures like Satnam Agri Products by Mandip Singh producing premium potato chips, Minchy brand on wines by Girish Minocha and Pawas Canning by Hemant Desai exporting mango pulp to Japan. It also covers Nisarg Nirman Agro Products growing and selling exotic fruits to five start hotels, Jalbindu Agri Tech by Rahul Gala growing and selling dates using high echnology and "Best Roses" by Kumar Patel.

Farm Insurance, hike in MSPs

1. Business-line writes about the status of farm-insurance in our country in its editorial. According to a survey by Max New York Life and National Council for Applied Economic Research, only 19% of rural household have life insurance while only 10-15% of all farmers have crop insurance.


2. Some happy news for farmers. Government has announced higher MSP (Minimum support price) for various Kharif crops for year 2008. However as "harvest of crops is only weeks away; and there is no way farmers will draw any benefit from the announcement at this point of time in the crop growth cycle." MSP of cotton has also been increased by 38.9-47.8

Cotton export, bumper potato harvest

1. According to the International Cotton Advisory Committee (ICAC), the world cotton production is likely to fall. China has reduced its acreage for cotton cultivation and US and Pakistan are also set to report lower output. India, set to produce higher output will benefit from exports. Higher MSP (Rs 3000/quintal - 2,500/quintal) will also benefit farmers.

2. Bumper potato crop has become a curse for farmers instead of helping them. The prices have dropped down to Rs 350-400/quintal

SMP for cane, Global Industry Analysis Report

1. Farmers are urging the government to raise the Statutory Minimum Price (SMP) of sugarcane. The current price is Rs811.80 /ton.

2. Global Industry Analysis (GIA) has come out with a research report on Agriculture (priced $1950). "The report titled "Agriculture: A Global Outlook", published by Global Industry Analysts, provides a collection of statistical anecdotes, market briefs, and concise summaries of research findings. Discussions in the report take note of burning issues consuming the world agriculture industry, such as, food security for nations, food integrity, environmental degradation, and the growing notoriety of GMOs (Genetically Modified Organisms). Also covered are evolving trends i.e. the green revolution brought about by organic farming, e-commerce penetration in agrochemical trading, and the impact of biotechnology on agriculture, among others. Punctuated with 64 data rich, information laden tables and easy to understand charts and graphs, the discussion on the global market offers exclusive coverage on Agricultural Biotechnology, Agriculture and Environmental Diagnostics, and Agrochemicals, among others. Annotated with tables that enumerate key research findings, the regional markets briefly abstracted, and summarized include the US, Canada, and Japan, among others. The report provides an indexed, easy-to-refer, fact-finder directory listing the addresses, and contact details of 415 companies worldwide."

Investment in food

The profile of food investment is changing in middle east because of constraints in agricultural capacity and rising food prises. This analysis discusses the changes.