“Is your potato same as mine?” — How digitizing produce quality assessment can transform Indian agri-marketing!
Indian agriculture has undoubtedly witnessed a remarkable growth during last few decades. Agricultural production in India has undergone a phenomenal change since the dawn of green revolution and data from Agriculture Ministry suggests that the marketed surplus ratio (MSR) for most of the crops has increased appreciably during last 13 years from 1999–00 to 2013–14. A growing MSR clearly indicates the increasing commercialization of Indian agriculture. But for this achievement on the production front to translate into higher farm incomes, an efficient and competitive marketing system is quintessential.
According to the Dalwai committee, the primary objective of regulating markets under APMC act was to ensure regulation of marketing practices and protect the farmers from the exploitation of intermediaries. However, over a period, these regulations have taken the form of restrictive and monopolistic trade and the balance of power in transactions has moved in the favour of middle men and traders, causing low price realization by farmers. The committee suggested that it is imperative to reform markets to achieve the goal of doubling farmers income by 2022 and to enable the markets to operate effectively and efficiently, a few of the recommendations suggested are:
- Creating a new market architecture to inter-connect the existing locations and allow for a seamless flow of produce to various demand centers
- Developing futures markets to provide an alternative marketing channel for farmers
- Boosting warehouse-based sales and commodity finance
- Improving competitiveness of small and marginal farmers through aggregation
But, if there is 1 key factor that can perhaps hamper the implementation of the above-mentioned recommendations, I believe, lack of well-developed grading and harmonized standards should be the one!
Digging deeper — Understanding the pain points
In any trade, for 2 parties to be able to agree on a fair price, it is imperative that they agree objectively on the parameters that the price is determined by. In less fragmented agricultural markets, this requirement has translated into high end, expensive equipment that are generally deployed at the aggregation points to measure the pre-decided quality parameters, that become key inputs in pricing the commodity.
But for Indian context, where markets are highly fragmented, such equipment make little sense due to limited volumes across each aggregation point, resulting in unviable cost structures and hence limited adoption. As a result, the chain still depends on manual quality assessment process, making the process archaic, human intensive and often biased! This leads to a high friction in almost every trade and quite often the price a farmer realizes reflects the inefficiency of the chain upstream as well as the inefficiency and integrity of the trader who is offering him/her the price.
The problem doesn’t end here! Limited emphasis on pricing- based -on- quality strategy creeps up the chain, leading to an inefficient pricing mechanism and an asymmetry in quality information, forcing food processors deploy an army of people for basic inspection of the commodities during procurement. Once again, this is done manually, making the process archaic, slow and inconsistent.
Hence lack of viable methods to diagnose quality is affecting both growers as well as consumers and today’s agri ecosystem is proactively demanding for a solution that is affordable, easily deployable across chain and provide real time diagnosis!
Produce standardization — Key imperative to unlock larger market access
Last month, we announced our investment in Agricx lab, an agritech venture in the space of digital assessment of quality of agri-produce. The company has developed a digital tool that processes images of the produce captured from a mobile phone camera and generates objective, accurate quality reports. By effectively leveraging computer vision and artificial intelligence, the missing element of affordable and accessible QA solution should be addressed, while saving costs at all levels of supply chain and for all stakeholders (farmers, traders and processors)!
a. Enabling farmers look beyond what’s apparently visible!
Digitizing the entire assessment process brings in standardization, that is quintessential in creating trust amongst various stakeholders involved in the trade. With rising acceptance from the top of the chain (such as large food processors, stockists, cold storages) to trust the quality certifications in trade, farmers can comfortably bypass spot markets to discover better, viable trade options elsewhere. This shall boost the adoption of initiatives like e-nam and infact can direct access to futures markets!
b. Warehouse receipt financing
The ability to digitally assess and record quality brings in transparency and should lead to an increase in financing options to farmers; such as warehouse receipt financing and facilitate an ecosystem around credit linkages.
c. Supporting the food processing wave
One of the important challenge food processing industry face today is lack of timely micro level commodity data that becomes key in their procurement plans. By essentially capturing information about the produce, one can build better data models and can link it to Traceability. This real time information should enable the industry to be frame better procurement plans and increase the efficiency in their overall procurement.
To conclude, with an ever-ready market, rising food processing industry and an ambitious government policy to reform farm sector in place, I believe every farmer will be able to unlock the true economic potential of their effort. Perhaps, the day is not far away for a farmer to realize his/her dream of working like an artist and recognized as one. After all, farming is no less than an art!
First published on Ankur Capital — http://www.ankurcapital.com/BlogDetails.aspx?blogid=9
