The farm-to-fork data explosion

The one peril that needs no fresh introduction is the peril of the poor Indian farmer. Half of the population is directly dependent on agriculture with a meager 13% share of the country’s output. This article is not another judgment or recommendations on policies and social systems. I am trying to present here a perspective on how the current trends of data and rapidly increasing smartphone penetration are throwing up new opportunities for entrepreneurs targeting to dig in the pie. First, let us take a sneak peek into who harvests the toil of the farmers.

Take the price of any food item, the share of the farmer is always at an abysmally low percentage. For perishables, a mere 15 to 25% goes to the farmers, in non-perishable slightly better at around 35 to 40%, and in highly commoditized products like milk maybe up to 55%. The logistics, warehousing, rental, first level processing like milling, grinding, dehusking, oil extraction, bulk milk cooling, amount to not more than 25%. The lion’s share in every situation is taken away by the middlemen and the customer facing companies who hardly add any value beyond stocking, marketing, and branding. Though every policy and developmental effort starts with the fundamental premise of shifting this value towards farmer, but in the vast majority of the attempts the results are otherwise. So then, is all hope lost?

No. What meets the eye is the just the massive price jack up at the front end instead of back end. What doesn’t meet is why these prices go up beyond what can be justified by a simple cost plus profit analysis. The primary structural reason for this is the practice of what I call the Destructive Bundling of value. In the prevailing dynamics, the procurement of farm produce is largely based on the quantity and once in a while some value attached to physical properties such as touch, feel, size and aroma. A piece of tomato grown with the guttered water of an industrially polluted river is priced the same as those grown in pristine surroundings. Milk from a pure breed native variety cows fetches the same price as from a supplement overdosed dairy cow. These are just a couple of examples of the tens of thousands of unique characteristics that are ruthlessly destroyed at the time of procurement. This practice is followed across the value chain from farmers to aggregators to marketyard traders right up to the end customer. Any uniqueness the products might have had is lost in one ethereal market. Under the practice of clubbing the produce from different farms, villages and localities, the farm stands no chance of getting its true worth. As a result, the growers also tend to gradually shift themselves more and more to industrial cultivation practices with a sharp focus on quantity and yields. Somebody somewhere might be taking that extra care of a cow by feeding it RO water, or monitoring her farms 24 by 7 on a CCTV, or using ready test kits for timely prevention of diseases in shrimp farms, or deploying Integrated Pest Management (IPM) practices, or eradicating insects using benign pheromones traps. The list is endless. But the economic value of these novel practices is hardly ever realized. Is there a possibility to stop this Destructive bundling and instead unlock the values contained in some of the the superior practices followed by millions of farmers across the country? Maybe. Interestingly, there are a few not so unfortunate who do realize part of their due credit.

In the familiar example of certified organic, residue free and other similar products, which are nothing but products grown under well-defined special conditions, the Indian customer is already paying a good premium. The market is small but growing rapidly. These certifications are just an encoded guarantee of the quality of food products whose hallmark is more than just the touch and feel of it. It is a dissemination of the knowledge that these have been grown under superior conditions and perhaps have a better quality than the regular ones. No doubt we have a myriad of certification agencies, domestic as well as international which are in the business of assessing and stamping these farms and processes. Though there are major variations in the prices realized by an unbranded player counting on the appeal of the certification and the likes of branded stores of Fabindia, Natures’ Basket, 24mantra etc. In several instances, premium prices are commanded by the niche brands even for non-certified or minimally certified products. All of that premium is for the true worth of the product which lies in its wealth of nutritional qualities and not just the appearance. A grain, fruit, vegetable, for that matter any crop grown with the right seed and under proper conditions can either be a nutritional powerhouse with a range of vitamins and minerals or be a lump of carbs, fats, proteins or even toxins. Though due to lack of alternatives, as of today appearance is the only practical proxy available to judge the quality. In my sane mind, I should never buy even the best looking vegetable irrigated with water from an industrially discharged source, which is but a reality in several parts of the country. Customers are willing to pay a significant premium for a simple assurance of the quality beyond just the appearance.

The challenge for today’s food market is that it operates at two extremes. On one hand are the Destructively Bundled products with all their never communicated unique characteristics lost, and on the other hand are the certified, assured, branded products where the hefty premium is enjoyed by the front facing sellers, guarding the mouth of the customer. In between lies an entire abyss of opportunities, which are good enough to pique a lot of patrons, but not a cookie cutter fit to get a well-defined certificate of limited appeal. This is where the power of internet technology comes in.

Today a host of start-ups are providing easy to use mobile platforms for farmers to directly communicate with the customers, to showcase their products in innovative ways. (Note: Working in an agriculture venture capital I will not take specific names.) Right now most of these platforms allow for providing elementary information like the variety, quantity, location, price and some high-level overview. As the smartphone penetration deepens and low-cost data pervades, this communication is expected to get savvier and pertinent eventually rendering a lot of middlemen redundant. The smartphone penetration in rural India is already at 12% in 2016 and is set to reach 50% by 2020. All of this penetration will be alongside a high-speed 4G data network allowing easy sharing of photos, videos, and documents for the poorest of the farmer. They are getting empowered to sell their produce by showcasing it directly to the customer. In the e-commerce parlance, new marketplaces are being created. Though a fulfillment of the transaction requires several other enabling pieces like delivery, payments, traceability, infrastructure and verification of authenticity. Several start-ups smelling the opportunity have started promising work to address each one of these. So while things look not so unfortunate in the near future to come, a question arises is why will the customer risk to be taken for a ride by some unknown farmer trying to sell products from some corner of the country, showcasing whatever truth or myth she wants to. What about authenticity?

The authenticity challenge here is not so different from the problems faced by the broader ecosystem of social and marketplace platforms. Albeit in the case of food products direct from the farm, there is the additional challenge of the authenticity of processes rather than just claims on the product as with a typical internet consumer goods seller. The usual practices of customer feedback, ratings, and independent reviews will naturally fall in place and I need not say more here. What I want to particularly highlight is the already existing mechanism of establishing trust and verifying the authenticity of any tall claims. The customer has always known how to evaluate the local farmers with a limited but relevant set of information. In India with 120 million farming families serving 150 odd million non-farming families, almost every family has some direct or indirect access to the on-ground farming practices. She has also likely purchased food through direct channels, maybe by traveling to a nearby village or from a farmers market or an NGO or a voluntary organization. Essentially they are well entrenched and have a knack for judging the authenticity, which makes it difficult for the individual farmer to misrepresent when interacting directly with her customer. This is all the more evident in the brisk business conducted in the numerous local farmers market in several towns, cities, and villages in spite of no certifications. On the contrary, the customer is often skeptical of the certification processes rather than the farmer’s claims. Several certified brands bypassing the certification process is a common knowledge. The consumer is well aware of these and does not blindly trust them. The onus of proof is more a matter of private discussion between the customer and the seller, where there is already a prevailing sense to assess what to believe and what not to. It is this rhythmic exchange of information which is expected to be carried out on a countrywide scale with the farmers getting closer than ever to the customers, leveraging the technology platforms. As this ecosystem of farmer-consumer connect matures and evolves, a battery of IoT-enabled technologies will also enable part of the verification process. Low-cost handheld spectroscopy devices, rapid chemical tests kits, barcode/QRcode enabled farm gate packaging are some of the technologies which are already in place where needed. More such crop specific tools and services are coming up to provide the necessary glue to stitch the entire ecosystem together. If blockchain technologies have their way, the entire process might see a complete overhaul. Trust and authenticity will be solved by a close mesh of technology and prevailing ethos of the society.

In short, the entire value chain of inputs, cultivation, harvest, post-harvest, storage, logistics, processing and marketing is set for disruptive opportunities for tech-driven entrepreneurs and investors to capitalize on. The individual farms and sellers are raring to connect with the customers in a much more meaningful way. Agriculture being one of the least digitized space in the country, is just scratching the surface of the digital data explosion.