Intermediaries intermention

A STUDY OF INTERMEDIARIES’ INTERVENTION IN AGRICULT URE

SUPPLY CHAIN AND ITS EFFECT ON FARMERS’ INCOME

A Project Report

Submitted to

G. B. PANT UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

PANTNAGAR-263145, (U. S. NAGAR)

Uttrakhand, India

Submitted by

Prince

I.D. No. 31996

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE

AWARD OF THE DEGREE OF

Master of Business Administration (Food Retail and Supply Chain)

May,2011

i

CERTIFICATE

We, the undersigned, members of Project Advisory Committee of Ms. Prince,

I.D.No. 31996, a candidate for the degree of Master of Business

Administration (Food Retail and Supply chain), agree that the project report

entitled “A Study of Intermediaries’ Intervention in Agricul ture Supply

chain and its effect on Farmers’ Income” may be submitted in partial

fulfillment of the requirements of the degree.

Advisory Committee

(Ashutosh Singh)

Chairman

(Mukesh Pandey) (Nirdesh Kumar Singh)

Member Member

ii

ACKOWLEDGEMENT

I take this opportunity to express my sincere and deepest gratitude to Govind Ballabh

Pant University of Agriculture & Technology and college of Agribusiness Management

for providing me a chance of learning. This project not only helped me to understand

about the Indian agriculture, but widened this vision in field of management too, by

virtue of being associated with an esteemed and professional institute.

This report is the result of contribution made by numerous people too many to mention

individually, therefore I thank all the respondents who have given their valuable time,

views and authentic information for this project. At the very outset, I would like to

thank my advisor Dr.AshutoshDr.AshutoshDr.AshutoshDr.Ashutosh Singh,Singh,Singh,Singh, Associate professor, department of Human

Resource and personal management for providing me all types of support, constant

encouragement and his relentless efforts to motivate me to achieve my goal. His close

supervision and precious input have made me able to refine this project to this extent. I

consider it my privilege to express my deep sense of gratitude to Dr. Mukesh Pandey,Dr. Mukesh Pandey,Dr. Mukesh Pandey,Dr. Mukesh Pandey,

Associate Professor Department of marketing and Mr. Niredesh KumarMr. Niredesh KumarMr. Niredesh KumarMr. Niredesh Kumar Singh,

Assistant professor, for their continuous guidance, motivation and providing valuable

suggestion and critically analyzed my project work.

I am grateful to Dr B.K.KumbherDr B.K.KumbherDr B.K.KumbherDr B.K.Kumbher, Dean post graduate studies for providing me the

necessary research facilities. Also I would like to express my sincere thanks to

Dr.Devendra Kumar Dean, College of Agribusiness Management, Dr.B.k. Sikka

Former Dean, College of Agribusiness Management, Pantnagar for providing a chance

to undertake this present study.

This acknowledgement would be incomplete if I don’t mention a special regard to my

parents, my sister Preety, my batch mates, administrative staff of my college and all

those who motivated me to perform better than the best.

Last but not the least; I thank The ALMIGHTY, for blessings me with enough patience

endurance and strength in accomplishment of the Endeavor.

Pantnagar Prince

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EXECUTIVE SUMMARY

Intermediaries in agri-supply chain are very important component with various pros and

cons. Among the several shortcomings that plague this sector is the high intermediary margin as

a result of numerous intermediaries in the agri-supply chain. These intermediaries add-on their

margins to the produce during its transit from farm gates to the final consumer.

The proposed study was conducted in Rudrapur, Kashipur, Bazpur, Gadarpur and Jaspur

block of district Udham Singh Nagar. The study was conducted in two phases; the initial phase

was survey, information collection regarding farmers and intermediaries while second phase of

study was to analyse the data of survey.

This study was conducted to identify the intermediaries in agri-supply chain and to

compare the income of farmers who market through commission agents and through Rice/flour

millers. The study also analyses the impact of intermediaries on cash flow of the farmers. During

the study it was found that four types of intermediaries are involved namely commission agent,

rice/flour millers, wholesaler and retailers. A major portion of farmers sell their produce through

commission agents .It was also revealed that the farmers who sold their produce to rice millers

received higher profit as compare to farmers who sell through commission agents. The various

facilities provided by intermediaries include assured prices, advance credit, information about

agricultural input and transportation facilities. As a result of these activities the income of

farmers increase considerably.

The study suggests that the farmers should sell their produce directly to the rice/flour

millers as it gives them higher profit. Commission agents are necessary evil in agri-marketing.

But, it is expected that as a result of better extension activities and enforcement of APMC act

the role of commission agent is expected to decrease in future.

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TABLE OF CONTENTS

S.No Title Page No.

Acknowledgement

i

Executive summary

ii

Table of Contents iii

List of Exhibits

iv

List of Tables

iv

1 Introduction 1-3

Background 1

1.1 Agriculture Marketing in India

1

1.2 Role of Intermediaries

2

1.3 Problem Statement

3

1.4 Objectives

3

2 Review of Literature

4-6

3 Research Methodology

7-10

3.1 Research Design

7

3.2 Information required

7

3.3 Data source

7

3.4 Area of Study

8

3.5 Sampling Plan

8

3.6 Research Instrument

9

3.7 Duration of Study

9

3.8 Data Analysis 10

v

4 Result and discussion

11-20

4.1 Classification of farmers

11

4.2 Intermediaries in agri-Supply chain

12

4.3 Different links in supply Chain of Wheat and Rice

12

4.4 Income of Farmer who sell directly 14

4.5 No. of farmers who are taking credit 16

4.6 Factor affecting the selection of Commission agents by Farmers 17

4.7 Income of farmer who sell through Intermediaries 17

4.8 Comparison of Farmer’s Income 18

4.9 Factor affecting the selection of Farmers by Intermediaries 18

4.10 Facilities Provided by Intermediaries to the Farmers 19

4.11 Increase the Income of Farmer 22

5 Conclusion

23

6 Suggestions

24

Reference

vi

Annexure I

vii

Annexure II

viii

Vita

vi

LIST OF EXHIBITS

S.No Exhibit No. Title of Exhibit Page No.

1 Exhibit 4.1 Classification of farmers

10

2 Exhibit 4.2 Intermediaries in Agri-supply chain

11

3 Exhibit 4.3 Different links in agri –supply chain 13

4 Exhibit 4.5 No. of farmers who are taking credit 16

6 Exhibit 4.6 Factor affecting the selection of Commission agents by Farmers

17

5 Exhibit 4.8 Comparison of income of farmer

18

7 Exhibit 4.9 Factor affecting the selection of Farmers by Intermediaries

18

8 Exhibit 4.10 Facilities Provided by Intermediaries to the Farmers

20

9 Exhibit 4.11 Increase the Income of Farmer 22

vii

LIST OF TABLES

S.No Table No. Title of Table Page No

1 Table4.1 Variable Cost of Production 14

2 Table 4.2 Changes in the cash flow of farmer 21

1

1. INTRODUCTION Background The marketing as a term is broader than traditional trading and agricultural marketing as a

concept is still evolving in the Indian agrarian society. The National Commission on

Agriculture defined agricultural marketing as a process which starts with a decision to

produce a saleable farm commodity and it involves all aspects of market structure of system,

both functional and institutional, based on technical and economic considerations and

includes pre and post- harvest operations, assembling, grading, storage, transportation and

distribution.

Agricultural marketing also reflect another dimension from supply of produce from rural to

rural and rural to urban and from rural to industrial. In modern world it became challenging

with the latest technologies and involvement of middlemen, commission agents who keep

their margins and move the produce further. As it is well known more the number of

mediatory more will be the costs as each transaction incurs expenses and invites profits.

Ultimately when it comes to the producer the cost of the produce goes up steep. In the entire

process of marketing the producer gets the lowest price and the ultimate consumer pays the

highest as the involvement of more middlemen.

1.1 Agriculture Marketing in India In the case of agricultural marketing in India it is

not exactly the marketing in the literal sense and we can call it as ‘distributive handling’ and

to go further we may call it as ‘distributive handling’ of agricultural produce as there are

number of intermediaries who are involved in marketing the agricultural produce. Marketing

systems are dynamic; they are competitive and involve continuous change and improvement.

Businesses that have lower costs, are more efficient, and can deliver quality products, are

those that prosper. Those that have high costs, fail to adapt to changes in market demand, and

provide poorer quality, are often forced out of business. Marketing has to be customer-

oriented and has to provide the farmer, transporter, trader, processor, etc. with a profit. This

requires those involved in marketing chains to understand buyer requirements, both in terms

of product and business conditions.

Activities include market information development, marketing extension, training in

marketing and infrastructure development. Improvement of marketing systems necessitates a

2

strong private sector backed up by appropriate policy and legislative frameworks and

effective government support services. Such services can include provision of market

infrastructure, supply of market information, and agricultural extension services able to

advise farmers on marketing. Training in marketing at all levels is also needed.

1.2 Role of Intermediaries The number of middlemen or intermediaries is shrinking

dramatically as the structure of the food and agriculture system changes. Major customers are

requiring their producer-suppliers to perform many of the services previously accomplished

by middlemen. This fact may be detrimental to small- to mid-sized producers in maintaining

their access to important customers. Producers attempting to accomplish all of the assembly

and distribution functions otherwise performed by intermediaries will need to bear that cost

themselves. In some cases, producers may be able to perform those functions profitably but in

many cases the actual costs of assembly and distribution are underestimated by producers,

resulting in losses. Some producers may be in a position to accomplish all of the necessary

assembly and distribution functions themselves or as a group. However, for others not in that

position, eliminating “middlemen” may not be as desirable at first glance as producers might

think, unless they can accomplish all of those functions at a lower cost as those individuals or

firms who performed those assembly and distribution activities on their behalf.

Intermediaries are an important link in the supply chain. One should not forget that even if

there are 3 to 4 intermediaries in the existing supply chain, still the chain is very efficient.

Just ignoring them will lead to no fruitful result. Taking out the middle man from the chain

does not guarantee a higher realization of price for the farmers. The Commission agents play

a very important role by providing finance to the farmer. Though there are arguments that the

intermediaries is exploiting the farmer by charging high interest rate and also that the farmer

is forced to sell the produce to the middle man but he provides finance to farmer when it is

required, procures from the farm level, gives extra credit to meet the house hold needs of the

farmer. The farmer knows that he is not getting the best price from the middleman; He is

fully aware where the mandi is even in the mandi he has to sell to commission agent so why

not sell the produce in the village itself without the hassle of additional transportation cost.

3

1.3 PROBLEM STATEMENT

The traditional agriculture supply chain model that is operational in India results in

significant reduction in farmers’ income. The farmers have the option to sell his produce in

various agriculture agencies. However selling in mandis in most cases is unprofitable due to

two notable reasons – (1) cost issues involved in transporting produce to mandi, and (2)

structural deficiencies rampant at mandis. On an average, the distance between regulated

markets (mandis) and farm field ranges from 7.7 kilometres to 15 kilometres in India. Indian

agriculture being dominated by small and marginal famers, it may not be economically viable

nor commercially feasible for a small farmer to sell their produce directly to consumers. Here

the agri intermediaries play a crucial role, they add values at several stages of the goods

movement in the value chain because of their specialized role which everyone cannot does

and the biggest role they are playing is the aggregation of goods from large number of small

farmers scattered across a vast area but the negative impact of the agri intermediaries in

downgrading the efficiency of the agricultural marketing in India. It won’t be fallacious to

state that intermediaries also have a role in increasing price of several food commodities. So

the proposed study has been undertaken with the following objectives.

1.4 OBJECTIVES

1. To identify different intermediaries who are involved in supply chain of rice and wheat.

2. To compare the revenue of farmers who market through commission agents and through

Rice/flour millers.

3. To analyse the impact of intermediaries on Income of the farmers.

4

2. REVIEW OF LITERATURE

Patel (2009) in his study found that agriculture intermediaries in form of commission agents

at mandis (government regulated markets) operate at 4-5 percent margins, intermediaries at

wholesale markets get around 30 percent, and retail vendors make around 20 – 40 percent.

Consequently, the price of commodities that range between Rs 5 – 7 per Kg at farm gate

eventually costs in the range of Rs 15 per kg at the consumer. Among the several

shortcomings that plague this sector is the high intermediary margin that results from the

numerous intermediaries in the agri value chain. These intermediaries add-on their margins to

the produce during its transit from farm gates to the final consumer.

Vasisth and Bhardwaj (2009) observed that Farmers have been at the mercy of traders or

intermediaries while selling their produce, who pay less to farmers and in turn sell it at

exorbitant rates and thus getting huge trading margins as the margin between consumer price

and producers’ price gets added due to several levels of intermediaries prevalent in India

mainly due to the market infrastructure. Many farmers lack instant access to the present

market price.

Michael and Jusman(2008) states that the rationale for emergency of intermediary

institutions in marketing channel has been the focus of research for marketing scholars

review of the work done in this area reveals two broad approaches of this issue. One group of

scholars focus on the ability of intermediary institutions to reduce the cost of the physical

flow of goods and services from producers to users. Another approach adopted by several

researchers has been focus on the role of marketing intermediary in facilitating transmission

of information within the marketing channel between producers and users.

Thorat (2007) analyzed the state level APMC acts, acc. to that the products of the early

1960’s and 1970’s and enacted with the view that the state alone could protect farmers from

exploitation at the hand of traders to overcome this the APMC act were passed, wherein

wholesale trade was conducted under the presence of the responsible government officials

who are designated. The market mandis were administrated by a marketing committee

comprising of representative of farmers traders and other stockholders.

Mohana Rao(2005) in his study formal credit institutions have largely failed to provide

access to farm credit to small and medium-scale landowners, or zamindars. This paper

examines interlocked transactions between traders and landowners in the wheat markets in

5

UP that facilitate the provision of credit by traders. It is concluded that the case examined

provides an example where traders lend to landowners in a segment of the credit market that

approximates competitive behavior, without surplus extraction by traders. Key conditions

resulting in this favorable outcome are the existence of both competition for market share and

information sharing on borrowers between traders. Whether this outcome is also beneficial

for other rural groups who may borrow from landowners, in particular sharecropping tenants,

is independent of market relations between landowners and traders and is not determined

here.

Verma and Patidar (2004) describe in his study that the producers may either send their

produce to commission agents who arrange the sale in market or they may themselves bring

the produce to the commission agent premises for sale. After purchasing from the agents, the

wholesaler and exporters sort the crop, pack and then dispatch to different distributing or

consuming market. In the process of marketing the producer has to incur various marketing

costs. Agriculture marketing is costly with high commission charges, trader’s profit margins,

wastage and malpractices.

Bieri (2002) states that the welfare consequences of price instability critically depend on the

type of market intermediary. Both a producer marketing board and a pure middleman will

stabilize consumer prices; but the latter, unlike the producer marketing board, will find it

advantageous to "manufacture" price instability for producers.

Deepak et al.(1999) worked against the backdrop of viewing marketing intermediaries in

developing countries as parasites, Necessary information was collected from all major

stakeholders such as farmers, collectors and commission agents, and the relative position of

farmers in terms of their gains was analyzed. Marketing margin and farmers’ share of gross

income are also analyzed ‘with’ and ‘without’ the cost of malicious practices by marketing

intermediaries.

Matsuda (1997) in his study addressed that functional structure of agricultural electronic

marketplaces, together with associated pricing mechanisms. The analysis of transaction costs

suggests that electronic commerce with intermediaries provides more efficient trading

environments than electronic marketplace without intermediaries. This indicates that existing

intermediary institutions will remain important for agricultural transactions even after the

6

adoption of electronic market systems. Compared to other industries or markets, agricultural

markets are characterized as competitive markets and pricing is a key factor for efficient

resource allocations.

7

3. RESEARCH METHODOLOGY

Keeping in view the formulated objectives, the project was carried out with the following research methodology-

3.1 Research Design

The methodology adopted for the completion of study was descriptive and analylitical

research approach. Descriptive research was used for the identification and role of

intermediaries’ in marketing of agriculture produce while, analytical research approach was

used for analysing the impact of intermediaries on farmers’ income.

3.2 Information Required

For completing the study, information required was about background of Udham Singh

Nagar district, data regarding different blocks and villages of district. Data related to land

holding of farmers, their cropping pattern, their socio-economic status..

3.3 Data Source

Secondary data as well as primary data were used for the information generation. The

inferences were drawn mainly from primary source.

Secondary Data-Secondary data were collected from internet, journals, book research

articles, different mandis and government booklet issued by district agricultural department.

Primary Data-This data was first hand information for the study. This was collected with

the help of survey method using a self structured questionnaire consisting of both open ended

and close ended questions. The questionnaire was used for conducting the personal interview

of farmers and intermediaries.

3.4 Area of Study

The study was conducted in the Udham Singh Nagar district of Uttrakhand within the district

Udham Singh Nagar different areas like Rudrapur, Gadarpur, Bazpur, Kashipur, Jaspur was

taken.

8

Figure 3.1 Map of district Udham Singh Nagar

3.5 Sampling Plan

3.5.1 Universe

The universe of sampling was comprises of farmers, intermediaries government personnel

who are directly or indirectly related with marketing of agriculture produce of district

Udham Singh Nagar.

3.5.2 Sampling Unit- Farmers and intermediaries were the sampling units for the study.

These were selected from two villages of each block.

9

3.5.3 Sample Size-

S.No Block Farmer Intermediaries

1 Rudrapur 25 4

2 Gadarpur 25 4

3 Bazpur 25 4

4 Kashipur 25 4

5 Jaspur 25 4

Total 100 20

3.5.4 Sampling Technique-Convenience and simple random sampling employed for the

selection of farmers and intermediaries. Farmers were selected on the basis of their land

holding. In some places judgemental sampling was also used for selecting intermediaries.

3.6 Research Instrument

Questionnaire containing both open and close ended questions was used as main research

instrument. Questionnaire was structured in such a way that it has contained all the questions

which was helpful in getting the objectives of study fulfilled.

3.7 Data Analysis

Data obtained from the survey of samples was analyzed with the help of graphical

representation, tabulation and classification of data and by using statistical tools like 5 point

scale method, bar diagram, pie charts and other related methods. 5 point scale method is used

for analyzing the factors which are affecting the selection of commission agent by the

farmers.

3.8 Duration of Study

The period of study was from 7th of March to 30th April, 2011.

10

3.9 Limitation of Study

i. There may be discrepancies in the actual data and the recorded data due to

misinterpretations and wrong selection of respondents.

ii. Topic is vast but availability of information and timeline was short.

iii. In some cases there were some contradictory answers given by farmers which were

create confusion regarding intermediaries’.

4. RESULT AND DISCUSSION

In accordance with the objective of the study,

sources were analyzed and interpreted.

4.1 Classification of Farmers

It is very important to know that

socio-economic status. The farmers are classified into three main categories

Farmer, small Farmer and Large Farmer.

It is evident from the Exhibit 4.1 that out of total sample, 17 percent are marginal farmers, 50

percent are small farmers and 33 percent belongs to the category of large farmer.

Exhibi t 4.1 Classification of Farmers

Small Farmer

Marginal Farmer

4. RESULT AND DISCUSSION

the objective of the study, the data collected from primary and secondary

were analyzed and interpreted.

4.1 Classification of Farmers

It is very important to know that the categories of the farmers for understanding the

The farmers are classified into three main categories

Farmer and Large Farmer.



t 4.1 Classification of Farmers

Large Farmer

33%

Small Farmer

50%

Marginal Farmer

17%

11

the data collected from primary and secondary

of the farmers for understanding their

The farmers are classified into three main categories –Marginal



4.2 Identification of Different Intermediaries involved in

Wheat

Farmers producing agricultural produce are scattered in remote villages

to reach to the consumers for its final use and consumption. There are dif

and functionaries through which this produce passes and reaches

channel or channel of distribution is therefore defined as a path traced in the direct or indirect

transfer of title of a product as it moves from a p

user. There are several channels of distribution which

need. Exhibit- 4.2 shows that

agents, 35 percent farmers

farmers sell their produce to others

Exhibit 4.2 Proportion of Intermediaries in

4.3 Different links in Supply Chain of W

The Exhibit 4.3 illustrates that in Supply chain of wheat and rice in Udham Singh Naga

district, there is linkage of four

millers/ flour millers, wholesaler and retailers

produce from farmer to ultimate consumer.

Commission agents

60%

ent Intermediaries involved in Supply Chain of Rice and

Farmers producing agricultural produce are scattered in remote villages and t

consumers for its final use and consumption. There are dif

and functionaries through which this produce passes and reaches to the consumer. A market


transfer of title of a product as it moves from a producer to an ultimate consumer or industrial

annels of distribution which used by farmers according to their

shows that, 60 percent farmers sell their produce to the commission

ers sell to the rice/ flour millers directly and on

others (Wholeselor and Retailers).

Intermediaries in Distribution of sold produce

erent links in Supply Chain of Wheat and Rice

that in Supply chain of wheat and rice in Udham Singh Naga

of four kinds of intermediaries that is Commission agents, Rice

millers/ flour millers, wholesaler and retailers. These intermediaries are involved for flow of

produce from farmer to ultimate consumer.

Rice/Flour millers

35%

Commission agents

other

5%

12

Supply Chain of Rice and

and this produce has

consumers for its final use and consumption. There are different agencies

the consumer. A market


roducer to an ultimate consumer or industrial

used by farmers according to their

their produce to the commission

to the rice/ flour millers directly and only 5 percent

Distribution of sold produce

that in Supply chain of wheat and rice in Udham Singh Nagar

of intermediaries that is Commission agents, Rice

intermediaries are involved for flow of

13

Exhibit 4.3 Different links in Agri-Supply Chain of Rice and Wheat

Farmer

Commission

agent

Rice millers

/Flour millers

Others

Wholesaler

Retailer

Consumer

Export

14

4.3.1 Different Types of Marketing Channel for Rice and Wheat

1. Producer– Miller- Consumer

2. Producer– Miller- Retailer– Consumer

3. Producer- Miller- Wholesaler- Retailer- Consumer

4. Producer– Commission agents - Miller– Retailer– Consumer

5. Producer– Govt. procurement– Miller– Retailer– Consumer

These above are the different type of marketing channels for rice and wheat supply chain. In

first channel produce is directly sold to the millers and then it reaches to the ultimate

consumers. In second type of marketing Channel produce is sold to the millers and then it is

further sold to the retailers and finally it reaches to the ultimate consumer. In third type of

marketing channel there is involvement of 3 kinds of intermediaries, produce is sold to the

millers, and then it sold to the wholesaler and again sold to the retailers and finally reaches to

the ultimate consumer. In forth kind of marketing channel there is also involvement of three

kind of intermediaries, in this case produce is first purchased by commission agent then they

sell it to millers, then from millers it sold to the retailers and finally from retailers to the

consumer. In fifth kind of marketing channel produce is first procured by the Government

people then produce is sold to the miller and from milers to retailers and from retailers to the

ultimate consumers.

4.4 Income of Farmer

4.4.1 Cost of Production

Cost of production of paddy and wheat is different. There are different kinds of cost

involved in paddy and wheat production. These costs are two type Fixed cost and variable

cost. Cost of Rice production is high because variable cost is high.

Following items are considered for cost of production

Fixed cost (Land Rate) = Rs 8000/acre

Variable cost = cost of ploughing , seeds, Transplanting, Irrigation, Fertilizer, Pesticide,

Harvesting and Threshing, Transportation

15

Table 4.1 Variable cost of production

S.No Parameters Cost /acre Total

Paddy Wheat

1 Ploughing 1500 800 2300

2 Seed 400 700 1100

3 Transplanting 1200 1200

4 Irrigation 1500 500 2000

5 Fertilizer 1200 1200 2400

6 Pesticide 1000 500 1500

7 Harvesting and Threshing 700 900 1600

8 Transportation 1000 1000 2000

Total Cost 7600 4700 Rs.14100

Interest on variable cost = 10.5 percent/year

= Interest on variable cost for 3 month period

= [(Variable cost* Rate of interest* Time)/100]

= [14100*0.105*3/12]

= Rs 370/acre

Total cost = Fixed Cost + Variable cost + Interest on variable cost

= 8000 + 14100 + 370 = Rs.22470 /acre

Total cost of Production is = Rs. 22470/acre

4.4 .2 Value of Total Produce in Market

Total produce from farmers’ field is 32 quintal/acre Paddy and 22 quintal/acre Wheat. Market

price of the produce is for paddy Rs1000/quintal and for wheat Rs1100/quintals. So the total

value of produce is [{(32*1000) + (22*1100)}] = 56200.

Total revenue in market is = Rs.56200

4.4.3 Income of Farmers Who

40 percent of farmers

So the income of these

Income = (Total Value

Income = Rs. 3373

4.5 No. of farmers who are Availing

In India number of marginal farmers is more than large

facilities is used by these marginal farmers. The reasons for using these facilities by marginal

farmers is unavailability of sufficient amount of money used for crop production

facilities providing to the farmers

are selling their produce through commission agents

them. Exhibit 4.5 shows that

while 63 percent farmers use their own money for farming.

Exhibit 4.5 No. of farmers who avail

Not Availing Credit

63%

ho Sell their Produce without Intermediaries

40 percent of farmers who directly sell their produce to Rice millers/flour millers.

of these farmers is-

Value of produce – Cost of production)

(56200 -22470)

Rs. 33730 / acre

No. of farmers who are Availing Advance Credit Facility

farmers is more than large farmers and the chunk of these credit


farmers is unavailability of sufficient amount of money used for crop production

s providing to the farmers are very important feature of commission agents

r produce through commission agents because they are taking credit from

shows that only 37 percent farmers take credit from the commission age

their own money for farming.

No. of farmers who avail credit

Availing Credit

37%

16

Intermediaries

Rice millers/flour millers.

and the chunk of these credit


farmers is unavailability of sufficient amount of money used for crop production .Credit

are very important feature of commission agents. Farmers

because they are taking credit from

credit from the commission agents

4.6 Factors Affecting the Selection of Commission Agents by F

There are many factors responsible for the selection of commission agents by the farmers.

Factors affecting the selection of commission agents

4.6 shows that the two facto

were amount of advance credit

important like period of credit and behavior of commission agent.

Exhibit 4.6 Factors affecting the selection of commission agent

4.7 Income of Farmers’ Who S

Farmers sell their produce to the commission

facility from the commission agents

or 24 % per year. So the income of

agents is

Income = (Total cost of produce

(56200 –2247

Income = Rs. 28426

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Period of Credit

3

5 p

oin

t S

cale

Factors Affecting the Selection of Commission Agents by Farmer


affecting the selection of commission agents were devised on 5 point scale.

ors which affect the most in the selection of

dvance credit and rate of interest on credit. The other factors were also

important like period of credit and behavior of commission agent.

Factors affecting the selection of commission agent

of Farmers’ Who Sell their Produce through Intermediaries

their produce to the commission agents because they have taken

facility from the commission agents. Rate of interest on that advance credit

the income of farmers who sell their produce through commission

Income = (Total cost of produce – Cost of cultivation- interest on investment Capital

470 -5304)

Income = Rs. 28426 / acre

Amount of

Advance Credit

Rate of inerest on

credit

Behavior of

Commission agent

5

4

2

factors

17


5 point scale. Exhibit

of commission agent

The other factors were also

Intermediaries

taken advance credit

advance credit is 2 % per month

farmers who sell their produce through commission

interest on investment Capital

Behavior of

Commission agent

2

18

4.8 Comparison of Farmers’ Income Who Market Their Produce without

Intermediaries and Those Who Market Through Intermediaries

After comparison of both the farmers it has been found that there is a difference of Rs 5304 in

the income of farmers. Exhibit 4.8 shows that farmers who sell their produce directly to the

Rice/flour millers have an income of Rs 33730 while the farmers who sell their produce to

the intermediaries have an income of Rs28426.

Exhibit no- 4.8 Comparison of farmers’ Income

4.9 Factors affecting for selection of farmers by intermediaries

There are many factors responsible for the selection of farmers by commission agents.

Factors affecting the selection of farmers were devised on 5 point scale. Exhibit 4.9 shows

that the two factors which affect the most in the selection of farmers are trust on farmer and

interest on credit. The other factors were also important like quantity of produce and quality

of produce.

33730

28426

25000

26000

27000

28000

29000

30000

31000

32000

33000

34000

35000

Direct With Intermediaries

Inco

me

Farmers

Exhibit no-4.9 Factors affecting for selections of farmers by intermediarie

4.10 Facilities provided

Commission agents provide

of farmers for selling the product in the market. They are gi

assured prices. Exhibit 4.10

agriculture input, 20 percent of farmers get information about transportation facilities, 60

percent farmers get advance credit facility as well as other information like market

information and 100 percent of farme

information related to the different markets, knowledge regarding their agricultural activities

and information of agri-inputs.

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Interest on Credit

4

5 P

oin

t S

cale

Factors affecting for selections of farmers by intermediarie

Facilities provided by intermediaries to the farmers

many facilities to the farmers. Commission agents are the need

of farmers for selling the product in the market. They are giving credit to the farmers

4.10 has shown that 20 percent farmers get information about



information and 100 percent of farmers get information about assured prices.

different markets, knowledge regarding their agricultural activities

inputs.

Quality of Produce Trust on Farmer Quantity of

Produce

3

5

2

Factors

19

Factors affecting for selections of farmers by intermediaries

Commission agents are the need

ving credit to the farmers and pay

20 percent farmers get information about



prices. They give them

different markets, knowledge regarding their agricultural activities

Quantity of

Produce

2

Exhibit -4.10 Facilities provided by intermediaries to the

4.10.1 Impact of Intermediaries

Intermediaries support to the farmers by prov

the information related to high yielding

of the crop. These activities are very much he

Table 4.2 shows improvement

field was 30 quintal/acre paddy

Rs 900/quintal and Rs 1000/qui

of intermediaries yield of farmers’ field has improved and market price of the produc

increased. Yield of paddy and

market price is Rs 1000/quintal

0

10

20

30

40

50

60

70

80

90

100

Assured Price

100

perc

enta

ge o

f far

mer

s

Facilities provided by intermediaries to the farmers

Intermediaries on Farmers’ Income

to the farmers by providing them different facilities.

the information related to high yielding varieties which results in better q

activities are very much helpful in the farmers’ cash flow.

improvement in the cash flow of the farmer. Earlier the yield of farmers’

paddy and 20 quintal/acre wheat. Market price of the produce was

/quintal for paddy and wheat respectively. Now, after

yield of farmers’ field has improved and market price of the produc

and wheat is 32quintal/acre and 22 quintal/acre

/quintal for paddy and Rs 1100/quintal for wheat.

Advance Credit Agriculture input Transportation

Facilities

60

20

40

Faclities

20

iding them different facilities. They also give

quality and quantity

lpful in the farmers’ cash flow.

Earlier the yield of farmers’

price of the produce was

Now, after the Support

yield of farmers’ field has improved and market price of the produce has

32quintal/acre and 22 quintal/acre respectively and

Transportation

Facilities

21

Table 4.2 Changes in the Income of Farmer

Before , Income

After ,Income

Yield/Acre

Price/Quintal

Yield/acre

Price/Quintal

Rice- 30

Wheat-20

Rice – 900

Wheat – 1000

Rice- 32

Wheat-22

Rice – 1000

Wheat – 1100

Revenue B = [{(3o*900) + (20*1000)}]

Rs. 47000/acre

Revenue A = [{(32*1000)+(22*1100)}]

Rs.56200/acre

Farmers’ Income B = Revenue - Cost of Cultivation

47000 - 22470

=Rs.24530/acre

Farmer Income A= Revenue-Cost of Cultivation

56200 – 22470

= Rs.33730/acre

Percentage Change in the Income of Farmers

% change = [{ ( Income A-Income B)/Income B}*100]

= [{(33730-24530)/24530}*100]

= [(0.3750)*100]

= 37%

4.11 Increases in the Income

Exhibit 4.11 shows that 37 percent

of the farmers was Rs.24530 but

has increased up to Rs.3373

improvement in the cash flow of

Exhibit – 4.11 Increase in the Income

0

5000

10000

15000

20000

25000

30000

35000

Earlier Situation of Farmer

Inco

me

of F

arm

er

in the Income of Farmer

shows that 37 percent improvement in cash flow of farmer. Earlier the

0 but after the help from rice/flour millers the income of f

0. Improvement in the income of farmer is by Rs 9200

improvement in the cash flow of farmers helps in the further capital formation of farmer.

Increase in the Income of Farmers

Earlier Situation of Farmer Current Situation of Farmer

24530

33730

Farmers' Situation

22

. Earlier the income

the income of farmers

Improvement in the income of farmer is by Rs 9200.This

formation of farmer.

Current Situation of Farmer

23

6. CONCLUSION

Agricultural marketing includes the movement of agricultural produce from farmers to

ultimate consumer through intermediaries. Intermediaries are important aspect of agricultural

marketing and affect the price paid by consumers as well as the profit received by farmers.

The present system of agricultural marketing is not well-organized and the farmers have to

depend largely on the intermediaries for the disposal of the farm’s yield. The intermediaries

have no hesitation in taking advantage of the farmer’s dependence upon them. Intermediaries

are necessary evil that cannot be removed but efforts can be made to reduced them in order

to bring about efficiencies in the supply chain.

The study was conducted in five blocks of district Udham Singh Nagar namely

Rudrapur, Gadarpur, Bazpur, Kashipur and Jaspur. This study identified the various

intermediaries in agri-supply chain.These include commission agent, rice/flour millers,

wholesaler and retailers. The survey revealed that majority of the farmers were small

farmers. The study identifies two important channels of marketing viz farmers selling their

produce directly to the rice/flour millers and farmers selling their produce to the commission

agents.

During the study it was revealed that the farmers who sell their produce directly to the

rice/flour millers received greater profit as compared to those who sell through commission

agents. It was found that a difference of Rs 5304 existed between the two channels which

means that a farmer who sells his produce to commission agent will receive Rs. 5304 less.

The study also emphasizes on the role of credit in case of commission agents. Majority of the

farmers who sell to the commission agents take loan from them at a higher rate of interest.

Various factors are involved in the selection of commission agents by farmers. These include

period of credit, amount of advance credit, rate of interest on credit and behavior of

commission agent. On the other hand a commission agent also selects a farmers on basis of

certain factors namely interest on credit, quality and quantity of produce and trust on farmer.

The various facilities provided by intermediaries include assured prices; advance credit,

information about agricultural input and transportation facilities. These facilities improve the

income of farmers.

24

6. SUGGESTIONS

1. Most of the farmers depend on agriculture as their main source of income. So, they

should focus on selection of marketing channel like in which mandi or through

which channel they should sell their produce.

2. The farmers should try to sell their produce directly to the rice/flour millers instead of

selling to the commission agent for getting higher profit.

3. Farmers should avoid the habit of taking advance credit from the intermediaries

because they charge a higher rate of interest.

4. The loan providing process of the commercial bank should be simplified, so that the

farmers could easily approach to banks instead of the commission agents.

5. There should be proper government norms in the mandi for selling of produce. There

should not be any fraud in the market pricing strategies of produce.

6. There should be the appointment of ombudsman for keeping the farmer updated and

providing them proper information regarding marketing practices.

7. There should be nonprofit firm to educate the farmer from time to time regarding the

market situation so that they will be able to understand where they should sell their

produce.

8. There should be involvement of cooperatives for selling of produce to the

government warehouses. Cooperative employees should be placed for communication

between farmers and government.

viii

References

1. T Matsuda,TH Clark System Sciences,(1997) Market Intermediaries and Price Instability:

Some Welfare Implications.

2. Laurence E. D. Smith and Michael (1999)Facilitating the Provision of Farm Credit: The

Role of Interlocking Transactions Between Traders and Zamindars in Crop Marketing

Systems in Sindh.

3. Deepak M. Pokhrel and Gopal B. Thapa (1999)A study based on market price, marketing

margin and income distribution analyses

4. Verma A.R,(2004) “Price spread marketing Efficiency and Constraints in Marketing of

wheat”Vol-8,No-2,Page 171-194

5. Thorat Y.S.P(2007) “Issue in agriculture marketing in India”Vol-4,No-3,Page 59-68

6. Vashisth A.K(2009) “Price Dynamics of Agriculture Commodity Future and its impact on

demand-supply situation of Agriculture commodities”

7. Kothari C.R. Reserch Methodology

8. www.agricultural marketing ,Retrieved on 17/03/2011 at 16.30

9. www.kpmg.ie, Retrieved on 18/03/2011 at 12.30

10. www.google.com, Retrieved on 18/03/2011 at 17.00

11. www.wikipedia.com, retrieved on 19/03/2011 at 16.30

12. www.ficci.com, retrieved on 25/03/2011 at12.00 at 14.00

13. http://www.agriculturemarkrting retrieved on 2/04/2011

14. http://www.agricultural Marketing service - history and Scope.mht retrieved on 12/04/2011

at 08.15

15. http://www.project matter\Science Direct - Agricultural Systems and marketing retrieved

on 10.00

ix

Annexure I

Questionnaire for farmer

1. Name-

2. Age-

3. Land Holding-

4. Crop currently grown-

5. Village-

6. Educational qualification:

Illiterate Primary School

Middle school Intermediate Graduate Post Graduate

7. What are the major crops you grow?

1.Kharif

2. Rabi

3.Zaid

8. What is the Yield from Your Field?

I. Rice ( ) II Wheat ( )

9. What is the market price of these produce?

i. Rice……………………. ii. Wheat………………….. iii. Other crop………………

10. Three years before what was the yield from your field?

I.Rice ( ) II Wheat ( )

x

11. Where do you market your produce?

1. Major market…………………… 2. Minor market………………………

12. How you market your produce?

i. Directly to consumer ( ) ii. Through intermediaries ( ) iii. Both ( ) iv. Any other ( )

13. If through intermediaries, What is the level of that intermediary?

i. Commission agent ( ) ii. Rice/flour millers ( ) iii. Whole seller ( ) iv. Retailer ( )

14. At what price produce has been sold to intermediary?

i. Rice ……………… ii. Wheat……………… iii. Other crops………….

15. Costs involved in farming?

i. Agri- input……………………… ii. Labor……………………………. iii. Transportation…………………… iv. Irrigation………………………….

16.Are you availing credit facilities from the intermediaries?

Yes ( ) No ( )

If Yes how much amount you are borrowing?

I. Less than 5000 ( ) II. 5000 to 10,000 ( )

III. More than 10,000 ( )

xi

17. Factors involved in the selection of Commission agent?

18. What are the facilities being provided to you?

1. Assured price ( ) 2. Advance credit ( ) 3. Transportation facilities ( ) 4. Agricultural input ( ) 5. Agricultural extension activities ( )

19. What is the impact of these activities on your farming with respect to

i. Price of the produce ii. Quality and Quantity of produce iii. Transit time iv. Reduction in wastage

20. Annual Income

Less than 50,000 50.000 to 1 lakh 1 Lakh to 2 lakh 2 lakh to 4 Lakh More than 4 lakh

21. Are you having livestock’s?

If yes how much the income from livestock’s………………………………………….

Factors Points

Period of Credit

Amount of advance credit

Rate of interest on advance credit

Behavior of commission agent

xii

22. Have you ever face any kind of problem? Yes ( ) No ( )

If yes what kind of problems

…………………………………………………………………………………………….

………………………………………………………………………………………………

23. If no what other facilities you expecting from the intermediaries

………………………………………………………………………………………………

………………………………………………………………………………………………

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Annexure II

Questionnaire for intermediaries

1. What are the major crops of this area?

Season Crops Sowing time Kharif 1

2 3

Rabi 1 2 3

Zaid 1 2 3

2. What is your level in that supply chain?

i. Commission agent ( ) ii. Whole seller ( ) iii. Retailer ( )

3. from where you purchase that produce?

(1) Direct from farmers ( ) (2) Middleman ( ) (3) both ( )

4. if Farmers, Do you having permanent farmers ? Yes ( ) No ( )

5. How do you decide the price of produce?

Quality basis ( ) Quantity base ( )

6. Where do you finally sale that produce?

(1) Mandi ( ) (2) Rice mill ( ) (3) Directly to consumer ( ) (4) any other ( )

7. At what price you purchase the produce?

I. Rice…………. II. Wheat…………

III. Other crop………..

xiv

8. At what price you sale the produce?

i. Rice………. ii. Wheat……………. iii. Other crop……………

9. Do you having storage facilities?

Yes ( ) N0 ( )

10. If yes how much amount you store

…………………………………………………………

11. 17. Factors involved in the selection of Farmers?

12. What are the other special services which you are providing to farmers?

6. Assured price ( ) 7. Advance credit ( ) 8. Transportation facilities ( ) 9. Agricultural input ( ) 10. Agricultural extension activities ( )

Factors Points

Interest on credit

Quantity of produce

Quality of Produce

Trust on Farmer

Vita

Prince Verma, the author of this manuscript was born on 18th December, 1988 in

Gadarpur, Uttrakhand. She has completed her high school and intermediate

examination from uttrakhand board, further she took admission in the prestigious

college of agriculture, a constituent of G.B.P.U.A & T (Uttrakhand) batch 2005

and obtained B.Sc. Agriculture degree in 2009 with first division. Thereafter she

got selected in MBA (Food Retail and Supply Chain) management degree

programme in college of Agribusiness Management of the same university. In the

month of November 2010 during campus placement she got selected by D2k

technologies as management trainee.

Address

Prince Verma

Shiva Colony, Kartarpur Road

Gadarpur (U.S.Nagar)

Uttrakhand

Email [email protected]

Intermediaries intermention

Education

Transcript of Intermediaries intermention