Vertical coordination in high-value commodities

"Rising per capita income, urbanization and globalization are changing the consumption basket in the developing countries towards high-value commodities (like fruits & vegetables, milk, meat, poultry, fish, etc.). This paper explores how smallholders can benefit from the emerging opportunities from a silent demand-driven changes in high-value agriculture in India. The study examines the institutional mechanisms adopted by different firms to integrate small producers of milk, broilers and vegetables in supply chain and their effects on producers' transaction costs and farm profitability. The study finds that the innovative institutional arrangements in the form of contract farming have considerably reduced transaction costs and improved market efficiency to benefit the smallholders. The study does not find any bias against smallholders in contract farming. Also, the study does not find that the relevant firms have exploited their monopsonistic position by paying lower prices to farmers. On the contrary, contract producers were found enjoying benefits of assured procurement of their produce and higher prices. The study lists policy hurdles in scaling up the innovative models of vertical coordination in high-value food commodities" Authors' AbstractHigh value commodities ,Urbanization ,High value agriculture ,Scaling up ,

Agriculture diversification in South Asia

The South Asian countries are gradually diversifying with some inter-country variation in favor of high value commodities, namely fruits, vegetables, livestock and fisheries. Agricultural diversification is strongly influenced by price policy, infrastructure development (especially markets and roads), urbanization and technological improvements. Rainfed areas have benefited more as a result of agricultural diversification in favor of high value crops by substituting inferior coarse cereals. Agricultural diversification is also contributing to employment opportunities in agriculture and increasing exports. The need is to suitably integrate production and marketing of high value commodities through appropriate institutions. Market reforms in developing and strengthening desired institutions through required legal changes would go a long way in boosting agricultural growth, augmenting income of small farm holders and promoting exports.Agricultural diversification Economic aspects ,price policies ,Urbanization ,Technological innovations ,South Asia Economic conditions ,Markets Economic policy ,Agricultural growth ,

Improving farm-to-market linkages through contract farming: A case study of smallholder dairying in India

"Contract farming is emerging as an important form of vertical coordination in the agrifood supply chain in India, and its socioeconomic consequences are attracting considerable attention in public policy debates. This study is an empirical assessment of the costs and benefits of contract farming in milk using information generated through field surveys in the western state of Rajasthan. Contract farming is found to be more profitable than independent production. Its major benefits come from a reduction in marketing and transaction costs, which are otherwise much higher in the open markets. Contract farming also contributes toward improving milk yield and reducing production costs, albeit not significantly. Dairy producers also benefit from provision of services and technical advice by integrators/firms who secure milk supplies from farmers through contract. The benefits of contract farming vary by scale of operation. Economies of scale are also important determinants of competitiveness, in which large farms (both contract and independent) have lower per unit cost due to buying of inputs in bulk and greater access to markets. Smallholders, on the other hand, derive significant benefits from a reduction in marketing and transaction costs due to their participation in contract farming." from authors' abstractContract farming, smallholder dairying in India, marketing and transaction costs, milk supply chain, treatment effects model, mass balance approach,

Effect of Trade Liberalization on the Efficiency of Indian Dairy Industry

India is the largest producer of milk, and milk is the second largest agricultural commodity after rice in terms of its contribution to agricultural gross domestic product. Having achieved selfsufficiency in milk production, the emphasis now is shifting towards value addition to improve the share of dairy products in global trade, which hitherto has remained negligible. Most of the Indian dairy products are not export competitive. The lack of competitiveness is often attributed to inefficiency in the processing industry. Further, the international diary markets, remains distorted due to protectionist policies followed in the developed world. Under such a situation India has a daunting task to make its presence felt in the world market. Using data from Annual Survey of Industries, this study has analyzed the effects of trade liberalization on performance of dairy industry. Technical and scale efficiency were estimated using non-parametric approach called Data Envelopment Analysis (DEA). The effect of economic reforms on dairy industry was measured in terms of association between the effective protection coefficient and performance indicators of the industry. Except the employment, other indicators such as gross output, net value added, capital and labour productivity and technical and scale efficiency were negatively correlated with the protection level. This indicates that dismantling the protection structures would help improve the performance of the dairy industry

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